8-K

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): October 29, 2019

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 September 30, 2019, as described in Company's press release dated October 29, 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	Press release issued by the Registrant dated October 29, 2019.

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:	October 29, 2019	By:	/s/ Thomas E. Line
			Thomas E. Line, Chief Financial Officer

EX-99.1

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

THIRD QUARTER2019

Columbus, Ohio - October 29, 2019 - Diamond Hill Investment Group, Inc. (the "Company," "we," "our") (NASDAQ:DHIL) today reported unaudited results for the quarter ended September 30, 2019 and filed its Form 10-Q.

Selected Income Statement Data

(in thousands, except per share figures)

	Three Months Ended September 30,
	2019			2018			% Change
Revenue	34,592			37,472			(8)%
Operating expenses	21,835			20,556			6%
Net operating income	12,757			16,916			(25)%
Investment income, net	2,822			5,210
Income before taxes	15,579			22,126			(30)%
Income tax expense	(4,063		)	(5,727		)	(29)%
Net income	11,516			16,399			(30)%
Net income attributable to redeemable noncontrolling interest	(99		)	(1,191		)
Net income attributable to common shareholders	$	11,417		$	15,208		(25)%
Earnings per share attributable to common shareholders - diluted	$	3.35		$	4.31		(22)%

	Nine Months Ended September 30,
	2019			2018			% Change
Revenue	100,717			111,181			(9)%
Operating expenses	64,747			59,712			8%
Net operating income	35,970			51,469			(30)%
Investment income, net	23,627			7,217
Income before taxes	59,597			58,686			2%
Income tax expense	(14,367		)	(14,446		)	(1)%
Net income	45,230			44,240			2%
Net income attributable to redeemable noncontrolling interest	(3,685		)	(1,672		)
Net income attributable to common shareholders	$	41,545		$	42,568		(2)%
Earnings per share attributable to common shareholders - diluted	$	12.00		$	12.11		(1)%

Selected Balance Sheet Data

(in thousands, except per share figures)

	As Of
	September 30, 2019		December 31, 2018
Total cash and corporate investments held directly by DHCM	$	212,864	$	196,545
Total assets	289,711		325,728
Total liabilities	55,827		67,472
Redeemable noncontrolling interest	10,662		62,680
Shareholders equity	223,222		195,576
Book value per share	$	65.58	$	55.89

	For the Three Months Ended September 30,
(in millions)	2019			2018
AUM at beginning of the period	$	21,612		$	21,827
Net cash inflows (outflows)
proprietary funds	327			(158		)
sub-advised funds	50			(130		)
separately managed accounts	(45		)	(82		)
	332			(370		)
Net market appreciation and income	259			1,172
Increase during the period	591			802
AUM at end of the period	$	22,203		$	22,629
	Change in Assets Under Management
	For the Nine Months Ended September 30,
(in millions)	2019			2018
AUM at beginning of the period	$	19,108		$	22,317
Net cash inflows (outflows)
proprietary funds	(488		)	(332		)
sub-advised funds	185			(3		)
separately managed accounts	(216		)	(171		)
	(519		)	(506		)
Net market appreciation and income	3,614			818
Increase during the period	3,095			312
AUM at end of the period	$	22,203		$	22,629

Special Dividend:

The Company today announced that its board of directors has approved a $9.00 per share special cash dividend to shareholders of record on December 2, 2019 payable December 10, 2019. The Company expects 100% of the distribution to be classified as a qualified dividend.

While this is the twelfth consecutive year that the company has paid a special dividend, there can be no assurance that the Company will pay a dividend in the future. The board of directors and management continually review various factors to determine whether the Company has capital in excess of that required for the business and the appropriate use of any excess capital. The factors considered include the Company's investment opportunities, the Company's risks, and future dividend and capital gain tax rates. The board of directors has also authorized its management to repurchase the Company's common shares having an aggregate purchase price up to $50.0 million, of which $19.5 million is remaining as of September 30, 2019. The authority to repurchase shares will be exercised from time to time as market conditions warrant and is subject to regulatory considerations.

Evaluating management's stewardship of capital for shareholders is a central part of our intrinsic value investment discipline that we practice for our clients. We hold ourselves to the same standard that we look for when evaluating investments for our clients.

About Diamond Hill:

We are an independent investment management firm with significant employee ownership and $22.2 billion in assets under management as of September 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 nine months ended September 30, 2019 and 2018, respectively.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(in thousands, except percentages and per share data)	2019			2018			2019			2018
Total revenue	$	34,592		$	37,472		$	100,717		$	111,181
Net operating income, GAAP basis	$	12,757		$	16,916		$	35,970		$	51,469
Non-GAAP adjustment:
Gains on deferred compensation plan investments, net(1)	357			983			4,052			923
Net operating income, as adjusted, non-GAAP basis(2)	13,114			17,899			40,022			52,392
Non-GAAP adjustment:
Tax provision on net operating income, as adjusted, non-GAAP basis(3)	(3,442		)	(4,896		)	(10,284		)	(13,275		)
Net operating income, as adjusted, after tax, non-GAAP basis(4)	$	9,672		$	13,003		$	29,738		$	39,117
Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)	$	2.83		$	3.68		$	8.59		$	11.13
Diluted weighted average shares outstanding, GAAP basis	3,412			3,532			3,461			3,515
Operating profit margin, GAAP basis	37		%	45		%	36		%	46		%
Operating profit margin, as adjusted, non-GAAP basis(6)	38		%	48		%	40		%	47		%

⁽¹⁾Gains on deferred compensation plan investments, net: The gain on deferred compensation plan investments, which increases 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 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: Thisnon-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

XML

Cover Page Cover Page	Oct. 29, 2019
Cover page.
Entity Central Index Key	0000909108
Title of 12(b) Security	Common Stock, no par value
Document Period End Date	Oct. 29, 2019
Entity Registrant Name	DIAMOND HILL INVESTMENT GROUP INC
Entity Incorporation, State or Country Code	OH
Document Type	8-K
Entity File Number	000-24498
Entity Tax Identification Number	65-0190407
Entity Address, Address Line One	325 John H. McConnell Blvd, Suite 200
Entity Address, City or Town	Columbus
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43215
City Area Code	614
Local Phone Number	255-3333
Trading Symbol	DHIL
Security Exchange Name	NASDAQ
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Amendment Flag	false