dhil-20231031

Securities and Exchange Commission

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 31, 2023

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

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

On October 31, 2023, Diamond Hill Investment Group, Inc. (the “Company”) issued a press release reporting its results of operations for the fiscal quarter ended September 30, 2023. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, unless the Company specifically states that the information is to be considered filed under the Exchange Act or incorporates the information by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended. By furnishing the information in this Form 8-K and the attached exhibit, the Company is making no admission as to the materiality of any information in this Form 8-K or the exhibit.

Item 9.01 Financial Statements and Exhibits

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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 31, 2023

By:

/s/ Thomas E. Line

Thomas E. Line, Chief Financial Officer and Treasurer

FOR IMMEDIATE RELEASE:


Investor Contact:
Tom Line—Chief Financial Officer
614-255-5989 (tline@diamond-hill.com)


Media Contact:
Lara Hoffmans—Managing Director-Marketing
614-255-5550 (lhoffmans@diamond-hill.com)

DIAMOND HILL INVESTMENT GROUP, INC. REPORTS RESULTS FOR

THIRD QUARTER 2023 AND DECLARES QUARTERLY DIVIDEND

COLUMBUS, Ohio - October 31, 2023 -- Diamond Hill Investment Group, Inc. (Nasdaq: DHIL) today reported unaudited financial results for the third quarter of 2023.

The following are selected highlights for the quarter ended September 30, 2023:

•Assets under management (“AUM”) and assets under advisement (“AUA”) combined was $26.6 billion, compared to $26.6 billion as of December 31, 2022, and $25.6 billion as of September 30, 2022.

•Average AUM and AUA combined was $27.8 billion, compared to $28.1 billion for the third quarter of 2022.

•Net client outflows were $343.0 million, compared to $760.0 million of net outflows for the third quarter of 2022.

•Revenue was $35.6 million, compared to $38.3 million for the third quarter of 2022.

•Operating profit margin was 35%, compared to 42% for the third quarter of 2022. Adjusted operating profit margin1 was 33%, compared to 39% for the third quarter of 2022.

•Investment loss was $4.6 million, compared to an investment loss of $8.0 million for the third quarter of 2022.

•The Company recorded a gain of $6.8 million during the third quarter of 2022 from the final payment on the sale of its high yield-focused advisory contracts.

•Net income attributable to common shareholders was $6.5 million, compared to $12.0 million for the third quarter of 2022.

•Earnings per share attributable to common shareholders - diluted was $2.20, compared to $3.90 for the third quarter of 2022.

•Adjusted earnings per share attributable to common shareholders - diluted2 was $2.85, compared to $3.57 for the third quarter of 2022.

•The Company returned $9.1 million to shareholders - $4.7 million through the repurchase of 28,142 shares and $4.4 million through a quarterly cash dividend of $1.50 per share.

“The investments we are making to diversify our business continue to show promise,” said Heather Brilliant, CEO. “Our fixed income strategies experienced inflows again in the third quarter and performance remains strong, helping partially offset outflows from some of our US equity strategies. We remain focused on generating excellent, long-term client outcomes in all market environments.”

_____________________________________________

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 any consolidated funds. During each of the first three quarters of 2023 and 2022, the Diamond Hill International Fund was consolidated. During each of the first two quarters of 2022, the Diamond Hill Large Cap Concentrated Fund was also consolidated. The Fund(s) consolidated during the applicable period are referred to as the “Consolidated Funds.” See the reconciliation to the comparable GAAP financial 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, the gain on the sale of the high yield-focused advisory contracts, and investment income related to certain other investments. See the reconciliation to the comparable GAAP financial measure at the end of this earnings release.

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 December 8, 2023, to the Company’s shareholders of record as of November 24, 2023.

“Our capital allocation approach is designed to grow the intrinsic value of the business by investing in new and existing strategies and ensuring we have sufficient capital to operate the business in any market environment,” Brilliant added. “When we believe we have more capital than is necessary to achieve those aims, we return capital to shareholders. When we believe our shares are trading at a discount to our estimate of the firm’s intrinsic value, we aim to return capital through share repurchases. Each year we determine if we have excess capital to pay a special dividend in the fourth quarter. After assessing the current market environment, the level of share repurchases during the year, as well as our $6.00 regular dividend, we have decided not to issue a special dividend this year.”

Selected Income Statement Data


	Three Months Ended September 30,
	2023		2022		% Change
Revenue	$	35,554,280	$	38,264,674	(7)%
Compensation and related costs, excluding deferred compensation benefit	17,837,787		17,259,543		3%
Deferred compensation benefit	(859,252)		(1,051,637)		(18)%
Other expenses	6,214,551		6,024,171		3%
Total operating expenses	23,193,086		22,232,077		4%
Net operating income	12,361,194		16,032,597		(23)%
Investment loss, net	(4,636,952)		(8,031,706)		NM
Gain on sale of high yield-focused advisory contracts	—		6,813,579		NM
Net income before taxes	7,724,242		14,814,470		(48)%
Income tax expense	(2,523,649)		(4,442,070)		(43)%
Net income	5,200,593		10,372,400		(50)%
Net loss attributable to redeemable noncontrolling interest	1,272,839		1,642,040		(22)%
Net income attributable to common shareholders	$	6,473,432	$	12,014,440	(46)%

Earnings per share attributable to common shareholders - diluted	$	2.20	$	3.90	(44)%

	Nine Months Ended September 30,
	2023		2022		% Change
Revenue	$	102,895,420	$	119,542,174	(14)%
Compensation and related costs, excluding deferred compensation expense (benefit)	51,600,045		53,128,680		(3)%
Deferred compensation expense (benefit)	1,867,983		(6,920,586)		NM
Other expenses	18,338,448		17,976,932		2%
Total operating expenses	71,806,476		64,185,026		12%
Net operating income	31,088,944		55,357,148		(44)%
Investment income (loss), net	9,722,494		(33,301,836)		NM
Gain on sale of high yield-focused advisory contracts	—		6,813,579		NM
Net income before taxes	40,811,438		28,868,891		41%
Income tax expense	(11,338,849)		(9,005,711)		26%
Net income	29,472,589		19,863,180		48%
Net (income) loss attributable to redeemable noncontrolling interest	(859,126)		5,694,098		NM
Net income attributable to common shareholders	$	28,613,463	$	25,557,278	12%

Earnings per share attributable to common shareholders - diluted	$	9.61	$	8.14	18%

Selected Assets Under Management and Assets Under Advisement Data



	Change in Assets Under Management
	For the Three Months Ended September 30,
(in millions)	2023		2022
AUM at beginning of the period	$	26,066	$	25,789
Net cash (outflows) inflows
Diamond Hill Funds	(260)		(629)
Separately managed accounts	(251)		(184)
Collective investment trusts	184		(1)
Other pooled vehicles	(16)		54
	(343)		(760)
Net market depreciation and income	(740)		(1,147)
Decrease during the period	(1,083)		(1,907)
AUM at end of the period	24,983		23,882
AUA at end of period	1,638		1,713
Total AUM and AUA at end of period	$	26,621	$	25,595

Average AUM during the period	$	26,004	$	26,245
Average AUA during the period	1,756		1,813
Total average AUM and AUA during the period	$	27,760	$	28,057

	Change in Assets Under Management
	For the Nine Months Ended September 30,
(in millions)	2023		2022
AUM at beginning of the period	$	24,763	$	31,028
Net cash (outflows) inflows
Diamond Hill Funds	(349)		(885)
Separately managed accounts	(340)		(25)
Collective investment trusts	67		(6)
Other pooled vehicles	260		(122)
	(362)		(1,038)

Net market appreciation (depreciation) and income	582		(6,108)
Increase (decrease) during the period	220		(7,146)
AUM at end of the period	24,983		23,882
AUA at end of period	1,638		1,713
Total AUM and AUA at end of period	$	26,621	$	25,595

Average AUM during the period	$	25,496	$	28,300
Average AUA during the period	1,796		1,976
Total average AUM and AUA during the period	$	27,291	$	30,277


	Net Cash (Outflows) Inflows Further Breakdown
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Net cash (outflows) inflows
Equity	$	(732)	$	(682)	$	(1,448)	$	(1,064)
Fixed Income	389		(78)		1,086		26
	$	(343)	$	(760)	$	(362)	$	(1,038)

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.

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 schedules reconcile financial measures calculated in accordance with GAAP to non-GAAP financial measures for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively.


	Three Months Ended September 30, 2023
(in thousands, except percentages and per share data)	Total Operating expenses		Net operating income		Total Non-operating income (loss)		Income tax expense(5)		Net income attributable to common shareholders		Earnings per share attributable to common shareholders - diluted		Operating profit margin
GAAP Basis	$	23,193	$	12,361	$	(4,637)	$	2,524	$	6,473	$	2.20	35	%
Non-GAAP Adjustments:
Deferred compensation liability(1)	859		(859)		859		—		—		—		(2)	%
Consolidated Funds(2)	—		121		3,269		593		1,525		0.52		—
Other investment income(4)	—		—		509		143		366		0.13		—
Adjusted Non-GAAP basis	$	24,052	$	11,623	$	—	$	3,260	$	8,364	$	2.85	33	%













	Three Months Ended September 30, 2022
(in thousands, except percentages and per share data)	Total Operating expenses		Net operating income		Total Non-operating income (loss)		Income tax expense(5)		Net income attributable to common shareholders		Earnings per share attributable to common shareholders - diluted		Operating profit margin
GAAP Basis	$	22,232	$	16,033	$	(1,218)	$	4,442	$	12,014	$	3.90	42	%
Non-GAAP Adjustments:
Deferred compensation liability(1)	1,052		(1,052)		1,052		—		—		—		(3)	%
Consolidated Funds(2)	—		90		5,827		1,154		3,121		1.01		—
Gain on sale of high-yield focused advisory contracts (3)	—		—		(6,814)		(1,840)		(4,974)		(1.62)		—
Other investment income(4)	—		—		1,153		311		842		0.28		—
Adjusted Non-GAAP basis	$	23,284	$	15,071	$	—	$	4,067	$	11,003	$	3.57	39	%

	Nine Months Ended September 30, 2023
	Total Operating expenses		Net operating income		Total Non-operating income (loss)		Income tax expense(5)		Net income attributable to common shareholders		Earnings per share attributable to common shareholders - diluted		Operating profit margin
GAAP Basis	$	71,806	$	31,089	$	9,722	$	11,339	$	28,613	$	9.61	30	%
Non-GAAP Adjustments:
Deferred compensation liability(1)	(1,868)		1,868		(1,868)		—		—		—		2	%
Consolidated Funds(2)	—		330		(4,148)		(840)		(2,119)		(0.71)		—
Other investment income(4)	—		—		(3,706)		(1,053)		(2,653)		(0.89)		—
Adjusted Non-GAAP basis	$	69,938	$	33,287	$	—	$	9,446	$	23,841	$	8.01	32	%

	Nine Months Ended September 30, 2022
	Total Operating expenses		Net operating income		Total Non-operating income (loss)		Income tax expense(5)		Net income attributable to common shareholders		Earnings per share attributable to common shareholders - diluted		Operating profit margin
GAAP Basis	$	64,185	$	55,357	$	(26,488)	$	9,006	$	25,557	$	8.14	46	%
Non-GAAP Adjustments:
Deferred compensation liability (1)	6,921		(6,921)		6,921		—		—		—		(5)	%
Consolidated Funds(2)	—		333		19,099		3,586		10,152		3.24		—
Gain on sale of high-yield focused advisory contracts (3)	—		—		(6,814)		(1,778)		(5,036)		(1.60)		—
Other investment income(4)	—		—		7,282		1,901		5,381		1.71		—
Adjusted Non-GAAP basis	$	71,106	$	48,769	$	—	$	12,715	$	36,054	$	11.49	41	%

(1) This non-GAAP adjustment removes the compensation expense resulting from market valuation changes in the Company’s deferred compensation plans’ 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 removes the impact of the gain on the sale of the high yield-focused advisory contracts. The sale of the high yield-focused advisory contracts was a nonrecurring transaction, thus, the Company believes that removing the impact of the gain helps readers understand the Company’s core operating results and improves comparability from period to period.

(4) This non-GAAP adjustment represents the net gains or losses earned on the Company’s non-consolidated investment portfolio that are not designated as economic hedges of the deferred compensation plans’ 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.

(5) The income tax expense impacts were calculated and resulted in an overall non-GAAP effective tax rates of 28.0% for the three months ended September 30, 2023, 27.0% for the three months ended September 30, 2022, 28.4% for the nine months ended September 30, 2023, and 26.1% for the nine months ended September 30, 2022.

The Company does not recommend that investors consider 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 September 30, 2023. These factors include, but are not limited to: (i) any reduction in the Company’s AUM or AUA; (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.

325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215 614-255-3333 info@diamond-hill.com

Cover Page Cover Page	Oct. 31, 2023
Cover [Abstract]
Entity Central Index Key	0000909108
Title of 12(b) Security	Common Stock, no par value
Document Period End Date	Oct. 31, 2023
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

Cover Page Cover Page


Exhibit No.						Description
99.1						Press release issued by the Registrant dated October 3 1 , 2023.