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Section 1: 8-K (8-K)

Document
false0000909108 0000909108 2019-07-31 2019-07-31


 

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): July 31, 2019
 

398989622_dhillogoa14.jpg

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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, no par value
 
DHIL
 
The NASDAQ Stock Market LLC
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 June 30, 2019, as described in Company's press release dated July 31, 2019, 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:
July 31, 2019
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 (tline@diamond-hill.com)

DIAMOND HILL INVESTMENT GROUP, INC. REPORTS RESULTS FOR
SECOND QUARTER 2019

Columbus, Ohio - July 31, 2019 - 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.


325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215 614-255-3333 info@diamond-hill.com

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