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Section 1: 8-K (8-K)

Document


 

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 30, 2018
 

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DIAMOND HILL INVESTMENT GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 
 
Ohio
 
000-24498
 
65-0190407
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)
325 John H. McConnell Blvd., Suite 200, Columbus, Ohio
43215
(Address of Principal Executive Offices)
(Zip Code)

Registrant's Telephone Number, Including Area Code: (614) 255-3333
 

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:

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 


Item 2.02    Results of Operations and Financial Condition

Diamond Hill Investment Group, Inc. (the "Company") has reported its results of operations for the fiscal quarter ended September 30, 2018, as described in Company's press release dated October 30, 2018, a copy of which is filed herewith as Exhibit 99.1 and incorporated herein by reference.


Item 9.01     Financial Statements and Exhibits

Exhibit No.
 
Description
99.1
 

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.

 
 
DIAMOND HILL INVESTMENT GROUP, INC.
 
 
 
 
Date:
October 30, 2018
By:
 
/s/ Thomas E. Line
 
 
 
 
Thomas E. Line, Chief Financial Officer


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


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FOR IMMEDIATE RELEASE:    
Investor Contact:
Tom Line-Chief Financial Officer
614-255-5989 ([email protected])

DIAMOND HILL INVESTMENT GROUP, INC. REPORTS RESULTS FOR
THIRD QUARTER 2018

Columbus, Ohio - October 30, 2018 - 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.


325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215 614-255-3333 [email protected]

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