4Q14 Earnings Release Exhibit



	GAAP Basis				Non-GAAP Basis
	For the Three Months Ended				For the Three Months Ended
	December 31,				December 31,
	2014		2013		2014		2013
	(unaudited)

Basic Net Income	$	2,469	$	2,279	$	1,853	$	2,092
Basic Earnings Per Share	$	0.19	$	0.19	$	0.14	$	0.17

Diluted Net Income	$	9,487	$	10,204	$	9,063	$	10,017
Diluted Earnings Per Share	$	0.14	$	0.15	$	0.13	$	0.15

	GAAP Basis				Non-GAAP Basis
	For the Twelve Months Ended				For the Twelve Months Ended
	December 31,				December 31,
	2014		2013		2014		2013
	(unaudited)

Basic Net Income	$	8,100	$	6,670	$	6,743	$	5,681
Basic Earnings Per Share	$	0.64	$	0.56	$	0.53	$	0.47

Diluted Net Income	$	35,685	$	30,317	$	34,512	$	29,328
Diluted Earnings Per Share	$	0.53	$	0.45	$	0.51	$	0.44

The results for the three and twelve months ended December 31, 2014 and 2013 include both recurring and one-time adjustments related to the Company's deferred tax asset, valuation allowance and the associated liability to its selling and converting shareholders. Results for the three and twelve months ended December 31, 2014 also include adjustments related to certain non-recurring charges recognized in operating expense in the fourth quarter of 2014. Management believes that these accounting adjustments add a measure of non-operational complexity which obscures the underlying performance of the business. In evaluating the financial condition and results of operations, management also reviews non-GAAP measures of earnings, which exclude these items. Excluding these adjustments, non-GAAP diluted net income and non-GAAP diluted earnings per share were $9.1 million and $0.13, respectively, for the three months ended December 31, 2014, and $10.0 million and $0.15, respectively, for the three months ended December 31, 2013. Non-GAAP diluted net income and non-GAAP diluted earnings per share were $34.5 million and $0.51, respectively, for the twelve months ended December 31, 2014, and $29.3 million and $0.44, respectively, for the twelve months ended December 31, 2013. GAAP and non-GAAP net income for diluted earnings per share generally assume all operating company membership units are converted into Company stock at the beginning of the reporting period, and the resulting change to Company GAAP and non-GAAP net income associated with its increased interest in the operating company is taxed at the Company's effective tax rate, exclusive of the adjustments noted above and other adjustments. When this conversion results in an increase in earnings per share or a decrease in loss per share, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share for the reporting period.



Assets Under Management (unaudited)
($ billions)
	Three Months Ended									Twelve Months Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2014			2014			2013			2014			2013

Institutional Accounts
Assets
Beginning of Period	$	14.3		$	15.1		$	13.8		$	15.4		$	11.2
Inflows	1.5			0.4			0.7			2.8			1.9
Outflows	(0.3		)	(0.8		)	(0.6		)	(3.0		)	(2.0		)
Net Flows	1.2			(0.4		)	0.1			(0.2		)	(0.1		)
Market Appreciation/(Depreciation)	0.1			(0.4		)	1.5			0.4			4.3
End of Period	$	15.6		$	14.3		$	15.4		$	15.6		$	15.4

Retail Accounts
Assets
Beginning of Period Assets	$	12.1		$	11.9		$	8.5		$	9.6		$	5.9
Inflows	0.3			0.8			0.4			3.3			2.3
Outflows	(0.7		)	(0.5		)	(0.3		)	(1.7		)	(1.2		)
Net Flows	(0.4		)	0.3			0.1			1.6			1.1
Market Appreciation/(Depreciation)	0.4			(0.1		)	1.0			0.9			2.6
End of Period	$	12.1		$	12.1		$	9.6		$	12.1		$	9.6

Total
Assets
Beginning of Period	$	26.4		$	27.0		$	22.3		$	25.0		$	17.1
Inflows	1.8			1.2			1.1			6.1			4.2
Outflows	(1.0		)	(1.3		)	(0.9		)	(4.7		)	(3.2		)
Net Flows	0.8			(0.1		)	0.2			1.4			1.0
Market Appreciation/(Depreciation)	0.5			(0.5		)	2.5			1.3			6.9
End of Period	$	27.7		$	26.4		$	25.0		$	27.7		$	25.0



Revenue (unaudited)
($ thousands)
	Three Months Ended
	December 31,		September 30,		December 31,
	2014		2014		2013

Institutional Accounts	$	20,572	$	21,431	$	22,952
Retail Accounts	7,988		8,174		5,797
Total	$	28,560	$	29,605	$	28,749


			Twelve Months Ended
			December 31,		December 31,
			2014		2013

Institutional Accounts			$	82,805	$	75,783
Retail Accounts			29,706		19,986
Total			$	112,511	$	95,769

Included in these amounts were performance fees recognized of $1.2 million for the fourth quarter of 2014, compared to $2.1 million for the third quarter of 2014, and $3.1 million for the fourth quarter of 2013. In general, performance fees are calculated on an annualized basis over the contract's measurement period, which, for the majority of our performance fee arrangements, extends to three years. However, during the fourth quarter of 2013, one account's performance fee, based on a measurement period of approximately one year, made up roughly 65% of the performance fees recognized. These fees did not recur in 2014.

The weighted average fee rate for retail accounts was 0.262% for the fourth quarter of 2014, decreasing from 0.271% for the third quarter of 2014, and increasing from 0.254% for the fourth quarter of 2013. The decrease from the third quarter of 2014 reflects a shift in mix toward our U.S. Value Strategies which generally carry lower fee rates. The increase from the fourth quarter of 2013 primarily reflects the addition of assets in strategies which generally carry higher fee rates, as well as an increase in retail performance fees recognized in the fourth quarter of 2014.

Total operating expenses were $13.8 million in the fourth quarter of 2014, increasing from $13.0 million for the third quarter of 2014 and from $11.6 million for the fourth quarter of 2013. The increase from the third quarter of 2014 primarily reflects $0.4 million in lease expenses associated with our new corporate headquarters. We plan to move to our new offices during the first half of 2015. We reflect the lease expense associated with our current office space that will not recur once we move to our new headquarters as non-recurring lease expenses below. The increase from fourth quarter of 2013 primarily reflects an increase in compensation and headcount, costs associated with our mutual funds during 2014, and the lease expense described above. Details of operating expenses and a reconciliation of GAAP to non-GAAP operating expenses are shown below:



Operating Expenses (unaudited)
($ thousands)
	Three Months Ended
	December 31,			September 30,			December 31,
	2014			2014			2013

Compensation and Benefits Expense	$	10,702		$	10,622		$	9,200
General and Administrative Expense	3,109			2,351			2,352
GAAP Operating Expenses	13,811			12,973			11,552
Non-Recurring Lease Expenses	(392		)	—			—
Non-GAAP Operating Expenses	$	13,419		$	12,973		$	11,552

				Twelve Months Ended
				December 31,			December 31,
				2014			2013

Compensation and Benefits Expense				$	41,273		$	36,822
General and Administrative Expense				10,285			8,099
GAAP Operating Expenses				51,558			44,921
Non-Recurring Lease Expenses				(392		)	—
Non-GAAP Operating Expenses				$	51,166		$	44,921

Other (expense)/ income was an expense of approximately $0.2 million for the fourth quarter of 2014, $2.3 million for the third quarter of 2014, and income of $0.8 million for the fourth quarter of 2013. Other (expense)/ income includes the (losses)/ gains and other investment income recognized by the Company on its direct investments, as well as those recognized by the Company's external investors on their investments in investment partnerships that the Company is required to consolidate. A portion of (losses)/ gains and other investment income associated with the investments of the Company's outside interests are offset in net income attributable to non-controlling interests. For the fourth quarter of 2014, other expense also includes an expense of $0.2 million reflecting an increase in the Company's liability to its selling and converting shareholders resulting from an increase in expected future tax benefits described in income tax expense/ (benefit) below. Changes in the liability to selling and converting shareholders associated with changes in the realizability of the deferred tax asset generated an expense of $1.8 million and income of $0.1 million in the third quarter of 2014 and the fourth quarter of 2013, respectively. Details of other (expense)/ income, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:



Other (Expense)/ Income (unaudited)
($ thousands)
	Three Months Ended
	December 31,			September 30,			December 31,
	2014			2014			2013

Net Interest and Dividend Income	$	119		$	88		$	71
(Losses)/ Gains and Other Investment Income	(129		)	(434		)	686
Change in Liability to Selling and Converting Shareholders¹	(221		)	(1,824		)	57
Other (Expense)/ Income	(1		)	(179		)	34
GAAP Other (Expense)/ Income	(232		)	(2,349		)	848
Change in Liability to Selling and Converting Shareholders¹	221			1,824			(57		)
Outside Interests of Investment Partnerships²	73			149			(305		)
Non-GAAP Other Income/ (Expense), Net of Outside Interests	$	62		$	(376	)	$	486

				Twelve Months Ended
				December 31,			December 31,
				2014			2013

Net Interest and Dividend Income				$	387		$	323
(Losses)/ Gains and Other Investment Income				(49		)	2,449
Change in Liability to Selling and Converting Shareholders¹				(4,168		)	(4,468		)
Other Expense				(206		)	(125		)
GAAP Other Expense				(4,036		)	(1,821		)
Change in Liability to Selling and Converting Shareholders¹				4,168			4,468
Outside Interests of Investment Partnerships²				92			(1,235		)
Non-GAAP Other Income, Net of Outside Interests				$	224		$	1,412


1 Reflects the change in the liability to the Company’s selling and converting shareholders associated with
the deferred tax asset generated by the Company’s initial public offering and subsequent unit conversions.

2 Represents the non-controlling interest allocation of the loss/(income) of the Company's consolidated
investment partnerships to its external investors.

The Company recognized income tax expense of $0.7 million for the fourth quarter of 2014, income tax benefit of $0.2 million for the third quarter of 2014, and expense of $1.9 million for the fourth quarter of 2013. Fourth quarter of 2014 income taxes included a $0.4 million income tax benefit associated with a decrease to the valuation allowance recorded against the Company's deferred tax asset related to the basis step ups created by operating company unit exchanges. This adjustment generated $2.4 million and $0.1 million in income tax benefits in the third quarter of 2014 and fourth quarter of 2013, respectively. Fourth quarter of 2014 and third quarter of 2014 income tax expense/ (benefit) also included $0.5 million and $0.3 million in net adjustments, respectively, to the deferred tax asset and valuation allowance. These adjustments were driven by changes in expected future tax benefits. Details of the income tax expense/ (benefit), as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:



Income Tax Expense/ Benefit (unaudited)
($ thousands)
	Three Months Ended
	December 31,			September 30,			December 31,
	2014			2014			2013

Non-GAAP Corporate Income Tax Expense	$	962		$	1,225		$	1,060
Non-GAAP Unincorporated Business Tax Expense	648			701			947
Non-GAAP Income Tax Expense	1,610			1,926			2,007
Change in Valuation Allowance²	(422		)	(2,439		)	(97		)
Less: Effects of Non-Recurring Lease Expenses³	(44		)	—			—
Net Adjustment to Deferred Tax Asset⁴	(450		)	293			(33		)
GAAP Income Tax Expense/ (Benefit)	$	694		$	(220	)	$	1,877

				Twelve Months Ended
				December 31,			December 31,
				2014			2013

Non-GAAP Corporate Income Tax Expense				$	4,521		$	3,612
Non-GAAP Unincorporated Business Tax Expense¹				2,966			2,434
Non-GAAP Income Tax Expense				7,487			6,046
Change in Valuation Allowance²				(6,005		)	(5,710		)
Less: Effects of Non-Recurring Lease Expenses³				(44		)	—
Net Adjustment to Deferred Tax Asset⁴				445			253
GAAP Income Tax Expense				$	1,883		$	589

1 Includes a $0.6 million tax benefit recognized in the first quarter of 2013 associated with the
amendment of prior year tax returns to change the methodology for state and local receipts.
2 Reflects the change in the valuation allowance assessed against the deferred tax asset established
as part of the Company's initial public offering and subsequent unit conversions.
3 Reflects the tax effect of non-recurring lease expenses on Corporate Income Tax Expense and Unincorporated
Business Tax Expense of $31 thousand and $13 thousand, respectively, which are excluded from Non-GAAP results.
4 Reflects the net impact of the changes in the Company's deferred tax asset and valuation allowance
assessed against the deferred tax asset associated with the changes in expected future tax benefits
and the prior year's final tax return.



Non-Controlling Interests (unaudited)
($ thousands)

	Three Months Ended
	December 31,			September 30,			December 31,
	2014			2014			2013

Operating Company Allocation	$	11,427		$	12,593		$	13,584
Add Back: Effects of Non-Recurring Lease Expenses¹	313			—			—
Non-GAAP Operating Company Allocation	11,740			12,593			13,584
Outside Interests of Investment Partnerships²	(73		)	(149		)	305
Less: Effects of Non-Recurring Lease Expenses¹	(313		)	—			—
GAAP Net Income Attributable to Non-Controlling Interests	$	11,354		$	12,444		$	13,889

				Twelve Months Ended
				December 31,			December 31,
				2014			2013

Operating Company Allocation				$	47,026		$	40,533
Add Back: Effects of Non-Recurring Lease Expenses¹				313			—
Non-GAAP Operating Company Allocation				47,339			40,533
Outside Interests of Investment Partnerships²				(92		)	1,235
Less: Effects of Non-Recurring Lease Expenses¹				(313		)	—
GAAP Net Income Attributable to Non-Controlling Interests				$	46,934		$	41,768


1 Reflects the effects of non-recurring lease expenses on non-controlling interests.

2 Represents the non-controlling interest allocation of the (loss)/ income of the Company's consolidated
investment partnerships to its external investors.

This press release may contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company's current assumptions, expectations and projections about future events. Words like “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of the Company's management and involve a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.

Among the factors that could cause actual results to differ from those expressed or implied by a forward-looking statement are those described in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's Annual Report on Form 10-K, as filed with the SEC on March 12, 2014 and in the Company's Quarterly Reports on Form 10-Q as filed with the SEC. In light of these risks, uncertainties, assumptions, and factors, actual results could differ materially from those expressed or implied in the forward-looking statements.

The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward-looking statements to reflect circumstances existing after the date of this release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.



PZENA INVESTMENT MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)

		As of
		December 31,		December 31,
		2014		2013
		(unaudited)
ASSETS
	Cash and Cash Equivalents	$	39,109	$	33,878
	Restricted Cash	2,810		316
	Due from Broker	94		58
	Advisory Fees Receivable	22,939		23,947
	Investments	27,945		7,621
	Prepaid Expenses and Other Assets	1,599		1,246
	Deferred Tax Asset, Net of Valuation Allowance
	of $44,239 and $53,973, respectively	14,618		12,312
	Property and Equipment, Net of Accumulated
	Depreciation of $3,072 and $2,850, respectively	2,772		835
	TOTAL ASSETS	$	111,886	$	80,213

LIABILITIES AND EQUITY
	Liabilities:
	Accounts Payable and Accrued Expenses	$	5,974	$	5,570
	Due to Broker	698		5
	Securities Sold Short, at Fair Value	1,572		—
	Liability to Selling and Converting Shareholders	15,358		12,777
	Lease Liability	354		778
	Deferred Compensation Liability	2,211		2,339
	Other Liabilities	686		195
	TOTAL LIABILITIES	26,853		21,664

	Equity:
	Total Pzena Investment Management, Inc.'s Equity	18,401		16,362
	Non-Controlling Interests	66,632		42,187
	TOTAL EQUITY	85,033		58,549
	TOTAL LIABILITIES AND EQUITY	$	111,886	$	80,213



PZENA INVESTMENT MANAGEMENT, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per-share amounts)


		Three Months Ended					Twelve Months Ended
		December 31,					December 31,
		2014			2013		2014			2013

REVENUE		$	28,560		$	28,749	$	112,511		$	95,769

EXPENSES
Compensation and Benefits Expense		10,702			9,200		41,273			36,822
General and Administrative Expense		3,109			2,352		10,285			8,099
	TOTAL OPERATING EXPENSES	13,811			11,552		51,558			44,921
Operating Income		14,749			17,197		60,953			50,848

Other (Expense)/ Income		(232		)	848		(4,036		)	(1,821		)

Income Before Taxes		14,517			18,045		56,917			49,027

Income Tax Expense		694			1,877		1,883			589
Consolidated Net Income		13,823			16,168		55,034			48,438

Less: Net Income Attributable to Non-Controlling Interests		11,354			13,889		46,934			41,768

Net Income Attributable to Pzena Investment Management, Inc.		$	2,469		$	2,279	$	8,100		$	6,670


Earnings per Share - Basic and Diluted Attributable to
Pzena Investment Management, Inc. Common Stockholders:

Net Income for Basic Earnings per Share		$	2,469		$	2,279	$	8,100		$	6,670
Basic Earnings per Share		$	0.19		$	0.19	$	0.64		$	0.56
Basic Weighted Average Shares Outstanding		13,177,612			12,158,756		12,628,676			11,990,757

Net Income for Diluted Earnings per Share		$	9,487		$	10,204	$	35,685		$	30,317
Diluted Earnings per Share		$	0.14		$	0.15	$	0.53		$	0.45
Diluted Weighted Average Shares Outstanding		67,484,615			67,352,833		67,797,524			66,759,840



	PZENA INVESTMENT MANAGEMENT, INC.

	UNAUDITED NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
	(in thousands, except share and per-share amounts)


		Non-GAAP Basis					Non-GAAP Basis
		Three Months Ended					Twelve Months Ended
		December 31,					December 31,
		2014			2013		2014			2013

REVENUE		$	28,560		$	28,749	$	112,511		$	95,769

EXPENSES
Compensation and Benefits Expense		10,702			9,200		41,273			36,822
General and Administrative Expense		2,717			2,352		9,893			8,099
	TOTAL OPERATING EXPENSES	13,419			11,552		51,166			44,921
Operating Income		15,141			17,197		61,345			50,848

Other Income, Net of Outside Interests		62			486		224			1,412

Income Before Taxes and Operating Company Allocation		15,203			17,683		61,569			52,260

Unincorporated Business Tax Expense		648			947		2,966			2,434
Allocable Income		14,555			16,736		58,603			49,826

Operating Company Allocation		11,740			13,584		47,339			40,533
Income Before Corporate Income Taxes		2,815			3,152		11,264			9,293

Corporate Income Tax Expense		962			1,060		4,521			3,612
Non-GAAP Net Income		$	1,853		$	2,092	$	6,743		$	5,681
Effect of Non-Recurring Lease Expenses		(35		)	—		(35		)	—
Tax Receivable Agreement Income, Net of Taxes		651			187		1,392			989
GAAP Net Income		$	2,469		$	2,279	$	8,100		$	6,670

Earnings Per Share - Basic and Diluted Attributable to
Pzena Investment Management, Inc. Common Stockholders:

	Net Income for Basic Earnings per Share	$	1,853		$	2,092	$	6,743		$	5,681
	Basic Earnings per Share	$	0.14		$	0.17	$	0.53		$	0.47
	Basic Weighted Average Shares Outstanding	13,177,612			12,158,756		12,628,676			11,990,757

	Net Income for Diluted Earnings per Share	$	9,063		$	10,017	$	34,512		$	29,328
	Diluted Earnings per Share	$	0.13		$	0.15	$	0.51		$	0.44
	Diluted Weighted Average Shares Outstanding	67,484,615			67,352,833		67,797,524			66,759,840


•	2014 revenue was $28.6 million for the fourth quarter and $112.5 million for the full year.


•	2014 GAAP operating income was $14.7 million for the fourth quarter and $61.0 million for the full year. For the same periods, non-GAAP operating income was $15.1 million and $61.3 million, respectively.


•	2014 GAAP diluted earnings per share was $0.14 for the fourth quarter and $0.53 for the full year. For the same periods, non-GAAP diluted earnings per share was $0.13 and $0.51, respectively.


•	Declared a year-end dividend of $0.32 per share - in line with the targeted cash dividend ratio of 70% to 80% of non-GAAP diluted net income.