|
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|
Ohio
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65-0190407
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(State of
incorporation)
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|
(I.R.S. Employer
Identification No.)
|
|
Large accelerated filer
|
|
¨
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Accelerated filer
|
|
x
|
|
|
|
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
|
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¨
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Emerging growth company
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¨
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PAGE
|
|
|
|
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|
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Item 1.
|
||
|
|
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Item 2.
|
||
|
|
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Item 3.
|
||
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Item 4.
|
||
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
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Item 2.
|
||
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Item 3.
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||
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Item 4.
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||
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Item 5.
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||
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Item 6.
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||
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|
PART I:
|
FINANCIAL INFORMATION
|
ITEM 1:
|
Consolidated Financial Statements
|
|
6/30/2018
|
|
12/31/2017
|
||||
|
(Unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
78,227,005
|
|
|
$
|
76,602,108
|
|
Investment portfolio
|
205,200,638
|
|
|
138,476,022
|
|
||
Accounts receivable
|
20,884,354
|
|
|
19,220,279
|
|
||
Prepaid expenses
|
2,139,139
|
|
|
2,073,343
|
|
||
Income taxes receivable
|
—
|
|
|
4,114,962
|
|
||
Property and equipment, net of depreciation
|
4,202,536
|
|
|
4,057,901
|
|
||
Deferred taxes
|
7,097,692
|
|
|
5,843,704
|
|
||
Total assets
|
$
|
317,751,364
|
|
|
$
|
250,388,319
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
20,470,960
|
|
|
$
|
11,890,403
|
|
Accrued incentive compensation
|
14,534,000
|
|
|
25,496,500
|
|
||
Deferred compensation
|
24,449,750
|
|
|
20,480,790
|
|
||
Income taxes payable
|
439,811
|
|
|
—
|
|
||
Total liabilities
|
59,894,521
|
|
|
57,867,693
|
|
||
Redeemable noncontrolling interest
|
50,777,801
|
|
|
20,076,806
|
|
||
Permanent Shareholders’ equity
|
|
|
|
||||
Common stock, no par value 7,000,000 shares authorized; 3,532,634 issued and outstanding at June 30, 2018 (inclusive of 213,700 unvested shares); 3,470,428 issued and outstanding at December 31, 2017 (inclusive of 191,900 unvested shares)
|
130,369,411
|
|
|
118,209,111
|
|
||
Preferred stock, undesignated, 1,000,000 shares authorized and unissued
|
—
|
|
|
—
|
|
||
Deferred equity compensation
|
(24,019,869
|
)
|
|
(19,134,963
|
)
|
||
Retained earnings
|
100,729,500
|
|
|
73,369,672
|
|
||
Total permanent shareholders’ equity
|
207,079,042
|
|
|
172,443,820
|
|
||
Total liabilities and shareholders’ equity
|
$
|
317,751,364
|
|
|
$
|
250,388,319
|
|
|
|
|
|
||||
Book value per share
|
$
|
58.62
|
|
|
$
|
49.69
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Investment advisory
|
$
|
33,526,273
|
|
|
$
|
32,558,324
|
|
|
$
|
68,157,563
|
|
|
$
|
64,323,301
|
|
Mutual fund administration, net
|
2,401,442
|
|
|
2,984,217
|
|
|
5,552,154
|
|
|
6,258,313
|
|
||||
Total revenue
|
35,927,715
|
|
|
35,542,541
|
|
|
73,709,717
|
|
|
70,581,614
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Compensation and related costs
|
14,572,121
|
|
|
14,313,734
|
|
|
28,959,595
|
|
|
27,992,883
|
|
||||
General and administrative
|
2,822,528
|
|
|
2,980,469
|
|
|
5,786,200
|
|
|
6,468,585
|
|
||||
Sales and marketing
|
1,302,040
|
|
|
1,252,852
|
|
|
2,511,526
|
|
|
2,382,570
|
|
||||
Mutual fund administration
|
881,487
|
|
|
1,028,738
|
|
|
1,898,906
|
|
|
2,029,354
|
|
||||
Total operating expenses
|
19,578,176
|
|
|
19,575,793
|
|
|
39,156,227
|
|
|
38,873,392
|
|
||||
NET OPERATING INCOME
|
16,349,539
|
|
|
15,966,748
|
|
|
34,553,490
|
|
|
31,708,222
|
|
||||
Investment income, net
|
3,565,669
|
|
|
3,024,729
|
|
|
2,005,946
|
|
|
6,905,973
|
|
||||
INCOME BEFORE TAXES
|
19,915,208
|
|
|
18,991,477
|
|
|
36,559,436
|
|
|
38,614,195
|
|
||||
Income tax expense
|
(5,017,185
|
)
|
|
(6,024,458
|
)
|
|
(8,719,285
|
)
|
|
(12,521,728
|
)
|
||||
NET INCOME
|
14,898,023
|
|
|
12,967,019
|
|
|
27,840,151
|
|
|
26,092,467
|
|
||||
Less: Net income attributable to redeemable noncontrolling interest
|
(527,655
|
)
|
|
(328,580
|
)
|
|
(480,323
|
)
|
|
(697,133
|
)
|
||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
$
|
14,370,368
|
|
|
$
|
12,638,439
|
|
|
$
|
27,359,828
|
|
|
$
|
25,395,334
|
|
Earnings per share attributable to common shareholders
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
4.08
|
|
|
$
|
3.67
|
|
|
$
|
7.81
|
|
|
$
|
7.39
|
|
Diluted
|
$
|
4.08
|
|
|
$
|
3.66
|
|
|
$
|
7.81
|
|
|
$
|
7.38
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
3,518,665
|
|
|
3,443,783
|
|
|
3,503,379
|
|
|
3,436,391
|
|
||||
Diluted
|
3,519,816
|
|
|
3,449,128
|
|
|
3,505,136
|
|
|
3,441,022
|
|
|
Shares
Outstanding
|
|
Common
Stock
|
|
Deferred Equity
Compensation
|
|
Retained
Earnings
|
|
Total
|
|
Redeemable Noncontrolling Interest
|
|||||||||||
Balance at December 31, 2017
|
3,470,428
|
|
|
$
|
118,209,111
|
|
|
$
|
(19,134,963
|
)
|
|
$
|
73,369,672
|
|
|
$
|
172,443,820
|
|
|
$
|
20,076,806
|
|
Issuance of restricted stock grants
|
61,650
|
|
|
11,917,937
|
|
|
(11,917,937
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Amortization of restricted stock grants
|
—
|
|
|
—
|
|
|
3,016,235
|
|
|
—
|
|
|
3,016,235
|
|
|
—
|
|
|||||
Issuance of stock grants
|
20,153
|
|
|
4,109,197
|
|
|
—
|
|
|
—
|
|
|
4,109,197
|
|
|
—
|
|
|||||
Issuance of common stock related to 401k plan match
|
5,242
|
|
|
1,067,125
|
|
|
—
|
|
|
—
|
|
|
1,067,125
|
|
|
—
|
|
|||||
Shares withheld related to employee tax withholding
|
(4,439
|
)
|
|
(917,163
|
)
|
|
—
|
|
|
—
|
|
|
(917,163
|
)
|
|
—
|
|
|||||
Forfeiture of restricted stock grants
|
(20,400
|
)
|
|
(4,016,796
|
)
|
|
4,016,796
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
27,359,828
|
|
|
27,359,828
|
|
|
480,323
|
|
|||||
Net subscriptions of consolidated funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,776,032
|
|
|||||
New consolidations of Company sponsored investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,444,640
|
|
|||||
Balance at June 30, 2018
|
3,532,634
|
|
|
$
|
130,369,411
|
|
|
$
|
(24,019,869
|
)
|
|
$
|
100,729,500
|
|
|
$
|
207,079,042
|
|
|
$
|
50,777,801
|
|
|
Six Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net Income
|
$
|
27,840,151
|
|
|
$
|
26,092,467
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation
|
574,457
|
|
|
432,705
|
|
||
Share-based compensation
|
4,083,360
|
|
|
4,082,127
|
|
||
(Increase) decrease in accounts receivable
|
(1,608,910
|
)
|
|
327,183
|
|
||
Change in current income taxes
|
4,554,773
|
|
|
1,185,389
|
|
||
Change in deferred income taxes
|
(1,253,988
|
)
|
|
(1,197,061
|
)
|
||
Net losses (gains) on investments
|
644,680
|
|
|
(5,774,968
|
)
|
||
Net change in securities held by Consolidated Funds
|
(46,416,866
|
)
|
|
(3,725,638
|
)
|
||
Decrease in accrued incentive compensation
|
(6,853,303
|
)
|
|
(5,035,076
|
)
|
||
Increase in deferred compensation
|
3,968,960
|
|
|
4,937,302
|
|
||
Other changes in assets and liabilities
|
7,129,382
|
|
|
380,641
|
|
||
Net cash (used in) provided by operating activities
|
(7,337,304
|
)
|
|
21,705,071
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchase of property and equipment
|
(593,989
|
)
|
|
(129,669
|
)
|
||
Purchase of Company sponsored investments
|
(3,286,872
|
)
|
|
(11,358,395
|
)
|
||
Proceeds from sale of Company sponsored investments
|
1,508,543
|
|
|
1,685,088
|
|
||
Net cash used in investing activities
|
(2,372,318
|
)
|
|
(9,802,976
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Value of shares withheld related to employee tax withholding
|
(917,163
|
)
|
|
(1,883,676
|
)
|
||
Net subscriptions received from redeemable noncontrolling interest holders
|
12,251,682
|
|
|
3,296,134
|
|
||
Net cash provided by financing activities
|
11,334,519
|
|
|
1,412,458
|
|
||
CASH AND CASH EQUIVALENTS
|
|
|
|
||||
Net change during the period
|
1,624,897
|
|
|
13,314,553
|
|
||
At beginning of period
|
76,602,108
|
|
|
57,189,876
|
|
||
At end of period
|
$
|
78,227,005
|
|
|
$
|
70,504,429
|
|
Supplemental cash flow information:
|
|
|
|
||||
Income taxes paid
|
$
|
5,418,500
|
|
|
$
|
12,533,400
|
|
Supplemental disclosure of non-cash transactions:
|
|
|
|
||||
Common stock issued as incentive compensation
|
$
|
4,109,197
|
|
|
$
|
3,892,424
|
|
Charitable donation of corporate investments and property and equipment
|
1,989,803
|
|
|
1,748,841
|
|
||
Net subscriptions (redemptions) of ETF shares for marketable securities
|
1,524,350
|
|
|
(99,060
|
)
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Cash equivalents
|
$
|
77,021,577
|
|
$
|
—
|
|
$
|
—
|
|
$
|
77,021,577
|
|
Fair value investments
|
|
|
|
|
||||||||
Securities held in Consolidated Funds
(a)
|
44,931,719
|
|
104,017,818
|
|
—
|
|
148,949,537
|
|
||||
Company sponsored investments
|
36,775,789
|
|
—
|
|
—
|
|
36,775,789
|
|
|
Three Months Ended June 30, 2018
|
||||||||||
|
Investment advisory
|
|
Mutual fund
administration, net
|
|
Total revenue
|
||||||
Proprietary funds
|
$
|
26,294,908
|
|
|
$
|
2,401,442
|
|
|
$
|
28,696,350
|
|
Sub-advised funds and institutional accounts
|
7,231,365
|
|
|
—
|
|
|
7,231,365
|
|
|||
|
$
|
33,526,273
|
|
|
$
|
2,401,442
|
|
|
$
|
35,927,715
|
|
|
Three Months Ended June 30, 2017
|
||||||||||
|
Investment advisory
|
|
Mutual fund
administration, net
|
|
Total revenue
|
||||||
Proprietary funds
|
$
|
25,553,777
|
|
|
$
|
2,984,217
|
|
|
$
|
28,537,994
|
|
Sub-advised funds and institutional accounts
|
7,004,547
|
|
|
—
|
|
|
7,004,547
|
|
|||
|
$
|
32,558,324
|
|
|
$
|
2,984,217
|
|
|
$
|
35,542,541
|
|
|
Six Months Ended June 30, 2018
|
||||||||||
|
Investment advisory
|
|
Mutual fund
administration, net
|
|
Total revenue
|
||||||
Proprietary funds
|
$
|
53,600,106
|
|
|
$
|
5,552,154
|
|
|
$
|
59,152,260
|
|
Sub-advised funds and institutional accounts
|
14,557,457
|
|
|
—
|
|
|
14,557,457
|
|
|||
|
$
|
68,157,563
|
|
|
$
|
5,552,154
|
|
|
$
|
73,709,717
|
|
|
Six Months Ended June 30, 2017
|
||||||||||
|
Investment advisory
|
|
Mutual fund
administration, net |
|
Total revenue
|
||||||
Proprietary funds
|
$
|
50,403,848
|
|
|
$
|
6,258,313
|
|
|
$
|
56,662,161
|
|
Sub-advised funds and institutional accounts
|
13,919,453
|
|
|
—
|
|
|
13,919,453
|
|
|||
|
$
|
64,323,301
|
|
|
$
|
6,258,313
|
|
|
$
|
70,581,614
|
|
|
As of June 30, 2018
|
|||||
|
AUM subject to variable rate fees
|
Unearned variable rate fees
|
||||
Contractual Period Ends:
|
|
|
||||
Quarter Ending December 31, 2018
|
$
|
103,406,795
|
|
$
|
1,352,041
|
|
Quarter Ending September 30, 2019
|
35,092,891
|
|
559,421
|
|
||
Quarter Ending March 31, 2020
|
12,800,012
|
|
—
|
|
||
Quarter Ending September 30, 2021
|
263,730,212
|
|
3,578,497
|
|
||
Total
|
$
|
415,029,910
|
|
$
|
5,489,959
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Mutual fund administration:
|
|
|
|
|
|
|
|
||||||||
Administration revenue, gross
|
$
|
5,993,719
|
|
|
$
|
6,465,152
|
|
|
$
|
12,601,056
|
|
|
$
|
12,874,949
|
|
Fund related expense
|
(3,595,555
|
)
|
|
(3,489,399
|
)
|
|
(7,063,880
|
)
|
|
(6,638,351
|
)
|
||||
Revenue, net of related expenses
|
2,398,164
|
|
|
2,975,753
|
|
|
5,537,176
|
|
|
6,236,598
|
|
||||
DHCM C-Share financing:
|
|
|
|
|
|
|
|
||||||||
Broker commission advance repayments
|
83,380
|
|
|
100,576
|
|
|
179,858
|
|
|
214,047
|
|
||||
Broker commission amortization
|
(80,102
|
)
|
|
(92,112
|
)
|
|
(164,880
|
)
|
|
(192,332
|
)
|
||||
Financing activity, net
|
3,278
|
|
|
8,464
|
|
|
14,978
|
|
|
21,715
|
|
||||
Mutual fund administration revenue, net
|
$
|
2,401,442
|
|
|
$
|
2,984,217
|
|
|
$
|
5,552,154
|
|
|
$
|
6,258,313
|
|
|
As of
|
|||||
|
June 30, 2018
|
December 31, 2017
|
||||
Fair value investments:
|
|
|
||||
Securities held in Consolidated Funds
(a)
|
$
|
148,949,537
|
|
$
|
65,890,500
|
|
Company sponsored investments
|
36,775,789
|
|
36,541,818
|
|
||
Company sponsored equity method investments
|
19,475,312
|
|
36,043,704
|
|
||
Total Investment portfolio
|
$
|
205,200,638
|
|
$
|
138,476,022
|
|
|
|
|
As of
|
||||
|
|
|
June 30, 2018
|
||||
Total assets
|
|
|
$
|
97,401,862
|
|
||
Total liabilities
|
|
|
31,334,781
|
|
|||
Net assets
|
|
|
66,067,081
|
|
|||
DHCM's portion of net assets
|
|
|
19,475,312
|
|
|||
|
|
|
|
||||
|
For the Three Months Ended
|
|
For the Six Months Ended
|
||||
|
June 30, 2018
|
|
June 30, 2018
|
||||
Investment income
|
$
|
292,943
|
|
|
$
|
556,095
|
|
Expenses
|
244,943
|
|
|
484,002
|
|
||
Net realized gains (losses)
|
725,794
|
|
|
(252,686
|
)
|
||
Net change in unrealized appreciation
|
2,089,091
|
|
|
313,546
|
|
||
Net income
|
2,862,885
|
|
|
132,953
|
|
||
DHCM's portion of net income
|
860,657
|
|
|
74,718
|
|
|
Shares
|
|
Weighted-Average
Grant Date Price
per Share
|
|||
Outstanding Restricted Stock as of December 31, 2017
|
197,900
|
|
|
$
|
165.60
|
|
Grants issued
|
58,650
|
|
|
203.20
|
|
|
Grants vested
|
(19,450
|
)
|
|
74.61
|
|
|
Grants forfeited
|
(20,400
|
)
|
|
196.90
|
|
|
Total Outstanding Restricted Stock as of June 30, 2018
|
216,700
|
|
|
$
|
173.56
|
|
Six Months
Remaining In |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
$
|
3,699,502
|
|
|
$
|
6,807,766
|
|
|
$
|
5,333,844
|
|
|
$
|
4,011,302
|
|
|
$
|
3,024,169
|
|
|
$
|
1,143,286
|
|
|
$
|
24,019,869
|
|
|
Shares Issued
|
|
Grant Date Value
|
|||
June 30, 2018
|
20,153
|
|
|
$
|
4,109,197
|
|
June 30, 2017
|
19,219
|
|
|
3,892,424
|
|
|
June 30,
2018 |
|
June 30,
2017 |
||||
Three Months Ended
|
$
|
238,014
|
|
|
$
|
234,191
|
|
Six Months Ended
|
$
|
494,304
|
|
|
$
|
465,654
|
|
Future Minimum Lease Payments
|
||||||||||||||||||||||||||
Six Months
Remaining In |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
$
|
293,175
|
|
|
$
|
595,807
|
|
|
$
|
624,179
|
|
|
$
|
624,179
|
|
|
$
|
624,179
|
|
|
$
|
1,092,000
|
|
|
$
|
3,853,519
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net Income
|
$
|
14,898,023
|
|
|
$
|
12,967,019
|
|
|
$
|
27,840,151
|
|
|
$
|
26,092,467
|
|
Less: Net income attributable to redeemable noncontrolling interest
|
(527,655
|
)
|
|
(328,580
|
)
|
|
(480,323
|
)
|
|
(697,133
|
)
|
||||
Net income attributable to common shareholders
|
$
|
14,370,368
|
|
|
$
|
12,638,439
|
|
|
$
|
27,359,828
|
|
|
$
|
25,395,334
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of outstanding shares - Basic
|
3,518,665
|
|
|
3,443,783
|
|
|
3,503,379
|
|
|
3,436,391
|
|
||||
Dilutive impact of restricted stock units
|
1,151
|
|
|
5,345
|
|
|
1,757
|
|
|
4,631
|
|
||||
Weighted average number of outstanding shares - Diluted
|
3,519,816
|
|
|
3,449,128
|
|
|
3,505,136
|
|
|
3,441,022
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per share attributable to common shareholders
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
4.08
|
|
|
$
|
3.67
|
|
|
$
|
7.81
|
|
|
$
|
7.39
|
|
Diluted
|
$
|
4.08
|
|
|
$
|
3.66
|
|
|
$
|
7.81
|
|
|
$
|
7.38
|
|
ITEM 2:
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Assets Under Management
|
|||||||||
|
As of June 30,
|
|||||||||
(in millions, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Proprietary funds
|
$
|
15,545
|
|
|
$
|
15,044
|
|
|
3
|
%
|
Sub-advised funds
|
1,628
|
|
|
1,423
|
|
|
14
|
%
|
||
Institutional accounts
|
4,654
|
|
|
4,457
|
|
|
4
|
%
|
||
Total AUM
|
$
|
21,827
|
|
|
$
|
20,924
|
|
|
4
|
%
|
|
Assets Under Management
by Investment Strategy
|
|||||||||
|
As of June 30,
|
|||||||||
(in millions, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Small Cap
|
$
|
1,482
|
|
|
$
|
1,667
|
|
|
(11
|
)%
|
Small-Mid Cap
|
3,409
|
|
|
3,440
|
|
|
(1
|
)%
|
||
Mid Cap
|
130
|
|
|
108
|
|
|
20
|
%
|
||
Large Cap
|
11,020
|
|
|
9,572
|
|
|
15
|
%
|
||
All Cap Select
|
478
|
|
|
405
|
|
|
18
|
%
|
||
Long-Short
|
4,248
|
|
|
4,960
|
|
|
(14
|
)%
|
||
Global/International
|
18
|
|
|
5
|
|
|
260
|
%
|
||
Short Duration Fixed Income
|
425
|
|
|
272
|
|
|
56
|
%
|
||
Core Fixed Income
|
52
|
|
|
42
|
|
|
24
|
%
|
||
Long Duration Fixed Income
|
25
|
|
|
—
|
|
|
NM
|
|
||
Corporate Credit
|
712
|
|
|
629
|
|
|
13
|
%
|
||
High Yield
|
50
|
|
|
27
|
|
|
85
|
%
|
||
(Less: Investments in affiliated funds)
(a)
|
(222
|
)
|
|
(203
|
)
|
|
9
|
%
|
||
Total AUM
|
$
|
21,827
|
|
|
$
|
20,924
|
|
|
4
|
%
|
|
Change in Assets
Under Management
|
||||||
|
For the Three Months Ended
June 30, |
||||||
(in millions)
|
2018
|
|
2017
|
||||
AUM at beginning of the period
|
$
|
21,929
|
|
|
$
|
20,333
|
|
Net cash inflows (outflows)
|
|
|
|
||||
proprietary funds
|
(362
|
)
|
|
389
|
|
||
sub-advised funds
|
23
|
|
|
(54
|
)
|
||
institutional accounts
|
(53
|
)
|
|
(142
|
)
|
||
|
(392
|
)
|
|
193
|
|
||
Net market appreciation and income
|
290
|
|
|
398
|
|
||
Increase (decrease) during the period
|
(102
|
)
|
|
591
|
|
||
AUM at end of the period
|
$
|
21,827
|
|
|
$
|
20,924
|
|
|
Change in Assets
Under Management
|
||||||
|
For the Six Months Ended
June 30, |
||||||
(in millions)
|
2018
|
|
2017
|
||||
AUM at beginning of the period
|
$
|
22,317
|
|
|
$
|
19,381
|
|
Net cash inflows (outflows)
|
|
|
|
||||
proprietary funds
|
(174
|
)
|
|
698
|
|
||
sub-advised funds
|
126
|
|
|
(132
|
)
|
||
institutional accounts
|
(88
|
)
|
|
(207
|
)
|
||
|
(136
|
)
|
|
359
|
|
||
Net market appreciation (depreciation) and income
|
(354
|
)
|
|
1,184
|
|
||
Increase (decrease) during the period
|
(490
|
)
|
|
1,543
|
|
||
AUM at end of the period
|
$
|
21,827
|
|
|
$
|
20,924
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
(in thousands, except per share amounts and percentages)
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
Total revenue
|
$
|
35,928
|
|
|
$
|
35,543
|
|
|
1
|
%
|
|
$
|
73,710
|
|
|
$
|
70,582
|
|
|
4
|
%
|
Net operating income
|
$
|
16,350
|
|
|
$
|
15,967
|
|
|
2
|
%
|
|
$
|
34,553
|
|
|
$
|
31,708
|
|
|
9
|
%
|
Net income attributable to common shareholders
|
$
|
14,370
|
|
|
$
|
12,638
|
|
|
14
|
%
|
|
$
|
27,360
|
|
|
$
|
25,395
|
|
|
8
|
%
|
Earnings per share attributable to common shareholders (Diluted)
|
$
|
4.08
|
|
|
$
|
3.66
|
|
|
11
|
%
|
|
$
|
7.81
|
|
|
$
|
7.38
|
|
|
6
|
%
|
Operating profit margin
|
46
|
%
|
|
45
|
%
|
|
|
|
47
|
%
|
|
45
|
%
|
|
|
||||||
Operating profit margin, as adjusted
(a)
|
47
|
%
|
|
46
|
%
|
|
|
|
47
|
%
|
|
46
|
%
|
|
|
|
Three Months Ended June 30,
|
|
|
|||||||
(in thousands, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Investment advisory
|
$
|
33,526
|
|
|
$
|
32,558
|
|
|
3
|
%
|
Mutual fund administration, net
|
2,402
|
|
|
2,985
|
|
|
(20
|
)%
|
||
Total
|
$
|
35,928
|
|
|
$
|
35,543
|
|
|
1
|
%
|
|
Three Months Ended June 30,
|
|
|
|||||||
(in thousands, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Compensation and related costs
|
$
|
14,572
|
|
|
$
|
14,314
|
|
|
2
|
%
|
General and administrative
|
2,823
|
|
|
2,980
|
|
|
(5
|
)%
|
||
Sales and marketing
|
1,302
|
|
|
1,253
|
|
|
4
|
%
|
||
Mutual fund administration
|
881
|
|
|
1,029
|
|
|
(14
|
)%
|
||
Total
|
$
|
19,578
|
|
|
$
|
19,576
|
|
|
—
|
%
|
|
Six Months Ended
June 30, |
|
|
|||||||
(in thousands, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Investment advisory
|
$
|
68,158
|
|
|
$
|
64,323
|
|
|
6
|
%
|
Mutual fund administration, net
|
5,552
|
|
|
6,259
|
|
|
(11
|
)%
|
||
Total
|
$
|
73,710
|
|
|
$
|
70,582
|
|
|
4
|
%
|
|
Six Months Ended
June 30, |
|
|
|||||||
(in thousands, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Compensation and related costs
|
$
|
28,960
|
|
|
$
|
27,993
|
|
|
3
|
%
|
General and administrative
|
5,786
|
|
|
6,469
|
|
|
(11
|
)%
|
||
Sales and marketing
|
2,512
|
|
|
2,383
|
|
|
5
|
%
|
||
Mutual fund administration
|
1,898
|
|
|
2,028
|
|
|
(6
|
)%
|
||
Total
|
$
|
39,156
|
|
|
$
|
38,873
|
|
|
1
|
%
|
|
As of
|
||||||
|
June 30, 2018
|
|
December 31, 2017
|
||||
Corporate Investments:
|
|
|
|
||||
Diamond Hill Core Bond Fund
|
$
|
36,368,849
|
|
|
$
|
30,529,852
|
|
Diamond Hill High Yield Fund
|
25,124,671
|
|
|
14,200,885
|
|
||
Diamond Hill Mid Cap Fund
|
17,564,193
|
|
|
19,270,451
|
|
||
Diamond Hill Research Opportunities Fund
|
15,480,553
|
|
|
15,409,571
|
|
||
Diamond Hill Valuation-Weighted 500 ETF
|
12,442,222
|
|
|
12,096,719
|
|
||
Diamond Hill Global Fund
|
9,942,549
|
|
|
—
|
|
||
Diamond Hill Global Fund, L.P.
|
—
|
|
|
2,055,196
|
|
||
Diamond Hill International Equity Fund, L.P.
|
1,166,372
|
|
|
1,173,870
|
|
||
Total Corporate Investments
|
118,089,409
|
|
|
94,736,544
|
|
||
Deferred Compensation Plan Investments in the Funds
|
24,449,750
|
|
|
20,480,790
|
|
||
Total investments held by DHCM
|
142,539,159
|
|
|
115,217,334
|
|
||
Redeemable noncontrolling interest in Consolidated Funds
|
62,661,479
|
|
|
23,258,688
|
|
||
Total Investment Portfolio
|
$
|
205,200,638
|
|
|
$
|
138,476,022
|
|
|
Six Months Ended June 30, 2018
|
||||||||||||||
|
Cash flow attributable to Diamond Hill Investment Group, Inc.
|
|
Cash flow attributable to Consolidated Funds
|
|
Eliminations
|
|
As reported on the Consolidated Statement of Cash Flows
|
||||||||
Cash flows from Operating Activities:
|
|
|
|
|
|
|
|
||||||||
Net Income
|
$
|
27,359,828
|
|
|
$
|
872,167
|
|
|
$
|
(391,844
|
)
|
|
$
|
27,840,151
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
||||||||
Depreciation
|
574,457
|
|
|
—
|
|
|
—
|
|
|
574,457
|
|
||||
Share-based compensation
|
4,083,360
|
|
|
—
|
|
|
—
|
|
|
4,083,360
|
|
||||
Net (gains)/losses on investments
|
1,125,003
|
|
|
(872,167
|
)
|
|
391,844
|
|
|
644,680
|
|
||||
Net change in securities held by Consolidated Funds
|
—
|
|
|
(46,416,866
|
)
|
|
—
|
|
|
(46,416,866
|
)
|
||||
Other changes in assets and liabilities
|
(69,968
|
)
|
|
6,006,882
|
|
|
—
|
|
|
5,936,914
|
|
||||
Net cash provided by (used in) operating activities
|
33,072,680
|
|
|
(40,409,984
|
)
|
|
—
|
|
|
(7,337,304
|
)
|
||||
Net cash used in investing activities
|
(30,530,622
|
)
|
|
—
|
|
|
28,158,304
|
|
|
(2,372,318
|
)
|
||||
Net cash provided by (used in) financing activities
|
(917,161
|
)
|
|
40,409,984
|
|
|
(28,158,304
|
)
|
|
11,334,519
|
|
||||
Net change during the period
|
1,624,897
|
|
|
—
|
|
|
—
|
|
|
1,624,897
|
|
||||
Cash and cash equivalents at beginning of period
|
76,602,108
|
|
|
—
|
|
|
—
|
|
|
76,602,108
|
|
||||
Cash and cash equivalents at end of period
|
$
|
78,227,005
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78,227,005
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in thousands, except percentages and per share data)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Total revenue
|
$
|
35,928
|
|
|
$
|
35,543
|
|
|
$
|
73,710
|
|
|
$
|
70,582
|
|
|
|
|
|
|
|
|
|
||||||||
Net operating income, GAAP basis
|
$
|
16,350
|
|
|
$
|
15,967
|
|
|
$
|
34,553
|
|
|
$
|
31,708
|
|
Non-GAAP adjustment:
|
|
|
|
|
|
|
|
||||||||
Gains (losses) on deferred compensation plan investments, net
(1)
|
456
|
|
|
436
|
|
|
(60
|
)
|
|
1,021
|
|
||||
Net operating income, as adjusted, non-GAAP basis
(2)
|
16,806
|
|
|
16,403
|
|
|
34,493
|
|
|
32,729
|
|
||||
Non-GAAP adjustment:
|
|
|
|
|
|
|
|
||||||||
Tax provision on net operating income, as adjusted, non-GAAP basis
(3)
|
(4,234
|
)
|
|
(5,203
|
)
|
|
(8,226
|
)
|
|
(10,613
|
)
|
||||
Net operating income, as adjusted, after tax, non-GAAP basis
(4)
|
$
|
12,572
|
|
|
$
|
11,200
|
|
|
$
|
26,267
|
|
|
$
|
22,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net operating income, as adjusted after tax per diluted share, non-GAAP basis
(5)
|
$
|
3.57
|
|
|
$
|
3.25
|
|
|
$
|
7.49
|
|
|
$
|
6.43
|
|
Diluted weighted average shares outstanding, GAAP basis
|
3,520
|
|
|
3,449
|
|
|
3,505
|
|
|
3,441
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating profit margin, GAAP basis
|
46
|
%
|
|
45
|
%
|
|
47
|
%
|
|
45
|
%
|
||||
Operating profit margin, as adjusted, non-GAAP basis
(6)
|
47
|
%
|
|
46
|
%
|
|
47
|
%
|
|
46
|
%
|
ITEM 3:
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4:
|
Controls and Procedures
|
PART II:
|
OTHER INFORMATION
|
ITEM 1:
|
Legal Proceedings
|
ITEM 1A:
|
Risk Factors
|
ITEM 2:
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
Total Number
of Shares Purchased
(a)
|
|
Average Price
Paid Per Share
|
|
Total Number
of Shares Purchased
as part of Publicly
Announced Plans
or Programs
|
|
Maximum Number
of Shares That May
Yet Be Purchased
Under the Plans or
Programs
(b)
|
|||||
April 1, 2018 through April 30, 2018
|
2,012
|
|
|
$
|
206.56
|
|
|
—
|
|
|
318,433
|
|
May 1, 2018 through May 31, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
318,433
|
|
June 1, 2018 through June 30, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
318,433
|
|
Total
|
2,012
|
|
|
$
|
206.56
|
|
|
—
|
|
|
318,433
|
|
(a)
|
All of the
2,012
shares of the Company's common shares purchased during the quarter ended
June 30, 2018
represented shares withheld for tax payments due upon employee Restricted Stock which vested during the quarter.
|
(b)
|
The Company’s current share repurchase program was announced on August 9, 2007. The Board of Directors authorized management to repurchase up to 350,000 shares of the Company’s common shares in the open market and in private transactions in accordance with applicable securities laws. The Company’s share repurchase program is not subject to an expiration date.
|
ITEM 3:
|
Defaults Upon Senior Securities
|
ITEM 4:
|
Mine Safety Disclosures
|
ITEM 5:
|
Other Information
|
ITEM 6:
|
Exhibits
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
3.3
|
|
|
|
|
|
10.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
Section 1350 Certifications.
(Furnished herewith)
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
Date
|
|
Title
|
|
Signature
|
|
|
|
|
|
August 1, 2018
|
|
Chief Executive Officer and President
|
|
/s/ Christopher M. Bingaman
|
|
|
|
|
Christopher M. Bingaman
|
|
|
|
|
|
August 1, 2018
|
|
Chief Financial Officer and Treasurer
|
|
/s/ Thomas E. Line
|
|
|
|
|
Thomas E. Line
|
Dated:
|
5/30/2018
|
|
/s/ Lisa M. Wesolek
|
|
|
|
|
Lisa M. Wesolek
|
Dated:
|
5/30/2018
|
|
DIAMOND HILL CAPITAL MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Thomas E. Line
|
|
|
|
Its:
|
Chief Financial Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Diamond Hill Investment Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 1, 2018
|
|
/s/ Christopher M. Bingaman
|
|
|
Christopher M. Bingaman
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Diamond Hill Investment Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 1, 2018
|
|
/s/ Thomas E. Line
|
|
|
Thomas E. Line
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Christopher M. Bingaman
|
Print Name: Christopher M. Bingaman
|
Title: Chief Executive Officer
|
Date: August 1, 2018
|
|
/s/ Thomas E. Line
|
Print Name: Thomas E. Line
|
Title: Chief Financial Officer
|
Date: August 1, 2018
|