DIAMOND HILL INVESTMENT GROUP, INC. REPORTS 2023 FINANCIAL RESULTS AND DECLARES FIRST QUARTER DIVIDEND
The following are selected highlights for the year ended
- Assets under management ("AUM") and assets under advisement ("AUA") combined was
$29.2 billion , compared to$26.6 billion as ofDecember 31, 2022 . - Average AUM and AUA combined was
$27.3 billion , compared to$29.6 billion during 2022. - Net client outflows were
$494.0 million , compared to$2.2 billion of net outflows during 2022. - Revenue was
$136.7 million , compared to$154.5 million in 2022. - Operating profit margin was 26% in 2023, compared to 42% in 2022. Adjusted operating profit margin[1] was 30% in 2023 and 39% in 2022.
- Investment income was
$23.1 million in 2023, compared to investment loss of$20.2 million in 2022. - Net income attributable to common shareholders was
$42.2 million , compared to$40.4 million in 2022. - Earnings per share attributable to common shareholders - diluted was
$14.32 in 2023, compared to$13.01 in 2022. - Adjusted earnings per share attributable to common shareholders - diluted[2] was
$10.28 , compared to$14.40 in 2022. - The Company returned a total of
$52.6 million to its shareholders -$34.9 million through the repurchase of 212,638 common shares and$17.7 million through dividends totaling$6.00 per common share.
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1 Adjusts the financial measures calculated in accordance with |
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2
Adjusts the financial measure calculated in accordance with GAAP for the impact of the Consolidated Funds, the gain on the sale of the Diamond Hill Corporate Credit and the Diamond Hill High Yield investment advisory contracts ("the "High Yield-Focused Advisory Contracts") effective |
"Our 2023 revenue was impacted by lower average assets under management/advisement, and outflows from
Dividend:
The Company's board of directors has approved the payment of a regular quarterly cash dividend of
Selected Income Statement Data (in thousands, except per share figures and percentages) |
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Three Months Ended December 31, |
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Year Ended
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2023 |
|
2022 |
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% Change |
|
2023 |
|
2022 |
|
% Change |
Revenue |
$ 33,821 |
|
$ 34,954 |
|
(3) % |
|
$ 136,716 |
|
$ 154,496 |
|
(12) % |
Compensation and related costs, excluding deferred compensation expense (benefit) |
19,131 |
|
17,376 |
|
10 % |
|
70,731 |
|
70,505 |
|
— % |
Deferred compensation expense (benefit) |
3,732 |
|
2,517 |
|
48 % |
|
5,600 |
|
(4,402) |
|
(227) % |
Other expenses |
6,543 |
|
6,085 |
|
8 % |
|
24,881 |
|
24,062 |
|
3 % |
Total operating expenses |
29,406 |
|
25,978 |
|
13 % |
|
101,212 |
|
90,165 |
|
12 % |
Net operating income |
4,415 |
|
8,976 |
|
(51) % |
|
35,504 |
|
64,331 |
|
(45) % |
Investment income (loss), net |
13,349 |
|
13,115 |
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2 % |
|
23,071 |
|
(20,187) |
|
(214) % |
Gain on sale of High Yield-Focused Advisory Contracts |
— |
|
— |
|
NM |
|
— |
|
6,815 |
|
(100) % |
Net income before taxes |
17,764 |
|
22,091 |
|
(20) % |
|
58,575 |
|
50,959 |
|
15 % |
Income tax expense |
(4,151) |
|
(5,082) |
|
(18) % |
|
(15,490) |
|
(14,088) |
|
10 % |
Net income |
13,613 |
|
17,009 |
|
(20) % |
|
43,085 |
|
36,871 |
|
17 % |
Net loss (income) attributable to redeemable noncontrolling interest |
— |
|
(2,131) |
|
NM |
|
(859) |
|
3,563 |
|
NM |
Net income attributable to common shareholders |
$ 13,613 |
|
$ 14,878 |
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(9) % |
|
$ 42,226 |
|
$ 40,434 |
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4 % |
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Earnings per share attributable to common shareholders - diluted |
$ 4.76 |
|
$ 4.93 |
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(3) % |
|
$ 14.32 |
|
$ 13.01 |
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10 % |
Selected Assets Under Management and Assets Under Advisement Data |
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Change in AUM and AUA |
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For the Year Ended |
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(in millions) |
2023 |
|
2022 |
AUM at beginning of the year |
$ 24,763 |
|
$ 31,028 |
Net cash inflows (outflows) |
|
|
|
Diamond Hill Funds |
(599) |
|
(2,433) |
Separately managed accounts |
(416) |
|
(73) |
Collective investment trusts |
153 |
|
486 |
Other pooled vehicles |
368 |
|
(221) |
|
(494) |
|
(2,241) |
Net market appreciation (depreciation) and income |
3,149 |
|
(4,024) |
Increase (decrease) during the year |
2,655 |
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(6,265) |
AUM at end of the year |
27,418 |
|
24,763 |
AUA at end of the year |
1,746 |
|
1,802 |
Total AUM and AUA at end of the year |
$ 29,164 |
|
$ 26,565 |
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Average AUM during the year |
$ 25,552 |
|
$ 27,599 |
Average AUA during the year |
1,769 |
|
1,952 |
Total average AUM and AUA during the year |
$ 27,321 |
|
$ 29,551 |
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For the Year Ended |
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(in millions) |
2023 |
|
2022 |
Net cash (outflows) inflows |
|
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Equity |
$ (1,865) |
|
$ (2,247) |
Fixed Income |
1,371 |
|
6 |
|
$ (494) |
|
$ (2,241) |
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 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 the differences between financial measures calculated in accordance with GAAP and non-GAAP financial measures for 2023 and 2022.
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Year Ended |
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(in thousands, except percentages and per share data) |
Total |
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Net |
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Total non- |
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Income tax |
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Net income |
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Earnings per |
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Net |
GAAP Basis |
$ 101,212 |
|
$ 35,504 |
|
$ 23,071 |
|
$ 15,490 |
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$ 42,226 |
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$ 14.32 |
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26 % |
Non-GAAP Adjustments: |
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Deferred compensation liability(1) |
(5,600) |
|
5,600 |
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(5,600) |
|
— |
|
— |
|
— |
|
4 % |
Consolidated Funds(2) |
— |
|
330 |
|
(4,148) |
|
(793) |
|
(2,166) |
|
(0.73) |
|
— |
Other investment income(4) |
— |
|
— |
|
$ (13,323) |
|
(3,571) |
|
(9,752) |
|
(3.31) |
|
— |
|
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Adjusted Non-GAAP Basis |
$ 95,612 |
|
$ 41,434 |
|
— |
|
$ 11,126 |
|
$ 30,308 |
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$ 10.28 |
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30 % |
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Year Ended |
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(in thousands, except percentages and per share data) |
Total |
|
Net |
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Total non- |
|
Income tax |
|
Net income |
|
Earnings per |
|
Net |
GAAP Basis |
$ 90,165 |
|
$ 64,331 |
|
$ (13,373) |
|
$ 14,088 |
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$ 40,434 |
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$ 13.01 |
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42 % |
Non-GAAP Adjustments: |
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|
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Deferred compensation liability(1) |
4,402 |
|
(4,402) |
|
4,402 |
|
— |
|
— |
|
— |
|
(3) % |
Consolidated Funds(2) |
— |
|
423 |
|
11,317 |
|
2,113 |
|
6,063 |
|
1.95 |
|
— |
Gain on sale of High-Yield Focused Advisory Contracts(3) |
— |
|
— |
|
(6,814) |
|
(1,761) |
|
(5,053) |
|
(1.63) |
|
— |
Other investment income(4) |
— |
|
— |
|
$ 4,468 |
|
1,155 |
|
3,313 |
|
1.07 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
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Adjusted Non-GAAP Basis |
$ 94,567 |
|
$ 60,352 |
|
— |
|
$ 15,595 |
|
$ 44,757 |
|
$ 14.40 |
|
39 % |
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(1) This non-GAAP adjustment removes the compensation expense resulting from market valuation changes in the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan's (together, the "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. |
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(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. |
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(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 discrete transaction, thus, the Company believes that removing the impact of the gain helps readers understand the Company's core operating results and improves comparability period to period. |
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(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. |
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(5) The income tax expense impacts were calculated and resulted in an overall non-GAAP effective tax rate of 26.8% for 2023, and 25.8% for 2022. |
The Company does not recommend that investors consider the above 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
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 undertakes 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.
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