PR Newswire | Jul 28, 2021 04:15PM EDT

07/28 15:15 CDT

Diamond Hill Investment Group, Inc. Reports Results For Second Quarter 2021 COLUMBUS, Ohio, July 28, 2021

COLUMBUS, Ohio, July 28, 2021 /PRNewswire/ -- Diamond Hill Investment Group, Inc. (NASDAQ: DHIL) today reported unaudited financial results for the second quarter of 2021.

The following are selected highlights for the quarter ended June 30, 2021:

* Assets under management ("AUM") were $32.4 billion compared to $30.6 billion as of March 31, 2021, and $20.6 billion as of June 30, 2020. * Average AUM was $32.1 billion compared to $19.7 billion during the second quarter of 2020. * Net client inflows were $550 million, compared to $231 million of net inflows for the same period in 2020. Net inflows into our fixed income strategies were $485 million and net inflows into our equity strategies were $65 million. * Revenue was $45.1 million, compared to $28.2 million in the second quarter of 2020. * Operating profit margin was 39% compared to 25% for the second quarter of 2020. Operating profit margin, as adjusted6, was 43% compared to 38% for the second quarter of 2020. * Investment income was $5.9 million compared to investment income of $11.6 million for the second quarter of 2020. * Net income attributable to common shareholders was $16.9 million compared to $12.2 million during the second quarter of 2020. * Earnings per share attributable to common shareholders - diluted was $5.28 compared to $3.79 in the second quarter of 2020. * The Company returned a total of $3.2 million to its shareholders via a $1.00 per share dividend. * Total cash and corporate investments held directly by Diamond Hill Capital Management, Inc. were $198.4 million, or $61.86 per share.

"Our business results improved in Q2 relative to last year and also benefited from a strong market environment. Our AUM includes $3.4 billion from the Corporate Credit and High Yield Funds which we expect to move to Brandywine Global on July 30, 2021," said Heather Brilliant, president and CEO. "We believe our long-term focus, capacity discipline, investment results, and alignment with investor interests positions Diamond Hill well to navigate changing market environments and compete successfully."

Dividend:

The Company also announced today that its board of directors has approved payment of a quarterly cash dividend of $1.00 per share. The dividend will be paid on September 24, 2021, to its shareholders of record as of September 9, 2021.

Selected Income Statement Data

(in thousands, except per share figures and percentages)

Three Months Ended June 30,

2021 2020 % Change

Revenue $ 45,070 $ 28,249 60%

Compensation and related costs, excluding 18,940 12,558 51%deferred compensation expense

Deferred compensation expense 1,511 3,826 (61)%

Other expenses 6,852 4,837 42%

Total operating expenses 27,303 21,221 29%

Net operating income 17,767 7,028 153%

Investment income, net 5,877 11,563 (49)%

Net income before taxes 23,644 18,591 27%

Income tax expense (6,017) (4,952) 22%

Net income 17,627 13,639 29%

Net income attributable to redeemable (762) (1,438) (47)%noncontrolling interest

Net income attributable to common $ 16,865 $ 12,201 38%shareholders

Earnings per share attributable to common $ 5.28 $ 3.79 39%shareholders - diluted

Six Months Ended June 30,

2021 2020 % Change

Revenue $ 84,084 $ 60,175 40%

Compensation and related costs, excluding 35,755 27,975 28%deferred compensation (benefit) expense

Deferred compensation expense (benefit) 4,614 (4,330) NM

Other expenses 12,416 9,037 37%

Total operating expenses 52,785 32,682 62%

Net operating income 31,299 27,493 14%

Investment income (loss), net 11,540 (10,836) NM

Net income before taxes 42,839 16,657 157%

Income tax expense (10,950) (5,547) 97%

Net income 31,889 11,110 187%

Net loss (income) attributable to (1,316) 2,621 NMredeemable noncontrolling interest

Net income attributable to common $ 30,573 $ 13,731 123%shareholders

Earnings per share attributable to common $ 9.62 $ 4.23 127%shareholders - diluted

Selected Balance Sheet Data

(in thousands, except per share figures)



As of

June 30, 2021 December 31, 2020

Total cash and corporate investments held directly by DHCM $ 198,436 $ 184,055

Shareholders' equity $ 209,907 $ 184,081

Book value per share $ 65.43 $ 58.09

Cash and corporate investments per share $ 61.86 $ 58.08



Change in Assets Under Management

For the Three Months Ended June 30,

(in millions) 2021 2020

AUM at beginning of the period $ 30,582 $ 17,496

Net cash inflows (outflows)

proprietary funds 260 (59)

sub-advised funds (99) 146

separately managed accounts 389 144

550 231

Net market appreciation and income 1,228 2,918

Increase during the period 1,778 3,149

AUM at end of the period $ 32,360 $ 20,645



Average AUM during the period $ 32,095 $ 19,729



Change in Assets Under Management

For the Six Months Ended June 30,

(in millions) 2021 2020

AUM at beginning of the period $ 26,411 $ 23,399

Net cash inflows (outflows)

proprietary funds^(a) 1,987 (47)

sub-advised funds (57) 691

separately managed accounts 214 (162)

2,144 482

Net market appreciation (depreciation) and income^(a) 3,805 (3,236)

Increase (decrease) during the period 5,949 (2,754)

AUM at end of the period $ 32,360 $ 20,645



Average AUM during the period $ 30,146 $ 20,591



(a) Reflects a $150 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.





Net Cash Inflows (Outflows) Further Breakdown For the Three Months Ended June 30,

(in millions) 2021 2020

Net cash inflows (outflows)

Equity $ 65 $ (374)

Fixed Income 485 605

$ 550 $ 231



Net Cash Inflows (Outflows) Further Breakdown For the Six Months Ended June 30,

(in millions) 2021 2020

Net cash inflows (outflows)

Equity^(a) $ 1,200 $ (192)

Fixed Income^(b) 944 674

$ 2,144 $ 482



(a) Reflects a $120 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.

(b) Reflects a $30 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.

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 June 30, 2021, Diamond Hill had $32.4 billion in assets under management. For more information visit www.diamond-hill.com.

Use of Supplemental Data as Non-GAAP Performance Measure

As supplemental information, the Company 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 its core business activities, are important metrics in estimating the value of an asset management business, and may enable more appropriate peer comparisons. These non-GAAP measures should not be used as 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, 2021, and 2020, respectively.

Three Months Ended Six Months Ended June 30, June 30,

(in thousands, except percentages and per share 2021 2020 2021 2020 data)

Total revenue $45,070 $28,249 $84,084 $60,175



Net operating income, GAAP $17,767 $7,028 $31,299 $27,493 basis

Non-GAAP adjustment:

Gains (losses) on deferred compensation plan investments,1,511 3,826 4,614 (4,330) net^(1)

Net operating income, as 19,278 10,854 35,913 23,163 adjusted, non-GAAP basis^(2)

Non-GAAP adjustment:

Tax provision on net operating income, as adjusted, non-GAAP (5,070) (3,133) (9,471) (6,665) basis^(3)

Net operating income, as adjusted, after tax, non-GAAP $14,208 $7,721 $26,442 $16,498 basis^(4)



Net operating income, as adjusted after tax per diluted$4.44 $2.40 $8.32 $5.08 share, non-GAAP basis^(5)

Diluted weighted average 3,197 3,221 3,177 3,247 shares outstanding, GAAP basis



Operating profit margin, GAAP 39 %25 %37 %46 %basis

Operating profit margin, as 43 %38 %43 %38 %adjusted, non-GAAP basis^(6)



^(1) Gains on deferred compensation plan investments, net: The gain on deferred compensation plan investments, which increases deferred compensationexpense included in operating income, is removed from operating income in thecalculation 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 represents the Company's net operating income adjusted to exclude the impact on compensationexpense 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.

The Company 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, Diamond Hill 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, 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 are discussed under "Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as under "Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. These factors include, but are not limited to: the adverse effect from a decline in the securities markets; a decline in the performance of our products; the effect of national, regional and global economic conditions generally, including the effects of the COVID-19 pandemic and the actions taken in connection therewith; political uncertainty caused by, among other things, political parties, economic nationalist sentiments, and tensions surrounding the current socioeconomic landscape; 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 Securities and Exchange Commission.

In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Diamond Hill or any other persons, that our 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 Diamond Hill and speak only as of the date on which they are made. We assume 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.

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SOURCE Diamond Hill Investment Group, Inc.