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Diamond Hill Investment Group, Inc. Reports 2016 Financial Results

COLUMBUS, Ohio, Feb. 23, 2017 /PRNewswire/ -- Diamond Hill Investment Group, Inc.  (the "Company," "we," "our") (DHIL) today reported results for the year ended December 31, 2016.  The Company plans to file its Form 10-K later today and we urge investors to read and consider the information in that filing. 

 

 

Summary of Results of Operations

(in thousands, except per share figures)



Three Months Ended

 December 31,




Year Ended

December 31,




2016


2015


% Change


2016


2015


% Change

Revenues:












    Investment advisory(a)

$

36,893


$

28,021


32%


$

121,645


$

107,916


13%

    Mutual fund administration, net

3,146


4,281


(27)%


14,458


16,510


(12)%

    Total revenue

40,039


32,302


24%


136,103


124,426


9%













Operating expenses

20,512


15,039


36%


73,034


65,706


11%

Net operating income

19,527


17,263


13%


63,069


58,720


7%













Investment income (loss)

2,522


973




7,517


(737)



Gain on sale of subsidiary





2,676
















Income before taxes

22,049


18,236


21%


73,262


57,983


26%

Net income attributable to common
Shareholders

$

13,645


$

11,655


17%


$

46,052


$

37,074


24%













Earnings per share - diluted

$

3.99


$

3.43


16%


$

13.49


$

11.03


22%

Operating profit margin

49%


53%




46%


47%




(a) - Investment advisory revenue in the fourth quarter of 2016 includes $6.4 million received in connection with the termination of a variable
fee contract.

 

 

Selected Balance Sheet Data

(in thousands, except per share figures)



December 31,


2016


2015

Assets




    Cash equivalents and investment portfolio

$

165,206


$

109,966

    Accounts receivable

18,605


18,579

    Deferred taxes

8,737


9,206

    Other assets

7,170


7,436

    Total assets

$

199,718


$

145,187





Liabilities

46,653


39,873





Redeemable noncontrolling interest

13,841






Total shareholders' equity

139,224


105,314





Total liabilities and shareholders' equity

$

199,718


$

145,187





Book value per share

$

40.81


$

30.84

Outstanding shares

3,412


3,414

 

 


Change in Assets Under Management


For the Year Ended December 31,

(in millions)

2016


2015

AUM at beginning of the year

$

16,841


$

15,656

Net cash inflows (outflows)




    proprietary funds

548


1,916

    sub-advised funds

639


(6)

    institutional accounts

(1,023)


(443)


164


1,467

Net market appreciation (depreciation) and income

2,376


(282)

Increase during the year

2,540


1,185

AUM at end of the year

$

19,381


$

16,841

 

About Diamond Hill:
We are an independent investment management firm with significant employee ownership and $19.4 billion in assets under management as of  December 31, 2016.  We provide investment management services to institutions and individuals through mutual funds, institutional separate accounts, an exchange traded fund, 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 Measures
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 years ended December 31, 2016, 2015, and 2014, respectively.

 


 Year Ended December 31,

 (in thousands, except per share data)

2016


2015


2014

Total revenue

$

136,103


$

124,426


$

104,559







Net operating income, GAAP basis

$

63,069


$

58,720


$

47,460

Non-GAAP adjustments:






Gains (losses) on deferred compensation plan investments, net(1)

1,837


(234)


533

Net operating income, as adjusted, non-GAAP basis(2)

64,906


58,486


47,993

Non-GAAP Adjustment:






Tax provision on net operating income, as adjusted, non-GAAP basis(3)

(23,626)


(21,090)


(17,900)

Net operating income, as adjusted, after tax, non-GAAP basis(4)

$

41,280


$

37,396


$

30,093







Net operating income, as adjusted after tax per diluted share, non-
GAAP basis(5)

$

12.09


$

11.13


$

9.21

Diluted weighted average shares outstanding, GAAP basis

3,413


3,360


3,266







Operating profit margin, GAAP basis

46%


47%


45%

Operating profit margin, as adjusted, non-GAAP basis(6)

48%


47%


46%


(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 was calculated by taking 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 investments.


(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 the sale of subsidiary and is calculated by applying the tax rate from the actual tax provision to net operating income, as adjusted.


(4) Net operating income, as adjusted after tax: This non-GAAP measure was calculated by taking the net operating income, as adjusted less 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, 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 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 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 U. S. Securities and Exchange Commission.

 

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