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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
Date of Report (Date of Earliest Event Reported): October 18, 2016
 
PZENA INVESTMENT MANAGEMENT, INC.
 
 
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware
 
001-33761
 
20-8999751
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification Number)
 
320 Park Avenue, New York, New York
10022
 
(Address of Principal Executive Offices)
 
Zip Code
 
 
 
 
Registrant’s Telephone Number, Including Area Code: (212) 355-1600
 
 
 
(Former Name or Former Address, If Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act.
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act.
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.






ITEM 2.02
RESULTS OF OPERATION AND FINANCIAL CONDITION.
 
On October 18, 2016, Pzena Investment Management, Inc. (the “Company”) issued a press release reporting its financial results for the third quarter of 2016. Copies of the press release and related attachments are furnished as Exhibit 99.1 to this Current Report.
 
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS.
 
 
 
(d) Exhibits
 
 
 
99.1 Press release, dated October 18, 2016, of Pzena Investment Management, Inc.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
Dated: October 18, 2016
By:
/s/ Jessica R. Doran
 
 
Name: Jessica R. Doran
 
 
Title: Chief Financial Officer
 
 
 






EXHIBIT INDEX

Exhibit No.
Document
99.1
Press release, dated October 18, 2016, of Pzena Investment Management, Inc.



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


36290598_pzenalogoinc.jpg

PZENA INVESTMENT MANAGEMENT, INC.
REPORTS RESULTS FOR THE THIRD QUARTER OF 2016

2016 revenue was $27.0 million for the third quarter.

2016 GAAP operating income was $12.0 million for the third quarter.

2016 GAAP diluted earnings per share was $0.12 for the third quarter.

Declared a quarterly dividend of $0.03 per share.

NEW YORK, NEW YORK, October 18, 2016 - Pzena Investment Management, Inc. (NYSE: PZN) reported the following U.S. Generally Accepted Accounting Principles (GAAP) and non-GAAP basic and diluted net income and earnings per share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per-share amounts):
    

GAAP Basis
 
Non-GAAP Basis
 
For the Three Months Ended
 
For the Three Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
 
(unaudited)
 
 
 
 
 
 
 
 
Basic Net Income
$
2,165

 
$
1,922

 
$
1,954

 
$
1,799

Basic Earnings Per Share
$
0.13

 
$
0.13

 
$
0.12

 
$
0.12

 
 
 
 
 
 
 
 
Diluted Net Income1
$
8,192

 
$
8,932

 
$
7,981

 
$
1,799

Diluted Earnings Per Share1
$
0.12

 
$
0.13

 
$
0.12

 
$
0.12

 
 
 
 
 
 
 
 
 
GAAP Basis
 
Non-GAAP Basis
 
For the Nine Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
 
(unaudited)
 
 
 
 
 
 
 
 
Basic Net Income
$
5,193

 
$
5,466

 
$
4,924

 
$
5,356

Basic Earnings Per Share
$
0.33

 
$
0.40

 
$
0.31

 
$
0.39

 
 
 
 
 
 
 
 
Diluted Net Income
$
21,167

 
$
25,391

 
$
20,898

 
$
26,208

Diluted Earnings Per Share
$
0.31

 
$
0.37

 
$
0.30

 
$
0.38

 
 
 
 
 
 
 
 
    1 During the three months ended September 30, 2015, the calculation of non-GAAP diluted
         earnings per share resulted in an increase in earnings per share. Therefore, diluted net income and
         diluted earnings per share are assumed to be equal to basic net income and basic earnings per share.


1




The GAAP results for the three and nine months ended September 30, 2016 and 2015 include adjustments related to the Company's deferred tax asset, valuation allowance and the associated liability to its selling and converting shareholders. GAAP results for 2015 also include adjustments related to certain non-recurring charges recognized in operating expenses associated with our former corporate headquarters. Management believes that these accounting adjustments add a measure of non-operational complexity which obscures the underlying performance of the business. In evaluating the results of operations, management also reviews non-GAAP measures of earnings, which exclude these items. Excluding these adjustments, non-GAAP diluted net income and non-GAAP diluted earnings per share were $8.0 million and $0.12, respectively, for the three months ended September 30, 2016, and $1.8 million and $0.12, respectively, for the three months ended September 30, 2015. Non-GAAP diluted net income and non-GAAP diluted earnings per share were $20.9 million and $0.30, respectively, for the nine months ended September 30, 2016, and $26.2 million and $0.38, respectively, for the nine months ended September 30, 2015. GAAP and non-GAAP net income for diluted earnings per share generally assume all operating company membership units are converted into Company stock at the beginning of the reporting period, and the resulting change to Company GAAP and non-GAAP net income associated with its increased interest in the operating company is taxed at the Company's effective tax rate, exclusive of the adjustments noted above and other adjustments. When this conversion results in an increase in earnings per share or a decrease in loss per share, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share for the reporting period.

Management uses the non-GAAP measures to assess the strength of the underlying operations of the business. It believes the non-GAAP measures provide information to better analyze the Company's operations between periods and over time. Investors should consider the non-GAAP measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.




2



Assets Under Management (unaudited)
 
 
 
 
 
 
 
 
 
 
($ billions)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
Institutional Accounts
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period
 
$
14.3

 
$
14.5

 
$
15.9

 
$
14.9

 
$
14.3

          Inflows
 
1.1

 
0.4

 
1.5

 
2.2

 
4.4

          Outflows
 
(0.9
)
 
(0.3
)
 
(0.6
)
 
(2.9
)
 
(2.5
)
          Net Flows
 
0.2

 
0.1

 
0.9

 
(0.7
)
 
1.9

          Market Appreciation/(Depreciation)
 
1.4

 
(0.3
)
 
(1.9
)
 
1.7

 
(1.3
)
     End of Period
 
$
15.9

 
$
14.3

 
$
14.9

 
$
15.9

 
$
14.9

 
 
 
 
 
 
 
 
 
 
 
Retail Accounts
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period Assets
 
$
11.1

 
$
11.6

 
$
12.1

 
$
10.6

 
$
12.1

          Inflows
 
0.1

 
0.2

 
0.2

 
1.5

 
1.2

          Outflows
 
(0.7
)
 
(0.7
)
 
(0.3
)
 
(2.1
)
 
(1.9
)
          Net Flows
 
(0.6
)
 
(0.5
)
 
(0.1
)
 
(0.6
)
 
(0.7
)
          Market Appreciation/(Depreciation)
 
1.0

 

 
(1.4
)
 
1.5

 
(0.8
)
     End of Period
 
$
11.5

 
$
11.1

 
$
10.6

 
$
11.5

 
$
10.6

 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period
 
$
25.4

 
$
26.1

 
$
28.0

 
$
25.5

 
$
26.4

          Inflows
 
1.2

 
0.6

 
1.7

 
3.7

 
5.6

          Outflows
 
(1.6
)
 
(1.0
)
 
(0.9
)
 
(5.0
)
 
(4.4
)
          Net Flows
 
(0.4
)
 
(0.4
)
 
0.8

 
(1.3
)
 
1.2

          Market Appreciation/(Depreciation)
 
2.4

 
(0.3
)
 
(3.3
)
 
3.2

 
(2.1
)
     End of Period
 
$
27.4

 
$
25.4

 
$
25.5

 
$
27.4

 
$
25.5


















3



Financial Discussion

Revenue (unaudited)
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
For the Three Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2016
 
2016
 
2015
 
 
 
 
 
 
Institutional Accounts
$
20,513

 
$
19,169

 
$
23,233

Retail Accounts
6,477

 
7,266

 
7,539

    Total
$
26,990

 
$
26,435

 
$
30,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
 
 
 
 
 
Institutional Accounts
 
 
$
58,679

 
$
65,694

Retail Accounts
 
 
20,584

 
23,241

    Total
 
 
$
79,263

 
$
88,935


Revenue was $27.0 million for the third quarter of 2016, an increase of 2.1% from $26.4 million for the second quarter of 2016, and a decrease of 12.3% from $30.8 million for the third quarter of 2015.

Included in these amounts for the third quarter of 2015, were performance fees recognized of $3.2 million. No performance fees were recognized during the third or second quarters of 2016. In general, performance fees are calculated on an annualized basis over the contract's measurement period, which, for the majority of our performance fee arrangements, extends to three years.

Average assets under management for the third quarter of 2016 were $26.8 billion, an increase of 2.7% from $26.1 billion for the second quarter of 2016, and a decrease of 1.1% from $27.1 billion for the third quarter of 2015. The increase from the second quarter of 2016 primarily reflects market appreciation over the period partially offset by net outflows. The decrease from the third quarter of 2015 primarily reflects changes in asset levels during the third quarter of 2015. Assets under management ended the third quarter of 2015 at $25.5 billion with $3.3 billion in market depreciation occurring primarily toward the second half of the quarter resulting in higher average assets under management for the quarter.

The weighted average fee rate was 0.403% for the third quarter of 2016, decreasing from 0.405% for the second quarter of 2016, and from 0.454% for the third quarter of 2015.

The weighted average fee rate for institutional accounts was 0.533% for the third quarter of 2016, increasing from 0.526% for the second quarter of 2016, and decreasing from 0.596% for the third quarter of 2015. The increase from last quarter primarily reflects an increase in assets in our non-U.S. value strategies that generally carry higher fee rates. The decrease from the second quarter of last year primarily reflects a decrease in performance fees recognized during the third quarter of 2016.

The weighted average fee rate for retail accounts was 0.227% for the third quarter of 2016, decreasing from 0.253% for the second quarter of 2016, and from 0.262% for the third quarter of 2015.  Certain accounts related to one retail client relationship have fulcrum fee arrangements.  These fee arrangements require a reduction in the base fee, or allow for a performance fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period, which extends to three years.  The decrease in the weighted average fee rate for retail accounts in the third quarter of 2016 was driven by the reduction of base fees

4



related to these fee arrangements. To the extent the three-year performance records of these accounts improve relative to their relevant benchmarks, we will expect to earn the full base fee in the future.

Total operating expenses on a GAAP basis were $15.0 million for the third quarter of 2016, decreasing from $15.2 million for the second quarter of 2016 and increasing from $14.5 million for the third quarter of 2015. The fluctuations in operating expenses on a GAAP basis from the second quarter of 2016 and third quarter of 2015 primarily reflect changes in general and administrative costs over the periods. Details of operating expenses and a reconciliation of GAAP to non-GAAP operating expenses are shown below:

Operating Expenses (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Compensation and Benefits Expense
 
$
11,767

 
$
11,699

 
$
11,645

General and Administrative Expense
 
3,271

 
3,475

 
2,896

    Operating Expenses
 
$
15,038

 
$
15,174

 
$
14,541

 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
 
September 30,
 
September 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Compensation and Benefits Expense
 
 
 
$
35,964

 
$
35,515

General and Administrative Expense
 
 
 
9,790

 
10,989

    GAAP Operating Expenses
 
 
 
45,754

 
46,504

One-Time Adjustments
 
 
 

 
(1,834
)
Non-GAAP Operating Expenses
 
 
 
$
45,754

 
$
44,670



As of September 30, 2016, employee headcount was 92, down from 93 at June 30, 2016 and up from 88 at September 30, 2015.

The operating margin was 44.3% on a GAAP basis for the third quarter of 2016, compared to 42.6% for the second quarter of 2016, and 52.7% for the third quarter of 2015.


5



Other income/ (expense) was income of approximately $0.4 million for the third quarter of 2016, income of $0.3 million for the second quarter of 2016, and an expense of $5.0 million for the third quarter of 2015. Other income/ (expense) includes the gains/ (losses) and other investment income recognized by the Company on its direct investments, as well as those recognized by external investors on their investments in investment partnerships that the Company consolidates. A portion of gains/ (losses) and other investment income associated with the investments of outside interests are offset in net income attributable to non-controlling interests. For the third quarter of 2016, other income/ (expense) also includes an expense of $1.2 million reflecting an increase in the Company's liability to its selling and converting shareholders resulting from an increase in expected future tax benefits described in income tax expense below. Changes in the liability to selling and converting shareholders associated with changes in the realizability of the deferred tax asset generated income of $0.7 million and an expense of $0.7 million in the second quarter of 2016 and the third quarter of 2015, respectively. Details of other income/ (expense), as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:

Other Income/ (Expense) (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
 For the Three Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Net Interest and Dividend Income
 
$
87

 
$
125

 
$
187

Gains/ (Losses) and Other Investment Income
 
1,533

 
(506
)
 
(4,398
)
Change in Liability to Selling and Converting Shareholders¹
 
(1,200
)
 
700

 
(697
)
Other Income/ (Expense)
 
20

 
24

 
(119
)
    GAAP Other Income/ (Expense)
 
440

 
343

 
(5,027
)
Change in Liability to Selling and Converting Shareholders¹
 
1,200

 
(700
)
 
697

Outside Interests of Investment Partnerships²
 
(209
)
 
68

 
2,605

    Non-GAAP Other Income/ (Expense), Net of Outside Interests
 
$
1,431

 
$
(289
)
 
$
(1,725
)
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
 
September 30,
 
September 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Net Interest and Dividend Income
 
 
 
$
298

 
$
615

Gains/ (Losses) and Other Investment Income
 
 
 
1,131

 
(3,923
)
Change in Liability to Selling and Converting Shareholders¹
 
 
 
(1,378
)
 
(1,614
)
Other Income/ (Expense)
 
 
 
14

 
(233
)
    GAAP Other Income/ (Expense)
 
 
 
65

 
(5,155
)
Change in Liability to Selling and Converting Shareholders¹
 
 
 
1,378

 
1,614

Outside Interests of Investment Partnerships²
 
 
 
(136
)
 
2,295

    Non-GAAP Other Income/ (Expense), Net of Outside Interests
 
 
 
$
1,307

 
$
(1,246
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Reflects the change in the liability to the Company’s selling and converting shareholders associated with
    the deferred tax asset generated by the Company’s initial public offering and subsequent unit conversions.
2 Represents the non-controlling interest allocation of the (income)/ loss of the Company's consolidated
     investment partnerships to its external investors.


6




The Company recognized income tax expenses of $0.5 million for the third quarter of 2016, $2.2 million for the second quarter of 2016, and $0.7 million for the third quarter of 2015. Income taxes for the third quarter of 2016 included a $1.4 million income tax benefit associated with a decrease in the valuation allowance recorded against the Company's deferred tax asset related to the basis step ups created by operating company unit exchanges. This adjustment generated $0.8 million in income tax expense and $0.8 million in income tax benefit in the second quarter of 2016 and third quarter of 2015, respectively. Details of the income tax expense, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:
Income Tax Expense (unaudited)
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Non-GAAP Corporate Income Tax Expense
 
$
1,124

 
$
910

 
$
956

Non-GAAP Unincorporated and Other Business Tax Expenses
 
758

 
512

 
612

     Non-GAAP Income Tax Expense
 
1,882

 
1,422

 
1,568

         Change in Valuation Allowance1
 
(1,411
)
 
825

 
(820
)
GAAP Income Tax Expense
 
$
471

 
$
2,247

 
$
748

 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
 
September 30,
 
September 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Non-GAAP Corporate Income Tax Expense
 
 
 
$
2,850

 
$
2,767

Non-GAAP Unincorporated and Other Business Tax Expenses
 
 
 
1,735

 
1,718

     Non-GAAP Income Tax Expense
 
 
 
4,585

 
4,485

         Change in Valuation Allowance1
 
 
 
(1,647
)
 
(1,907
)
         Less: Effects of One-Time Adjustments2
 
 
 

 
(176
)
GAAP Income Tax Expense
 
 
 
$
2,938

 
$
2,402

 
 
 
 
 
 
 
    1 Reflects the change in the valuation allowance assessed against the deferred tax asset established
         as part of the Company's initial public offering and subsequent unit conversions.
    2 Reflects the tax effect of non-recurring lease expenses on Corporate Income Tax Expense and Unincorporated and Other
        Business Tax Expenses for the nine months ended September 30, 2015 of $133 thousand and $43 thousand, respectively,
        which are excluded from Non-GAAP results.



7



Details of the net income attributable to non-controlling interests of the Company's operating company and consolidated subsidiaries, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:

Non-Controlling Interests (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 Operating Company Allocation
 
$
9,547

 
$
8,019

 
$
11,139

 Outside Interests of Investment Partnerships2
 
209

 
(68
)
 
(2,605
)
 GAAP Net Income Attributable to Non-Controlling Interests
 
$
9,756

 
$
7,951

 
$
8,534

 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
 
September 30,
 
September 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
 Operating Company Allocation
 
 
 
$
25,307

 
$
31,703

Add Back: Effects of One-Time Adjustments1
 
 
 

 
1,475

         Non-GAAP Operating Company Allocation
 
 
 
25,307

 
33,178

 Outside Interests of Investment Partnerships2
 
 
 
136

 
(2,295
)
         Less: Effects of One-Time Adjustments1
 
 
 

 
(1,475
)
 GAAP Net Income Attributable to Non-Controlling Interests
 
 
 
$
25,443

 
$
29,408

 
 
 
 
 
 
 
 
 
 
 
 
 
 
    1 Reflects the effects of non-recurring lease expenses on non-controlling interests.
    2 Represents the non-controlling interest allocation of the income/ (loss) of the Company's consolidated
          investment partnerships to its external investors.

On October 13, 2016, the Company's Board of Directors approved a quarterly dividend of $0.03 per share of its Class A common stock. The following dates apply to the dividend:

Record Date: October 28, 2016

Payment Date: November 23, 2016

During the last twelve months, inclusive of the dividend noted above, the Company declared total dividends of $0.41 per share of its Class A common stock.











8



Third Quarter 2016 Earnings Call Information

Pzena Investment Management, Inc. (NYSE: PZN) will hold a conference call to discuss the Company's financial results and outlook at 10:00 a.m. ET, Wednesday, October 19, 2016. The call will be open to the public.

Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to the Events page in the Investor Relations area of the Company's website, www.pzena.com.

Teleconference Instructions: To gain access to the conference call via telephone, U.S. callers should dial 888-317-6016; Canada callers should dial 855-669-9657; international callers should dial 412-317-6016. Please reference the Pzena Investment Management call.

Replay: The conference call will be available for replay through November 2, 2016, on the web using the information given above.

About Pzena Investment Management

Pzena Investment Management, LLC, the firm's operating company, is a value-oriented investment management firm. Founded in 1995, Pzena Investment Management has built a diverse, global client base. More firm and stock information is posted at www.pzena.com.

Forward-Looking Statements

This press release may contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements provide the Company’s current views, expectations, or forecasts of future events and performance, and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Among the factors that could cause actual results to differ from those expressed or implied by a forward-looking statement are those described in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's Annual Report on Form 10-K, as filed with the SEC on March 14, 2016 and in the Company's Quarterly Reports on Form 10-Q as filed with the SEC. In light of these risks, uncertainties, assumptions, and factors, actual results could differ materially from those expressed or implied in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this release.

The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward-looking statements to reflect circumstances existing after the date of this release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Contact: Gary Bachman, 212-583-0225 or bachman@pzena.com.



9



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (in thousands)
 
 
 
 
 
 
 
 
 
 As of
 
 
 
September 30,
 
December 31,
 
 
 
2016
 
2015
 
 
 
 (unaudited)
 
 
 ASSETS
 
 
 
 
 
 Cash and Cash Equivalents
 
$
31,062

 
$
35,417

 
 Restricted Cash
 
3,507

 
3,552

 
 Due from Broker
 
319

 
297

 
 Advisory Fees Receivable
 
25,584

 
22,248

 
 Investments
 
20,082

 
27,452

 
 Prepaid Expenses and Other Assets
 
2,439

 
2,445

 
 Deferred Tax Asset, Net of Valuation Allowance
 
 
 
 
 
      of $57,152 and $53,968, respectively
 
15,039

 
14,995

 
 Property and Equipment, Net of Accumulated
 
 
 
 
 
     Depreciation of $2,004 and $1,202, respectively
 
7,196

 
7,903

 
      TOTAL ASSETS
 
$
105,228

 
$
114,309

 
 
 
 
 
 
 LIABILITIES AND EQUITY
 
 
 
 
 
 Liabilities:
 
 
 
 
 
 Accounts Payable and Accrued Expenses
 
$
19,947

 
$
7,885

 
 Due to Broker
 
291

 
30

 
 Securities Sold Short, at Fair Value
 
2,483

 
2,231

 
 Liability to Selling and Converting Shareholders
 
17,511

 
15,075

 
 Deferred Compensation Liability
 
2,860

 
2,896

 
 Other Liabilities
 
929

 
730

 
      TOTAL LIABILITIES
 
44,021

 
28,847

 
 
 
 
 
 
 
 Equity:
 
 
 
 
 
 Total Pzena Investment Management, Inc.'s Equity
 
17,468

 
18,422

 
 Non-Controlling Interests
 
43,739

 
67,040

 
      TOTAL EQUITY
 
61,207

 
85,462

 
      TOTAL LIABILITIES AND EQUITY
 
$
105,228

 
$
114,309








10



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 
 
 
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per-share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 REVENUE
 
$
26,990

 
$
30,772

 
$
79,263

 
$
88,935

 
 
 
 
 
 
 
 
 
 
 EXPENSES
 
 
 
 
 
 
 
 
 Compensation and Benefits Expense
 
11,767

 
11,645

 
35,964

 
35,515

 General and Administrative Expense
 
3,271

 
2,896

 
9,790

 
10,989

 
 TOTAL OPERATING EXPENSES
 
15,038

 
14,541

 
45,754

 
46,504

 Operating Income
 
11,952

 
16,231

 
33,509

 
42,431

 
 
 
 
 
 
 
 
 
 
 Other Income/ (Expense)
 
440

 
(5,027
)
 
65

 
(5,155
)
 
 
 
 
 
 
 
 
 
 
 Income Before Taxes
 
12,392

 
11,204

 
33,574

 
37,276

 
 
 
 
 
 
 
 
 
 
 Income Tax Expense
 
471

 
748

 
2,938

 
2,402

 Consolidated Net Income
 
11,921

 
10,456

 
30,636

 
34,874

 
 
 
 
 
 
 
 
 
 
 Less: Net Income Attributable to Non-Controlling Interests
 
9,756

 
8,534

 
25,443

 
29,408

 
 
 
 
 
 
 
 
 
 
 Net Income Attributable to Pzena Investment Management, Inc.
 
$
2,165

 
$
1,922

 
$
5,193

 
$
5,466

 
 
 
 
 
 
 
 
 
 
 Earnings per Share - Basic and Diluted Attributable to
 
 
 
 
 
 
 
 
 Pzena Investment Management, Inc. Common Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net Income for Basic Earnings per Share
 
$
2,165

 
$
1,922

 
$
5,193

 
$
5,466

 Basic Earnings per Share
 
$
0.13

 
$
0.13

 
$
0.33

 
$
0.40

 Basic Weighted Average Shares Outstanding
 
16,390,298

 
14,585,650

 
15,807,340

 
13,591,432

 
 
 
 
 
 
 
 
 
 
 Net Income for Diluted Earnings per Share
 
$
8,192

 
$
8,932

 
$
21,167

 
$
25,391

 Diluted Earnings per Share
 
$
0.12

 
$
0.13

 
$
0.31

 
$
0.37

 Diluted Weighted Average Shares Outstanding
 
68,656,042

 
68,036,216

 
68,609,667

 
68,136,888


11



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 
 
 
 
 UNAUDITED NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per-share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Basis
 
Non-GAAP Basis
 
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 REVENUE
 
$
26,990

 
$
30,772

 
$
79,263

 
$
88,935

 
 
 
 
 
 
 
 
 
 
 EXPENSES
 
 
 
 
 
 
 
 
 Compensation and Benefits Expense
 
11,767

 
11,645

 
35,964

 
35,515

 General and Administrative Expense
 
3,271

 
2,896

 
9,790

 
9,155

 
 TOTAL OPERATING EXPENSES
 
15,038

 
14,541

 
45,754

 
44,670

 Operating Income
 
11,952

 
16,231

 
33,509

 
44,265

 
 
 
 
 
 
 
 
 
 
 Other Income/ (Expense), Net of Outside Interests
 
1,431

 
(1,725
)
 
1,307

 
(1,246
)
 
 
 
 
 
 
 
 
 
 
 Income Before Taxes and Operating Company Allocation
 
13,383

 
14,506

 
34,816

 
43,019

 
 
 
 
 
 
 
 
 
 
 Unincorporated and Other Business Tax Expenses
 
758

 
612

 
1,735

 
1,718

 Allocable Income
 
12,625

 
13,894

 
33,081

 
41,301

 
 
 
 
 
 
 
 
 
 
 Operating Company Allocation
 
9,547

 
11,139

 
25,307

 
33,178

 Income Before Corporate Income Taxes
 
3,078

 
2,755

 
7,774

 
8,123

 
 
 
 
 
 
 
 
 
 
Corporate Income Tax Expense
 
1,124

 
956

 
2,850

 
2,767

Non-GAAP Net Income
 
$
1,954

 
$
1,799

 
$
4,924

 
$
5,356

Effect of One-Time Adjustments
 

 

 

 
(183
)
Tax Receivable Agreement Income, Net of Taxes
 
211

 
123

 
269

 
293

GAAP Net Income
 
$
2,165

 
$
1,922

 
$
5,193

 
$
5,466

 
 
 
 
 
 
 
 
 
 
 Earnings Per Share - Basic and Diluted Attributable to
 
 
 
 
 
 
 
 
 Pzena Investment Management, Inc. Common Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income for Basic Earnings per Share
 
$
1,954

 
$
1,799

 
$
4,924

 
$
5,356

Basic Earnings per Share
 
$
0.12

 
$
0.12

 
$
0.31

 
$
0.39

Basic Weighted Average Shares Outstanding
 
16,390,298

 
14,585,650

 
15,807,340

 
13,591,432

 
 
 
 
 
 
 
 
 
 
Net Income for Diluted Earnings per Share
 
$
7,981

 
$
1,799

 
$
20,898

 
$
26,208

Diluted Earnings per Share
 
$
0.12

 
$
0.12

 
$
0.30

 
$
0.38

Diluted Weighted Average Shares Outstanding
 
68,656,042

 
14,585,650

 
68,609,667

 
68,136,888



12
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Section 3: EX-99.1 (EXHIBIT 99.1 PDF)

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