DIAMOND HILL INVESTMENT GROUP, INC. REPORTS RESULTS FOR THIRD QUARTER 2024 AND DECLARES QUARTERLY DIVIDEND
Rhea-AI Summary
Diamond Hill Investment Group reported Q3 2024 financial results with assets under management (AUM) and assets under advisement (AUA) reaching $33.2 billion, up from $26.6 billion in Q3 2023. Revenue increased 10% to $39.0 million, while net client outflows improved to $22.0 million from $343.0 million in Q3 2023. Earnings per share rose to $5.35 from $2.20 year-over-year. The company declared a quarterly dividend of $1.50 per share and approved a new $50 million share repurchase program. Net operating profit margin decreased to 26% from 35% in Q3 2023, while adjusted net operating profit margin was 32% compared to 33% last year.
Positive
- Assets under management and advisement increased 24.9% YoY to $33.2 billion
- Revenue grew 10% YoY to $39.0 million
- EPS increased 143% YoY to $5.35
- Net client outflows improved significantly to $22.0M from $343.0M in Q3 2023
- Board approved new $50M share repurchase program
Negative
- Net operating profit margin declined to 26% from 35% YoY
- Operating expenses increased 24% YoY
- Net operating income decreased 17% YoY
News Market Reaction
On the day this news was published, DHIL gained 3.12%, reflecting a moderate positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
The following are selected highlights for the quarter ended September 30, 2024:
- Assets under management ("AUM") and assets under advisement ("AUA") combined were
$33.2 billion $29.2 billion $26.6 billion - Average AUM and AUA combined were
$32.4 billion $27.8 billion - Net client outflows were
$22.0 million $343.0 million - Revenue was
$39.0 million $35.6 million - Net operating profit margin was
26% , compared to35% for the third quarter of 2023. - Adjusted net operating profit margin1 was
32% , compared to33% for the third quarter of 2023. - Investment income was
$9.7 million $4.6 million - Net income attributable to common shareholders was
$14.6 million $6.5 million - Earnings per share attributable to common shareholders - diluted was
$5.35 $2.20 - Adjusted earnings per share attributable to common shareholders - diluted2 was
$3.35 $2.85 - The Company returned approximately
$7.5 million $3.4 million $4.1 million $1.50
"We continue making progress in diversifying our asset base, vehicle offerings and client types," said Heather Brilliant, CEO. "This is reflected in total fixed income assets reaching
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1 | Adjusts the financial measure calculated in accordance with |
2 | Adjusts the financial measure calculated in accordance with GAAP for the impact of the Consolidated Fund(s) and investment income related to certain other investments. See the reconciliation to the comparable GAAP financial measure at the end of this earnings release. |
Capital Allocation:
The Company's board of directors approved the payment of a regular quarterly cash dividend of
The Company's board of directors also approved a new repurchase plan, authorizing management to repurchase up to
Selected Income Statement Data | |||||
Three Months Ended September 30, | |||||
2024 | 2023 | % Change | |||
Revenue | $ 39,018,232 | $ 35,554,280 | 10 % | ||
Compensation and related costs, excluding deferred compensation expense (benefit) | 19,509,116 | 17,837,787 | 9 % | ||
Deferred compensation expense (benefit) | 2,250,168 | (859,252) | NM | ||
Other expenses | 7,041,477 | 6,214,551 | 13 % | ||
Total operating expenses | 28,800,761 | 23,193,086 | 24 % | ||
Net operating income | 10,217,471 | 12,361,194 | (17) % | ||
Investment income (loss), net | 9,668,961 | (4,636,952) | NM | ||
Net income before taxes | 19,886,432 | 7,724,242 | 157 % | ||
Income tax expense | (5,241,839) | (2,523,649) | 108 % | ||
Net income | 14,644,593 | 5,200,593 | 182 % | ||
Net income attributable to redeemable noncontrolling interest | — | 1,272,839 | NM | ||
Net income attributable to common shareholders | $ 14,644,593 | $ 6,473,432 | 126 % | ||
Earnings per share attributable to common shareholders - diluted | $ 5.35 | $ 2.20 | 143 % | ||
Weighted average shares outstanding - diluted | 2,738,588 | 2,939,055 | (7) % | ||
Nine Months Ended September 30, | |||||
2024 | 2023 | % Change | |||
Revenue | $ 111,974,495 | $ 102,895,420 | 9 % | ||
Compensation and related costs, excluding deferred compensation expense | 55,987,247 | 51,600,045 | 9 % | ||
Deferred compensation expense | 4,571,396 | 1,867,983 | 145 % | ||
Other expenses | 20,762,944 | 18,338,448 | 13 % | ||
Total operating expenses | 81,321,587 | 71,806,476 | 13 % | ||
Net operating income | 30,652,908 | 31,088,944 | (1) % | ||
Investment income, net | 18,380,048 | 9,722,494 | 89 % | ||
Net income before taxes | 49,032,956 | 40,811,438 | 20 % | ||
Income tax expense | (13,246,590) | (11,338,849) | 17 % | ||
Net income | 35,786,366 | 29,472,589 | 21 % | ||
Net income attributable to redeemable noncontrolling interest | — | (859,126) | NM | ||
Net income attributable to common shareholders | $ 35,786,366 | $ 28,613,463 | 25 % | ||
Earnings per share attributable to common shareholders - diluted | $ 12.90 | $ 9.61 | 34 % | ||
Weighted average shares outstanding - diluted | 2,774,819 | 2,977,853 | (7) % | ||
Selected Assets Under Management and Assets Under Advisement Data | |||
Change in AUM and AUA | |||
For the Three Months Ended September 30, | |||
(in millions) | 2024 | 2023 | |
AUM at beginning of the period | $ 29,291 | $ 26,066 | |
Net cash inflows (outflows) | |||
Diamond Hill Funds | 423 | (260) | |
Separately managed accounts | (313) | (251) | |
Collective investment trusts | (23) | 184 | |
Other pooled vehicles | (109) | (16) | |
(22) | (343) | ||
Net market appreciation (depreciation) and income | 2,006 | (740) | |
Increase (decrease) during the period | 1,984 | (1,083) | |
AUM at end of the period | 31,275 | 24,983 | |
AUA at end of period | 1,957 | 1,638 | |
Total AUM and AUA at end of period | $ 33,232 | $ 26,621 | |
Average AUM during the period | $ 30,488 | $ 26,004 | |
Average AUA during the period | 1,928 | 1,756 | |
Total average AUM and AUA during the period | $ 32,416 | $ 27,760 | |
Change in AUM and AUA | |||
For the Nine Months Ended September 30, | |||
(in millions) | 2024 | 2023 | |
AUM at beginning of the period | $ 27,418 | $ 24,763 | |
Net cash inflows (outflows) | |||
Diamond Hill Funds | 632 | (349) | |
Separately managed accounts | (661) | (340) | |
Collective investment trusts | 394 | 67 | |
Other pooled vehicles | (40) | 260 | |
325 | (362) | ||
Net market appreciation and income | 3,532 | 582 | |
Increase during the period | 3,857 | 220 | |
AUM at end of the period | 31,275 | 24,983 | |
AUA at end of period | 1,957 | 1,638 | |
Total AUM and AUA at end of period | $ 33,232 | $ 26,621 | |
Average AUM during the period | $ 29,333 | $ 25,495 | |
Average AUA during the period | 1,870 | 1,796 | |
Total average AUM and AUA during the period | $ 31,203 | $ 27,291 | |
Net Cash Inflows (Outflows) Further Breakdown | |||||||
For the Three Months Ended | For the Nine Months Ended | ||||||
(in millions) | 2024 | 2023 | 2024 | 2023 | |||
Net cash inflows (outflows) | |||||||
Equity | $ (477) | $ (732) | $ (1,199) | $ (1,448) | |||
Fixed Income | 455 | 389 | 1,524 | 1,086 | |||
$ (22) | $ (343) | $ 325 | $ (362) | ||||
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
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 are presented for supplemental informational purposes only, should not be used as a substitute for financial measures calculated in accordance with GAAP and may be calculated differently from similarly titled non-GAAP measures used by other companies. The following schedules reconcile the differences between financial measures calculated in accordance with GAAP and non-GAAP financial measures for the three-month and nine-month periods ended September 30, 2024 and 2023, respectively. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, as well as the Company's condensed consolidated financial statements and related notes included elsewhere in this report.
Three Months Ended September 30, 2024 | |||||||||||||
(in thousands, except percentages and per share data) | Total | Net | Total | Income tax | Net income | Earnings per to common | Net | ||||||
GAAP Basis | $ 28,801 | $ 10,217 | $ 9,669 | $ 5,242 | $ 14,645 | $ 5.35 | 26 % | ||||||
Non-GAAP Adjustments: | |||||||||||||
Deferred compensation liability(1) | (2,250) | 2,250 | (2,250) | — | — | — | 6 % | ||||||
Other investment income(3) | — | — | (7,419) | (1,956) | (5,463) | (2.00) | — | ||||||
Adjusted Non-GAAP basis | $ 26,551 | $ 12,467 | $ — | $ 3,286 | $ 9,182 | $ 3.35 | 32 % | ||||||
Three Months Ended September 30, 2023 | |||||||||||||
(in thousands, except percentages and per share data) | Total | Net | Total income (loss) | Income tax | Net income | Earnings per | Net | ||||||
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 Fund(2) | — | 121 | 3,269 | 593 | 1,525 | 0.52 | — | ||||||
Other investment income(3) | — | — | 509 | 143 | 366 | 0.13 | — | ||||||
Adjusted Non-GAAP basis | $ 24,052 | $ 11,623 | $ — | $ 3,260 | $ 8,364 | $ 2.85 | 33 % | ||||||
Nine Months Ended September 30, 2024 | |||||||||||||
(in thousands, except percentages and per share data) | Total | Net | Total | Income tax | Net income | Earnings per | Net | ||||||
GAAP Basis | $ 81,322 | $ 30,653 | $ 18,380 | $ 13,247 | $ 35,786 | $ 12.90 | 27 % | ||||||
Non-GAAP Adjustments: | |||||||||||||
Deferred compensation liability(1) | (4,571) | 4,571 | (4,571) | — | — | — | 4 % | ||||||
Other investment income(3) | — | — | (13,809) | (3,731) | (10,078) | (3.64) | — | ||||||
Adjusted Non-GAAP basis | $ 76,751 | $ 35,224 | $ — | $ 9,516 | $ 25,708 | $ 9.26 | 31 % | ||||||
Nine Months Ended September 30, 2023 | |||||||||||||
(in thousands, except percentages and per share data) | Total expenses | Net | Total | Income tax | Net income attributable shareholders | Earnings per | Net | ||||||
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 Fund(2) | — | 330 | (4,148) | (840) | (2,119) | (0.71) | — | ||||||
Other investment income(3) | — | — | (3,706) | (1,053) | (2,653) | (0.89) | — | ||||||
Adjusted Non-GAAP basis | $ 69,938 | $ 33,287 | $ — | $ 9,446 | $ 23,841 | $ 8.01 | 32 % | ||||||
(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 Fund has 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 Fund. The adjustment to net operating income represents the operating expenses of the Consolidated Fund, 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 Fund, net of redeemable non-controlling interests. The Company believes removing the impact of the Consolidated Fund helps readers understand its core operating results and improves comparability from period to period.
(3) 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.
(4) The income tax expense impacts were calculated and resulted in the overall non-GAAP effective tax rates of
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
Factors that may 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, 2023, as well as in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024. 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) challenges from industry trends towards lower fee strategies and model portfolio arrangements; (vii) adverse regulatory and legal developments; (viii) unfavorable changes in tax laws or limitations; (ix) interruptions in or failure to provide critical technological service by the Company or third parties; (x) adverse civil litigation and government investigations or proceedings; (xi) failure to adapt to or successfully incorporate technological changes, such as artificial intelligence, into the Company's business; (xii) risk of loss on the Company's investments; (xiii) lack of sufficient capital on satisfactory terms; (xiv) losses or costs not covered by insurance; (xv) a decline in the performance of the Company's products; (xvi) changes in interest rates and inflation; (xvii) changes in national and local economic and political conditions; (xviii) the continuing economic uncertainty in various parts of the world; (xix) the after-effects of the COVID-19 pandemic and the actions taken in connection therewith; (xx) political uncertainty caused by, among other things, political parties, economic nationalist sentiments, tensions surrounding the current socioeconomic landscape; and (xxi) other risks identified from time-to-time in the Company's public documents on file with the
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 after the date they are made, whether as a result of new information, future events or developments or otherwise, except as 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.
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SOURCE Diamond Hill Investment Group, Inc.
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