COLUMBUS, Ohio, May 10, 2023
/PRNewswire/ -- Diamond Hill Investment Group, Inc. (Nasdaq: DHIL)
today reported unaudited financial results for the first quarter of
2023.
The following are selected highlights for the quarter ended
March 31, 2023:
- Assets under management ("AUM") and assets under advisement
("AUA") combined were $26.7 billion
as of March 31, 2023, compared to
$26.6 billion as of December 31, 2022, and $32.4 billion as of March
31, 2022.
- Average AUM and AUA combined were $27.3
billion, compared to $32.6
billion for the first quarter of 2022.
- Net client inflows were $84.0
million, compared to $237.0
million of net inflows for the first quarter of 2022.
- Revenue was $34.0 million,
compared to $42.3 million for the
first quarter of 2022.
- Operating profit margin was 32%, compared to 45% for the first
quarter of 2022. Adjusted operating profit margin1 was
35%, compared to 43% for the first quarter of 2022.
- Investment income was $8.1
million, compared to an investment loss of $7.6 million for the first quarter of 2022.
- Net income attributable to common shareholders was $12.7 million, compared to $9.1 million for the first quarter of 2022.
- Earnings per share attributable to common shareholders -
diluted was $4.20, compared to
$2.87 for the first quarter of
2022.
- Adjusted earnings per share attributable to common shareholders
- diluted2 was $2.81,
compared to $4.19 for the first
quarter of 2022.
- The Company returned $9.2 million
to shareholders - $4.6 million
through the repurchase of 27,706 shares and $4.6 million through a quarterly cash dividend of
$1.50 per share.
"Last year's market downturn and related client outflows had a
significant impact on our beginning AUM, reducing our Q1 revenues
and adjusted earnings per share," said Heather Brilliant, President and CEO. "Our
differentiated fixed income strategies continued to weather this
interest rate environment well, and we are pleased with the client
interest and inflows we are seeing there. As always, we remain
steadfastly focused on delivering strong client outcomes and
managing the business with a long-term perspective."
_____________________________________________
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 the Diamond Hill International Fund and the Diamond Hill Large
Cap Concentrated Fund (together, the "Consolidated Funds"). See the
reconciliation to the comparable GAAP measure at the end of this
earnings release.
2 Adjusts the financial measure
calculated in accordance with GAAP for the impact of the
Consolidated Funds, and investment income related to certain other
investments. See the reconciliation to the comparable GAAP measure
at the end of this earnings release.
Dividend:
The Company's board of directors approved the payment of a
regular quarterly cash dividend of $1.50 per share. The dividend will be paid on
June 16, 2023, to the Company's shareholders of record as of
June 1, 2023.
|
Selected Income
Statement Data
|
|
|
Three Months Ended
March 31,
|
|
|
|
2023
|
|
2022
|
|
%
Change
|
|
Revenue
|
$
33,990,503
|
|
$
42,256,386
|
|
(20) %
|
|
Compensation and
related costs, excluding deferred compensation
expense (benefit)
|
16,362,908
|
|
18,646,894
|
|
(12) %
|
|
Deferred compensation
expense (benefit)
|
744,511
|
|
(1,178,556)
|
|
NM
|
|
Other
expenses
|
5,941,517
|
|
5,715,009
|
|
4 %
|
|
Total operating
expenses
|
23,048,936
|
|
23,183,347
|
|
(1) %
|
|
Net operating
income
|
10,941,567
|
|
19,073,039
|
|
(43) %
|
|
Investment income
(loss), net
|
8,082,738
|
|
(7,592,257)
|
|
NM
|
|
Net income before
taxes
|
19,024,305
|
|
11,480,782
|
|
66 %
|
|
Income tax
expense
|
(4,921,258)
|
|
(3,205,766)
|
|
54 %
|
|
Net income
|
14,103,047
|
|
8,275,016
|
|
70 %
|
|
Net loss (income)
attributable to redeemable noncontrolling interest
|
(1,395,495)
|
|
854,936
|
|
NM
|
|
Net income attributable
to common shareholders
|
$
12,707,552
|
|
$
9,129,952
|
|
39 %
|
|
|
|
|
|
|
|
Earnings per share
attributable to common shareholders - diluted
|
$
4.20
|
|
$
2.87
|
|
46 %
|
|
|
|
|
|
|
|
Selected Assets
Under Management and Assets Under Advisement Data
|
|
|
Change in Assets Under
Management
|
|
For the Three Months
Ended March 31,
|
|
(in
millions)
|
2023
|
|
2022
|
|
AUM at beginning of the
period
|
$
24,763
|
|
$
31,028
|
|
Net cash inflows
(outflows)
|
|
|
|
|
Diamond Hill
Funds
|
110
|
|
172
|
|
Separately managed
accounts
|
84
|
|
89
|
|
Collective investment
trusts
|
18
|
|
(3)
|
|
Other pooled
vehicles
|
(128)
|
|
(21)
|
|
84
|
|
237
|
|
Net market appreciation
(depreciation) and income
|
80
|
|
(943)
|
|
Increase (decrease)
during the period
|
164
|
|
(706)
|
|
AUM at end of the
period
|
24,927
|
|
30,322
|
|
AUA at end of
period
|
1,776
|
|
2,094
|
|
Total AUM and AUA at
end of period
|
$
26,703
|
|
$
32,416
|
|
|
|
|
|
Average AUM during the
period
|
$
25,427
|
|
$
30,459
|
|
Average AUA during the
period
|
1,833
|
|
2,155
|
|
Total average AUM and
AUA during the period
|
$
27,260
|
|
$
32,614
|
|
|
|
|
|
|
|
Net Cash Inflows
(Outflows) Further Breakdown
For the Three Months
Ended March 31,
|
|
(in
millions)
|
2023
|
|
2022
|
|
Net cash inflows
(outflows)
|
|
|
|
|
Equity
|
$
(479)
|
|
$
193
|
|
Fixed
Income
|
563
|
|
44
|
|
$
84
|
|
$
237
|
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. As of April 30, 2023,
Diamond Hill had $25.0 billion in AUM. For more information visit
www.diamond-hill.com.
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 should not be used as a substitute for financial
measures calculated in accordance with GAAP and may be calculated
differently by other companies. The following schedule reconciles
financial measures calculated in accordance with GAAP to non-GAAP
financial measures for the three-month periods ended March 31,
2023 and 2022, respective
|
Three Months Ended
March 31, 2023
|
|
(in thousands, except
percentages
and per share data)
|
Operating
expenses
|
|
Net
operating
income
|
|
Non-
operating
income
(loss)
|
|
Income tax
expense(4)
|
|
Net income
attributable
to common
shareholders
|
|
Earnings
per share
attributable
to common
shareholders
(diluted)
|
|
Operating
profit
margin
|
|
GAAP
Basis
|
$
23,049
|
|
$
10,942
|
|
$ 8,083
|
|
$
4,921
|
|
$
12,708
|
|
$
4.20
|
|
32 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability(1)
|
(745)
|
|
745
|
|
(745)
|
|
—
|
|
—
|
|
—
|
|
3 %
|
|
Consolidated
Funds(2)
|
—
|
|
99
|
|
(5,024)
|
|
(985)
|
|
(2,544)
|
|
(0.84)
|
|
—
|
|
Other investment
income(3)
|
—
|
|
—
|
|
(2,314)
|
|
(646)
|
|
(1,668)
|
|
(0.55)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP
basis
|
$
22,304
|
|
$
11,786
|
|
$
—
|
|
$
3,290
|
|
$
8,496
|
|
$
2.81
|
|
35 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2022
|
|
(in thousands, except
percentages
and per share data)
|
Operating
expenses
|
|
Net
operating
income
|
|
Non-
operating
income
(loss)
|
|
Income tax
expense(4)
|
|
Net income
attributable
to common
shareholders
|
|
Earnings per
share
attributable
to common
shareholders
(diluted)
|
|
Operating
profit
margin
|
|
GAAP
Basis
|
$
23,183
|
|
$
19,073
|
|
$
(7,592)
|
|
$
3,206
|
|
$
9,130
|
|
$
2.87
|
|
45 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability(1)
|
1,179
|
|
(1,179)
|
|
1,179
|
|
—
|
|
—
|
|
—
|
|
(2) %
|
|
Consolidated
Funds(2)
|
—
|
|
123
|
|
3,241
|
|
652
|
|
1,857
|
|
0.58
|
|
—
|
|
Other investment
income(3)
|
—
|
|
—
|
|
3,172
|
|
825
|
|
2,347
|
|
0.74
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP
basis
|
$
24,362
|
|
$
18,017
|
|
$
—
|
|
$
4,683
|
|
$
13,334
|
|
$
4.19
|
|
43 %
|
|
|
|
(1)
|
This non-GAAP
adjustment removes the compensation expense resulting from market
valuation changes in the deferred
compensation plan 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 Funds have 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 Funds. The adjustment to net operating income
represents the operating expenses of the Consolidated Funds,
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 Funds,
net of redeemable non-controlling interests. The Company
believes removing the impact of the Consolidated Funds helps
readers understand its core operating results and improves
comparability from period to period .
|
|
(3)
|
This non-GAAP
adjustment represents the net gains/losses earned on the Company's
non-consolidated investment portfolio
that are not designated as economic hedges of the deferred
compensation plan 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 an overall non-GAAP
effective tax rate of 27.9% for the
three months ended March 31, 2023 and 26.0% for the three months
ended March 31, 2022.
|
The Company does not recommend that investors consider the
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, 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 Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, statements regarding
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 "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 could differ materially from the
anticipated results or other expectations expressed in its
forward-looking statements.
Factors that could 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, 2022, as well as
in the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2023. These factors include, but are not
limited to: (i) any reduction in the Company's AUM; (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) adverse regulatory and legal developments;
(vii) unfavorable changes in tax laws or limitations; (viii)
interruptions in or failure to provide critical technological
service by the Company or third parties; (ix) adverse civil
litigation and government investigations or proceedings; (x) risk
of loss on the Company's investments; (xi) lack of sufficient
capital on satisfactory terms; (xii) losses or costs not covered by
insurance; (xiii) a decline in the performance of the Company's
products; (xiv) changes in interest rates and inflation; (xv)
changes in national and local economic and political conditions;
(xvi) the continuing economic uncertainty in various parts of the
world; (xvii) the after-effects of the COVID-19 pandemic and the
actions taken in connection therewith; (xviii) political
uncertainty caused by, among other things, political parties,
economic nationalist sentiments, tensions surrounding the current
socioeconomic landscape, and other risks identified from
time-to-time in other public documents of the Company on file with
the SEC.
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, whether as a result of new information,
future developments or otherwise, except as may be 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.
