United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24498

DIAMOND HILL INVESTMENT GROUP, INC.

(Exact name of registrant as specified in its charter)


Ohio						65-0190407
(State of incorporation)						(I.R.S. Employer Identification No.)

325 John H. McConnell Blvd., Suite 200, Columbus, Ohio 43215

(Address of principal executive offices) (Zip Code)

(614) 255-3333

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

DHIL

The NASDAQ Stock Market LLC

~~The number of shares outstanding of the issuer’s common stock as of July 28, 2021 is 3,203,103 shares.~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: x No: ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: x

The number of shares outstanding of the issuer’s common stock as of April 26, 2022 is 3,170,577 shares.

DIAMOND HILL INVESTMENT GROUP, INC.


		PAGE

Part I: FINANCIAL INFORMATION		3

Item 1.	Consolidated Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3328

Item 4.	Controls and Procedures	3328

Part II: OTHER INFORMATION		3328

Item 1.	Legal Proceedings	3328

Item 1A.	Risk Factors	3328

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3328

Item 3.	Defaults Upon Senior Securities	3429

Item 4.	Mine Safety Disclosures	3429

Item 5.	Other Information	3429

Item 6.	Exhibits	3530

Signatures		3631

Table of Contents


PART I:			FINANCIAL INFORMATION


ITEM 1:			Consolidated Financial Statements

Diamond Hill Investment Group, Inc.

Consolidated Balance Sheets


		6/30/2021		12/31/2020			3/31/2022		12/31/2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	87,761,054	$	98,478,202	Cash and cash equivalents	$	58,779,282	$	80,550,393
Investments	Investments	160,603,484		128,401,136		Investments	161,930,168		166,656,001
Accounts receivable	Accounts receivable	22,695,729		17,805,864		Accounts receivable	21,133,187		20,443,562
Prepaid expenses	Prepaid expenses	2,841,026		2,977,759		Prepaid expenses	3,157,795		2,555,296
Income taxes receivable		0		256,538

Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	6,595,301		6,740,396		Property and equipment, net of accumulated depreciation	5,642,790		6,100,599
Deferred taxes	Deferred taxes	7,071,667		8,437,446		Deferred taxes	10,723,101		9,847,552
Total assets	Total assets	$	287,568,261	$	263,097,341	Total assets	$	261,366,323	$	286,153,403
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities	Liabilities					Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	10,158,068	$	8,002,303	Accounts payable and accrued expenses	$	9,765,278	$	8,588,713
Accrued incentive compensation	Accrued incentive compensation	18,199,037		28,400,000		Accrued incentive compensation	9,400,752		37,235,418
Income taxes payable	Income taxes payable	204,425		0		Income taxes payable	4,883,055		801,740
Deferred compensation	Deferred compensation	34,880,340		33,241,952		Deferred compensation	33,968,699		37,348,294
Total liabilities	Total liabilities	63,441,870		69,644,255		Total liabilities	58,017,784		83,974,165
Redeemable noncontrolling interest	Redeemable noncontrolling interest	14,219,856		9,372,333		Redeemable noncontrolling interest	20,738,520		17,756,336
Permanent Shareholders’ equity	Permanent Shareholders’ equity					Permanent Shareholders’ equity
Common stock, no par value: 7,000,000 shares authorized; 3,208,022 issued and outstanding at June 30, 2021 (inclusive of 216,068 unvested shares); 3,168,823 issued and outstanding at December 31, 2020 (inclusive of 183,718 unvested shares)		86,888,594		80,810,946
Common stock, no par value: 7,000,000 shares authorized; 3,191,487 issued and outstanding at March 31, 2022 (inclusive of 263,702 unvested shares); 3,171,536 issued and outstanding at December 31, 2021 (inclusive of 201,170 unvested shares)						Common stock, no par value: 7,000,000 shares authorized; 3,191,487 issued and outstanding at March 31, 2022 (inclusive of 263,702 unvested shares); 3,171,536 issued and outstanding at December 31, 2021 (inclusive of 201,170 unvested shares)	83,517,125		80,434,049
Preferred stock, undesignated, 1,000,000 shares authorized and unissued	Preferred stock, undesignated, 1,000,000 shares authorized and unissued	0		0		Preferred stock, undesignated, 1,000,000 shares authorized and unissued	—		—
Deferred equity compensation	Deferred equity compensation	(19,229,825)		(14,748,118)		Deferred equity compensation	(24,476,298)		(15,268,705)
Retained earnings	Retained earnings	142,247,766		118,017,925		Retained earnings	123,569,192		119,257,558
Total permanent shareholders’ equity	Total permanent shareholders’ equity	209,906,535		184,080,753		Total permanent shareholders’ equity	182,610,019		184,422,902
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	287,568,261	$	263,097,341	Total liabilities and shareholders’ equity	$	261,366,323	$	286,153,403

Book value per share	Book value per share	$	65.43	$	58.09	Book value per share	$	57.22	$	58.15

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Diamond Hill Investment Group, Inc.

Consolidated Statements of Income (unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
REVENUES:	REVENUES:									REVENUES:
Investment advisory	Investment advisory	$	41,716,427	$	26,698,993	$	78,285,530	$	56,856,673	Investment advisory		$	39,278,886	$	36,569,103
Mutual fund administration, net	Mutual fund administration, net	3,353,226		1,549,936		5,798,556		3,318,001		Mutual fund administration, net		2,977,500		2,445,330
Total revenue	Total revenue	45,069,653		28,248,929		84,084,086		60,174,674		Total revenue		42,256,386		39,014,433
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Compensation and related costs, excluding deferred compensation expense (benefit)	Compensation and related costs, excluding deferred compensation expense (benefit)	18,940,034		12,557,769		35,754,975		27,974,945		Compensation and related costs, excluding deferred compensation expense (benefit)		18,646,894		16,814,941
Deferred compensation expense (benefit)	Deferred compensation expense (benefit)	1,511,254		3,825,540		4,614,200		(4,330,341)		Deferred compensation expense (benefit)		(1,178,556)		3,102,946
General and administrative	General and administrative	3,870,965		2,899,853		6,686,643		4,828,509		General and administrative		3,185,971		2,815,678
Sales and marketing	Sales and marketing	2,036,856		1,148,782		3,904,882		2,604,464		Sales and marketing		1,711,160		1,868,026
Mutual fund administration	Mutual fund administration	943,669		789,316		1,824,390		1,604,269		Mutual fund administration		817,878		880,721
Total operating expenses	Total operating expenses	27,302,778		21,221,260		52,785,090		32,681,846		Total operating expenses		23,183,347		25,482,312
NET OPERATING INCOME	NET OPERATING INCOME	17,766,875		7,027,669		31,298,996		27,492,828		NET OPERATING INCOME		19,073,039		13,532,121
Investment income (loss), net	Investment income (loss), net	5,877,086		11,562,624		11,540,540		(10,835,468)		Investment income (loss), net		(7,592,257)		5,663,454

NET INCOME BEFORE TAXES	NET INCOME BEFORE TAXES	23,643,961		18,590,293		42,839,536		16,657,360		NET INCOME BEFORE TAXES		11,480,782		19,195,575
Income tax expense	Income tax expense	(6,017,423)		(4,951,814)		(10,950,385)		(5,547,249)		Income tax expense		(3,205,766)		(4,932,962)
NET INCOME	NET INCOME	17,626,538		13,638,479		31,889,151		11,110,111		NET INCOME		8,275,016		14,262,613
Net loss (income) attributable to redeemable noncontrolling interest	Net loss (income) attributable to redeemable noncontrolling interest	(761,708)		(1,437,789)		(1,315,810)		2,620,687		Net loss (income) attributable to redeemable noncontrolling interest		854,936		(554,102)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	16,864,830	$	12,200,690	$	30,573,341	$	13,730,798	NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	9,129,952	$	13,708,511
Earnings per share attributable to common shareholders	Earnings per share attributable to common shareholders									Earnings per share attributable to common shareholders
Basic	Basic	$	5.28	$	3.79	$	9.62	$	4.23	Basic		$	2.87	$	4.34
Diluted	Diluted	$	5.28	$	3.79	$	9.62	$	4.23	Diluted		$	2.87	$	4.34
Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	3,196,501		3,220,973		3,176,744		3,246,867		Basic		3,185,930		3,156,768
Diluted	Diluted	3,196,501		3,220,973		3,176,744		3,246,867		Diluted		3,185,930		3,156,768

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Diamond Hill Investment Group, Inc.

Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited)

Three Months Ended June 30, 2021
Shares
Outstanding Common
Stock Deferred Equity
Compensation Retained
Earnings Total Redeemable Noncontrolling Interest
Balance at March 31, 2021 3,197,634 $ 85,303,452 $ (19,440,920) $ 128,578,546 $ 194,441,078 $ 10,665,146
Issuance of restricted stock grants 15,343 2,551,601 (2,551,601) — — —
Amortization of restricted stock grants — — 1,711,863 — 1,711,863 —
Issuance of common stock related to 401(k) plan match 142 24,000 — — 24,000 —
Issuance of common stock related to employee stock purchase plan 3,083 525,374 — — 525,374 —
Shares withheld related to employee tax withholding (2,753) (429,495) — — (429,495) —
Forfeiture of restricted stock grants (5,197) (1,050,833) 1,050,833 — — —
Repurchase of common stock (230) (35,505) — — (35,505) —
Cash dividend paid of $1.00 per share — — — (3,195,610) (3,195,610) —
Net income — — — 16,864,830 16,864,830 761,708
Net subscriptions of consolidated funds — — — — — 2,793,002
Balance at June 30, 2021 3,208,022 $ 86,888,594 $ (19,229,825) $ 142,247,766 $ 209,906,535 $ 14,219,856
Three Months Ended June 30, 2020
Shares
Outstanding Common
Stock Deferred Equity
Compensation Retained
Earnings Total Redeemable Noncontrolling Interest
Balance at March 31, 2020 3,247,515 $ 90,602,468 $ (18,686,750) $ 118,864,202 $ 190,779,920 $ 9,554,350
Issuance of restricted stock grants 13,015 1,462,975 (1,462,975) — — —
Amortization of restricted stock grants — — 560,606 — 560,606 —
Issuance of common stock related to 401(k) plan match 6,403 642,008 — — 642,008 —
Shares withheld related to employee tax withholding (13,631) (1,230,062) — — (1,230,062) —
Forfeiture of restricted stock grants (13,300) (2,485,647) 2,485,647 — — —
Repurchase of common stock (27,078) (2,801,896) — — (2,801,896) —
Net income — — — 12,200,690 12,200,690 1,437,789
Net redemptions of consolidated funds — — — — — (1,420,417)
Balance at June 30, 2020 3,212,924 $ 86,189,846 $ (17,103,472) $ 131,064,892 $ 200,151,266 $ 9,571,722

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~Diamond Hill Investment Group, Inc.~~

~~Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited)~~


														Three Months Ended March 31, 2022
														Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at December 31, 2021													Balance at December 31, 2021	3,171,536	$	80,434,049	$	(15,268,705)	$	119,257,558	$	184,422,902	$	17,756,336
Issuance of restricted stock grants													Issuance of restricted stock grants	66,190	11,700,781		(11,700,781)		—		—		—
Amortization of restricted stock grants													Amortization of restricted stock grants	—	—		2,248,679		—		2,248,679		—
Common stock issued as incentive compensation													Common stock issued as incentive compensation	2,743	487,870		—		—		487,870		—
Issuance of common stock related to 401k plan match													Issuance of common stock related to 401k plan match	108	19,249		—		—		19,249		—
Issuance of common stock related to employee stock purchase plan													Issuance of common stock related to employee stock purchase plan	2,335	437,346		—		—		437,346		—

Forfeiture of restricted stock grants													Forfeiture of restricted stock grants	(1,321)	(244,509)		244,509		—		—		—
Repurchase of common stock													Repurchase of common stock	(50,104)	(9,317,661)		—		—		(9,317,661)		—
Cash dividends paid													Cash dividends paid	—	—		—		(4,818,318)		(4,818,318)		—
Net income (loss)													Net income (loss)	—	—		—		9,129,952		9,129,952		(854,936)
Net subscriptions of consolidated Funds													Net subscriptions of consolidated Funds	—	—		—		—		—		3,837,120
Balance at March 31, 2022													Balance at March 31, 2022	3,191,487	$	83,517,125	$	(24,476,298)	$	123,569,192	$	182,610,019	$	20,738,520

		Six Months Ended June 30, 2021												Three Months Ended March 31, 2021
		Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest			Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at December 31, 2020	Balance at December 31, 2020	3,168,823	$	80,810,946	$	(14,748,118)	$	118,017,925	$	184,080,753	$	9,372,333	Balance at December 31, 2020	3,168,823	$	80,810,946	$	(14,748,118)	$	118,017,925	$	184,080,753	$	9,372,333
Issuance of restricted stock grants	Issuance of restricted stock grants	67,777	10,712,315		(10,712,315)		—		—		—		Issuance of restricted stock grants	52,434	8,160,714		(8,160,714)		—		—		—
Amortization of restricted stock grants	Amortization of restricted stock grants	—	—		3,108,995		—		3,108,995		—		Amortization of restricted stock grants	—	—		1,397,132		—		1,397,132		—
Common stock issued as incentive compensation	Common stock issued as incentive compensation	3,681	529,806		—		—		529,806		—		Common stock issued as incentive compensation	3,681	529,806		—		—		529,806		—
Issuance of common stock related to 401k plan match	Issuance of common stock related to 401k plan match	296	48,000		—		—		48,000		—		Issuance of common stock related to 401k plan match	154	24,000		—		—		24,000		—
Issuance of common stock related to employee stock purchase plan		3,083	525,374		—		—		525,374		—
Shares withheld related to employee tax withholding	Shares withheld related to employee tax withholding	(4,482)	(687,583)		—		—		(687,583)		—		Shares withheld related to employee tax withholding	(1,729)	(258,088)		—		—		(258,088)		—
Forfeiture of restricted stock grants	Forfeiture of restricted stock grants	(18,397)	(3,121,613)		3,121,613		—		—		—		Forfeiture of restricted stock grants	(13,200)	(2,070,780)		2,070,780		—		—		—
Repurchase of common stock	Repurchase of common stock	(12,759)	(1,928,651)		—		—		(1,928,651)		—		Repurchase of common stock	(12,529)	(1,893,146)		—		—		(1,893,146)		—
Cash dividend paid of $1.00 per share		—	—		—		(6,343,500)		(6,343,500)		—
Cash dividend paid													Cash dividend paid	—	—		—		(3,147,890)		(3,147,890)		—
Net income	Net income	—	—		—		30,573,341		30,573,341		1,315,810		Net income	—	—		—		13,708,511		13,708,511		554,102
Net subscriptions of consolidated Funds	Net subscriptions of consolidated Funds	—	—		—		—		—		3,531,713		Net subscriptions of consolidated Funds	—	—		—		—		—		738,711
Balance at June 30, 2021		3,208,022	$	86,888,594	$	(19,229,825)	$	142,247,766	$	209,906,535	$	14,219,856

		Six Months Ended June 30, 2020
		Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at December 31, 2019		3,294,672	$	95,853,477	$	(20,331,890)	$	117,334,094	$	192,855,681	$	14,178,824
Issuance of restricted stock grants		16,865	1,810,399		(1,810,399)		—		—		—
Amortization of restricted stock grants		—	—		2,346,823		—		2,346,823		—
Common stock issued as incentive compensation		23,640	3,396,359		—		—		3,396,359		—
Issuance of common stock related to 401k plan match		11,719	1,289,108		—		—		1,289,108		—
Shares withheld related to employee tax withholding		(15,432)	(1,483,030)		—		—		(1,483,030)		—
Forfeiture of restricted stock grants		(14,525)	(2,691,994)		2,691,994		—		—		—
Repurchase of common stock		(104,015)	(11,984,473)		—		—		(11,984,473)		—
Net income (loss)		—	—		—		13,730,798		13,730,798		(2,620,687)
Net redemptions of consolidated Funds		—	—		—		—		—		(1,986,415)

Balance at June 30, 2020		3,212,924	$	86,189,846	$	(17,103,472)	$	131,064,892	$	200,151,266	$	9,571,722
Balance at March 31, 2021													Balance at March 31, 2021	3,197,634	$	85,303,452	$	(19,440,920)	$	128,578,546	$	194,441,078	$	10,665,146

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Diamond Hill Investment Group, Inc.

Consolidated Statements of Cash Flows (unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$	31,889,151	$	11,110,111
Adjustments to reconcile net income to net cash provided by operating activities:
Net income						Net income	$	8,275,016	$	14,262,613
Adjustments to reconcile net income to net cash used in operating activities:						Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	Depreciation	577,706		507,737		Depreciation	362,902		218,731
Share-based compensation	Share-based compensation	3,268,734		3,635,931		Share-based compensation	2,333,530		1,481,578
Decrease (increase) in accounts receivable		(4,889,865)		3,230,897
Increase in accounts receivable						Increase in accounts receivable	(689,625)		(1,911,973)
Change in current income taxes	Change in current income taxes	460,963		5,903,671		Change in current income taxes	4,081,315		3,904,225
Change in deferred income taxes	Change in deferred income taxes	1,365,779		(794,862)		Change in deferred income taxes	(875,549)		1,004,084
Net (gains) losses on investments		(10,647,261)		12,135,645

Net losses (gains) on investments						Net losses (gains) on investments	7,998,535		(5,205,321)
Net change in securities held by Consolidated Funds	Net change in securities held by Consolidated Funds	(14,055,138)		169,476		Net change in securities held by Consolidated Funds	(5,129,789)		(11,456,604)
Decrease in accrued incentive compensation	Decrease in accrued incentive compensation	(9,671,157)		(10,265,331)		Decrease in accrued incentive compensation	(27,346,796)		(19,634,038)
Increase (decrease) in deferred compensation	Increase (decrease) in deferred compensation	1,638,388		(3,649,491)		Increase (decrease) in deferred compensation	(3,379,595)		127,135
Other changes in assets and liabilities	Other changes in assets and liabilities	2,889,156		(285,183)		Other changes in assets and liabilities	691,886		1,549,065
Net cash provided by operating activities		2,826,456		21,698,601
Net cash used in operating activities						Net cash used in operating activities	(13,678,170)		(15,660,505)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	Purchase of property and equipment	(662,714)		(864,508)		Purchase of property and equipment	(22,913)		(413,441)
Purchase of Company sponsored investments	Purchase of Company sponsored investments	(12,433,151)		(11,879,416)		Purchase of Company sponsored investments	(1,684,026)		(1,890,082)
Proceeds from sale of Company sponsored investments	Proceeds from sale of Company sponsored investments	4,566,647		24,662,847		Proceeds from sale of Company sponsored investments	3,541,113		3,891,396

Net cash provided by (used in) investing activities		(8,529,218)		11,918,923

Net cash provided by investing activities						Net cash provided by investing activities	1,834,174		1,587,873
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Value of shares withheld related to employee tax withholding	Value of shares withheld related to employee tax withholding	(687,583)		(1,483,030)		Value of shares withheld related to employee tax withholding	—		(258,088)
Payment of dividends	Payment of dividends	(6,343,500)		0		Payment of dividends	(4,818,318)		(3,147,890)
Net subscriptions (redemptions) received from redeemable noncontrolling interest holders		3,531,713		(1,986,415)
Repurchase of common stock		(1,928,651)		(11,984,473)
Net subscriptions received from redeemable noncontrolling interest holders						Net subscriptions received from redeemable noncontrolling interest holders	3,837,120		738,711
Repurchases of common stock						Repurchases of common stock	(9,317,661)		(1,893,146)
Proceeds received under employee stock purchase plan	Proceeds received under employee stock purchase plan	413,635		0		Proceeds received under employee stock purchase plan	371,744		342,528
Net cash used in financing activities	Net cash used in financing activities	(5,014,386)		(15,453,918)		Net cash used in financing activities	(9,927,115)		(4,217,885)
CASH AND CASH EQUIVALENTS	CASH AND CASH EQUIVALENTS					CASH AND CASH EQUIVALENTS
Net change during the period	Net change during the period	(10,717,148)		18,163,606		Net change during the period	(21,771,111)		(18,290,517)
At beginning of period	At beginning of period	98,478,202		93,176,253		At beginning of period	80,550,393		98,478,202
At end of period	At end of period	$	87,761,054	$	111,339,859	At end of period	$	58,779,282	$	80,187,685
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:

Income taxes paid	Income taxes paid	$	9,123,643	$	438,440	Income taxes paid	—		$	24,653
Supplemental disclosure of non-cash transactions:	Supplemental disclosure of non-cash transactions:					Supplemental disclosure of non-cash transactions:
Common stock issued as incentive compensation	Common stock issued as incentive compensation	$	529,806	$	3,396,359	Common stock issued as incentive compensation	$	487,870	529,806
Charitable donation of corporate investments	Charitable donation of corporate investments	$	366,555	0		Charitable donation of corporate investments	—		$	366,555

The accompanying notes are an integral part of these consolidated financial statements.

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Diamond Hill Investment Group, Inc.

Notes to Consolidated Financial Statements (unaudited)

Note 1 Business and Organization

Diamond Hill Investment Group, Inc. (the ~~"Company"~~“Company”), an Ohio corporation, derives its consolidated ~~revenue~~revenues and net income from investment advisory and fund administration ~~services.~~

services provided by its wholly-owned subsidiary, Diamond Hill Capital Management, Inc. ~~("DHCM")~~, an Ohio corporation (“DHCM”).

DHCM is ~~a wholly owned subsidiary of the Company and~~ a registered investment ~~adviser. DHCM~~adviser, and is the investment adviser and administrator for the Diamond Hill Funds (the "Funds"), a series of open-end mutual funds. DHCM also provides investment advisory services to Diamond Hill Micro Cap Fund, LP (“DHMF”), a private ~~investment~~ fund, as well as separately managed accounts, other pooled investment vehicles, and ~~other mutual funds.~~model delivery programs.

Note 2 Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, condensed, and consolidated financial statements ~~as of June 30, 2021 and December 31, 2020, and for the three- and six-month periods ended June 30, 2021 and 2020,~~ for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in these notes to the condensed consolidated financial statements as "the Company," "management," "we," "us," and "our"), as of March 31, 2022 and December 31, 2021, and for the three-month periods ended March 31, 2022 and 2021, have been prepared in accordance with United States generally accepted accounting principles ("GAAP"), ~~with~~ the instructions to Form 10-Q, and ~~with~~ Article 10 of Securities and Exchange Commission (the "SEC") Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments ~~consisting~~(consisting of normal recurring ~~accruals,~~accruals) considered necessary for a fair statement of the financial condition and results of operations as of the dates, and for the interim periods, presented, have been included. These unaudited, condensed, and consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 (the ~~"2020~~"2021 Form 10-K"), as filed with the SEC.

Operating results for the ~~three- and six-month periods~~three-month period ended ~~June 30, 2021~~March 31, 2022, are not necessarily indicative of the results the Company may expect for the full fiscal year ending December 31, ~~2021 (“fiscal 2021”).~~2022.

For further information regarding the risks to the Company's business, refer to the consolidated financial statements and notes thereto included in the ~~2020~~2021 Form 10-K and in “Part II – Item 1A. – Risk Factors” of this Quarterly Report on Form 10-Q.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires ~~Company~~ management to make estimates and assumptions related to the reported amounts of assets and liabilities, ~~and~~the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates.

Reclassification

Certain ~~prior period~~ amounts and disclosures for prior periods may have been reclassified to conform to the current period's financial presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the operations of the Company and its controlled subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.

The Company holds certain investments in the Funds and DHMF, for general corporate investment purposes, to provide seed capital for newly formed strategies or to add capital to existing strategies. The Funds are organized in a series fund structure in which there are multiple mutual funds within one ~~trust (the "Trust").~~Trust. The Trust is an open-end investment company registered under the Investment ~~Company~~Advisers Act of 1940, as amended (the "1940 Act"). Each individual Fund represents a separate share class of a legal entity organized under the Trust. DHMF is organized as a Delaware limited partnership and is exempt from registration under the 1940 Act.

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The Company performs its consolidation analysis at the individual Fund level and has concluded that the Funds are voting rights entities ~~("VREs"~~(“VREs”) because the structure of the Funds is such that the shareholders are deemed to have the power through voting rights to direct the activities that most significantly impact each ~~Fund's~~Fund’s economic performance. To the extent material,

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~~the~~ these Funds are consolidated if Company ownership, directly or indirectly, represents a majority interest (greater than 50%). The Company records redeemable noncontrolling ~~interest~~interests in consolidated investments for which the Company's ownership is less than 100%. ~~The~~As of March 31, 2022, the Company has consolidated ~~the Diamond Hill Large Cap Concentrated Fund,~~ the Diamond Hill International Fund and the Diamond Hill ~~Global~~Large Cap Concentrated Fund ~~(collectively,~~(together, the "Consolidated Funds") ~~as of June 30, 2021.~~.

DHCM is the investment manager of ~~Diamond Hill Micro Cap Fund, LP (“DHMF”), a Delaware limited partnership,~~DHMF and is the managing member of Diamond Hill Fund GP, LLC (the “General Partner”), which is the general partner of DHMF. DHCM is wholly owned by, and consolidated with, the Company. Further, DHCM, through its control of the General Partner, has the power to direct DHMF’s economic activities and the right to receive investment advisory fees that may be significant tofrom DHMF. ~~DHMF's~~DHMF commenced operations on June 1, 2021, and its underlying assets consist primarily of marketable securities.

The Company concluded DHMF was a variable interest entity (“VIE”) given that: (i) DHCM has disproportionately less voting interest than economic interest, and (ii) DHMF's limited partners have full power to remove the General Partner (which is controlled by the Company) due to the existence of substantive kick-out rights. In addition, substantially all of DHMF's activities are conducted on behalf of the General Partner, which has disproportionately few voting rights. The Company concluded it is not the primary beneficiary of DHMF as it lacks the power to control DHMF, since DHMF's limited partners have single-party kick-out rights and can unilaterally remove the General Partner without cause. DHCM’s investments in DHMF are reported as a component of the Company’s investment portfolio and valued at DHCM’s respective share of ~~the~~DHMF's net income or ~~loss of DHMF.~~loss.

Gains and losses attributable to changes in the value of DHCM’s interests in DHMF are included in the Company’s reported investment income. The Company’s exposure to loss as a result of its involvement with DHMF is limited to the amount of its investment. DHCM is not obligated to provide, and has not provided, financial or other support to DHMF, ~~other than~~except for its investments to date and its contractually provided investment advisory responsibilities. The Company has not provided liquidity arrangements, guarantees, or other commitments to support DHMF’s operations, and DHMF’s creditors and interest holders have no recourse to the general credit of the Company.

Redeemable Noncontrolling Interest

Redeemable noncontrolling interest represents third-party interests in the Consolidated Funds. This interest is redeemable at the option of the investors, and therefore, is not treated as permanent equity. Redeemable noncontrolling interest is recorded at redemption value, which approximates the fair value each reporting period.

Segment Information

Management has determined that the Company operates in 1a single business segment, which is providing investment ~~management~~advisory and ~~administration~~related services to ~~mutual funds,~~clients through pooled investment vehicles, including the Funds, DHMF, separately managed accounts, ~~sub-advised funds,~~ and ~~a private fund.~~model delivery programs. Therefore, the Company does not present disclosures relating to operating segments in annual or interim financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and money market mutual funds held by DHCM.

Accounts Receivable

The Company records accounts receivable when they are due and presents them on the balance sheet net of any allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical losses, existing conditions in the industry, and the financial stability of the individual or entity that owes the receivable. No allowance for doubtful accounts was deemed necessary at either ~~June 30, 2021,~~March 31, 2022, or December 31, ~~2020.~~2021. Accounts receivable from the Funds were ~~$12.8~~$11.6 million as of ~~June 30, 2021,~~March 31, 2022, and ~~$10.5~~$11.8 million as of December 31, ~~2020.~~2021.

Investments

Management determines the appropriate classification of its investments at the time of purchase and re-evaluates its determination for each reporting period.

~~Investments in the funds that DHCM advises,~~

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Company sponsored investments, where the Company has neither control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income (loss) in the Company's consolidated statements of income.

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Investments classified as equity method investments represent investments in which the Company owns between 20-50% of the outstanding voting interests in the entity or ~~when~~where it is determined that the Company is able to exercise significant influence but not control over the investments. When using the equity method, the Company recognizes its respective share of the investee's net income or loss for the period, which is recorded as investment income in the Company's consolidated statements of income.

Property and Equipment

Property and equipment, consisting of leasehold improvements, right-of-use lease assets, computer equipment, capitalized software, furniture, and fixtures are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated lives of the assets.

Implementation costs incurred to develop or obtain internal-use software, including hosting arrangements, are capitalized and expensed on a straight-line basis over either the estimated useful life of the respective software or the term of the hosting arrangement.

Property and equipment is tested for impairment when there is an indication that the carrying amount of an asset may not be recoverable. When an asset is determined to not be recoverable, the impairment loss is measured based on the excess, if any, of the carrying value of the asset over its fair value.

Revenue Recognition – General

The Company recognizes revenue when it satisfies performance obligations under the terms of a contract with a client. The Company earns substantially all of its revenue from DHCM investment advisory and fund administration contracts. Investment advisory and administration fees, generally calculated as a percentage of assets under management ("AUM"), are recorded as revenue as services are performed. In addition to fixed fees based on a percentage of AUM, certain client accounts also provide periodic performance-based fees.

Revenue earned during the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ under contracts with clients include:

Three Months Ended June 30, 2021
Investment advisory Mutual fund
administration, net Total revenue
Proprietary funds $ 30,452,474 $ 3,353,226 $ 33,805,700
Sub-advised funds and separately managed accounts 11,263,953 0 11,263,953
$ 41,716,427 $ 3,353,226 $ 45,069,653

Three Months Ended June 30, 2020
Investment advisory Mutual fund
administration, net Total revenue
Proprietary funds $ 19,722,742 $ 1,549,936 $ 21,272,678
Sub-advised funds and separately managed accounts 6,976,251 0 6,976,251
$ 26,698,993 $ 1,549,936 $ 28,248,929

~~Revenue earned during the six months ended June 30, 2021 and 2020 under contracts with clients include:~~


	Three Months Ended March 31, 2022
	Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	$	27,254,928	$	2,977,500	$	30,232,428
Separately managed accounts	7,192,290		—		7,192,290

Sub-Advised funds	3,114,504		—		3,114,504
Model delivery	1,717,164		—		1,717,164
	$	39,278,886	$	2,977,500	$	42,256,386

Six Months Ended June 30, 2021
Investment advisory Mutual fund
administration, net Total revenue
Proprietary funds $ 56,963,175 $ 5,798,556 $ 62,761,731
Sub-advised funds and separately managed accounts 21,322,355 0 21,322,355
$ 78,285,530 $ 5,798,556 $ 84,084,086


		Six Months Ended June 30, 2020							Three Months Ended March 31, 2021
		Investment advisory		Mutual fund administration, net		Total revenue			Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	Proprietary funds	$	43,177,305	$	3,318,001	$	46,495,306	Proprietary funds	$	26,510,701	$	2,445,330	$	28,956,031
Sub-advised funds and separately managed accounts		13,679,368		0		13,679,368
Separately managed accounts								Separately managed accounts	6,473,269		—		6,473,269
		$	56,856,673	$	3,318,001	$	60,174,674
Sub-Advised funds								Sub-Advised funds	2,678,410		—		2,678,410
Model delivery								Model delivery	906,723		—		906,723
									$	36,569,103	$	2,445,330	$	39,014,433

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Revenue Recognition – Investment Advisory Fees

DHCM's investment advisory contracts with clients have a single performance obligation because the contracted services are not separately identifiable from other obligations in the contracts, and therefore, are not distinct. All ~~performance~~ obligations to provide investment advisory services are satisfied over time by DHCM, and the Company recognizes revenue through DHCM as time passes.

The fees DHCM receives for its services under its investment advisory contracts are based on AUM, which changes based on the value of securities held under each investment advisory contract. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which DHCM's client is billed is no longer subject to market fluctuations.

DHCM also provides ~~services to model delivery programs in which DHCM provides~~ its strategy model ~~portfolio~~portfolios and related services to ~~the program sponsor.~~sponsors of model delivery programs. For its services, DHCM is paid a model delivery fee ~~for its services~~ by the program sponsor at a pre-determined rate based on the amount of assets in the program. Model delivery program revenues were ~~$1.3~~$1.7 million and ~~$0.6~~$0.9 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, and $2.2 million and $1.2 million for the six months ended June 30, 2021 and 2020,~~ respectively. ~~Model delivery program revenue is included in investment advisory fees in the consolidated statements of income.~~

Revenue Recognition – Performance-Based Fees

DHCM manages certain client accounts that pay performance-based fees. These fees are calculated based on client investment results over rolling five-year periods. The Company records performance-based fees when it is probable that a significant reversal of the revenue will not occur. The Company did not record any performance-based fees during ~~either of~~ the ~~three- or six-month~~three-month periods ended ~~June 30, 2021 and 2020.~~March 31, 2022 or March 31, 2021. The table below shows AUM subject to performance-based fees and the amount of performance-based fees that would be recognized based upon investment results as of ~~June 30, 2021:~~March 31, 2022:

As of June 30, 2021
AUM subject to performance-based fees Unearned performance-based fees
Contractual Period Ending:
Quarter Ending September 30, 2021 $ 391,510,444 $ 10,715,868
Quarter Ending December 31, 2021 70,457,587 265,240
Total $ 461,968,031 $ 10,981,108


	As of March 31, 2022
	AUM subject to performance-based fees		Unearned performance-based fees
Contractual Measurement Period Ending:
Quarter Ending September 30, 2022	$	505,870,628	$	1,091,899
Total	$	505,870,628	$	1,091,899

The contractual end dates highlight the time remaining until the performance-based fees are scheduled to be earned. The amount of performance-based fees that would be recognized based upon investments results as of ~~June 30, 2021,~~March 31, 2022 will increase or decrease based on future client investment results through the end of the contractual period. ~~The Company cannot assure that it will earn the unearned amounts set forth above.~~

Revenue Recognition – Mutual Fund Administration

DHCM has an administrative and transfer agency services agreement with the Funds under which DHCM performs certain services for each Fund. These services include performance obligations, such as mutual fund administration, fund accounting, transfer agency, and other related functions. These services are performed concurrently under DHCM's agreement with the Funds, all performance obligations to provide these administrative services are satisfied over time, and the Company recognizes the related revenue as time progresses. Each Fund pays DHCM a fee for performing these services, which is calculated using an annual rate multiplied by the average daily net assets of each respective Fund share class. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which DHCM bills the Funds is no longer subject to market fluctuations.

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The Funds have selected and contractually engaged certain vendors to fulfill various services to benefit the Funds’ shareholders or to satisfy regulatory requirements of the Funds. These services include, among others, required shareholder mailings, federal and state registrations, and legal and audit services. In fulfilling a portion of its role under the ~~administration~~administrative and transfer agency services agreement with the Funds, DHCM acts as agent and pays for these services on behalf of the Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates its fees and terms directly with the management and board of trustees of the Funds. Each year, the Funds' board of trustees reviews the fee that each Fund pays to DHCM, and specifically considers the contractual expenses that DHCM pays on behalf of the Funds. As a result, DHCM is not involved in the delivery or pricing of these services, and bears no risk related to these services. Revenue has been recorded net of these Fund-related expenses. ~~In addition, DHCM advances the upfront commissions that are paid to brokers who sell Class C shares~~

Table of the Funds. These advances are capitalized and amortized over 12 months to correspond with the repayments DHCM receives from the principal underwriter to recoup this commission advancement. During the first quarter of 2021, Class C shares were eliminated and converted to Investor Class shares. As a result, no financing activity will be recognized in future periods.Contents

Mutual fund administration gross and net revenue are summarized below:

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Mutual fund administration:
Administration revenue, gross $ 8,103,606 $ 4,980,615 $ 15,030,019 $ 10,573,273
Fund related expense (4,750,380) (3,434,966) (9,216,537) (7,262,215)
Revenue, net of related expenses 3,353,226 1,545,649 5,813,482 3,311,058
C-Share financing:
Broker commission advance repayments 0 66,817 33,594 130,359
Broker commission amortization 0 (62,530) (48,520) (123,416)
Financing activity, net 0 4,287 (14,926) 6,943
Mutual fund administration revenue, net $ 3,353,226 $ 1,549,936 $ 5,798,556 $ 3,318,001


	Three Months Ended March 31,
		2022		2021
Mutual fund administration:
Administration revenue, gross		$	6,940,172	$	6,960,008
Fund related expense		(3,962,672)		(4,514,678)
Mutual fund administration revenue, net		$	2,977,500	$	2,445,330

Income Taxes

The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ from actual payments or assessments. The Company regularly assesses its positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes. The Company records interest and penalties within income tax expense on the income statement. See Note 8.

Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, which includes unvested restricted shares. See Note 9.

Recently Adopted Accounting Guidance

The Company did not adopt any new accounting guidance during the three months ended March 31, 2022, that had a material effect on its financial position or results of operations.

Newly Issued But Not Yet Adopted Accounting Guidance

The Company has considered all newly issued accounting guidance that is applicable to its operations and the preparation of its

consolidated statements, including guidance it has not yet adopted. The Company does not believe that any such guidance had, or will have, a material effect on its financial position or results of operations.

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Note 3 Investments

The following table summarizes the carrying value of the Company's investments as of ~~June 30, 2021~~March 31, 2022, and December 31, ~~2020:~~2021:


		As of					As of
		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Fair value investments:	Fair value investments:					Fair value investments:
Securities held in Consolidated Funds(a)	Securities held in Consolidated Funds(a)	$	52,638,472	$	33,233,307	Securities held in Consolidated Funds(a)	$	75,621,130	$	73,855,204
Company sponsored investments	Company sponsored investments	98,061,822		95,167,829		Company sponsored investments	73,186,055		79,173,437
Company sponsored equity method investments	Company sponsored equity method investments	9,903,190		0		Company sponsored equity method investments	13,122,983		13,627,360
Total Investments	Total Investments	$	160,603,484	$	128,401,136	Total Investments	$	161,930,168	$	166,656,001

(a) Of the securities held in the Consolidated Funds as of ~~June 30, 2021,~~March 31, 2022, the Company directly held ~~$37.6~~$53.2 million and noncontrolling shareholders held ~~$15.0~~$22.4 million. Of the securities held in the Consolidated Funds as of December 31, ~~2020,~~2021, the Company directly held ~~$23.6~~$55.8 million and noncontrolling shareholders held ~~$9.6~~$18.1 million.

The components of net investment income (loss) are as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Realized gains (losses)		$	1,535,575	$	(925,889)	$	4,059,080	$	(1,743,428)
Unrealized gains (losses)		3,756,121		11,948,270		6,261,465		(10,519,328)
Realized gains										Realized gains		$	1,443,747	$	2,523,505
Change in unrealized										Change in unrealized		(9,750,856)		2,505,344
Dividends	Dividends	604,921		570,538		1,269,930		1,464,951		Dividends		767,885		665,009

Other	Other	(19,531)		(30,295)		(49,935)		(37,663)		Other		(53,033)		(30,404)
Investment income (loss), net	Investment income (loss), net	$	5,877,086	$	11,562,624	$	11,540,540	$	(10,835,468)	Investment income (loss), net		$	(7,592,257)	$	5,663,454

Company Sponsored Equity Method Investments

~~As of and during the three- and six-month periods ended June 30, 2021, the~~The Company's only equity method investment during the three-month period ended March 31, 2022 was DHMF, ~~and the~~which commenced operations on June 1, 2021. The Company's ownership percentage in DHMF was 86%~~. DHMF commenced operations on June 1, 2021.~~ as of March 31, 2022, and includes $3.4 million of deferred compensation plan investments.

The following table includes the condensed summary financial information from the Company's equity method investments as of and for the ~~three- and six-month periods~~three-month period ended ~~June 30, 2021:~~March 31, 2022:

As of
June 30, 2021
Total assets $ 11,609,592
Total liabilities 130,745
Net assets 11,478,847
DHCM's portion of net assets $ 9,903,190
For the Three Months Ended For the Six Months Ended
June 30, 2021 June 30, 2021
Investment income $ 5,600 $ 5,600
Expenses 8,857 8,857
Net unrealized depreciation (117,896) (117,896)
Net loss (121,153) (121,153)
DHCM's portion of net loss $ (96,810) $ (96,810)



	As of
	March 31, 2022
Total assets	$	15,466,537
Total liabilities	209,206
Net assets	15,257,331
DHCM's portion of net assets	$	13,122,983

	For the Three Months Ended
	March 31, 2022
Investment income	$	37,843
Expenses	17,667
Net realized losses	(19,569)
Change in unrealized	(1,456,666)
Net loss	(1,456,059)
DHCM's portion of net loss	$	(1,251,721)

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Note 4 Fair Value Measurements

The Company determines the fair value of its cash equivalents and certain investments using the following broad levels listed below:

Level 1 - Unadjusted quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations in which all significant inputs are observable.

Level 3 - Valuations derived from techniques in which significant inputs are unobservable. The Company does not value any investments using Level 3 inputs.

These levels are not necessarily indicative of the risk or liquidity associated with investments.

The following table summarizes investments that are recognized in the Company's consolidated balance sheet using fair value measurements (excluding investments classified as equity method investments) determined based upon the differing levels as of ~~June 30, 2021:~~March 31, 2022:


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3	Total
Cash equivalents	Cash equivalents	$	81,991,040	$	0	$	0	$	81,991,040	Cash equivalents	$	55,274,878	—		—	$	55,274,878
Fair value investments:	Fair value investments:									Fair value investments:
Securities held in Consolidated Funds(a)	Securities held in Consolidated Funds(a)	$	32,994,095	$	19,644,377	0		$	52,638,472	Securities held in Consolidated Funds(a)	42,429,301		$	33,191,829	—	75,621,130
Company-sponsored investments	Company-sponsored investments	$	98,061,822	$	0	$	0	$	98,061,822	Company-sponsored investments	$	73,186,055	—		—	$	73,186,055

Changes to fair values of the investments are recorded in the Company’s consolidated statements of income as investment income (loss), net.

Note 5 Line of Credit

The Company has a committed ~~line~~Line of ~~credit agreement~~Credit Agreement (the "Credit Agreement") with a commercial bank that matures on December ~~24, 2021,~~23, 2022, which permits the Company to borrow up to $25.0 million. Borrowings under the Credit Agreement bear interest at a rate equal to ~~LIBOR~~the Secured Overnight Financing Rate plus ~~1.00%~~1.10%. The Company pays a commitment fee on the unused portion of the facility, accruing at a rate per annum of 0.10%.

The proceeds of the Credit Agreement may be used by the Company and its subsidiaries for ongoing working capital needs, to seed new and existing investment strategies, and for other general corporate purposes. The Credit Agreement contains customary representations, warranties, and covenants.

The Company did not borrow under the Credit Agreement for the period ended ~~June 30, 2021,~~March 31, 2022, and no borrowings ~~are~~were outstanding as of ~~June 30, 2021.~~March 31, 2022.

Note 6 Compensation Plans

Share-Based Payment Transactions

The Company issues restricted stock grants under the 2014 Equity and Cash Incentive Plan (the "2014 Plan"). Restricted stock grants represent common shares issued and outstanding upon grant subject to vesting restrictions. The Company has historically issued stock grants that cliff vest after five years to all new employees upon hire and as additional grants to key employees on a periodic basis. While the Company currently plans to continue to issue five-year cliff vest grants to new employees, beginning in 2021, the Company also began making new long-term incentive awards to existing employees in the form of three-year graded vesting stock grants.

Restricted stock grants issued under the 2014 Plan are valued based upon the fair market value of the common shares on the applicable grant date. The restricted stock grants are recorded as deferred compensation in the equity section of the balance sheet on the grant date and then recognized as compensation expense on a straight-line basis over the vesting period of the respective grant. The Company's policy is to adjust compensation expense for forfeitures as they occur.

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The following table represents a roll-forward of outstanding restricted stock and related activity for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:


		Shares	Weighted-Average Grant Date Price per Share			Shares	Weighted-Average Grant Date Price per Share
Outstanding restricted stock as of December 31, 2020		183,718	$	173.80
Outstanding restricted stock as of December 31, 2021					Outstanding restricted stock as of December 31, 2021	201,170	$	165.61
Grants issued	Grants issued	67,777	158.05		Grants issued	66,190	176.78
Grants vested	Grants vested	(17,030)	173.69		Grants vested	(2,337)	147.66
Grants forfeited	Grants forfeited	(18,397)	169.68		Grants forfeited	(1,321)	185.09
Total outstanding restricted stock as of June 30, 2021		216,068	$	167.19
Total outstanding restricted stock as of March 31, 2022					Total outstanding restricted stock as of March 31, 2022	263,702	$	168.47

As of ~~June 30, 2021, 174,078~~March 31, 2022, 111,389 common shares remained available for grants under the 2014 Plan.

Total deferred equity compensation related to unvested restricted stock was ~~$19.2~~$24.5 million as of ~~June 30, 2021.~~March 31, 2022. The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows:

Six Months
Remaining In
2021 2022 2023 2024 2025 Thereafter Total
$ 4,129,469 $ 7,359,397 $ 5,499,650 $ 1,917,053 $ 314,519 $ 9,737 $ 19,229,825


Nine Months Remaining In
2022		2023		2024		2025		2026		Thereafter		Total
$	8,154,950	$	9,186,423	$	5,734,659	$	1,311,147	$	87,481	$	1,638	$	24,476,298

Employee Stock Purchase Plan

~~The Company adopted~~Under the Diamond Hill Investment Group, Inc. Employee Stock Purchase Plan (the "ESPP") ~~effective October 27, 2020. Under the ESPP,~~, eligible employees may purchase shares of the Company's common stock at 85% of the fair market value on the last day of each offering period. Each offering period is approximately three months, ~~coinciding~~which coincides with the Company's fiscal quarters. During the ~~six-month~~three-month period ended ~~June 30, 2021,~~March 31, 2022, ESPP participants purchased ~~3,083~~2,335 shares of common stock for $0.4 million, and the Company recorded $0.1 million of share-based payment expense related to these purchases. During the three-month period ended March 31, 2021, ESPP participants purchased 2,583 shares of common stock for $0.3 million, and the Company recorded $0.1 million of share based payment expense related to these purchases.

Stock Grant Transactions

The following table represents common shares issued as part of the Company's incentive compensation program during the ~~six-month period~~three-month periods ended ~~June 30, 2021,~~March 31, 2022, and ~~2020:~~2021:

Shares Issued Grant Date Value
June 30, 2021 3,681 $ 529,806
June 30, 2020 23,640 $ 3,396,359


	Shares Issued	Grant Date Value
March 31, 2022	2,743	$	487,870
March 31, 2021	3,681	$	529,806

401(k) Plan

The Company sponsors a 401(k) plan in which all employees are eligible to participate. Employees may contribute a portion of their compensation subject to certain limits based on federal tax laws. The Company matches employee contributions equal to ~~250 percent~~250.0% of the first ~~six percent~~6.0% of an employee’s compensation contributed to the plan. ~~Since January 1, 2021, the~~The Company ~~has settled~~settles the 401(k) plan matching contributions in cash or common shares of the Company based on the election of the employees. ~~Prior to January 1, 2021, the Company made all matching contributions in common shares of the Company.~~

Deferred Compensation Plans

The Company offers two deferred compensation ~~plans,~~plans: the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (together, the “Plans”). Under the Plans, participants may elect to voluntarily defer, for a minimum of five years, certain incentive compensation that the Company then contributes into the Plans. Participants are responsible for designating investment options for the assets they contribute, and the distribution paid to each participant reflects any gains or losses on the assets realized in connection with the Plans. Assets held in the Plans are included in the Company’s investment portfolio, and the associated obligation to participants is included in deferred compensation liability. Deferred compensation liability was ~~$34.9~~$34.0 million and ~~$33.2~~$37.3 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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Note 7 Operating Lease

The Company currently leases office space of approximately 37,829 square feet at 1a single location.

As of ~~June 30, 2021,~~March 31, 2022, the carrying value of this right-of-use asset, which is included in property and equipment, was approximately ~~$1.8~~$1.5 million net of deferred rent on the consolidated balance sheets. As of ~~June 30, 2021,~~March 31, 2022, the carrying value of the lease liability was approximately ~~$2.2~~$1.8 million, which is included in accounts payable and accrued expenses on the consolidated balance sheets.

The following table summarizes the total lease and operating expenses for the ~~three- and six-month~~three-month periods ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

June 30,
2021 June 30,
2020
Three Months Ended $ 241,190 $ 239,630
Six Months Ended $ 450,232 $ 465,488


	March 31, 2022		March 31, 2021
Three Months Ended	$	204,953	$	209,042

The approximate future minimum lease payments under the operating lease are as follows:


Future Minimum Lease Payments	Future Minimum Lease Payments									Future Minimum Lease Payments
Six Months Remaining In
2021		2022		2023		2024		2025			Total
Nine Months Remaining In													Nine Months Remaining In
2022													2022	2023		2024		2025		2026		Total
$	312,089	$	624,179	$	624,179	$	624,179	$	156,045		$	2,340,671	468,134	$	624,179	$	624,179	$	156,045	$	—	$	1,872,537

Note 8 Income Taxes

The Company has determined its interim tax provision projecting an estimated annual effective tax rate.

A reconciliation of the statutory federal tax rate to the Company’s effective income tax rate is as follows:


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Statutory U.S. federal income tax rate	Statutory U.S. federal income tax rate	21.0	%	21.0	%	Statutory U.S. federal income tax rate	21.0	%	21.0	%
State and local income taxes, net of federal benefit	State and local income taxes, net of federal benefit	4.5	%	4.3	%	State and local income taxes, net of federal benefit	4.6	%	4.4	%
Internal revenue code section 162 limitations	Internal revenue code section 162 limitations	0.9	%	1.4	%	Internal revenue code section 162 limitations	1.3	%	1.1	%
Other	Other	0	%	2.1	%	Other	(0.9)	%	—	%
Unconsolidated effective income tax rate	Unconsolidated effective income tax rate	26.4	%	28.8	%	Unconsolidated effective income tax rate	26.0	%	26.5	%
Impact attributable to redeemable noncontrolling interest(a)	Impact attributable to redeemable noncontrolling interest(a)	(0.8)	%	4.5	%	Impact attributable to redeemable noncontrolling interest(a)	1.9	%	(0.8)	%
Effective income tax rate	Effective income tax rate	25.6	%	33.3	%	Effective income tax rate	27.9	%	25.7	%

(a) The provision for income taxes includes the impact of the operations of the Consolidated Funds, which are not subject to federal income taxes. Accordingly, a portion of the Company’s earnings are not subject to corporate tax levels.

Absent the impact attributable to redeemable noncontrolling interest, the estimated unconsolidated effective income tax rate would have been ~~26.4%~~26.0%. The Company's actual effective tax rate for fiscal year ~~ended~~ending December 31, ~~2021~~2022 could be materially different from the projected rate as of ~~June 30, 2021.~~March 31, 2022.

The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some ~~portion~~ or all of the deferred tax assets will not be realized. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, no valuation allowance was deemed necessary.

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FASB ASC 740, Income Taxes, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return, and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are more likely than not sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company did not record an accrual for ~~tax related~~tax-related uncertainties or unrecognized tax positions as of ~~June 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

The Company did not recognize any interest and penalties during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

Note 9 Earnings Per Share

The Company’s common shares outstanding consist of all shares issued and outstanding, including unvested restricted shares. Basic and diluted EPS are calculated under the two-class method. The following table sets forth the computation for basic and diluted EPS:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net Income	Net Income	$	17,626,538	$	13,638,479	$	31,889,151	$	11,110,111	Net Income		$	8,275,016	$	14,262,613
Less: Net loss (income) attributable to redeemable noncontrolling interest	Less: Net loss (income) attributable to redeemable noncontrolling interest	(761,708)		(1,437,789)		(1,315,810)		2,620,687		Less: Net loss (income) attributable to redeemable noncontrolling interest		854,936		(554,102)
Net income attributable to common shareholders	Net income attributable to common shareholders	$	16,864,830	$	12,200,690	$	30,573,341	$	13,730,798	Net income attributable to common shareholders		$	9,129,952	$	13,708,511

Weighted average number of outstanding shares - Basic	Weighted average number of outstanding shares - Basic	3,196,501		3,220,973		3,176,744		3,246,867		Weighted average number of outstanding shares - Basic		3,185,930		3,156,768
Weighted average number of outstanding shares - Diluted	Weighted average number of outstanding shares - Diluted	3,196,501		3,220,973		3,176,744		3,246,867		Weighted average number of outstanding shares - Diluted		3,185,930		3,156,768

Earnings per share attributable to common shareholders	Earnings per share attributable to common shareholders									Earnings per share attributable to common shareholders
Basic	Basic	$	5.28	$	3.79	$	9.62	$	4.23	Basic		$	2.87	$	4.34
Diluted	Diluted	$	5.28	$	3.79	$	9.62	$	4.23	Diluted		$	2.87	$	4.34

Note 10 Commitments and Contingencies

The Company indemnifies its directors, officers, and certain employees for certain liabilities that may arise from the performance of their duties to the Company. From time to time, the Company may be involved in legal matters relating to claims arising in the ordinary course of business. There are currently no such matters pending that the Company believes could have a material adverse effect on its consolidated financial statements.

Additionally, in the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and that provide general indemnification obligations. Certain agreements do not contain any limits on the Company’s liability and could involve future claims that may be made against the Company that have not yet occurred. Therefore, it is not possible to estimate the Company’s potential liability under these indemnities. Further, the Company maintains insurance policies that may provide coverage against certain of these liabilities.

Note 11 Sale of ~~Assets of~~ Diamond Hill's High Yield-Focused ~~Funds~~

Investment Advisory Contracts

DHCM entered into an asset purchase agreement dated February 2, 2021 (the “Purchase Agreement”) with Brandywine Global Investment Management, LLC (“Brandywine Global”), a specialist investment manager of Franklin Resources, Inc. ~~Pursuant to the Purchase Agreement,~~The transaction closed on July 30, 2021 ("Closing Date"), at which time Brandywine Global ~~will acquire~~acquired the ~~businesses~~investment advisory contracts of DHCM’s two high yield-focused mutual funds - the Corporate Credit Fund and the High Yield Fund (the ~~“Acquired Funds”~~“High Yield-Focused Advisory Contracts”).

~~In connection~~DHCM determined the gain on this transaction in accordance with ASC 610-20, Gains and Losses from the ~~transaction, two~~Derecognition of ~~the Company’s portfolio managers and a research analyst will join Brandywine Global’s fixed income team.~~

Nonfinancial Assets

~~Pursuant to the Purchase Agreement,~~. DHCM ~~will receive~~received an initial cash payment at closing of ~~up to~~ $9.0 million, ~~based upon~~which was included in gain on sale of high yield-focused advisory contracts in the ~~closing date net revenue~~Consolidated Statements of Income during the ~~Acquired Funds, and~~third quarter of 2021.

DHCM may receive 2 additional payments of up to $13.0 million in the aggregate based on the net revenue of the Corporate Credit Fund and the High Yield Fund on July 30, 2022. The Company has not recorded any additional gain for the two potential

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~~aggregate~~additional payments because this variable consideration is constrained based on movements in the financial markets and the net ~~revenue~~shareholder flows of the ~~Acquired Funds on~~Corporate Credit Fund and the ~~one-year anniversary of the closing date. There~~High Yield Fund. Therefore, there can be no reasonable assurance that all or any of these additional ~~payment amounts~~payments will be received by DHCM.

The Purchase Agreement contains customary representations, warranties, and covenants and is subject to customary closing conditions, including a minimum net revenue requirement as of the closing date and approval by the shareholders of the Acquired Funds. The shareholder approval for each of the Acquired Funds was obtained during the three months ended June 30, 2021, and the sale is expected to close on July 30, 2021.

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Note 12 Subsequent Events

On ~~July 28, 2021,~~April 26, 2022, the ~~Company’s~~Company's board of directors ("Board") approved a quarterly cash dividend of ~~$1.00~~$1.50 per share, payable ~~September 24, 2021,~~on June 17, 2022, to shareholders of record as of ~~September 9, 2021.~~June 2, 2022. This dividend ~~will~~is expected to reduce shareholders' equity by approximately ~~$3.2~~$4.8 million.

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ITEM 2:			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Throughout this Quarterly Report on Form 10-Q and other publicly available documents, including the documents incorporated herein by reference, the Company may make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to such matters as anticipated operating results, AUM prospects and levels, technological developments, economic trends (including interest rates and market volatility), expected transactions and similar matters. The words “believe,” “expect,” “anticipate,” “estimate,” "may," "will," "likely," "project," “should,” “hope,” “seek,” “plan,” “intend” 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, actual results and experiences could differ materially from the anticipated results or other expectations expressed in the 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: (i) any reduction in the Company's AUM; (ii) withdrawal, renegotiation, or termination of DHCM's 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) adverse regulatory and legal developments; (vii) unfavorable changes in tax laws or limitations; (viii) interruptions in or failure to provide critical technological service by the Company or third parties; (ix) adverse civil litigation and government investigations or proceedings; (x) risk of loss on the Company's investments; (xi) lack of sufficient capital on satisfactory terms; (xii) losses or costs not covered by insurance; (xiii) impairment of goodwill or intangible assets; (xiv) a decline in the performance of our products; (xv) changes in interest rates; (xvi) changes in national and local economic and political conditions; (xvii) the continuing economic uncertainty in various parts of the world; (xviii) the effects of the COVID-19 pandemic and the actions taken in connection therewith; (xix) political uncertainty caused by, among other things, political parties, economic nationalist sentiments, tensions surrounding the current socioeconomic landscape, and other risks identified from time-to-time in other public documents the Company files with the SEC.

General

The Company derives consolidated revenue and net income from investment advisory and fund administration services provided by DHCM. DHCM is a registered investment adviser under the Investment Advisers Act of 1940, as amended. DHCM sponsors, distributes, and provides investment advisory and related services to clients through pooled investment vehicles, including the Funds, ~~sub-advised mutual funds, a private investment fund, and~~DHMF, separately managed ~~accounts.~~accounts, and model delivery programs.

DHCM is ~~a client-centric organization~~ committed to ~~a set of~~generating excellent, long-term investment outcomes and building enduring client partnerships. By committing to shared investment principles, ~~and core values intended to enable excellent investment outcomes for clients. By committing to valuation disciplined~~including valuation-disciplined active portfolio management, fundamental bottom-up research, and a long-term business owner mindset, DHCM has created a suite of investment strategies designed for long-term strategic allocations from ~~institutionally oriented~~institutionally-oriented investors. DHCM’s core values of curiosity, ownership, trust, and respect create an environment where investment professionals ~~can~~ focus on results and all teammates focus on the overall client experience. The combination of these investment principles and core values ~~create~~creates an aligned boutique model ensuring ~~that~~our associates ~~succeed when clients succeed.~~have a vested interest in our clients’ success. This alignment with clients is emphasized through: (i) personal investment by ~~Company~~Diamond Hill employees in the strategies managed, (ii) a fee philosophy focused on a fair sharing of the economics among clients, employees, and shareholders, (iii) a strict adherence to capacity discipline ensuring the ability to add value for existing clients, and (iv) compensation driven by the value ~~created.~~created for clients.

The Company's primary objective is to fulfill its fiduciary duty to its clients. The ~~Company's secondary objective is~~Company believes this focus on generating excellent, long-term investment outcomes and building enduring client partnerships will enable it to grow its intrinsic value to achieve ~~an adequate~~a compelling, long-term return for ~~our~~its shareholders.

Assets Under Management

The Company derives revenue primarily from DHCM's investment advisory and administration fees. Investment advisory and administration fees paid to DHCM are generally based on the value of the investment portfolios it manages and fluctuate with changes in the total value of its AUM. The Company, through DHCM, recognizes revenue when it satisfies its performance obligations under the terms of a contract with a client.

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The Company's revenues are highly dependent on both the value and composition of AUM. The following is a summary of the Company's AUM by product and investment objective, as well as a roll-forward of the change in AUM, for the ~~three-~~three months ended March 31, 2022 and ~~six-months ended June~~2021:


	Assets Under Management
	As of March 31,
(in millions, except percentages)	2022		2021		% Change
Proprietary funds	$	19,392	$	20,954	(7)	%
Sub-advised funds	3,846		3,575		8	%
Separately managed accounts	7,084		6,053		17	%
Total AUM	$	30,322	$	30,582	(1)	%


	Assets Under Management by Investment Strategy
	As of March 31,
(in millions, except percentages)	2022		2021		% Change
U.S. Equity
Large Cap	$	20,631	$	18,317	13	%
Small-Mid Cap	3,139		3,128		—	%
Mid Cap	1,112		1,097		1	%
Small Cap	489		616		(21)	%
All Cap Select	489		427		15	%
Large Cap Concentrated	82		43		91	%
Micro Cap	15		—		NM
Total U.S. Equity	25,957		23,628		10	%

Alternatives
Long-Short	2,080		2,028		3	%
Total Alternatives	2,080		2,028		3	%

Global/International Equity
International	56		19		195	%
Global(a)	—		16		NM
Total Global/International Equity	56		35		60	%

Fixed Income
Short Duration Securitized Bond	1,580		1,253		26	%
Core Fixed Income	636		550		16	%
Long Duration Treasury	41		47		(13)	%
Corporate Credit(b)	—		2,140		NM
High Yield(b)	—		965		NM
Total Fixed Income	2,257		4,955		(54)	%

Total-All Strategies	30,350		30,646		(1)	%
(Less: Investments in affiliated funds)(c)	(28)		(64)		(56)	%
Total AUM	$	30,322	$	30,582	(1)	%

(a) The Diamond Hill Global Fund was liquidated on December 17, 2021.

(b) The High Yield-Focused Advisory Contracts were sold to Brandywine Global effective July 30, ~~2021 and 2020:~~2021.

Assets Under Management
As of June 30,
(in millions, except percentages) 2021 2020 % Change
Proprietary funds $ 22,004 $ 13,780 60 %
Sub-advised funds 3,651 2,463 48 %
Separately managed accounts 6,705 4,402 52 %
Total AUM $ 32,360 $ 20,645 57 %

Assets Under Management
by Investment Strategy
As of June 30,
(in millions, except percentages) 2021 2020 % Change
Small Cap $ 603 $ 475 27 %
Small-Mid Cap 3,042 2,347 30 %
Mid Cap 1,081 837 29 %
Large Cap 19,604 11,387 72 %
Large Cap Concentrated 50 22 127 %
All Cap Select 419 343 22 %
Long-Short 2,058 2,202 (7) %
Global/International 38 28 36 %
Micro Cap 11 — NM
  Total Equity 26,906 17,641 53 %
Short Duration Securitized 1,345 855 57 %
Core Fixed Income 710 401 77 %
Long Duration Treasury 50 58 (14) %
Corporate Credit 2,266 1,370 65 %
High Yield 1,148 389 195 %
  Total Fixed Income 5,519 3,073 80 %
  Total Equity and Fixed Income 32,425 20,714 57 %
  (Less: Investments in affiliated funds)(a)
(65) (69) (6) %
Total AUM $ 32,360 $ 20,645 57 %

~~(a)~~(c) Certain of the Funds own shares of the Diamond Hill Short Duration Securitized Bond Fund. The Company reduces the total AUM by ~~these~~the investments held in this affiliated fund.

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Change in Assets
Under Management
For the Three Months Ended
June 30,
(in millions) 2021 2020
AUM at beginning of the period $ 30,582 $ 17,496
Net cash inflows (outflows)
proprietary funds 260 (59)
sub-advised funds (99) 146
separately managed accounts 389 144
550 231
Net market appreciation and income 1,228 2,918
Increase during the period 1,778 3,149
AUM at end of the period $ 32,360 $ 20,645
Average AUM during the period $ 32,095 $ 19,729

Change in Assets
Under Management
For the Six Months Ended
June 30,
(in millions) 2021 2020
AUM at beginning of the period $ 26,411 $ 23,399
Net cash inflows (outflows)
proprietary funds(a)
1,987 (47)
sub-advised funds (57) 691
separately managed accounts 214 (162)
2,144 482
Net market appreciation (depreciation) and income(a)
3,805 (3,236)
Increase (decrease) during the period 5,949 (2,754)
AUM at end of the period $ 32,360 $ 20,645
Average AUM during the period $ 30,146 $ 20,591

~~(a) Reflects a $150 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.~~


















	Change in Assets Under Management
	For the Three Months Ended March 31,
(in millions)	2022		2021
AUM at beginning of the period	$	31,028	$	26,411
Net cash inflows (outflows)
proprietary funds	173		1,877
sub-advised funds	(25)		42
separately managed accounts	89		(175)
	237		1,744

Net market appreciation (depreciation) and income	(943)		2,427
Increase (decrease) during the period	(706)		4,171
AUM at end of the period	$	30,322	$	30,582

Average AUM during the period	$	30,459	$	28,163

~~Table of Contents~~

Net Cash Inflows (Outflows) Further Breakdown
For the Three Months Ended June 30,
(in millions) 2021 2020
Net cash inflows (outflows)
Equity $ 65 $ (374)
Fixed Income 485 605
$ 550 $ 231
Net Cash Inflows (Outflows) Further Breakdown
For the Six Months Ended June 30,
(in millions) 2021 2020
Net cash inflows (outflows)
Equity(a)
$ 1,200 $ (192)
Fixed Income(b)
944 674
$ 2,144 $ 482

~~(a) Reflects a $120 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.~~

~~(b) Reflects a $30 million adjustment from net flows to market appreciation related to the quarter ended March 31, 2021.~~









	Net Cash Inflows Further Breakdown For the Three Months Ended March 31,
(in millions)	2022		2021
Net cash inflows
Equity	$	193	$	1,256
Fixed Income	44		488
	$	237	$	1,744

AUM ~~increased $1.8~~decreased $0.7 billion during the three months ended ~~June 30, 2021,~~March 31, 2022, due primarily to ~~appreciation~~depreciation in the financial markets, ~~and~~which was partially offset by net inflows into our strategies during the period. ~~Both~~With the exception of Small Cap and Mid Cap, all of our other equity ~~and fixed~~strategies had positive flows during the three months ended March 31, 2022. Fixed income ~~strategies experienced~~ net inflows during the three months ended ~~June 30, 2021. Flows~~March 31, 2022, were primarily into our ~~fixed income strategies during the three months ended June 30, 2021, totaled $0.5 billion. Flows into our equity strategies totaled $0.1 billion.~~

AUM increased $5.9 billion during the six months ended June 30, 2021, due to appreciation in the financial markets and net inflows into our strategies during the period. Both our equity and fixed income strategies experienced net inflows during the six months ended June 30, 2021. Flows in our equity strategies were largely driven by our Large Cap strategy, which experienced net inflows of $2.1 billion. These net inflows were partially offset by net outflows from our other equity strategies totaling approximately $0.9 billion. Each of the Company's fixed income strategies, except Long Duration Treasury, had net positive flows during the six months ended June 30, 2021, totaling $0.9 billion.

Effective March 31, 2021, the Company closed its Large Cap strategy to most new investors. In February 2021, the Company began offering its Large Cap Concentrated strategy as a new open-end mutual fund in the Fund lineup. On June 1, 2021, DHMF commenced operations and the Company began offering DHMF limited partnership interests for investment.Core Bond strategy.

Model Delivery Programs - Assets Under Advisement

DHCM provides strategy-specific model portfolios to sponsors of model delivery programs. DHCM does not have discretionary investment authority over individual client accounts in model delivery programs, and therefore these assets are not included in ~~its~~the Company's AUM. ~~DHCM provides updated~~Rather, we refer to these model ~~portfolios to the program sponsors on a periodic basis.~~delivery assets as assets under advisement ("AUA"). DHCM is paid for its services by the program sponsor at a pre-determined rate based on ~~assets~~the amount of AUA in the program. Model delivery ~~program assets were $1.8~~AUA was $2.1 billion as of ~~June 30, 2021, and $1.1~~March 31, 2022, $2.1 billion as of December 31, ~~2020.~~2021, and $1.4 billion as of March 31, 2021.

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Consolidated Results of Operations

The following is a table and discussion of the Company's consolidated results of operations.


		Three Months Ended June 30,							Six Months Ended June 30,								Three Months Ended March 31,
(in thousands, except per share amounts and percentages)	(in thousands, except per share amounts and percentages)	2021			2020			% Change	2021			2020			% Change	(in thousands, except per share amounts and percentages)		2022			2021			% Change
Total revenue	Total revenue	$	45,070		$	28,249		60%	$	84,084		$	60,175		40%	Total revenue		$	42,256		$	39,014		8%
Net operating income	Net operating income	$	17,767		$	7,028		153%	31,299			27,493			14%	Net operating income		19,073			13,532			41%
Net operating income, as adjusted(a)	Net operating income, as adjusted(a)	$	19,278		$	10,854		78%	35,913			23,163			55%	Net operating income, as adjusted(a)		17,894			16,635			8%
Investment income (loss), net	Investment income (loss), net	5,877			11,563			(49)%	11,541			(10,835)			NM	Investment income (loss), net		(7,592)			5,663			NM

Income tax expense	Income tax expense	6,017			4,952			22%	10,950			5,547			97%	Income tax expense		3,206			4,933			(35)%
Net income attributable to common shareholders	Net income attributable to common shareholders	16,865			12,201			38%	30,573			13,731			123%	Net income attributable to common shareholders		9,130			13,709			(33)%
Earnings per share attributable to common shareholders (diluted)	Earnings per share attributable to common shareholders (diluted)	$	5.28		$	3.79		39%	$	9.62		$	4.23		127%	Earnings per share attributable to common shareholders (diluted)		$	2.87		$	4.34		(34)%
Operating profit margin	Operating profit margin	39		%	25		%		37		%	46		%		Operating profit margin		45		%	35		%
Operating profit margin, as adjusted(a)	Operating profit margin, as adjusted(a)	43		%	38		%		43		%	38		%		Operating profit margin, as adjusted(a)		42		%	43		%

(a) Net operating income, as adjusted, and operating profit margin, as adjusted, are non-GAAP performance measurements. See the "Use of Supplemental Data as Non-GAAP Performance Measure" section within this Quarterly Report on ~~Form10-Q.~~Form 10-Q.

Summary Discussion of Consolidated Results of Operations - Three Months Ended ~~June 30, 2021,~~March 31, 2022, compared with Three Months Ended ~~June 30, 2020~~March 31, 2021

Revenue for the three months ended ~~June 30, 2021,~~March 31, 2022, increased ~~$16.8~~$3.2 million compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to a ~~63%~~8% increase in average ~~AUM,~~AUM. This increase was partially offset by a decrease in the average advisory fee rate from ~~0.55%~~0.53% to 0.52% quarter-over-quarter. ~~The decrease in average advisory fee rate was driven by an increase in the mix of assets held in lower fee rate strategies.~~

Operating profit margin was ~~39%~~45% for the three months ended ~~June 30, 2021,~~March 31, 2022, and ~~25%~~35% for the three months ended ~~June 30, 2020.~~March 31, 2021. Operating profit margin, as adjusted, was ~~43%~~42% for the three months ended ~~June 30, 2021,~~March 31, 2022, and ~~38%~~43% for the same period in ~~2020.~~2021. Operating profit margin, as adjusted, excludes deferred compensation expense (benefit) from operating income because it is offset by an equal amount in investment income below net operating income on the income statement and thus has no effect on net income attributable to the Company. The Company believes this non-GAAP measure helps the reader to understand its core operating results and increases comparability period-to-period. See "Use of Supplemental Data as Non-GAAP Performance Measure" section within this Quarterly Report on Form 10-Q.

The company expects that its operating margin will fluctuate from period-to-period based on various factors, including revenues, investment results, employee performance, staffing levels, gains and losses on investments held in deferred compensation plans, and development of investment strategies, products, or channels. The Company compensates portfolio managers based on long-term performance, so when revenue and long-term performance are misaligned, operating margins can fluctuate materially.

The Company recognized $5.9 million in investment income due to market appreciation for the three months ended June 30, 2021, compared with investment income of $11.6 million for the three months ended June 30, 2020.

Income tax expense increased $1.1 million for the three months ended June 30, 2021, compared to the same period in 2020. The increase in income tax expense was primarily due to an increase in DHCM's income before taxes, which was partially offset by a decrease in the Company's effective tax rate from 26.6% to 25.5% period-over-period primarily due to the impact of redeemable noncontrolling interest period-over-period. The provision for income taxes includes the effect of the operations ~~of th~~e Consolidated Funds that are not subject to federal income taxes. Accordingly, a portion of the Company's earnings are not subject to corporate tax. The effective tax rate of 25.5% differed from the federal statutory tax rate of 21% due primarily to state and local taxes in the jurisdictions in which the Company does business.

The Company generated net income attributable to common shareholders of $16.9 million ($5.28 per diluted share) for the three months ended June 30, 2021, compared with net income attributable to common shareholders of $12.2 million ($3.79 per diluted share) for the three months ended June 30, 2020, primarily due to increased revenues, which were partially offset by a decrease in investment income.

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~~Revenue~~

Three Months Ended June 30,
(in thousands, except percentages) 2021 2020 % Change
Investment advisory $ 41,716 $ 26,699 56 %
Mutual fund administration, net 3,354 1,550 116 %
Total $ 45,070 $ 28,249 60 %

~~Investment Advisory Fees.~~ Investment advisory fees increased $15.0 million, or 56%, from the three months ended June 30, 2020, to the three months ended June 30, 2021. Investment advisory fees are calculated as a percentage of the market value of client accounts at contractual fee rates, which vary by investment product. The increase in investment advisory fees was primarily due to an increase of 63% in average AUM, which was partially offset by a decrease in the average advisory fee rate from 0.55% to 0.52% quarter-over-quarter. The decrease in average advisory fee rate was driven by an increase in the mix of assets held in lower fee rate strategies during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

~~Mutual Fund Administration Fees.~~ Mutual fund administration fees increased $1.8 million, or 116%, from the three months ended June 30, 2020 to the three months ended June 30, 2021. Mutual fund administration fees include administration fees received from the Funds, which are calculated as a percentage of the Funds' average AUM. This increase was primarily due to a 67% increase in the Funds' average AUM from the three months ended June 30, 2020, to the three months ended June 30, 2021, and a reduction of administrative fees paid on behalf of the Funds.

~~Expenses~~

Three Months Ended June 30,
(in thousands, except percentages) 2021 2020 % Change
Compensation and related costs, excluding deferred compensation expense $ 18,940 $ 12,558 51 %
Deferred compensation expense 1,511 3,826 (61) %
General and administrative 3,871 2,900 33 %
Sales and marketing 2,037 1,149 77 %
Mutual fund administration 944 788 20 %
Total $ 27,303 $ 21,221 29 %

~~Compensation and Related Costs, Excluding Deferred Compensation Expense.~~ Employee compensation and benefits increased by $6.4 million, or 51%, from the three months ended June 30, 2020, compared to the three months ended June 30, 2021. This increase was due to an increase in accrued incentive compensation of $4.3 million, an increase in salary and related benefits of $1.1 million, and an increase in restricted stock expense of $1.0 million. Incentive compensation expense can fluctuate significantly period-over-period as the Company evaluates investment performance, individual performance, Company performance and other factors.

~~Deferred Compensation Expense.~~ Deferred compensation expense was $1.5 million for the three months ended June 30, 2021, compared to an expense of $3.8 million for the three months ended June 30, 2020, due to market appreciation on our deferred compensation plan investments.

The gain on deferred compensation plan investments increases deferred compensation expense and is included in operating income. Deferred compensation expense is offset by an equal amount in investment income below net operating income on the consolidated statements of income, and thus has no impact on net income attributable to the Company.

~~General and Administrative.~~ General and administrative expenses increased by $1.0 million, or 33%, from the three months ended June 30, 2020, to the three months ended June 30, 2021. This increase was due primarily due to approximately $0.5 million of proxy solicitation fees related to the pending sale of the businesses of DHCM’s two high yield-focused mutual funds (see note 11 in the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-

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Q), a $0.1 million increase in depreciation expense related to distribution technology software, a $0.2 million increase in IT staffing, hardware, and software expense, and $0.2 million of other general administrative expenses.

~~Sales and Marketing.~~ Sales and marketing expenses increased by $0.9 million from the three months ended June 30, 2020, to the three months ended June 30, 2021. The increase was due to $0.4 million in increased spending related to distribution technology and customer relationship management systems, a $0.3 million increase in payments made to third party intermediaries related to the sale of our proprietary funds, and a $0.2 million increase in advertising expenses.

~~Mutual Fund Administration.~~ Mutual fund administration expense increased by $0.2 million, or 20%, from the three months ended June 30, 2020, compared to the three months ended June 30, 2021. Mutual fund administration expenses consist of both variable and fixed expenses. The increase was primarily due to an increase in variable expenses as a result of the increase in the average Fund AUM period-over-period.

~~Summary Discussion of Consolidated Results of Operations - Six Months Ended June 30, 2021, compared with Six Months Ended June 30, 2020~~

Revenue for the six months ended June 30, 2021, increased $23.9 million, compared to revenue for the same period in 2020, primarily due to an increase in average AUM of 46% period-over-period, which was partially offset by a decrease in the average advisory fee rate from 0.56% to 0.52%. The decrease in the average advisory fee rate was primarily driven by an increase in the mix of assets held in lower fee rate strategies during the six months ended June 30, 2021, compared to the same period in 2020.

Operating profit margin was 37% for the six months ended June 30, 2021, and 46% for the six months ended June 30, 2020. Operating profit margin, as adjusted, was 43% for the six months ended June 30, 2021, and 38% for the six months ended June 30, 2020. Operating profit margin, as adjusted, excludes deferred compensation expense (benefit) from operating income because it is offset by an equal amount in investment income below net operating income on the income statement and thus has no effect on net income attributable to the Company. The Company believes this non-GAAP measure helps the reader to understand its core operating results and increases comparability period-to-period. See "Use of Supplemental Data as Non-GAAP Performance Measure" section within this report.

~~The~~ Company expects that its operating margin will fluctuate from period to period based on various factors, including revenues, investment results in the strategies we manage, employee performance, staffing levels, and gains and losses on investments held in deferred compensation plans, and development of investment strategies, products, or channels. The Company compensates portfolio managers based on long-term performance, so when revenue and long-term performance are misaligned, operating margins can fluctuate materially.plans.

The Company ~~recognized $11.5~~had $7.6 million in investment losses due to market depreciation for the three months ended March 31, 2022, compared to $5.7 million in investment income due to market appreciation for the ~~six~~three months ended ~~June 30, 2021, compared with investment losses of $10.8~~March 31, 2021.

Income tax expense decreased $1.7 million for the ~~six~~three months ended ~~June 30, 2020. The change year over year was primarily due to the negative impact that COVID-19 had on the financial markets in~~ March ~~2020, and the subsequent market rebound.~~

~~Income tax expense increased $5.4 million for the six months ended June 30, 2021,~~31, 2022, compared to the ~~six months ended June 30, 2020.~~same period in 2021. The ~~increase~~decrease in income tax expense was primarily due to the ~~increase~~decrease in the Company's income before taxes ~~which was partially offset by~~as a ~~decrease~~result of the investment losses incurred during the period.

The increase in the ~~Company's~~ effective tax rate from ~~33.3%~~25.7% to ~~25.6%,~~27.9% period-over-period, is primarily due to the impact ofattributable to redeemable noncontrolling ~~interest period-over-period.~~interest. The provision for income taxes includes the ~~effect~~impact of the operations of thethe Consolidated Funds, ~~that~~which are not subject to federal income taxes. Accordingly, a portion of the ~~Company's~~Company’s earnings are not subject to corporate ~~tax. The~~tax levels. Absent the impact attributable to redeemable noncontrolling interest, the estimated unconsolidated effective income tax rate ~~of 25.6% differed from the federal statutory tax rate of 21% due primarily to state and local taxes in the jurisdictions in which the Company does business.~~would have been 26.0%

The Company generated net income attributable to common shareholders of ~~$30.6~~$9.1 million ($~~9.62~~2.87 per diluted share) for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared with net income attributable to common shareholders of $13.7 million ($~~4.23~~4.34 per diluted share) for the ~~same period in 2020.~~three months ended March 31, 2021. The ~~increase~~decrease in net income ~~and earnings per diluted share~~period-over-period was primarily ~~driven by~~due to the ~~increase in revenue~~impact of investment losses in the ~~six months ended June 30, 2021, combined with the significant~~current period versus investment income ~~during~~in the ~~six months ended June 30, 2021.~~prior period.

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Revenue

Six Months Ended
June 30,
(in thousands, except percentages) 2021 2020 % Change
Investment advisory $ 78,286 $ 56,857 38 %
Mutual fund administration, net 5,798 3,318 75 %
Total $ 84,084 $ 60,175 40 %


	Three Months Ended March 31,
(in thousands, except percentages)	2022		2021		% Change
Investment advisory	$	39,279	$	36,569	7	%
Mutual fund administration, net	2,977		2,445		22	%
Total	$	42,256	$	39,014	8	%

Investment Advisory Fees. Investment advisory fees for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, increased ~~$21.4~~$2.7 million, or ~~38%~~7%, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Investment advisory fees are calculated as a percentage of the market value of client accounts at contractual fee rates, which vary by investment product. The increase in investment advisory fees was primarily due to an increase in average AUM of ~~46%, which~~8%. The increase was partially offset by a decrease in the average advisory fee rate from ~~0.56%~~0.53% to 0.52% period-over-period. The increase in AUM period-over-period was due to the rebound in the financial markets since the six months ended June 30, 2020 and $2.1 billion of net inflows into our strategies during the six months ended June 30, 2021. The decrease in average advisory fee rate was driven by an increase in the mix of assets held in lower fee rate strategies during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period in ~~2020.~~2021.

Mutual Fund Administration Fees. Mutual fund administration fees for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, increased ~~$2.5~~$0.5 million, or ~~75%~~22%, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Mutual fund administration fees include administration fees received from the Funds, which are calculated as a percentage of the Funds' average AUM. The Fund's average AUM increased approximately 2% from the three months ended March 31, 2021, to the three months ended March 31, 2022. The increase in net revenue was ~~primarily~~ due to ~~the 45% increase in the Funds' average AUM for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and~~ a reduction ~~of administrative~~in administration fees paid on behalf of the ~~Funds.~~Funds, which was primarily due to the sale of the High Yield-Focused Advisory Contracts and closure of the related funds in the third quarter of 2021.

Expenses

Six Months Ended
June 30,
(in thousands, except percentages) 2021 2020 % Change
Compensation and related costs, excluding deferred compensation expense (benefit) $ 35,755 $ 27,975 28 %
Deferred compensation expense (benefit) 4,614 (4,330) NM
General and administrative 6,687 4,829 38 %
Sales and marketing 3,905 2,604 50 %
Mutual fund administration 1,824 1,604 14 %
Total $ 52,785 $ 32,682 62 %


	Three Months Ended March 31,
(in thousands, except percentages)	2022		2021		% Change
Compensation and related costs, excluding deferred compensation expense (benefit)	$	18,647	$	16,815	11	%
Deferred compensation expense (benefit)	(1,179)		3,103		NM
General and administrative	3,186		2,816		13	%
Sales and marketing	1,711		1,868		(8)	%
Mutual fund administration	818		880		(7)	%
Total	$	23,183	$	25,482	(9)	%

Compensation and Related Costs, Excluding Deferred Compensation Expense (Benefit). Employee compensation and benefits for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, increased by ~~$7.8~~$1.8 million compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. This increase was ~~primarily~~ due to ~~an increase~~increases in accrued incentive compensation of ~~$5.0~~$1.0 million ~~an increase~~and in restricted stock expense of $1.0 million, which were partially offset by a decrease in salary and related benefits of ~~$2.2 million, and an increase in restricted stock expense of $0.6~~$0.2 million. Incentive compensation expense can fluctuate significantly period-over-period as the Company evaluates investment performance, individual performance, Company performance, and other factors.

Deferred Compensation Expense (Benefit). Deferred compensation ~~expense~~benefit was ~~$4.6~~$1.2 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~a benefit~~an expense of ~~$4.3~~$3.1 million for the ~~six~~three months ended ~~June 30, 2020. The expense in the current period was~~March 31, 2021, primarily due to market ~~appreciation~~depreciation on our deferred compensation plan investments ~~while the benefit in the prior~~ period ~~was primarily due to the negative impact COVID-19 had on the financial markets in March 2020.~~over period.

The gain (loss) on deferred compensation plan investments increases (decreases) deferred compensation expense (benefit) and is included in operating income. Deferred compensation expense (benefit) is offset by an equal amount in investment income below net operating income on the consolidated statements of income, and thus, has no impact on net income attributable to the Company.

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General and Administrative. General and administrative expense for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, increased by ~~$1.9~~$0.4 million, or ~~38%~~13%, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. This increase was primarily due to a ~~non-recurring $1.1~~increases of $0.2 million refund related to Ohio commercial activity tax, which was received in the first quarter of 2020 and reduced general and administrative expense for that quarter. The Ohio commercial activity tax is a gross receipts tax, and therefore, is not included in income taxes. Other increases in 2021 include $0.5 million of proxy solicitation fees related to the pending sale of the businesses of DHCM’s two high yield-focused mutual funds (see note 11 in the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q), a $0.1 million increase in depreciation expense related to ~~distribution technology~~our customer relationship management software, $0.1 million in other software expense, and ~~a $0.2~~$0.1 million ~~increase~~ in ~~IT staffing, hardware and software expense.~~corporate insurance.

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Sales and Marketing. Sales and marketing expense for the ~~six~~three months ended ~~June 30, 2021 increased~~March 31, 2022, decreased by ~~$1.3~~$0.2 million, or ~~50%~~8%, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. The ~~increase~~decrease was primarily due to ~~additional~~decreased payments ~~of $0.6 million~~ made to third-party intermediaries related to the sale of the Company's proprietary funds, and increases of $0.6 million related to the Company's customer relationship management system and related external data costs, and $0.2 million related to advertising expenses. These increases were partially offset by a reduction in sales and marketing travel and related expense of $0.1 million.our Funds on their platforms.

Mutual Fund Administration. Mutual fund administration expenses for the ~~six~~three months ended ~~June 30, 2021, increased~~March 31, 2022, decreased by ~~$0.2~~$0.1 million, or ~~14%~~7%, compared to the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Mutual fund administration expenses consist of both variable and fixed expenses. The ~~increase~~decrease was primarily due to ~~an increase~~a decrease in ~~variable~~various administrative expenses ~~as a result~~from the sale of the ~~increase~~High Yield-Focused Advisory Contracts and closure of the related funds in the ~~average Fund AUM period-over-period.~~third quarter of 2021.

Liquidity and Capital Resources

Sources of Liquidity

The Company's current financial condition is liquid, with a significant amount of its assets comprised of cash and cash equivalents, investments, accounts receivable, and other current assets. The Company's main source of liquidity is cash flows from operating activities, which are generated from investment advisory and mutual fund administration fees. Cash and cash equivalents, investments held directly by DHCM, accounts receivable, and other current assets represented ~~$223.0~~$188.3 million and ~~$205.1~~$214.7 million of total assets as of ~~June 30, 2021~~March 31, 2022, and December 31, ~~2020,~~2021, respectively. The Company believes that these sources of liquidity, as well as its continuing cash flows from operating activities, will be sufficient to meet its current and future operating ~~needs for the next 12 months.~~needs.

Uses of Liquidity

~~In line with the Company's primary objective to fulfill its fiduciary duty to clients and its secondary objective to achieve an adequate long-term return for shareholders, it~~The Company anticipates that its main uses of cash will be for operating expenses and seed capital to fund new and existing investment strategies. The ~~Company's board of directors~~Board and management regularly review various factors to determine whether itthe Company has capital in excess of that required for its business, and the appropriate uses of any such excess ~~capital.~~capital including share repurchases and dividends.

On February 27, 2020, the Company's board of directors approved a share repurchase program (the "2020 Repurchase Program") authorizing management to repurchase up to $50.0 million of the Company's common shares. Under the 2020 Repurchase Program, the

Share Repurchases

The Company repurchased ~~$1.9 million~~50,104 of its common shares during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022, for a total of $9.3 million. As of ~~June 30, 2021, $33.4~~March 31, 2022, $44.8 million remains available for ~~repurchase~~repurchases under the ~~2020 Repurchase Program. The authority to~~Company's current share repurchase shares: (1) may be exercised from time to time as market conditions warrant, (2) is subject to regulatory constraints, and (3) will expire two years from the date of board approval or upon the earlier repurchase in full of the authorized amount of shares. The timing, amount, and other terms and conditions of any repurchases will be determined by Company management in its discretion based on a variety of factors, including the market price of such shares, corporate considerations, general market and economic conditions, and applicable legal requirements.program.

~~The Company's board of directors has approved the institution of a regular quarterly dividend, which it began paying in the first quarter of 2021.~~

Dividends

Subject to Board approval ~~each quarter by the board of directors~~ and compliance with applicable law, the Company expects to pay a regular quarterly dividend of ~~$1.00~~$1.50 per share. ~~On February 25, 2021,~~In addition to the ~~board of directors approved~~regular quarterly dividends, the Board will decide whether to approve and pay a special dividend ~~for~~in the ~~first~~fourth quarter of ~~2021~~each fiscal year. Although the Company currently expects to pay regular quarterly dividends, depending on various circumstances and the Board's judgment, the Company may not pay such dividends as described. A summary of ~~$1.00 per share which was~~cash dividends paid onduring the three months ended March ~~19, 2021, to shareholders of record as of March 11, 2021. This dividend reduced shareholders' equity by approximately $3.1 million.~~ 31, 2022 is presented below:

Dividend

Declaration Date

Date Paid

Dividend Amount (in millions)

First quarter - $1.50 per share

February 25, 2022

March 18, 2022

4.8

On April 26, ~~2021,~~2022, the ~~board of directors~~Board approved a regular quarterly dividend for the second quarter of ~~2021~~2022 of ~~$1.00~~$1.50 per ~~share~~share. The regular dividend will be paid on June ~~18, 2021,~~17, 2022, to shareholders of record as of June 3, 2021. This dividend reduced shareholders' equity by approximately $3.2 million. On July 28, 2021, the board of directors approved a dividend for the third quarter of 2021 of $1.00 per share to be paid on September 24, 2021, to shareholders of record as of September 9, 2021.2, 2022. This dividend is expected to reduce shareholders' equity by approximately ~~$3.2~~$4.8 million.

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Going forward, at the end of each fiscal year, the board of directors will decide whether to pay an additional special dividend. Although the Company currently expects to pay the ongoing quarterly dividends, depending on the circumstances and the board of directors’ judgment, the Company may not pay such dividends as described.

Working Capital

As of ~~June 30, 2021,~~March 31, 2022, the Company had working capital of approximately ~~$196.2~~$166.2 million, compared to ~~$168.9~~$168.5 million as of December 31, ~~2020.~~2021. Working capital includes cash and cash equivalents, accounts receivable, investments, and other current assets of DHCM, net of accounts payable and accrued expenses, accrued incentive compensation, deferred compensation and other current liabilities of DHCM.

Below is a summary of ~~securities owned by the Company~~investments as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.


		As of					As of
		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Corporate Investments:	Corporate Investments:					Corporate Investments:
Diamond Hill Core Bond Fund	Diamond Hill Core Bond Fund	$	46,726,027	$	47,204,636	Diamond Hill Core Bond Fund	$	44,478,411	$	46,755,404
Diamond Hill Long-Short Fund		18,837,564		16,945,863
Diamond Hill International Fund						Diamond Hill International Fund	39,862,331		41,673,154
Diamond Hill Large Cap Concentrated Fund	Diamond Hill Large Cap Concentrated Fund	10,989,990		—		Diamond Hill Large Cap Concentrated Fund	11,489,086		12,098,049
Diamond Hill Global Fund		12,542,448		11,269,719
Diamond Hill Micro Cap Fund, LP	Diamond Hill Micro Cap Fund, LP	9,903,190		—		Diamond Hill Micro Cap Fund, LP	9,728,578		10,703,473
Diamond Hill International Fund		11,675,462		10,156,320
Total Corporate Investments	Total Corporate Investments	110,674,681		85,576,538		Total Corporate Investments	105,558,406		111,230,080
Deferred Compensation Plan Investments in the Funds	Deferred Compensation Plan Investments in the Funds	34,880,340		33,241,952		Deferred Compensation Plan Investments in the Funds	33,968,699		37,348,294
Total investments held by DHCM	Total investments held by DHCM	145,555,021		118,818,490		Total investments held by DHCM	139,527,105		148,578,374
Investments in Consolidated Funds held by noncontrolling interests		15,048,463		9,582,646
Total Investment Portfolio		$	160,603,484	$	128,401,136
Redeemable noncontrolling interest in Consolidated Funds						Redeemable noncontrolling interest in Consolidated Funds	22,403,063		18,077,627
Total investments						Total investments	$	161,930,168	$	166,656,001

Cash Flow Analysis

Cash Flows from Operating Activities

The Company’s cash flows from operating activities are calculated by adjusting net income to reflect other significant operating sources and uses of cash, certain significant non-cash items (such as share-based compensation), and timing differences in the cash settlement of operating assets and liabilities. The Company expects that cash flows provided by operating activities will continue to serve as its primary source of working capital in the near future.

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash ~~provided by~~used in operating activities totaled ~~$2.8~~$13.7 million. Cash ~~inflows~~outflows from operating activities were primarily driven by ~~net income of $31.9~~a $27.3 million ~~the add back of share-based compensation of $3.3 million and depreciation of $0.6 million. These inflows were partially offset a $9.7 million reduction~~decrease in the incentive compensation accrual due to the annual incentive compensation payment made in the first quarter of 2022, net change in securities ~~purchased~~held by the Consolidated Funds of ~~$14.1~~$5.1 million, and the cash impact of timing differences in the settlement of other assets and liabilities of ~~$9.2~~$0.3 million. These outflows were partially offset by net income of $8.3 million, and the add backs of net investment losses of $8.0 million, share-based compensation of $2.3 million, and depreciation of $0.4 million. Absent the cash used in operations by the Consolidated Funds, cash flows ~~provided by~~used for operations were ~~$16.3~~$9.9 million.

For the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, net cash ~~provided by~~used in operating activities totaled ~~$21.7~~$15.7 million. Cash ~~inflows provided by~~outflows from operating activities ~~was~~were primarily driven by a $19.6 million decrease in the incentive compensation accrual due to the annual incentive compensation payment made in the first quarter of 2021, net ~~income~~change in securities held by the Consolidated Funds of ~~$11.1 million, the add back of share-based compensation of $3.6 million, depreciation of $0.5~~$11.5 million, and the cash impact of timing differences in the settlement of assets and liabilities of ~~$16.7~~$0.6 million. These ~~increases~~outflows were partially offset by net income of $14.3 million, and the ~~decrease in accrued incentive~~add backs of share-based compensation of ~~$10.3~~$1.5 million ~~due to the payment~~and depreciation of ~~incentive compensation in the first quarter of 2020.~~$0.2 million. Absent the cash used in operations by the Consolidated Funds, ~~to purchase securities into their investment portfolios,~~ cash flows ~~provided by~~used for operations ~~was $21.5~~were $5.5 million.

~~Table of Contents~~

Cash Flows from Investing Activities

The Company’s cash flows from investing activities consist primarily of capital expenditures and purchases and redemptions in our investment portfolio.

Cash flows ~~used in~~provided by investing activities totaled ~~$8.5~~$1.8 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. Cash flows ~~used in~~provided by investing activities were primarily driven by ~~corporate investment~~proceeds from the sale of Company sponsored investments totaling $3.5 million, which were partially offset by purchases of ~~$12.4~~Company sponsored investments of $1.7 million.

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Cash flows provided by investing activities totaled $1.6 million for the three months ended March 31, 2021. Cash flows provided by investing activities were primarily driven by proceeds from the sale of Company sponsored investments totaling $3.9 million, which were partially offset by purchases of Company sponsored investments of $1.9 million and property and equipment purchases (primarily capitalized software) of ~~$0.7 million. These outflows were partially offset by proceeds from the redemption of investments totaling $4.6 million.~~

Cash flows provided by investing activities totaled $11.9 million for the six months ended June 30, 2020. Cash flows provided by investing activity were primarily driven by proceeds from the redemption of investments totaling $24.7 million, which was partially offset by corporate investment purchases of $11.9 million and property and equipment purchases of $0.9$0.4 million.

Cash Flows from Financing Activities

The Company’s cash flows from financing activities consist primarily of the repurchase of its common ~~shares,~~stock, shares withheld related to employee tax withholding, dividends paid on its common stock, proceeds received under the ESPP, and distributions to, or contributions from, redeemable noncontrolling interest holders.

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash used in financing activities totaled ~~$5.0~~$9.9 million, consisting of cash outlfows for repurchases of the Company’s common stock of $9.3 million and the payment of quarterly dividends totaling ~~$6.3 million, repurchases of the Company’s common shares of $1.9 million, and the value of shares withheld related to employee tax withholding of $0.7~~$4.8 million. These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable noncontrolling interest holders of ~~$3.5~~$3.8 million and proceeds received under the ESPP of $0.4 million.

For the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, net cash used in financing activities totaled ~~$15.5~~$4.2 million, consisting of cash outflows for the payment of quarterly dividends totaling $3.1 million, repurchases of the Company’s common ~~shares~~stock of ~~$12.0 million, net redemptions received in the Consolidated Funds from redeemable noncontrolling interest holders of $2.0~~$1.9 million, and the value of shares withheld related to employee tax withholding of ~~$1.5~~$0.3 million. These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable noncontrolling interest holders of $0.7 million, and proceeds received under our ESPP of $0.3 million.

Supplemental Consolidated Cash Flow Statement

The Company's consolidated balance sheets reflect the investments and other assets and liabilities of the Consolidated Funds, as well as redeemable noncontrolling interest for the portion of the Consolidated Funds that are held by third-party investors. Although the Company can redeem its net interest in the Consolidated Funds at any time, the Company cannot directly access or sell the assets held by the Consolidated Funds to obtain cash for general operations. Additionally, the assets of the Consolidated Funds are not available to our general creditors.

~~Table of Contents~~

The following table summarizes the condensed cash flows for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, that are attributable to the Company and to the Consolidated Funds, and the related eliminations required in preparing the consolidated statements.


		Six Months Ended June 30, 2021									Three Months Ended March 31, 2022
		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 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 (loss)		$	30,573,341	$	5,350,026	$	(4,034,216)	$	31,889,151
Cash flows from operating activities:										Cash flows from operating activities:
Net income										Net income	$	9,129,952	$	(3,363,869)	$	2,508,933	$	8,275,016
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:									Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	Depreciation	577,706		—		—		577,706		Depreciation	362,902		—		—		362,902
Share-based compensation	Share-based compensation	3,268,734		—		—		3,268,734		Share-based compensation	2,333,530		—		—		2,333,530

Net (gains)/losses on investments	Net (gains)/losses on investments	(9,331,451)		(5,350,026)		4,034,216		(10,647,261)		Net (gains)/losses on investments	7,143,606		3,363,862		(2,508,933)		7,998,535
Net change in securities held by Consolidated Funds	Net change in securities held by Consolidated Funds	—		(14,055,138)		—		(14,055,138)		Net change in securities held by Consolidated Funds	—		(5,129,789)		—		(5,129,789)
Other changes in assets and liabilities	Other changes in assets and liabilities	(8,825,030)		618,294		—		(8,206,736)		Other changes in assets and liabilities	(28,861,616)		1,343,252		—		(27,518,364)
Net cash provided by (used in) operating activities		16,263,300		(13,436,844)		—		2,826,456
Net cash used in operating activities										Net cash used in operating activities	(9,891,626)		(3,786,544)		—		(13,678,170)
Net cash (used in) provided by investing activities	Net cash (used in) provided by investing activities	(18,434,349)		—		9,905,131		(8,529,218)		Net cash (used in) provided by investing activities	1,884,750		—		(50,576)		1,834,174
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(8,546,099)		13,436,844		(9,905,131)		(5,014,386)		Net cash (used in) provided by financing activities	(13,764,235)		$	3,786,544	$	50,576	(9,927,115)
Net change during the period	Net change during the period	(10,717,148)		—		—		(10,717,148)		Net change during the period	(21,771,111)		—		—		(21,771,111)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	98,478,202		—		—		98,478,202		Cash and cash equivalents at beginning of period	80,550,393		—		—		80,550,393
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	87,761,054	$	—	$	—	$	87,761,054	Cash and cash equivalents at end of period	$	58,779,282	—		—		$	58,779,282

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Use of Supplemental Data as Non-GAAP Performance Measure

As supplemental information, the Company is providing performance measures that are based on methodologies other than GAAP (“non-GAAP”). The Company believes that the non-GAAP measures below are useful measures of its core business activities, are important metrics in estimating the value of an asset management business, and may enable more appropriate comparisons to its peers. These non-GAAP 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 schedule reconciles GAAP measures to non-GAAP measures for the ~~three-~~three months ended March 31, 2022 and ~~six-months ended June 30,~~ 2021, ~~and 2020,~~ respectively.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(in thousands, except percentages and per share data)	(in thousands, except percentages and per share data)	2021			2020			2021			2020			(in thousands, except percentages and per share data)		2022			2021
Total revenue	Total revenue	$	45,070		$	28,249		$	84,084		$	60,175		Total revenue		$	42,256		$	39,014

Net operating income, GAAP basis	Net operating income, GAAP basis	$	17,767		$	7,028		$	31,299		$	27,493		Net operating income, GAAP basis		$	19,073		$	13,532
Non-GAAP adjustment:	Non-GAAP adjustment:													Non-GAAP adjustment:
Gains (losses) on deferred compensation plan investments, net(1)	Gains (losses) on deferred compensation plan investments, net(1)	1,511			3,826			4,614			(4,330)			Gains (losses) on deferred compensation plan investments, net(1)		(1,179)			3,103
Net operating income, as adjusted, non-GAAP basis(2)	Net operating income, as adjusted, non-GAAP basis(2)	19,278			10,854			35,913			23,163			Net operating income, as adjusted, non-GAAP basis(2)		17,894			16,635
Non-GAAP adjustment:	Non-GAAP adjustment:													Non-GAAP adjustment:
Tax provision on net operating income, as adjusted, non-GAAP basis(3)	Tax provision on net operating income, as adjusted, non-GAAP basis(3)	(5,070)			(3,133)			(9,471)			(6,665)			Tax provision on net operating income, as adjusted, non-GAAP basis(3)		(4,650)			(4,402)
Net operating income, as adjusted, after tax, non-GAAP basis(4)	Net operating income, as adjusted, after tax, non-GAAP basis(4)	$	14,208		$	7,721		$	26,442		$	16,498		Net operating income, as adjusted, after tax, non-GAAP basis(4)		$	13,244		$	12,233

Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)	Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)	$	4.44		$	2.40		$	8.32		$	5.08		Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)		$	4.16		$	3.87
Diluted weighted average shares outstanding, GAAP basis	Diluted weighted average shares outstanding, GAAP basis	3,197			3,221			3,177			3,247			Diluted weighted average shares outstanding, GAAP basis		3,186			3,157

Operating profit margin, GAAP basis	Operating profit margin, GAAP basis	39		%	25		%	37		%	46		%	Operating profit margin, GAAP basis		45		%	35		%
Operating profit margin, as adjusted, non-GAAP basis(6)	Operating profit margin, as adjusted, non-GAAP basis(6)	43		%	38		%	43		%	38		%	Operating profit margin, as adjusted, non-GAAP basis(6)		42		%	43		%

(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 represents 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.

(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 is calculated by applying the unconsolidated effective tax rate to net operating income, as adjusted.

(4) Net operating income, as adjusted, after tax: This non-GAAP measure deducts from the net operating income, as adjusted, 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.

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Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements. The Company does not have any obligation under a guarantee contract, a retained or contingent interest in assets, or any similar arrangement that serves as credit, liquidity, or market risk support for such assets, or any other obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument or arising out of a variable interest.

~~Table of Contents~~

Critical Accounting Policies and Estimates

For a summary of the critical accounting policies important to understanding the condensed consolidated financial statements, please see Note 2, Significant Accounting Policies, in the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, and Critical Accounting Policies and Estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as Note 2, Significant Accounting Policies, in the ~~2020~~2021 Form 10-K.


ITEM 3:			Quantitative and Qualitative Disclosures About Market Risk

For information regarding the Company’s exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the ~~2020~~2021 Form 10-K. Except as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, there have been no significant changes in the Company’s market risk exposures since our December 31, ~~2020~~2021 year end.


ITEM 4:			Controls and Procedures

Management, including the Chief Executive Officer and the Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~June 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. The Company continues to monitor and assess the impact, if any, that the COVID-19 pandemic and the related economic impacts could have on the design and operating effectiveness of our internal controls.


PART II:			OTHER INFORMATION


ITEM 1:			Legal Proceedings

From time to time, the Company is party to ordinary, routine litigation that is incidental to its business. There are currently no such matters pending that the Company believes could have a material adverse effect on its consolidated financial statements.


ITEM 1A:			Risk Factors

There have been no material changes to the Company's risk factors from the information disclosed in Item 1A of the ~~2020~~2021 Form 10-K.


ITEM 2:			Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended ~~June 30, 2021, the Company~~March 31, 2022, we did not sell any shares of our common ~~shares~~stock that were not registered under the Securities Act. The following table sets forth information regarding ~~the Company’s~~ repurchases of ~~its~~our common ~~shares~~stock during the quarter ended ~~June 30, 2021:~~March 31, 2022:

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Period
Total Number of Shares Purchased for Employee Tax Withholdings(a)
Total Number
of Shares
Purchased
as part of Publicly
Announced Programs(b)
Average Price
Paid Per Share Purchased Under the Programs Aggregate Purchase Price of Shares
Purchased
Under the Programs Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Program
April 1, 2021 through
April 30, 2021 2,753 230 $ 154.37 $ 35,505 $ 33,447,025
May 1, 2021 through
May 31, 2021 — — — — 33,447,025
June 1, 2021 through
June 30, 2021 — — — — $ 33,447,025
Total 2,753 230 $ 154.37 $ 35,505


Period	Total Number of Shares Purchased as part of Publicly Announced Programs(a)	Average Price Paid Per Share Purchased Under the Programs		Purchase Price of Shares Purchased Under the Programs		Aggregate Purchase Price Yet Be Purchased Under the Programs(a)
January 1, 2022 through January 31, 2022	9,020	$	180.97	$	1,632,587	$	25,922,774
February 1, 2022 through February 28, 2022	13,777	179.23		2,469,295		50,000,000
March 1, 2022 through March 31, 2022	27,307	191.01		5,215,779		44,784,221
Total	50,104	$	185.94	$	9,317,661	$	44,784,221

(a)The Company regularly withholds common shares for tax payments due upon the vesting of employee restricted stock. During the quarter ended June 30, 2021, the Company purchased 2,753 common shares for employee tax withholdings at an average price paid per share of $156.01.

~~(b)~~On February 27, 2020, the ~~Company announced~~Board approved the 2020 Repurchase Program, ~~pursuant to which our board of directors authorized~~authorizing management to repurchase up to $50.0 million of ~~the Company’s~~our common shares in the open market and in private transactions in accordance with applicable securities laws. The 2020 Repurchase Program expired in February 2022. On February 25, 2022, the Board approved the 2022 Repurchase Program, authorizing management to repurchase up to $50.0 million of Company common shares in the open market and in private transactions in accordance with applicable securities laws. The 2022 Repurchase Program will expire in February ~~2022,~~2024, or upon the earlier completion of all authorized purchases under such program.

The Company has entered into a Rule 10b5-1 repurchase plan. This plan is intended to qualify for the safe harbor under Rule 10b5-1 of the Exchange Act. A Rule 10b5-1 plan allows a company to purchase its ~~shares~~stock at times when it would not ordinarily be in the market because of its trading policies or the possession of material nonpublic information. Because repurchases under the 10b5-1 plan are subject to specified parameters and certain price, timing, and volume restraints specified in the plan, there is no guarantee as to the exact number of shares that will be repurchased or that there will be any repurchases at all pursuant to the plan. Purchases may be made in the open market or through privately negotiated transactions. Purchases in the open market will be made in compliance with Rule 10b-18 under the Exchange Act.

Through ~~June 30, 2021,~~March 31, 2022, the Company has repurchased ~~142,148~~27,307 shares of the Company's common ~~shares~~stock under the ~~2020~~2022 Repurchase Program at a total cost of ~~$16.6~~$5.2 million.


ITEM 3:			Defaults Upon Senior Securities

None.


ITEM 4:			Mine Safety Disclosures

Not applicable.


ITEM 5:			Other Information

None.

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ITEM 6:			Exhibits


3.1						Amended and Restated Articles of Incorporation of the Company (Incorporated by reference from Exhibit 3(i) to the Current Report on Form 8-K filed with the SEC on May 7, 2002) (File No. 000-24498).

3.2						Certificate of Amendment by Shareholders to the Articles of Incorporation of the Company (Incorporated by reference from Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on April 28, 2017) (File No. 000-24498).

3.3						Amended and Restated Code of Regulations of the Company (Incorporated by reference from Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on April 28, 2017) (File No. 000-24498).

31.1						Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). (Filed herewith).

31.2						Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). (Filed herewith).

32.1						Section 1350 Certifications. (Filed herewith) ~~(Furnished herewith)~~

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

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DIAMOND HILL INVESTMENT GROUP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DIAMOND HILL INVESTMENT GROUP, INC.

Date

Title

Signature

~~July 28, 2021~~April 26, 2022

Chief Executive Officer and President

/s/ Heather E. Brilliant

Heather E. Brilliant

~~July 28, 2021~~April 26, 2022

Chief Financial Officer and Treasurer

/s/ Thomas E. Line

Thomas E. Line

3631


	Three Months Ended June 30, 2021
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at March 31, 2021	3,197,634	$	85,303,452	$	(19,440,920)	$	128,578,546	$	194,441,078	$	10,665,146
Issuance of restricted stock grants	15,343	2,551,601		(2,551,601)		—		—		—
Amortization of restricted stock grants	—	—		1,711,863		—		1,711,863		—
Issuance of common stock related to 401(k) plan match	142	24,000		—		—		24,000		—
Issuance of common stock related to employee stock purchase plan	3,083	525,374		—		—		525,374		—
Shares withheld related to employee tax withholding	(2,753)	(429,495)		—		—		(429,495)		—
Forfeiture of restricted stock grants	(5,197)	(1,050,833)		1,050,833		—		—		—
Repurchase of common stock	(230)	(35,505)		—		—		(35,505)		—
Cash dividend paid of $1.00 per share	—	—		—		(3,195,610)		(3,195,610)		—
Net income	—	—		—		16,864,830		16,864,830		761,708
Net subscriptions of consolidated funds	—	—		—		—		—		2,793,002
Balance at June 30, 2021	3,208,022	$	86,888,594	$	(19,229,825)	$	142,247,766	$	209,906,535	$	14,219,856

	Three Months Ended June 30, 2020
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at March 31, 2020	3,247,515	$	90,602,468	$	(18,686,750)	$	118,864,202	$	190,779,920	$	9,554,350
Issuance of restricted stock grants	13,015	1,462,975		(1,462,975)		—		—		—
Amortization of restricted stock grants	—	—		560,606		—		560,606		—

Issuance of common stock related to 401(k) plan match	6,403	642,008		—		—		642,008		—
Shares withheld related to employee tax withholding	(13,631)	(1,230,062)		—		—		(1,230,062)		—
Forfeiture of restricted stock grants	(13,300)	(2,485,647)		2,485,647		—		—		—
Repurchase of common stock	(27,078)	(2,801,896)		—		—		(2,801,896)		—
Net income	—	—		—		12,200,690		12,200,690		1,437,789
Net redemptions of consolidated funds	—	—		—		—		—		(1,420,417)

Balance at June 30, 2020	3,212,924	$	86,189,846	$	(17,103,472)	$	131,064,892	$	200,151,266	$	9,571,722


	As of June 30, 2021
	AUM subject to performance-based fees		Unearned performance-based fees
Contractual Period Ending:
Quarter Ending September 30, 2021	$	391,510,444	$	10,715,868
Quarter Ending December 31, 2021	70,457,587		265,240
Total	$	461,968,031	$	10,981,108


	June 30, 2021		June 30, 2020
Three Months Ended	$	241,190	$	239,630
Six Months Ended	$	450,232	$	465,488


	Assets Under Management
	As of June 30,
(in millions, except percentages)	2021		2020		% Change
Proprietary funds	$	22,004	$	13,780	60	%
Sub-advised funds	3,651		2,463		48	%
Separately managed accounts	6,705		4,402		52	%
Total AUM	$	32,360	$	20,645	57	%



	Change in Assets Under Management
	For the Three Months Ended June 30,
(in millions)	2021		2020
AUM at beginning of the period	$	30,582	$	17,496
Net cash inflows (outflows)
proprietary funds	260		(59)
sub-advised funds	(99)		146
separately managed accounts	389		144
	550		231
Net market appreciation and income	1,228		2,918
Increase during the period	1,778		3,149
AUM at end of the period	$	32,360	$	20,645

Average AUM during the period	$	32,095	$	19,729


















	Change in Assets Under Management
	For the Six Months Ended June 30,
(in millions)	2021		2020
AUM at beginning of the period	$	26,411	$	23,399
Net cash inflows (outflows)
proprietary funds(a)	1,987		(47)
sub-advised funds	(57)		691
separately managed accounts	214		(162)
	2,144		482
Net market appreciation (depreciation) and income(a)	3,805		(3,236)
Increase (decrease) during the period	5,949		(2,754)
AUM at end of the period	$	32,360	$	20,645

Average AUM during the period	$	30,146	$	20,591


Period	Total Number of Shares Purchased for Employee Tax Withholdings(a)	Total Number of Shares Purchased as part of Publicly Announced Programs(b)	Average Price Paid Per Share Purchased Under the Programs		Aggregate Purchase Price of Shares Purchased Under the Programs		Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Program
April 1, 2021 through April 30, 2021	2,753	230	$	154.37	$	35,505	$	33,447,025
May 1, 2021 through May 31, 2021	—	—	—		—		33,447,025
June 1, 2021 through June 30, 2021	—	—	—		—		$	33,447,025
Total	2,753	230	$	154.37	$	35,505