| Diamond Hill Investment Group, Inc. Reports Results for Third Quarter 2009
COLUMBUS, Ohio, Nov. 6 /PRNewswire-FirstCall/ -- Diamond Hill
Investment Group, Inc. (Nasdaq: DHIL) today reported unaudited results for
the quarter ended September 30, 2009. The operating results for the third
quarter and first nine months of 2009 are summarized in the following
paragraphs. However, we urge investors to read our 10-Q. The limited
information that follows in this press release is not adequate for making
an informed investment judgment. For this reason, whenever possible, we
will post our report on a Friday afternoon so that investors have a maximum
amount of time to digest the information contained therein.
Assets under management ended the quarter at $5.49 billion, a decrease
of 1% compared to the third quarter of 2008 and an increase of 22% compared
to the year ended December 31, 2008. Revenue decreased 15% to $11.4 million
for the third quarter of 2009 compared to the third quarter of 2008. Net
income for the quarter was $3.20 million, or $1.23 per diluted share,
compared to net income of $1.22 million or $0.50 per diluted share, in the
third quarter of 2008. The primary contributor to the increase in net
income was a positive investment return of $2.06 million, or $0.79 per
diluted share, in the quarter.
Ric Dillon, president and chief investment officer, stated, "Our
primary business objective is to fulfill our fiduciary responsibility to
our clients by achieving excellent long term investment returns. I am
pleased that our strategies have generally outperformed their benchmarks
over the past five years."
Jim Laird, chief financial officer, stated, "New client investments for
the first nine months of 2009 were $148 million, down significantly from
the $1.954 billion for the same period in 2008. In the third quarter, net
flows into separate accounts were $80 million and, year to date, we have
had $423 million in net flows in separate accounts. After experiencing
outflows of over $130 million in each of the first two quarters, the mutual
funds had net inflows of $40 million in the third quarter. Over the past
year we have seen strong growth in our long only strategies and a decline
in our long short strategies. The result of this shift in asset mix is that
our overall effective investment advisory fee is reduced."
Three Months Ended September 30,
--------------------------------
2009 2008 Change
---- ---- ------
Revenue $11,371,644 $13,347,900 -15%
Net operating income 2,848,569 4,221,993 -33%
Operating margin 25% 32%
Operating margin - Excluding
Beacon Hill 27% 35%
Investment return 2,064,283 -2,319,263 nm
Net income 3,203,918 1,224,391 162%
Earnings per share - diluted $1.23 $0.50 146%
Nine Months Ended September 30,
-------------------------------
2009 2008 Change
---- ---- ------
Revenue $29,848,811 $36,646,835 -19%
Net operating income $7,508,523 $11,803,191 -36%
Operating margin 25% 32%
Operating margin - Excluding
Beacon Hill 28% 35%
Investment return 4,517,328 -4,025,376 nm
Net income $7,871,645 $4,989,453 58%
Earnings per share - diluted $3.05 $2.08 47%
As Of
----------------------------------------
September 30, December 31, September 30,
2009 2008 2008
------------- ------------ -------------
Assets under management (millions) $5,489 $4,510 $5,548
Tangible book value per share (a) $17.27 $12.36 $22.54
Total outstanding shares 2,612,214 2,447,299 2,465,927
(a) - A $10 per share special dividend was declared and paid in October
2008.
Beacon Hill Fund Services - In April 2009, Beacon Hill received final
approval from FINRA to operate its registered broker dealer, BHIL
Distributors, Inc. During the three months ended September 30, 2009, Beacon
Hill generated an operating loss of $143 thousand on revenue of $330
thousand compared to an operating loss of $460 thousand on revenue of $28
thousand for the three months ended September 30, 2008. For the nine months
ended September 30, 2009, Beacon Hill generated an operating loss of $822
thousand on revenue of $571 thousand compared to an operating loss of
$1.027 million on revenue of $48 thousand for the nine months ended
September 30, 2008. The company continues to believe that Beacon Hill will
achieve a run rate breakeven by the end of 2009 and generate an operating
profit in 2010.
Assets Under Management - As of September 30, 2009, assets under
management ("AUM") totaled $5.5 billion, a 1% decrease in comparison to
September 30, 2008. The following is a roll-forward of AUM activity for the
nine months ended September 30, 2009 and 2008:
Change in Assets Under Management
For the Nine Months Ended September 30,
--------------------------------------
(in millions) 2009 2008
------------- ---- ----
AUM at beginning of the period $4,510 $4,403
Net cash inflows (outflows)
mutual funds (229) 1,482
separate accounts 423 545
private investment funds (46) (73)
--- ---
148 1,954
Net market appreciation
(depreciation) and income 831 (809)
--- ----
Increase during the period 979 1,145
--- -----
AUM at end of the period $5,489 $5,548
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About Diamond Hill:
Diamond Hill provides investment management services to institutions
and financial intermediaries seeking to preserve and build capital. The
firm currently manages mutual funds, separate accounts and private
investment funds. For more information on Diamond Hill, visit
http://www.diamond-hill.com.
Use of Supplemental Data as Non-GAAP Performance Measure
Net Operating Income After Tax
As supplemental information, we are providing performance measures that
are based on methodologies other than generally accepted accounting
principles ("non-GAAP") for "Net Operating Income After Tax" that
management uses as benchmarks in evaluating and comparing the
period-to-period operating performance of Diamond Hill Investment Group,
Inc. (the "Company") and its subsidiaries.
The Company defines "net operating income after tax" as the Company's
net operating income less income tax provision excluding investment return
and the tax impact related to the investment return. The Company believes
that "net operating income after tax" provides a good representation of the
company's operating performance as it excludes the impact of investment
return on financial results. The amount of the investment portfolio and
market fluctuations on the investments can fluctuate significantly from one
period to another, as seen over the past year, which can distort the
underlying earnings potential of a company. We also believe "net operating
income after tax" is an important metric in estimating the value of an
asset management business. This measure is provided in addition to net
income and net operating income and is not a substitute for net income or
net operating income and may not be comparable to non-GAAP performance
measures of other companies.
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- ------------------
2009 2008 2009 2008
---- ---- ---- ----
Net Operating Income,
GAAP basis $2,848,569 $4,221,993 $7,508,523 $11,803,191
Non-GAAP Adjustments:
Tax Provision excluding
impact of Investment
Return 990,874 1,505,175 2,593,742 4,231,467
Net operating income
after tax, non-GAAP
basis 1,857,695 2,716,818 4,914,781 7,571,724
Net operating income
after tax per diluted
share, non-GAAP basis $0.71 $1.11 $1.91 $3.16
Diluted weighted average
shares outstanding, GAAP
basis 2,611,933 2,444,340 2,576,657 2,396,999
The Company's 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
and Section 21E of the Securities Exchange Act of 1934 relating to such
matters as growth of the Company's business, corporate objectives,
prospects for achieving the critical threshold of assets under management,
operating margins, economic trends (including interest rates and market
volatility), intrinsic value of the Company's shares and similar matters.
The words "believe," "expect," "anticipate," "estimate," "should," "could,"
"goal" and similar expressions identify forward-looking statements that
speak only as of the date thereof. 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 actual results and experiences of the
Company could differ materially from the anticipated results or other
expectations expressed by the Company in its 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 the Company's products; changes in interest
rates; a general downturn in the economy; changes in government policy and
regulation, including monetary policy; changes in the Company's 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 the
Company's other public documents on file with the SEC.
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