COLUMBUS, Ohio, Feb. 27, 2020 /PRNewswire/ -- Diamond Hill
Investment Group, Inc. (Diamond
Hill) (NASDAQ:DHIL) today reported results for the fourth
quarter of 2019 and the year ended December 31, 2019.
The Company derives its consolidated revenue and net income from
investment advisory and fund administration services provided by
its subsidiary, Diamond Hill Capital Management, Inc. (DHCM).
The Company plans to file its Form 10-K later today.
During 2019, Diamond Hill's net
income and earnings per share increased due to strong performance
in U.S. equity markets. Revenues declined, however, due to a shift
in the mix of assets held in lower fee strategies. The
Company continued to invest in human capital and technology which,
coupled with the revenue decline, compressed our 2019 operating
margin. We take a long-term perspective in managing our
business, and as a result, our operating margin can fluctuate
materially from year to year. Selected highlights include the
following:
- Investment performance was strong. Seven mutual funds (primary
share class) have Morningstar Ratings™ of 4 or 5 stars
and six have Morningstar Analyst Ratings™ of Gold,
Silver or Bronze. Four institutional strategies have top
decile performance for the five years ended December 31, 2019
in their respective eVestment peer group rankings.
- Asset flows into fixed income strategies rose to $838 million, which were offset by equity
strategies outflows of $1.5
billion.
- Assets under management increased 22.5% to $23.4 billion, due to market appreciation.
- Revenue was $136.6 million, down
6% from $145.6 million in 2018,
primarily because of an increase in the mix of assets held in lower
fee strategies.
- Net income attributable to common shareholders was $55.0 million, up 16% from $47.4 million in 2018, primarily because of an
increase in investment income.
- Diluted earnings per common share was $15.99 in 2019 compared to $13.48 in 2018.
- The Company returned a total of $69
million to our shareholders through a $9.00 per share dividend and the repurchase of 8%
of our outstanding shares.
- The Company appointed Heather E.
Brilliant, CFA as president and CEO, in September.
- The Diamond Hill International Fund was launched in
July.
"Despite strong capital markets performance globally in 2019,
active asset managers continue to face headwinds because of
investor demand for passive strategies and the resulting downward
fee pressure." said Heather
Brilliant, president and CEO. "We believe Diamond Hill is well-positioned to navigate
these challenges and compete successfully because of our long-term
focus, capacity discipline, superior investment results in both
equity and fixed income strategies, and alignment with investor
interests."
Share Repurchase Program Update:
In September 2018, the Board of
Directors approved a share repurchase program authorizing the
purchase of up to $50 million of
Diamond Hill common shares, which was completed in February
2020. Under that program the Company repurchased
approximately 350,000 shares. On February 27, 2020, the Board of Directors
approved a new repurchase program authorizing management to
repurchase common shares having an aggregate purchase price of up
to an additional $50 million.
The authority to repurchase shares will be exercised from time to
time as market conditions warrant, is subject to regulatory
considerations and will expire in two years. The timing,
amount and other terms and conditions of any repurchases will be
determined by the Company's management at its discretion based on a
variety of factors, including the market price of shares, corporate
considerations, general market and economic conditions and legal
requirements.
Selected Income
Statement Data
|
(in thousands, except
per share figures)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
|
|
Year Ended
December
31,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Total
revenue
|
35,908
|
|
|
34,446
|
|
|
4%
|
|
136,624
|
|
|
145,628
|
|
|
(6)%
|
Compensation and
related costs, excluding
deferred compensation expense
|
16,651
|
|
|
12,497
|
|
|
33%
|
|
60,264
|
|
|
55,975
|
|
|
8%
|
Deferred compensation
expense (benefit)
|
1,925
|
|
|
(3,045)
|
|
|
NM
|
|
5,977
|
|
|
(2,121)
|
|
|
NM
|
Other
expenses
|
5,368
|
|
|
5,207
|
|
|
3%
|
|
22,448
|
|
|
20,518
|
|
|
9%
|
Total operating
expenses
|
23,944
|
|
|
14,659
|
|
|
63%
|
|
88,689
|
|
|
74,372
|
|
|
19%
|
Net operating
income
|
11,964
|
|
|
19,787
|
|
|
(40)%
|
|
47,935
|
|
|
71,256
|
|
|
(33)%
|
Investment income
(loss), net
|
6,880
|
|
|
(13,488)
|
|
|
|
|
30,507
|
|
|
(6,273)
|
|
|
|
Income before
taxes
|
18,844
|
|
|
6,299
|
|
|
199%
|
|
78,442
|
|
|
64,983
|
|
|
21%
|
Income tax
expense
|
(4,321)
|
|
|
(4,223)
|
|
|
2%
|
|
(18,688)
|
|
|
(18,669)
|
|
|
—%
|
Net income
|
$
|
14,523
|
|
|
$
|
2,076
|
|
|
600%
|
|
$
|
59,754
|
|
|
$
|
46,314
|
|
|
29%
|
Net income
attributable to common shareholders
|
$
|
13,414
|
|
|
$
|
4,809
|
|
|
179%
|
|
$
|
54,959
|
|
|
$
|
47,376
|
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to common shareholders - diluted
|
$
|
3.99
|
|
|
$
|
1.37
|
|
|
191%
|
|
$
|
15.99
|
|
|
$
|
13.48
|
|
|
19%
|
Selected Balance
Sheet Data
|
(in thousands, except
per share figures)
|
|
|
|
December
31,
|
|
2019
|
|
2018
|
Total cash and
corporate investments held directly by DHCM
|
$
|
187,189
|
|
|
$
|
196,545
|
|
Shareholders'
equity
|
192,856
|
|
|
195,576
|
|
Book value per
share
|
$
|
58.54
|
|
|
$
|
55.89
|
|
Cash and corporate
investments per share
|
$
|
56.82
|
|
|
$
|
56.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Assets
Under Management
|
|
For the Year Ended
December 31,
|
(in
millions)
|
2019
|
|
2018
|
AUM at beginning of
the year
|
$
|
19,108
|
|
|
$
|
22,317
|
|
Net cash inflows
(outflows)
|
|
|
|
proprietary funds
|
(499)
|
|
|
(978)
|
|
sub-advised funds
|
216
|
|
|
(25)
|
|
separately managed accounts
|
(394)
|
|
|
(99)
|
|
|
(677)
|
|
|
(1,102)
|
|
Net market
appreciation (depreciation) and income
|
4,968
|
|
|
(2,107)
|
|
Increase (decrease)
during the year
|
4,291
|
|
|
(3,209)
|
|
AUM at end of the
year
|
$
|
23,399
|
|
|
$
|
19,108
|
|
|
|
|
|
|
|
|
Net Cash Inflows
(Outflows) Further Breakdown
For the Year Ended December 31,
|
(in
millions)
|
2019
|
|
2018
|
Net cash inflows
(outflows)
|
|
|
|
Equity
|
$
|
(1,515)
|
|
|
$
|
(1,554)
|
|
Fixed
Income
|
838
|
|
|
452
|
|
|
$
|
(677)
|
|
|
$
|
(1,102)
|
|
About Diamond Hill:
Based in Columbus, Ohio,
Diamond Hill is an independent
active asset manager with significant employee ownership and
$23.4 billion in assets under
management as of December 31, 2019. The Company invests
on behalf of institutions and individuals through mutual funds and
separate accounts. Strategies include long-only U.S. and
international equity, alternative long-short equity, and fixed
income. Diamond Hill serves clients
by providing investment strategies that deliver lasting value
through a shared commitment to its intrinsic value investment
philosophy, long-term perspective, disciplined approach and
alignment with client interests. For more information visit
www.diamond-hill.com.
Use of Supplemental Data as Non-GAAP Performance
Measures
As supplemental information, Diamond
Hill is providing performance measures that are based on
methodologies other than U.S. generally accepted accounting
principles ("non-GAAP"). Management believes 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 years ended
December 31, 2019 and 2018,
respectively.
|
Year Ended
December 31,
|
(in thousands, except
percentages and per share data)
|
2019
|
|
2018
|
Total
revenue
|
$
|
136,624
|
|
|
$
|
145,628
|
|
|
|
|
|
Net operating income,
GAAP basis
|
$
|
47,935
|
|
|
$
|
71,256
|
|
Non-GAAP
adjustments:
|
|
|
|
Gains (losses) on
deferred compensation plan investments,
net(1)
|
5,977
|
|
|
(2,122)
|
|
Net operating income,
as adjusted, non-GAAP basis(2)
|
53,912
|
|
|
69,134
|
|
Non-GAAP
adjustments:
|
|
|
|
Tax provision on net
operating income, as adjusted, non-GAAP
basis(3)
|
(13,680)
|
|
|
(19,542)
|
|
Net operating income,
as adjusted, after tax, non-GAAP basis(4)
|
$
|
40,232
|
|
|
$
|
49,592
|
|
|
|
|
|
Net operating income,
as adjusted after tax per diluted share, non-GAAP
basis(5)
|
$
|
11.71
|
|
|
$
|
14.11
|
|
Diluted weighted
average shares outstanding, GAAP basis
|
3,437
|
|
|
3,515
|
|
|
|
|
|
Operating profit
margin, GAAP basis
|
35
|
%
|
|
49
|
%
|
Operating profit
margin, as adjusted, non-GAAP basis(6)
|
39
|
%
|
|
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.
|
Diamond Hill's 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, and 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 the
Company believes 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 such actual results or experiences to differ from results
discussed in the forward-looking statements include, but are not
limited to: the adverse effect from a decline in the securities
markets; a decline in the performance of 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 the
Company's 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 U. S. Securities and Exchange
Commission.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/diamond-hill-investment-group-inc-reports-2019-financial-results-and-announces-new-share-repurchase-program-301012972.html
SOURCE Diamond Hill Investment Group, Inc.