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 ~~March 31,~~September 30, 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~~Nasdaq Stock Market ~~LLC~~

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~~October 26, 2022 ~~is 3,170,577~~was 3,015,855 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	1922

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2836

Item 4.	Controls and Procedures	2836

Part II: OTHER INFORMATION		2836

Item 1.	Legal Proceedings	2837

Item 1A.	Risk Factors	2837

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2837

Item 3.	Defaults Upon Senior Securities	2937

Item 4.	Mine Safety Disclosures	2937

Item 5.	Other Information	2938

Item 6.	Exhibits	3039

Signatures		3140

Table of Contents


PART I:			FINANCIAL INFORMATION


ITEM 1:			Consolidated Financial Statements

Diamond Hill Investment Group, Inc.

Consolidated Balance Sheets


		3/31/2022		12/31/2021			9/30/2022		12/31/2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	58,779,282	$	80,550,393	Cash and cash equivalents	$	63,189,773	$	80,550,393
Investments	Investments	161,930,168		166,656,001		Investments	136,241,599		166,656,001
Accounts receivable	Accounts receivable	21,133,187		20,443,562		Accounts receivable	19,327,637		20,443,562
Prepaid expenses	Prepaid expenses	3,157,795		2,555,296		Prepaid expenses	3,692,086		2,555,296

Income taxes receivable						Income taxes receivable	1,658,895		—
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	5,642,790		6,100,599		Property and equipment, net of accumulated depreciation	4,720,696		6,100,599
Deferred taxes	Deferred taxes	10,723,101		9,847,552		Deferred taxes	14,844,976		9,847,552
Total assets	Total assets	$	261,366,323	$	286,153,403	Total assets	$	243,675,662	$	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	$	9,765,278	$	8,588,713	Accounts payable and accrued expenses	$	12,160,734	$	8,588,713
Accrued incentive compensation	Accrued incentive compensation	9,400,752		37,235,418		Accrued incentive compensation	24,260,281		37,235,418
Income taxes payable	Income taxes payable	4,883,055		801,740		Income taxes payable	—		801,740
Deferred compensation	Deferred compensation	33,968,699		37,348,294		Deferred compensation	28,226,669		37,348,294
Total liabilities	Total liabilities	58,017,784		83,974,165		Total liabilities	64,647,684		83,974,165
Redeemable noncontrolling interest	Redeemable noncontrolling interest	20,738,520		17,756,336		Redeemable noncontrolling interest	12,393,053		17,756,336
Permanent Shareholders’ equity	Permanent Shareholders’ equity					Permanent Shareholders’ equity
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
Common stock, no par value: 7,000,000 shares authorized; 3,035,784 issued and outstanding at September 30, 2022 (inclusive of 233,686 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; 3,035,784 issued and outstanding at September 30, 2022 (inclusive of 233,686 unvested shares); 3,171,536 issued and outstanding at December 31, 2021 (inclusive of 201,170 unvested shares)	55,910,331		80,434,049
Preferred stock, undesignated, 1,000,000 shares authorized and unissued	Preferred stock, undesignated, 1,000,000 shares authorized and unissued	—		—		Preferred stock, undesignated, 1,000,000 shares authorized and unissued	—		—
Deferred equity compensation	Deferred equity compensation	(24,476,298)		(15,268,705)		Deferred equity compensation	(19,975,380)		(15,268,705)
Retained earnings	Retained earnings	123,569,192		119,257,558		Retained earnings	130,699,974		119,257,558
Total permanent shareholders’ equity	Total permanent shareholders’ equity	182,610,019		184,422,902		Total permanent shareholders’ equity	166,634,925		184,422,902
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	261,366,323	$	286,153,403	Total liabilities and shareholders’ equity	$	243,675,662	$	286,153,403

Book value per share	Book value per share	$	57.22	$	58.15	Book value per share	$	54.89	$	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 March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2022			2021			2022		2021		2022		2021
REVENUES:	REVENUES:							REVENUES:
Investment advisory	Investment advisory		$	39,278,886		$	36,569,103	Investment advisory	$	35,842,083	$	51,848,379	$	111,529,134	$	130,133,909
Mutual fund administration, net	Mutual fund administration, net		2,977,500			2,445,330		Mutual fund administration, net	2,422,591		3,206,175		8,013,040		9,004,731
Total revenue	Total revenue		42,256,386			39,014,433		Total revenue	38,264,674		55,054,554		119,542,174		139,138,640
OPERATING EXPENSES:	OPERATING EXPENSES:							OPERATING EXPENSES:
Compensation and related costs, excluding deferred compensation expense (benefit)	Compensation and related costs, excluding deferred compensation expense (benefit)		18,646,894			16,814,941		Compensation and related costs, excluding deferred compensation expense (benefit)	17,259,543		20,432,734		53,128,680		56,187,709
Deferred compensation expense (benefit)	Deferred compensation expense (benefit)		(1,178,556)			3,102,946		Deferred compensation expense (benefit)	(1,051,637)		3,305		(6,920,586)		4,617,505
General and administrative	General and administrative		3,185,971			2,815,678		General and administrative	3,475,423		3,637,166		10,174,719		10,323,809
Sales and marketing	Sales and marketing		1,711,160			1,868,026		Sales and marketing	1,728,827		1,766,943		5,326,890		5,671,825
Mutual fund administration	Mutual fund administration		817,878			880,721		Mutual fund administration	819,921		893,417		2,475,323		2,717,807
Total operating expenses	Total operating expenses		23,183,347			25,482,312		Total operating expenses	22,232,077		26,733,565		64,185,026		79,518,655
NET OPERATING INCOME	NET OPERATING INCOME		19,073,039			13,532,121		NET OPERATING INCOME	16,032,597		28,320,989		55,357,148		59,619,985
Investment income (loss), net	Investment income (loss), net		(7,592,257)			5,663,454		Investment income (loss), net	(8,031,706)		(2,629,589)		(33,301,836)		8,910,951

Gain on sale of high yield-focused advisory contracts								Gain on sale of high yield-focused advisory contracts	6,813,579		9,000,000		6,813,579		9,000,000
NET INCOME BEFORE TAXES	NET INCOME BEFORE TAXES		11,480,782			19,195,575		NET INCOME BEFORE TAXES	14,814,470		34,691,400		28,868,891		77,530,936
Income tax expense	Income tax expense		(3,205,766)			(4,932,962)		Income tax expense	(4,442,070)		(9,815,605)		(9,005,711)		(20,765,990)
NET INCOME	NET INCOME		8,275,016			14,262,613		NET INCOME	10,372,400		24,875,795		19,863,180		56,764,946
Net loss (income) attributable to redeemable noncontrolling interest	Net loss (income) attributable to redeemable noncontrolling interest		854,936			(554,102)		Net loss (income) attributable to redeemable noncontrolling interest	1,642,040		751,850		5,694,098		(563,960)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	9,129,952		$	13,708,511	NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	12,014,440	$	25,627,645	$	25,557,278	$	56,200,986
Earnings per share attributable to common shareholders	Earnings per share attributable to common shareholders							Earnings per share attributable to common shareholders
Basic	Basic		$	2.87		$	4.34	Basic	$	3.90	$	8.03	$	8.14	$	17.66
Diluted	Diluted		$	2.87		$	4.34	Diluted	$	3.90	$	8.03	$	8.14	$	17.66
Weighted average shares outstanding	Weighted average shares outstanding							Weighted average shares outstanding
Basic	Basic		3,185,930			3,156,768		Basic	3,078,666		3,192,535		3,138,834		3,182,065
Diluted	Diluted		3,185,930			3,156,768		Diluted	3,078,666		3,192,535		3,138,834		3,182,065

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 3,171,536 $ 80,434,049 $ (15,268,705) $ 119,257,558 $ 184,422,902 $ 17,756,336
Issuance of restricted stock grants 66,190 11,700,781 (11,700,781) — — —
Amortization of restricted stock grants — — 2,248,679 — 2,248,679 —
Common stock issued as incentive compensation 2,743 487,870 — — 487,870 —
Issuance of common stock related to 401k plan match 108 19,249 — — 19,249 —
Issuance of common stock related to employee stock purchase plan 2,335 437,346 — — 437,346 —
Forfeiture of restricted stock grants (1,321) (244,509) 244,509 — — —
Repurchase of common stock (50,104) (9,317,661) — — (9,317,661) —
Cash dividends paid — — — (4,818,318) (4,818,318) —
Net income (loss) — — — 9,129,952 9,129,952 (854,936)
Net subscriptions of consolidated Funds — — — — — 3,837,120
Balance at March 31, 2022 3,191,487 $ 83,517,125 $ (24,476,298) $ 123,569,192 $ 182,610,019 $ 20,738,520
Three Months Ended March 31, 2021
Shares
Outstanding Common
Stock Deferred Equity
Compensation Retained
Earnings Total Redeemable Noncontrolling Interest
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 52,434 8,160,714 (8,160,714) — — —
Amortization of restricted stock grants — — 1,397,132 — 1,397,132 —
Common stock issued as incentive compensation 3,681 529,806 — — 529,806 —
Issuance of common stock related to 401k plan match 154 24,000 — — 24,000 —
Shares withheld related to employee tax withholding (1,729) (258,088) — — (258,088) —
Forfeiture of restricted stock grants (13,200) (2,070,780) 2,070,780 — — —
Repurchase of common stock (12,529) (1,893,146) — — (1,893,146) —
Cash dividend paid — — — (3,147,890) (3,147,890) —
Net income — — — 13,708,511 13,708,511 554,102
Net subscriptions of consolidated Funds — — — — — 738,711
Balance at March 31, 2021 3,197,634 $ 85,303,452 $ (19,440,920) $ 128,578,546 $ 194,441,078 $ 10,665,146


	Three Months Ended September 30, 2022
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at June 30, 2022	3,122,317	$	71,099,716	$	(23,250,408)	$	123,271,479	$	171,120,787	$	22,300,189

Amortization of restricted stock grants	—	—		2,775,945		—		2,775,945		—

Issuance of common stock related to employee stock purchase plan	484	79,861		—		—		79,861		—
Shares withheld related to employee tax withholding	(4,601)	(798,918)		—		—		(798,918)		—
Forfeiture of restricted stock grants	(3,480)	(499,083)		499,083		—		—		—
Repurchase of common stock	(78,936)	(13,971,245)		—		—		(13,971,245)		—
Cash dividends paid	—	—		—		(4,585,945)		(4,585,945)		—
Net income (loss)	—	—		—		12,014,440		12,014,440		(1,642,040)
Net deconsolidations of Company sponsored investments	—	—		—		—		—		(9,528,503)
Net subscriptions of Consolidated Funds	—	—		—		—		—		1,263,407
Balance at September 30, 2022	3,035,784	$	55,910,331	$	(19,975,380)	$	130,699,974	$	166,634,925	$	12,393,053

	Three Months Ended September 30, 2021
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
Balance at June 30, 2021	3,208,022	$	86,888,594	$	(19,229,825)	$	142,247,766	$	209,906,535	$	14,219,856
Issuance of restricted stock grants	812	142,636		(142,636)		—		—		—
Amortization of restricted stock grants	—	—		2,058,064		—		2,058,064		—

Issuance of common stock related to 401(k) plan match	68	11,542		—		—		11,542		—
Issuance of common stock related to employee stock purchase plan	485	85,195		—		—		85,195		—
Shares withheld related to employee tax withholding	(4,967)	(831,029)		—		—		(831,029)		—
Forfeiture of restricted stock grants	(700)	(126,014)		126,014		—		—		—
Repurchase of common stock	(31,468)	(5,615,250)		—		—		(5,615,250)		—
Cash dividends paid	—	—		—		(3,185,792)		(3,185,792)		—
Net income (loss)	—	—		—		25,627,645		25,627,645		(751,850)
Net redemptions of Consolidated Funds	—	—		—		—		—		(100,532)

Balance at September 30, 2021	3,172,252	$	80,555,674	$	(17,188,383)	$	164,689,619	$	228,056,910	$	13,367,474

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~~Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited)

Three Months Ended
March 31,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,275,016 $ 14,262,613
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 362,902 218,731
Share-based compensation 2,333,530 1,481,578
Increase in accounts receivable (689,625) (1,911,973)
Change in current income taxes 4,081,315 3,904,225
Change in deferred income taxes (875,549) 1,004,084
Net losses (gains) on investments 7,998,535 (5,205,321)
Net change in securities held by Consolidated Funds (5,129,789) (11,456,604)
Decrease in accrued incentive compensation (27,346,796) (19,634,038)
Increase (decrease) in deferred compensation (3,379,595) 127,135
Other changes in assets and liabilities 691,886 1,549,065
Net cash used in operating activities (13,678,170) (15,660,505)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (22,913) (413,441)
Purchase of Company sponsored investments (1,684,026) (1,890,082)
Proceeds from sale of Company sponsored investments 3,541,113 3,891,396
Net cash provided by investing activities 1,834,174 1,587,873
CASH FLOWS FROM FINANCING ACTIVITIES:
Value of shares withheld related to employee tax withholding — (258,088)
Payment of dividends (4,818,318) (3,147,890)
Net subscriptions received from redeemable noncontrolling interest holders 3,837,120 738,711
Repurchases of common stock (9,317,661) (1,893,146)
Proceeds received under employee stock purchase plan 371,744 342,528
Net cash used in financing activities (9,927,115) (4,217,885)
CASH AND CASH EQUIVALENTS
Net change during the period (21,771,111) (18,290,517)
At beginning of period 80,550,393 98,478,202
At end of period $ 58,779,282 $ 80,187,685
Supplemental cash flow information:
Income taxes paid — $ 24,653
Supplemental disclosure of non-cash transactions:
Common stock issued as incentive compensation $ 487,870 529,806
Charitable donation of corporate investments — $ 366,555


	Nine Months Ended September 30, 2022
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
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	75,764	13,366,316		(13,366,316)		—		—		—
Amortization of restricted stock grants	—	—		7,916,049		—		7,916,049		—
Common stock issued as incentive compensation	2,743	487,870		—		—		487,870		—
Issuance of common stock related to 401k plan match	211	37,313		—		—		37,313		—
Issuance of common stock related to employee stock purchase plan	3,176	579,196		—		—		579,196		—
Shares withheld related to employee tax withholding	(14,112)	(2,580,328)		—		—		(2,580,328)		—
Forfeiture of restricted stock grants	(4,801)	(743,592)		743,592		—		—		—
Repurchase of common stock	(198,733)	(35,670,493)		—		—		(35,670,493)		—
Cash dividends paid	—	—		—		(14,114,862)		(14,114,862)		—
Net income (loss)	—	—		—		25,557,278		25,557,278		(5,694,098)
Net deconsolidations of Company sponsored investments	—	—		—		—		—		(9,528,503)
Net subscriptions of Consolidated Funds	—	—		—		—		—		9,859,318
Balance at September 30, 2022	3,035,784	$	55,910,331	$	(19,975,380)	$	130,699,974	$	166,634,925	$	12,393,053

	Nine Months Ended September 30, 2021
	Shares Outstanding	Common Stock		Deferred Equity Compensation		Retained Earnings		Total		Redeemable Noncontrolling Interest
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	68,589	10,854,951		(10,854,951)		—		—		—
Amortization of restricted stock grants	—	—		5,167,059		—		5,167,059		—
Common stock issued as incentive compensation	3,681	529,806		—		—		529,806		—
Issuance of common stock related to 401k plan match	364	59,542		—		—		59,542		—
Issuance of common stock related to employee stock purchase plan	3,568	610,569		—		—		610,569		—
Shares withheld related to employee tax withholding	(9,449)	(1,518,612)		—		—		(1,518,612)		—
Forfeiture of restricted stock grants	(19,097)	(3,247,627)		3,247,627		—		—		—
Repurchase of common stock	(44,227)	(7,543,901)		—		—		(7,543,901)		—
Cash dividends paid	—	—		—		(9,529,292)		(9,529,292)		—
Net income	—	—		—		56,200,986		56,200,986		563,960
Net subscriptions of Consolidated Funds	—	—		—		—		—		3,431,181

Balance at September 30, 2021	3,172,252	$	80,555,674	$	(17,188,383)	$	164,689,619	$	228,056,910	$	13,367,474

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)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,863,180	$	56,764,946
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,046,949		930,990
Share-based compensation	8,040,241		5,351,120
Decrease (increase) in accounts receivable	1,108,806		(15,427,818)
Change in current income taxes	(2,460,635)		1,288,973
Change in deferred income taxes	(4,997,424)		354,374
Gain on sale of high yield-focused advisory contracts	(6,813,579)		(9,000,000)
Net losses (gains) on investments	35,007,945		(7,612,174)
Net change in securities held by Consolidated Funds	(17,490,298)		(23,532,392)
Increase (decrease) in accrued incentive compensation	(12,487,267)		960,550
Increase (decrease) in deferred compensation	(9,121,625)		1,641,694
Other changes in assets and liabilities	4,496,050		3,599,730
Net cash provided by operating activities	16,192,343		15,319,993
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(22,912)		(1,029,550)
Purchase of Company sponsored investments	(5,167,583)		(17,011,517)
Proceeds from sale of Company sponsored investments	6,838,001		8,497,693

Proceeds from sale of high yield-focused advisory contracts	6,813,579		9,000,000
Net cash provided by (used in) investing activities	8,461,085		(543,374)
CASH FLOWS FROM FINANCING ACTIVITIES:
Value of shares withheld related to employee tax withholding	(2,580,328)		(1,518,612)
Payment of dividends	(14,114,862)		(9,529,292)
Net subscriptions received from redeemable noncontrolling interest holders	9,859,318		3,431,181
Repurchases of common stock	(35,670,493)		(7,543,901)
Proceeds received under employee stock purchase plan	492,317		486,050
Net cash used in financing activities	(42,014,048)		(14,674,574)
CASH AND CASH EQUIVALENTS
Net change during the period	(17,360,620)		102,045
At beginning of period	80,550,393		98,478,202
At end of period	$	63,189,773	$	98,580,247
Supplemental cash flow information:

Income taxes paid	$	16,463,770	$	19,122,643
Supplemental disclosure of non-cash transactions:
Common stock issued as incentive compensation	$	487,870	529,806
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”~~(“DHIL”), an Ohio corporation, derives its consolidated revenues and net income from investment advisory and fund administration services provided by its wholly-owned subsidiary, Diamond Hill Capital Management, Inc., an Ohio corporation (“DHCM”).

DHCM is a registered investment 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 fund, as well as separately managed accounts, other pooled investment vehicles, and model delivery programs.

Note 2 Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, condensed, and consolidated financial statements for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in ~~these notes to~~this Quarterly Report on Form 10-Q for the ~~condensed consolidated financial statements~~fiscal quarter ended September 30, 2022 as "the Company,~~" "management,~~" "we," "us," and "our") as of ~~March 31,~~September 30, 2022 and December 31, 2021, and for the ~~three-month~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021, have been prepared in accordance with United States generally accepted accounting principles ("GAAP"), the instructions to Form 10-Q, and 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 Company management ("management"), all adjustments (consisting of normal recurring 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, 2021 (the "2021 Form 10-K"), as filed with the SEC.

Operating results for the ~~three-month period~~three- and nine-month periods ended ~~March 31,~~September 30, 2022, are not necessarily indicative of the results the Company may expect for the full fiscal year ending December 31, ~~2022.~~2022, or any subsequent period.

For further information regarding the risks to the Company's business, refer to the consolidated financial statements and notes thereto included in the 2021 Form 10-K, “Part I – Item 1A. – Risk Factors” of the 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 management to make estimates and assumptions related to the reported amounts of assets and liabilities, 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 materially from those estimates.

Reclassification

Certain 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.~~trust (the "Trust"). The Trust is an open-end investment company registered under the Investment ~~Advisers~~Company 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”) 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 economic performance. To the extent material, these Funds are consolidated if Company ownership, directly or indirectly, represents a majority interest (greater than 50%). The Company records redeemable noncontrolling interests in consolidated investments for which the Company's ownership is less than 100%. As of ~~March 31,~~September 30, 2022, the Company has consolidated the Diamond Hill International Fund. As of December 31, 2021, the Company consolidated the Diamond Hill International Fund and the Diamond Hill Large Cap Concentrated Fund ~~(together, the~~(the "Consolidated Funds"). The Company deconsolidated the Diamond Hill Large Cap Concentrated Fund during the three months ended September 30, 2022, as the Company's ownership declined to less than 50%.

DHCM is the investment manager of 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 from DHMF that may be ~~significant from DHMF.~~significant. 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 DHMF's net income or 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, 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 a single business segment, which is providing investment advisory and related services to clients through pooled investment vehicles, including the Funds and DHMF, separately managed accounts, and 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 ~~March 31,~~September 30, 2022, or December 31, 2021. Accounts receivable from the Funds were ~~$11.6~~$9.6 million as of ~~March 31,~~September 30, 2022, and $11.8 million as of December 31, 2021.

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Investments

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

~~Table of Contents~~

Company sponsored investments, where the Company has neither the 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.

Investments classified as equity method investments represent investments in which the Company owns ~~between 20-50%~~20% to 50% of the outstanding voting interests in the entity or 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.

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


	Three Months Ended September 30, 2022
	Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	$	24,072,698	$	2,422,591	$	26,495,289
Separately managed accounts, excluding performance-based fees	6,163,236		—		6,163,236
Performance-based fees	1,500,225		—		1,500,225
Sub-Advised funds	2,747,407		—		2,747,407
Model delivery	1,358,517		—		1,358,517
	$	35,842,083	$	2,422,591	$	38,264,674

	Three Months Ended September 30, 2021
	Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	$	28,605,297	$	3,206,175	$	31,811,472
Separately managed accounts, excluding performance-based fees	6,953,548		—		6,953,548
Performance-based fees	11,860,051		—		11,860,051
Sub-Advised funds	3,067,774		—		3,067,774
Model delivery	1,361,709		—		1,361,709
	$	51,848,379	$	3,206,175	$	55,054,554

Revenue earned during the nine months ended September 30, 2022 and 2021 under contracts with clients include:


		Three Months Ended March 31, 2022							Nine Months Ended September 30, 2022
		Investment advisory		Mutual fund administration, net		Total revenue			Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	Proprietary funds	$	27,254,928	$	2,977,500	$	30,232,428	Proprietary funds	$	76,774,749	$	8,013,040	$	84,787,789
Separately managed accounts		7,192,290		—		7,192,290

Separately managed accounts, excluding performance-based fees								Separately managed accounts, excluding performance-based fees	19,926,337		—		19,926,337
Performance-based fees								Performance-based fees	1,500,225		—		1,500,225
Sub-Advised funds	Sub-Advised funds	3,114,504		—		3,114,504		Sub-Advised funds	8,741,898		—		8,741,898
Model delivery	Model delivery	1,717,164		—		1,717,164		Model delivery	4,585,925		—		4,585,925
		$	39,278,886	$	2,977,500	$	42,256,386		$	111,529,134	$	8,013,040	$	119,542,174


		Three Months Ended March 31, 2021							Nine Months Ended September 30, 2021
		Investment advisory		Mutual fund administration, net		Total revenue			Investment advisory		Mutual fund administration, net		Total revenue
Proprietary funds	Proprietary funds	$	26,510,701	$	2,445,330	$	28,956,031	Proprietary funds	$	85,568,472	$	9,004,731	$	94,573,203
Separately managed accounts		6,473,269		—		6,473,269

Separately managed accounts, excluding performance-based fees								Separately managed accounts, excluding performance-based fees	20,472,633		—		20,472,633
Performance-based fees								Performance-based fees	11,860,051		—		11,860,051
Sub-Advised funds	Sub-Advised funds	2,678,410		—		2,678,410		Sub-Advised funds	8,705,847		—		8,705,847
Model delivery	Model delivery	906,723		—		906,723		Model delivery	3,526,906		—		3,526,906
		$	36,569,103	$	2,445,330	$	39,014,433		$	130,133,909	$	9,004,731	$	139,138,640

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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 obligations to provide investment advisory services are satisfied over time by ~~DHCM, and the Company recognizes revenue through DHCM as time passes.~~DHCM.

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 its strategy model portfolios and related services to sponsors of model delivery programs. For its services, DHCM is paid a model delivery fee by the program sponsor at a pre-determined rate based on the amount of assets under advisement ("AUA") in the program. ~~Model delivery program revenues were $1.7 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.~~

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~~recorded $1.5 million of performance-based fees during the ~~three-month~~three- and nine-month periods ended ~~March 31, 2022 or March 31,~~September 30, 2022. The Company recorded $11.9 million of performance-based fees during the three- and nine-month periods ended September 30, 2021, as a significant performance-based agreement reached its first five-year measurement term on September 30, 2021. After the initial five-year contract measurement term, the performance-based fee is calculated annually based on the client investment results over the recently completed five year period. 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 ~~March 31,~~September 30, 2022:

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


	As of September 30, 2022
	AUM subject to performance-based fees		Unearned performance-based fees
Contractual Measurement Period Ending:
Quarter Ending September 30, 2023	$	411,171,353	$	—
Total	$	411,171,353	$	—

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 ~~March 31,~~September 30, 2022 will ~~increase or decrease~~fluctuate based on future client investment results through the end of the contractual period.

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.

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 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 Funds' management and board of ~~trustees of the Funds.~~trustees. 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.

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Mutual fund administration gross and net revenue are summarized below:


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2022			2021			2022		2021		2022		2021
Mutual fund administration:	Mutual fund administration:							Mutual fund administration:
Administration revenue, gross	Administration revenue, gross		$	6,940,172		$	6,960,008	Administration revenue, gross	$	6,129,695	$	7,436,287	$	19,550,947	$	22,466,306
Fund related expense	Fund related expense		(3,962,672)			(4,514,678)		Fund related expense	(3,707,104)		(4,230,112)		(11,537,907)		(13,461,575)
Mutual fund administration revenue, net	Mutual fund administration revenue, net		$	2,977,500		$	2,445,330	Mutual fund administration revenue, net	$	2,422,591	$	3,206,175	$	8,013,040	$	9,004,731

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 materially 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,~~September 30, 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 ~~March 31,~~September 30, 2022, and December 31, 2021:


		As of					As of
		March 31, 2022		December 31, 2021			September 30, 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)	$	75,621,130	$	73,855,204	Securities held in Consolidated Funds(a)	$	50,498,804	$	73,855,204
Company sponsored investments	Company sponsored investments	73,186,055		79,173,437		Company sponsored investments	64,245,205		79,173,437
Company sponsored equity method investments	Company sponsored equity method investments	13,122,983		13,627,360		Company sponsored equity method investments	21,497,590		13,627,360
Total Investments	Total Investments	$	161,930,168	$	166,656,001	Total Investments	$	136,241,599	$	166,656,001

(a) Of the securities held in the Consolidated Funds as of ~~March 31,~~September 30, 2022, the Company directly held ~~$53.2~~$32.3 million and noncontrolling shareholders held ~~$22.4~~$18.2 million. Of the securities held in the Consolidated Funds as of December 31, 2021, the Company directly held $55.8 million and noncontrolling shareholders held $18.1 million.

As of September 30, 2022, the Company has consolidated the Diamond Hill International Fund. As of December 31, 2021, the Company consolidated the Diamond Hill International Fund and the Diamond Hill Large Cap Concentrated Fund. The Company deconsolidated the Diamond Hill Large Cap Concentrated Fund during the three months ended September 30, 2022, as the Company's ownership declined to less than 50%.

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

Three Months Ended March 31,
2022 2021
Realized gains $ 1,443,747 $ 2,523,505
Change in unrealized (9,750,856) 2,505,344
Dividends 767,885 665,009
Other (53,033) (30,404)
Investment income (loss), net $ (7,592,257) $ 5,663,454


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Realized gains (losses)	$	(162,973)	$	1,185,429	$	(432,444)	$	5,244,509
Change in unrealized gains / losses	(8,742,185)		(4,689,325)		(35,262,608)		1,572,140
Dividends	886,212		971,107		2,517,672		2,241,037

Other	(12,760)		(96,800)		(124,456)		(146,735)
Investment income (loss), net	$	(8,031,706)	$	(2,629,589)	$	(33,301,836)	$	8,910,951

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Company Sponsored Equity Method Investments

~~The~~As of September 30, 2022, the Company's ~~only~~ equity method ~~investment during~~investments consisted of DHMF and the ~~three-month period ended March 31, 2022 was DHMF, which commenced operations on June 1, 2021. The~~Diamond Hill Large Cap Concentrated Fund, and the Company's ownership percentage in each of these investments was 85% and 49%, respectively. The Company's ownership in DHMF ~~was 86% as of March 31, 2022,~~ and the Diamond Hill Large Cap Concentrated Fund 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-month period~~three- and nine-month periods ended ~~March 31,~~September 30, 2022:



	~~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)~~



			As of
			September 30, 2022
Total assets			$	36,539,300
Total liabilities			2,753,508
Net assets			33,785,792
DHCM's portion of net assets			$	21,497,590

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2022		September 30, 2022
Investment income	$	178,387	$	254,322
Expenses	48,142		83,291
Net realized losses	98,675		79,106
Change in unrealized	(400,858)		(4,099,039)
Net loss	(171,938)		(3,848,902)
DHCM's portion of net loss	$	120,512	$	(3,013,611)

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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 ~~March 31,~~September 30, 2022:


		Level 1		Level 2		Level 3	Total			Level 1		Level 2		Level 3	Total
Cash equivalents	Cash equivalents	$	55,274,878	—		—	$	55,274,878	Cash equivalents	$	61,770,076	—		—	$	61,770,076
Fair value investments:	Fair value investments:								Fair value investments:
Securities held in Consolidated Funds(a)	Securities held in Consolidated Funds(a)	42,429,301		$	33,191,829	—	75,621,130		Securities held in Consolidated Funds(a)	$	24,500,759	$	25,998,045	—	$	50,498,804
Company-sponsored investments	Company-sponsored investments	$	73,186,055	—		—	$	73,186,055	Company-sponsored investments	$	64,245,205	—		—	$	64,245,205

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 of Credit Agreement (the "Credit Agreement") with a commercial bank that matures on December 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 the Secured Overnight Financing Rate plus 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~~during the ~~period~~nine months ended ~~March 31,~~September 30, 2022, and no borrowings were outstanding as of ~~March 31,~~September 30, 2022.

Note 6 Compensation Plans

Share-Based Payment Transactions

The Company ~~issues restricted~~maintains the shareholder-approved Diamond Hill Investment Group, Inc. 2022 Equity and Cash Incentive Plan (the "2022 Plan"), which authorizes the issuance of 300,000 common shares of Company stock in various forms of equity awards. As of September 30, 2022, there were 293,058 common shares available for grants under the 2022 Plan. Previously, the Company issued equity awards under the Diamond Hill Investment Group, Inc. 2014 Equity and Cash Incentive Plan (the "2014 Plan"). There are no longer any common shares available for issuance under the 2014 Plan, although grants previously made under the 2014 Plan remain issued and outstanding.

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Restricted stock grants represent common shares issued and outstanding upon grant subject to vesting restrictions. The Company ~~has historically issued~~issues restricted stock grants that cliff vest after five years to all new employees upon hire and as additional ~~grants~~awards annually 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 ~~three~~nine months ended ~~March 31,~~September 30, 2022:


		Shares	Weighted-Average Grant Date Price per Share			Shares	Weighted-Average Grant Date Price per Share
Outstanding restricted stock as of December 31, 2021	Outstanding restricted stock as of December 31, 2021	201,170	$	165.61	Outstanding restricted stock as of December 31, 2021	201,170	$	165.61
Grants issued	Grants issued	66,190	176.78		Grants issued	75,764	176.42
Grants vested	Grants vested	(2,337)	147.66		Grants vested	(38,447)	173.28
Grants forfeited	Grants forfeited	(1,321)	185.09		Grants forfeited	(4,801)	154.88
Total outstanding restricted stock as of March 31, 2022		263,702	$	168.47
Total outstanding restricted stock as of September 30, 2022					Total outstanding restricted stock as of September 30, 2022	233,686	$	168.07

~~As of 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 ~~$24.5~~$20.0 million as of ~~March 31,~~September 30, 2022. The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows:


Nine Months Remaining In
Three Months Remaining In														Three Months Remaining In
2022	2022	2023		2024		2025		2026		Thereafter		Total		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	2,740,952	$	9,402,763	$	5,856,159	$	1,525,489	$	328,299	$	121,718	$	19,975,380

Employee Stock Purchase Plan

Under the Diamond Hill Investment Group, Inc. Employee Stock Purchase Plan (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, which coincides with the Company's fiscal quarters. During the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2022, ESPP participants purchased ~~2,335~~3,176 shares of common stock for ~~$0.4~~$0.5 million, and the Company recorded $0.1 million of share-based payment expense related to these purchases. During the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2021, ESPP participants purchased ~~2,583~~3,568 shares of common stock for ~~$0.3~~$0.5 million and the Company recorded $0.1 million of ~~share based~~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 ~~three-month~~nine-month periods ended ~~March 31,~~September 30, 2022, and 2021:

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


	Shares Issued	Grant Date Value
September 30, 2022	2,743	$	487,870
September 30, 2021	3,681	$	529,806

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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 250.0% of the first 6.0% of an employee’s compensation contributed to the plan. The Company settles the 401(k) plan matching contributions in cash or common shares of the Company based on the election of the employees.

Deferred Compensation Plans

The Company offers two deferred compensation plans: the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (together, the ~~“Plans”~~“ DC Plans”). Under the DC Plans, participants may elect to voluntarily defer, for a minimum of five years, certain incentive compensation that the Company then contributes into the DC 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 DC Plans. Assets held in the DC 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 ~~$34.0~~$28.2 million and $37.3 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

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Note 7 Operating Lease

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

As of ~~March 31,~~September 30, 2022, the carrying value of this right-of-use asset, which is included in property and equipment, was approximately ~~$1.5~~$1.2 million net of deferred rent on the consolidated balance sheets. As of ~~March 31,~~September 30, 2022, the carrying value of the lease liability was approximately ~~$1.8~~$1.5 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-month~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021:

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


	September 30, 2022		September 30, 2021
Three Months Ended	$	237,471	$	241,200
Nine Months Ended	$	681,025	$	691,432

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
Nine Months Remaining In
Three Months Remaining In													Three Months Remaining In
2022	2022	2023		2024		2025		2026			Total		2022	2023		2024		2025		2026	Total
$	468,134	$	624,179	$	624,179	$	156,045	$	—		$	1,872,537	156,045	$	624,179	$	624,179	$	156,045	—	$	1,560,448

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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:


		Three Months Ended March 31,					Nine Months Ended September 30,
		2022		2021			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	4.6	%	4.4	%	State and local income taxes, net of federal benefit	4.5	%	5.2	%
Internal revenue code section 162 limitations	Internal revenue code section 162 limitations	1.3	%	1.1	%	Internal revenue code section 162 limitations	1.8	%	0.7	%
Other	Other	(0.9)	%	—	%	Other	(1.2)	%	0.1	%
Unconsolidated effective income tax rate	Unconsolidated effective income tax rate	26.0	%	26.5	%	Unconsolidated effective income tax rate	26.1	%	27.0	%
Impact attributable to redeemable noncontrolling interest(a)	Impact attributable to redeemable noncontrolling interest(a)	1.9	%	(0.8)	%	Impact attributable to redeemable noncontrolling interest(a)	5.1	%	(0.2)	%
Effective income tax rate	Effective income tax rate	27.9	%	25.7	%	Effective income tax rate	31.2	%	26.8	%

(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 26.0%.~~ The Company's actual effective tax rate for the fiscal year ending December 31, 2022 could be materially different from the projected rate as of ~~March 31,~~September 30, 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 or all of the deferred tax assets will not be realized. As of ~~March 31,~~September 30, 2022 and December 31, 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 uncertainties or unrecognized tax positions as of ~~March 31,~~September 30, 2022 or December 31, 2021.

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

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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~~earnings per share ("EPS") are calculated under the two-class method. The following table sets forth the computation for basic and diluted EPS:


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2022			2021			2022		2021		2022		2021
Net Income	Net Income		$	8,275,016		$	14,262,613	Net Income	$	10,372,400	$	24,875,795	$	19,863,180	$	56,764,946
Less: Net loss (income) attributable to redeemable noncontrolling interest	Less: Net loss (income) attributable to redeemable noncontrolling interest		854,936			(554,102)		Less: Net loss (income) attributable to redeemable noncontrolling interest	1,642,040		751,850		5,694,098		(563,960)
Net income attributable to common shareholders	Net income attributable to common shareholders		$	9,129,952		$	13,708,511	Net income attributable to common shareholders	$	12,014,440	$	25,627,645	$	25,557,278	$	56,200,986

Weighted average number of outstanding shares - Basic	Weighted average number of outstanding shares - Basic		3,185,930			3,156,768		Weighted average number of outstanding shares - Basic	3,078,666		3,192,535		3,138,834		3,182,065
Weighted average number of outstanding shares - Diluted	Weighted average number of outstanding shares - Diluted		3,185,930			3,156,768		Weighted average number of outstanding shares - Diluted	3,078,666		3,192,535		3,138,834		3,182,065

Earnings per share attributable to common shareholders	Earnings per share attributable to common shareholders							Earnings per share attributable to common shareholders
Basic	Basic		$	2.87		$	4.34	Basic	$	3.90	$	8.03	$	8.14	$	17.66
Diluted	Diluted		$	2.87		$	4.34	Diluted	$	3.90	$	8.03	$	8.14	$	17.66

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 Diamond Hill's High Yield-Focused ~~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. The transaction closed on July 30, 2021, ~~("Closing Date"),~~ at which time Brandywine Global acquired the investment advisory contracts (the “High Yield-Focused Advisory Contracts”) of DHCM’s two high yield-focused mutual funds - the Corporate Credit Fund and the High Yield Fund. After the closing, the Corporate Credit Fund and the High Yield Fund were renamed as the BrandywineGLOBAL Corporate Credit Fund and the BrandywineGLOBAL High Yield Fund (the “High Yield-Focused ~~Advisory Contracts”~~Funds”).

DHCM determined the gain on this transaction in accordance with ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. DHCM received an initial cash payment at closing of $9.0 million, which was included in gain on sale of high yield-focused advisory contracts in the Consolidated Statements of Income during the third quarter of 2021.

Under the terms of the Purchase Agreement, DHCM ~~may receive 2~~received an additional ~~payments~~payment of ~~up to $13.0~~$6.8 million ~~in the aggregate~~ based on the net revenue of the ~~Corporate Credit Fund and the~~ High ~~Yield Fund~~Yield-Focused Funds on July 30, ~~2022. The Company has not recorded any additional~~2022, which was included in gain ~~for~~on sale of high yield-focused advisory contracts in the ~~two potential~~Consolidated Statements of Income during the third quarter of 2022.

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additional payments because this variable consideration is constrained based on movements in the financial markets and the net shareholder flows of the Corporate Credit Fund and the High Yield Fund. Therefore, there can be no reasonable assurance that all or any of these additional payments will be received by DHCM.

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Note 12 Subsequent Events

On ~~April~~October 26, 2022, the Company's board of directors ("Board") approved a quarterly cash dividend for the fourth quarter of 2022 of $1.50 per ~~share,~~share. The Board also approved a special cash dividend of $4.00 per share. Both the regular quarterly dividend and special dividend will be payable on ~~June 17,~~December 9, 2022, to shareholders of record as of ~~June 2,~~November 25, 2022. ~~This dividend is~~These dividends are expected to reduce shareholders' equity by approximately ~~$4.8~~$16.6 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,”~~"believe," "expect," "anticipate," "estimate," "guidance," "forecast," "may," "will," "likely," "project," ~~“should,” “hope,” “seek,” “plan,” “intend”~~"should," "hope," "seek," "plan," "intend" and similar expressions identify forward-looking statements that speak only as of the date thereof. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. 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~~the Company's products; (xv) changes in interest ~~rates;~~rates and inflation; (xvi) changes in national and local economic and political conditions; (xvii) the continuing economic uncertainty in various parts of the world; (xviii) the ~~effects~~after-effects of the COVID-19 ~~pandemic and the actions taken in connection therewith;~~pandemic; (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.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to publicly update forward-looking statements. Readers are advised, however, to consult any further disclosures the Company makes on related subjects in its public announcements and SEC filings.

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~~1940 Act, ~~of 1940,~~ as amended. DHCM sponsors, distributes, and provides investment advisory and related services to clients through pooled investment vehicles, including the Funds, DHMF, separately managed accounts, and model delivery programs.

DHCM is committed to generating excellent, long-term investment outcomes and building enduring client partnerships. By committing to shared investment principles, 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 investors. DHCM’s core values of curiosity, ownership, trust, and respect create an environment where investment professionals focus on results and all teammates focus on the overall client experience. The combination of these investment principles and core values creates an aligned boutique model ensuring ~~our~~the Company's associates have a vested interest in ~~our clients’ success.~~the success of the Company's clients. This alignment with clients is emphasized through: (i) personal investment by ~~Diamond Hill~~Company 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 for clients.

The Company's primary objective is to fulfill its fiduciary duty to its clients. The 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 a compelling, long-term return for its shareholders.

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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.~~the applicable contract.

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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 months~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021:


		Assets Under Management							Assets Under Management
		As of March 31,							As of September 30,
(in millions, except percentages)	(in millions, except percentages)	2022		2021		% Change		(in millions, except percentages)	2022		2021		% Change
Proprietary funds	Proprietary funds	$	19,392	$	20,954	(7)	%	Proprietary funds	$	15,151	$	18,750	(19)	%
Sub-advised funds	Sub-advised funds	3,846		3,575		8	%	Sub-advised funds	3,038		3,665		(17)	%
Separately managed accounts	Separately managed accounts	7,084		6,053		17	%	Separately managed accounts	5,693		6,771		(16)	%
Total AUM	Total AUM	$	30,322	$	30,582	(1)	%	Total AUM	$	23,882	$	29,186	(18)	%


		Assets Under Management by Investment Strategy							Assets Under Management by Investment Strategy
		As of March 31,							As of September 30,
(in millions, except percentages)	(in millions, except percentages)	2022		2021		% Change		(in millions, except percentages)	2022		2021		% Change
U.S. Equity	U.S. Equity							U.S. Equity
Large Cap	Large Cap	$	20,631	$	18,317	13	%	Large Cap	$	15,713	$	19,651	(20)	%
Small-Mid Cap	Small-Mid Cap	3,139		3,128		—	%	Small-Mid Cap	2,515		3,031		(17)	%
Mid Cap	Mid Cap	1,112		1,097		1	%	Mid Cap	847		1,086		(22)	%
Small Cap	Small Cap	489		616		(21)	%	Small Cap	342		595		(43)	%
All Cap Select	All Cap Select	489		427		15	%	All Cap Select	407		404		1	%
Large Cap Concentrated	Large Cap Concentrated	82		43		91	%	Large Cap Concentrated	86		50		72	%
Micro Cap	Micro Cap	15		—		NM		Micro Cap	14		14		—	%
Total U.S. Equity	Total U.S. Equity	25,957		23,628		10	%	Total U.S. Equity	19,924		24,831		(20)	%

Alternatives	Alternatives							Alternatives
Long-Short	Long-Short	2,080		2,028		3	%	Long-Short	1,776		2,062		(14)	%
Total Alternatives	Total Alternatives	2,080		2,028		3	%	Total Alternatives	1,776		2,062		(14)	%

Global/International Equity	Global/International Equity							Global/International Equity
International	International	56		19		195	%	International	45		29		55	%
Global(a)	Global(a)	—		16		NM		Global(a)	—		16		NM
Total Global/International Equity	Total Global/International Equity	56		35		60	%	Total Global/International Equity	45		45		—	%

Fixed Income	Fixed Income							Fixed Income
Short Duration Securitized Bond	Short Duration Securitized Bond	1,580		1,253		26	%	Short Duration Securitized Bond	1,357		1,494		(9)	%
Core Fixed Income	Core Fixed Income	636		550		16	%	Core Fixed Income	755		764		(1)	%
Long Duration Treasury	Long Duration Treasury	41		47		(13)	%	Long Duration Treasury	34		50		(32)	%
Corporate Credit(b)		—		2,140		NM
High Yield(b)		—		965		NM
Total Fixed Income	Total Fixed Income	2,257		4,955		(54)	%	Total Fixed Income	2,146		2,308		(7)	%

Total-All Strategies	Total-All Strategies	30,350		30,646		(1)	%	Total-All Strategies	23,891		29,246		(18)	%
(Less: Investments in affiliated funds)(c)		(28)		(64)		(56)	%
(Less: Investments in affiliated funds)(b)								(Less: Investments in affiliated funds)(b)	(9)		(60)		NM
Total AUM	Total AUM	$	30,322	$	30,582	(1)	%	Total AUM	$	23,882	$	29,186	(18)	%

(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.~~

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

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		Change in Assets Under Management					Change in Assets Under Management
		For the Three Months Ended March 31,					For the Three Months Ended September 30,
(in millions)	(in millions)	2022		2021		(in millions)	2022		2021
AUM at beginning of the period	AUM at beginning of the period	$	31,028	$	26,411	AUM at beginning of the period	$	25,789	$	32,360
Net cash inflows (outflows)	Net cash inflows (outflows)					Net cash inflows (outflows)
proprietary funds	proprietary funds	173		1,877		proprietary funds	(629)		155
sub-advised funds	sub-advised funds	(25)		42		sub-advised funds	53		—
separately managed accounts	separately managed accounts	89		(175)		separately managed accounts	(184)		65
		237		1,744			(760)		220
Sale of high yield-focused advisory contracts						Sale of high yield-focused advisory contracts	—		(3,456)
Net market appreciation (depreciation) and income						Net market appreciation (depreciation) and income	(1,147)		62
Decrease during the period						Decrease during the period	(1,907)		(3,174)
AUM at end of the period						AUM at end of the period	$	23,882	$	29,186

Average AUM during the period						Average AUM during the period	$	26,245	$	30,659

							Change in Assets Under Management
							For the Nine Months Ended September 30,
(in millions)						(in millions)	2022		2021
AUM at beginning of the period						AUM at beginning of the period	$	31,028	$	26,411
Net cash inflows (outflows)						Net cash inflows (outflows)
proprietary funds						proprietary funds	(884)		2,142
sub-advised funds						sub-advised funds	(129)		(57)
separately managed accounts						separately managed accounts	(25)		279
							(1,038)		2,364
Sale of high yield-focused advisory contracts						Sale of high yield-focused advisory contracts	—		(3,456)
Net market appreciation (depreciation) and income	Net market appreciation (depreciation) and income	(943)		2,427		Net market appreciation (depreciation) and income	(6,108)		3,867
Increase (decrease) during the period	Increase (decrease) during the period	(706)		4,171		Increase (decrease) during the period	(7,146)		2,775
AUM at end of the period	AUM at end of the period	$	30,322	$	30,582	AUM at end of the period	$	23,882	$	29,186

Average AUM during the period	Average AUM during the period	$	30,459	$	28,163	Average AUM during the period	$	28,300	$	30,305

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

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	Net Cash Inflows (Outflows) Further Breakdown For the Three Months Ended September 30,
(in millions)	2022		2021
Net cash inflows (outflows)
Equity	$	(682)	$	(18)
Fixed Income	(78)		238
	$	(760)	$	220

	Net Cash Inflows (Outflows) Further Breakdown For the Nine Months Ended September 30,
(in millions)	2022		2021
Net cash inflows (outflows)
Equity	$	(1,064)	$	1,182
Fixed Income	26		1,182
	$	(1,038)	$	2,364

AUM decreased ~~$0.7~~$1.9 billion during the three months ended ~~March 31,~~September 30, 2022, due ~~primarily~~ to depreciation in the financial markets ~~which was partially offset by~~and net ~~inflows into our~~outflows out of the Company's strategies during the period. ~~With the exception of Small Cap~~The Company experienced both equity and ~~Mid Cap, all of our other equity strategies had positive flows~~fixed income outflows during the ~~three~~period. Equity outflows were primarily out of the Company's Large Cap strategy.

AUM decreased $7.1 billion during the nine months ended ~~March 31, 2022. Fixed income~~September 30, 2022, due to depreciation in the financial markets and net ~~inflows~~outflows out of the Company's strategies. The Company experienced equity outflows during the ~~three months ended March 31, 2022, were~~period primarily ~~into our Core Bond~~out of the Company's Large Cap 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 the Company's AUM. Rather, ~~we refer~~the Company refers to these model delivery assets as assets under advisement ~~("AUA").~~or AUA. DHCM is paid for its services by the program sponsor at a pre-determined rate based on the amount of AUA in the program. Model delivery AUA was ~~$2.1~~$1.7 billion as of ~~March 31,~~September 30, 2022, $2.1 billion as of December 31, 2021, and ~~$1.4~~$1.9 billion as of ~~March 31,~~September 30, 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 March 31,				Three Months Ended September 30,									Nine Months Ended September 30,
(in thousands, except per share amounts and percentages)	(in thousands, except per share amounts and percentages)		2022				2021			% Change	(in thousands, except per share amounts and percentages)	2022			2021			% Change	2022			2021			% Change
Total revenue	Total revenue		$	42,256			$	39,014		8%	Total revenue	$	38,265		$	55,055		(30)%	$	119,542		$	139,139		(14)%
Net operating income	Net operating income		19,073				13,532			41%	Net operating income	16,033			28,321			(43)%	55,357			59,620			(7)%
Net operating income, as adjusted(a)	Net operating income, as adjusted(a)		17,894				16,635			8%	Net operating income, as adjusted(a)	14,981			28,324			(47)%	48,436			64,238			(25)%
Investment income (loss), net	Investment income (loss), net		(7,592)				5,663			NM	Investment income (loss), net	(8,032)			(2,630)			NM	(33,302)			8,911			NM

Gain on sale of high yield-focused advisory contracts											Gain on sale of high yield-focused advisory contracts	6,814			9,000			NM	6,814			9,000			NM
Income tax expense	Income tax expense		3,206				4,933			(35)%	Income tax expense	4,442			9,816			(55)%	9,006			20,766			(57)%
Net income attributable to common shareholders	Net income attributable to common shareholders		9,130				13,709			(33)%	Net income attributable to common shareholders	12,014			25,628			(53)%	25,557			56,201			(55)%
Earnings per share attributable to common shareholders (diluted)	Earnings per share attributable to common shareholders (diluted)		$	2.87			$	4.34		(34)%	Earnings per share attributable to common shareholders (diluted)	$	3.90		$	8.03		(51)%	$	8.14		$	17.66		(54)%
Operating profit margin	Operating profit margin		45		%		35		%		Operating profit margin	42		%	51		%		46		%	43		%
Operating profit margin, as adjusted(a)	Operating profit margin, as adjusted(a)		42		%		43		%		Operating profit margin, as adjusted(a)	39		%	51		%		41		%	46		%

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

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

Revenue for the three months ended ~~March 31,~~September 30, 2022, ~~increased $3.2~~decreased $16.8 million compared to the three months ended ~~March 31, 2021, primarily~~September 30, 2021. The Company recognized $1.5 million of performance-based fees during the three months ended September 30, 2022 compared to $11.9 million of performance-based fees recognized during the three months ended September 30, 2021. A significant performance-based agreement reached its first five-year measurement term on September 30, 2021. The remaining decrease in revenue was due to a ~~8% increase~~14% decrease in average AUM. ~~This increase was partially offset by a decrease in the~~The average advisory fee rate ~~from 0.53% to~~remained unchanged at 0.52% quarter-over-quarter.

Operating profit margin was ~~45%~~42% for the three months ended ~~March 31,~~September 30, 2022, and ~~35%~~51% for the three months ended ~~March 31,~~September 30, 2021. Operating profit margin, as adjusted, was ~~42%~~39% for the three months ended ~~March 31,~~September 30, 2022, and ~~43%~~51% for the same period in 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 (loss) below net operating income on the income statement and thus has no effect on net income attributable to the Company. The Company believes ~~this~~ the use of financial measures that are based on methodologies other than GAAP (“non-GAAP ~~measure helps~~financial measures”) helpt the reader to understand its core operating results and increases comparability period-to-period. See "Use of Supplemental Data as Non-GAAP ~~Performance Measure"~~Financial Measures" section within this Quarterly Report on Form 10-Q.

The Company expects that its operating margin will fluctuate from ~~period to period~~period-to-period based on various factors, including revenues, investment results in the strategies ~~we manage,~~the Company manages, employee performance, staffing levels, and gains and losses on investments held in deferred compensation plans.

The Company had ~~$7.6~~$8.0 million in investment losses due to market depreciation for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$5.7~~$2.6 million in investment ~~income~~losses due to market ~~appreciation~~depreciation for the three months ended ~~March 31,~~September 30, 2021.

The Company recorded a gain of $6.8 million from the final payment on the sale of its High Yield-Focused Advisory Contracts for the three months ended September 30, 2022. The Company recorded a gain of $9.0 million from the initial payment on the sale of its High Yield-Focused Advisory Contracts for the three months ended September 30, 2021.

Income tax expense decreased ~~$1.7~~$5.4 million for the three months ended ~~March 31,~~September 30, 2022, compared to the same period in 2021. The decrease in income tax expense was primarily due to the decrease in the Company's income before taxes as a result of the investment losses incurred during the period.

The increase in the effective tax rate from 25.7% to 27.9% period-over-period, is primarily due to the impact attributable to redeemable noncontrolling interest. The provision for income taxes includes the impact

Table 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 26.0%Contents

The Company generated net income attributable to common shareholders of ~~$9.1~~$12.0 million ($~~2.87~~3.90 per diluted share) for the three months ended ~~March 31,~~September 30, 2022, compared with net income attributable to common shareholders of ~~$13.7~~$25.6 million ($~~4.34~~8.03 per diluted share) for the three months ended ~~March 31,~~September 30, 2021. The decrease in net income attributable to common shareholders period-over-period was primarily due to the ~~impact~~decline of revenues as a result of decreased AUM, as well as an increase in investment losses ~~in the current period versus investment income in~~compared to the prior period.

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Revenue

~~Revenue~~


		Three Months Ended March 31,							Three Months Ended September 30,
(in thousands, except percentages)	(in thousands, except percentages)	2022		2021		% Change		(in thousands, except percentages)	2022		2021		% Change
Investment advisory	Investment advisory	$	39,279	$	36,569	7	%	Investment advisory	$	35,842	$	51,848	(31)	%
Mutual fund administration, net	Mutual fund administration, net	2,977		2,445		22	%	Mutual fund administration, net	2,423		3,207		(24)	%
Total	Total	$	42,256	$	39,014	8	%	Total	$	38,265	$	55,055	(30)	%

Investment Advisory Fees. Investment advisory fees decreased $16.0 million, or 31%, for the three months ended ~~March 31,~~September 30, 2022, ~~increased $2.7 million, or 7%,~~ compared to the three months ended ~~March 31, 2021.~~September 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~~Company recognized $1.5 million of performance-based fees during the three months ended September 30, 2022 compared to $11.9 million of performance-based fees recognized during the three months ended September 30, 2021. A significant performance-based agreement reached its first five-year measurement term on September 30, 2021. After the initial five-year contract measurement term, the performance-based fee is calculated annually based on the client investment results over the recently completed five year period.

The remaining decrease in investment advisory fees was ~~primarily~~ due to ~~an increase~~a decrease of 14% in average ~~AUM of 8%.~~AUM. The ~~increase was partially offset by a decrease in the~~ average advisory fee rate ~~from 0.53% to 0.52% period-over-period. The decrease in average advisory fee rate was driven by an increase in the mix of assets held in lower fee rate strategies during~~excluding performance-based fees for the three months ended ~~March 31,~~September 30, 2022 ~~compared to~~and the ~~same period in 2021.~~three months ended September 30, 2021 was 0.52% for both periods.

Mutual Fund Administration Fees. Mutual fund administration fees decreased $0.8 million, or 24%, for the three months ended ~~March 31,~~September 30, 2022, ~~increased $0.5 million, or 22%,~~ compared to the three months ended ~~March 31,~~September 30, 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~~This decrease was primarily due to the impact of a 17% decrease in the Funds' average AUM ~~increased approximately 2% from~~for the three months ended ~~March 31,~~September 30, 2021, compared to the three months ended ~~March 31,~~September 30, 2022. The increase in net revenue was due to a reduction in administration fees paid on behalf of the 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
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) %


	Three Months Ended September 30,
(in thousands, except percentages)	2022		2021		% Change
Compensation and related costs, excluding deferred compensation expense	$	17,260	$	20,433	(16)	%
Deferred compensation expense (benefit)	(1,052)		3		NM
General and administrative	3,475		3,637		(4)	%
Sales and marketing	1,729		1,767		(2)	%
Mutual fund administration	820		894		(8)	%
Total	$	22,232	$	26,734	(17)	%

Compensation and Related Costs, Excluding Deferred Compensation ~~Expense (Benefit).~~ Expense.Employee compensation and benefits decreased by $3.2 million, or 16%, for the three months ended ~~March 31,~~September 30, 2022, ~~increased by $1.8 million~~ compared to the three months ended ~~March 31,~~September 30, 2021. This ~~increase~~decrease was due to ~~increases~~a decrease in accrued incentive compensation of ~~$1.0~~$4.1 million ~~and~~that was partially offset by an increase in restricted stock expense of ~~$1.0~~$0.7 million ~~which were partially offset by a decrease~~related to the issuance of annual long-term incentive awards in the first quarter of 2022, and an increase in salary and related benefits of $0.2 million.

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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 benefit ~~was $1.2 million~~ for the three months ended ~~March 31,~~September 30, 2022 ~~compared to an~~was $1.1 million. Deferred compensation expense ~~of $3.1 million~~was not significant for the three months ended ~~March 31, 2021, primarily due to market depreciation on our deferred compensation plan investments period over period.~~September 30, 2021.

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 (loss) 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 decreased by $0.2 million, or 4%, for the three months ended September 30, 2022, compard to the three months ended September 30, 2021. This decrease was primarily due to a decrease in consulting fees in 2022.

Sales and Marketing. Sales and marketing expenses decreased by 2%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a reduction in payments made to third party intermediaries as a result of the decrease in the Funds' average AUM period-over-period.

Mutual Fund Administration. Mutual fund administration expense decreased by $0.1 million, or 8%, from the three months ended September 30, 2021, compared to the three months ended September 30, 2022. Mutual fund administration expenses consist of both variable and fixed expenses. The decrease was due to a reduction in variable expenses as a result of the decrease in the Funds' average AUM period-over-period.

Summary Discussion of Consolidated Results of Operations - Nine Months Ended September 30, 2022, compared with Nine Months Ended September 30, 2021

Revenue for the nine months ended September 30, 2022, decreased $19.6 million compared to revenue for the same period in 2021. The Company recognized $1.5 million of performance-based fees during the nine months ended September 30, 2022 compared to $11.9 million of performance-based fees recognized during the nine months ended September 30, 2021. A significant performance-based agreement reached its first five-year measurement term on September 30, 2021. The remaining decrease was due to the sale of the High Yield-Focused Advisory Contracts in July of 2021. During the nine months ended September 30, 2021, the Company recognized $8.6 million of investment advisory fees from these contracts before they were sold. The average advisory fee rate remained unchanged at 0.52% period-over-period.

Operating profit margin was 46% for the nine months ended September 30, 2022, and 43% for the nine months ended September 30, 2021. Operating profit margin, as adjusted, was 41% for the nine months ended September 30, 2022, and 46% for the nine months ended September 30, 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 (loss) 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 financial measure helps the reader to understand its core operating results and increases comparability period-to-period. See "Use of Supplemental Data as Non-GAAP Financial Measures" 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, employee performance, staffing levels, gains and losses on investments held in deferred compensation plans, and the development of investment strategies, products, or channels.

The Company recognized $33.3 million in investment losses due to market depreciation for the nine months ended September 30, 2022, compared with investment income of $8.9 million for the nine months ended September 30, 2021.

The Company recorded a gain of $6.8 million from the final payment on the sale of its High Yield-Focused Advisory Contracts for the nine months ended September 30, 2022. The Company recorded a gain of $9.0 million from the initial payment on the sale of its High Yield-Focused Advisory Contracts for the nine months ended September 30, 2021.

Income tax expense decreased $11.8 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The decrease in income tax expense was primarily due to the decrease in the Company's income before taxes.

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The Company generated net income attributable to common shareholders of $25.6 million ($8.14 per diluted share) for the nine months ended September 30, 2022, compared with net income attributable to common shareholders of $56.2 million ($17.66 per diluted share) for the same period in 2021. The decrease in net income attributable to common shareholders period-over-period was primarily due to the decline in revenues as a result of decreased AUM, as well as investment losses compared to the prior period.

Revenue


	Nine Months Ended September 30,
(in thousands, except percentages)	2022		2021		% Change
Investment advisory	$	111,529	$	130,134	(14)	%
Mutual fund administration, net	8,013		9,005		(11)	%
Total	$	119,542	$	139,139	(14)	%

Investment Advisory Fees. Investment advisory fees for the nine months ended September 30, 2022, decreased $18.6 million, or 14%, compared to the nine months ended September 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 Company recognized $1.5 million of performance-based fees during the nine months ended September 30, 2022 compared to $11.9 million of performance-based fees recognized during the nine months ended September 30, 2021. A significant performance-based agreement reached its first five-year measurement term on September 30, 2021. After the initial five-year contract measurement term, the performance-based fee is calculated annually based on the client investment results over the recently completed five year period.

The remaining decrease was due to the sale of the High Yield-Focused Advisory Contracts in July of 2021. During the nine months ended September 30, 2021, the Company recognized $8.6 million of investment advisory fees from these contracts before they were sold. The average advisory fee rate remained unchanged at 0.52% period-over-period.

Mutual Fund Administration Fees. Mutual fund administration fees for the nine months ended September 30, 2022, decreased $1.0 million, or 11%, compared to the nine months ended September 30, 2021. Mutual fund administration fees include administration fees received from the Funds, which are calculated as a percentage of the Funds' average AUM. The Funds' average AUM decreased approximately 11% for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2022.

Expenses


	Nine Months Ended September 30,
(in thousands, except percentages)	2022		2021		% Change
Compensation and related costs, excluding deferred compensation expense (benefit)	$	53,129	$	56,188	(5)	%
Deferred compensation expense (benefit)	(6,921)		4,618		NM
General and administrative	10,175		10,324		(1)	%
Sales and marketing	5,327		5,672		(6)	%
Mutual fund administration	2,475		2,717		(9)	%
Total	$	64,185	$	79,519	(19)	%

Compensation and Related Costs, Excluding Deferred Compensation Expense (Benefit). Employee compensation and benefits for the nine months ended September 30, 2022, decreased by $3.1 million compared to the nine months ended September 30, 2021. This decrease was due to a decrease in accrued incentive compensation of $5.6 million and a decrease in salary and related benefits of $0.3 million, which were partially offset by an increase in restricted stock expense of $2.8 million related to the issuance of annual long-term incentive awards in the first quarter of 2022. Incentive compensation expense can fluctuate significantly period-over-period as the Company evaluates investment performance, individual performance, Company performance, and other factors.

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Deferred Compensation Expense (Benefit). Deferred compensation benefit was $6.9 million for the nine months ended September 30, 2022, compared to an expense of $4.6 million for the nine months ended September 30, 2021, primarily due to market depreciation on the Company's deferred compensation plan investments period-over-period.

General and Administrative. General and administrative expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, ~~increased~~decreased by ~~$0.4~~$0.1 million, or ~~13%~~1%, compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. ~~This increase~~The decrease was primarily due to a ~~increases of $0.2 million~~decrease in ~~depreciation expense related to our customer relationship management software, $0.1 million~~consulting fees in ~~other software expense, and $0.1 million in corporate insurance.~~2022.

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Sales and Marketing. Sales and marketing expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, decreased by ~~$0.2~~$0.3 million, or 8%6%, compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The decrease was primarily due to decreased payments made to third-party intermediaries related to the sale of ~~our~~the Funds on their platforms.

Mutual Fund Administration. Mutual fund administration expenses for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, decreased by ~~$0.1~~$0.2 million, or 7%9%, compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. Mutual fund administration expenses consist of both variable and fixed expenses. The decrease was primarily due to a ~~decrease in various administrative expenses from the sale of the High Yield-Focused Advisory Contracts and closure of the related funds~~reduction in the ~~third quarter of 2021.~~Funds' average AUM period-over-period.

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 ~~$188.3~~$177.3 million and $214.7 million of total assets as of ~~March 31,~~September 30, 2022, and December 31, 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.

Uses of Liquidity

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 Board and management regularly review various factors to determine whether the Company has capital in excess of that required for its business, and the appropriate uses of any such excess capital including share repurchases and dividends.

Share Repurchases

The Company repurchased ~~50,104~~198,733 of its common shares during the ~~three~~nine months ended ~~March 31,~~September 30, 2022, for a total of ~~$9.3~~$35.7 million. As of ~~March 31,~~September 30, 2022, ~~$44.8~~$18.4 million remains available for repurchases under the ~~Company's current share repurchase program.~~2022 Repurchase Program. See "Part II - Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds" for a description of the 2022 Repurchase Program.

Dividends

Subject to Board approval and compliance with applicable law, the Company expects to pay a regular quarterly dividend of $1.50 per share. In addition to ~~the~~ regular quarterly dividends, the Board will decide whether to approve and pay a special dividend in the fourth quarter of 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 cash dividends paid during the ~~three~~nine months ended ~~March 31,~~September 30, 2022, is presented below:

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Dividend

Declaration Date

Date Paid

Dividend Amount (in millions)

First quarter - $1.50 per share

February 25, 2022

March 18, 2022

4.8

Second quarter - $1.50 per share

April 26, 2022

June 17, 2022

4.7

Third quarter - $1.50 per share

July 28, 2022

September 16, 2022

4.6

Total

14.1

On ~~April~~October 26, 2022, the Board approved a regular quarterly dividend for the ~~second~~fourth quarter of 2022 of $1.50 per share. The Board also approved a special cash dividend of $4.00 per share. Both the fourth quarter regular dividend and the special dividend will be paid on ~~June 17,~~December 9, 2022, to shareholders of record as of ~~June 2,~~November 25, 2022. ~~This dividend is~~These dividends are expected to reduce shareholders' equity by approximately ~~$4.8~~$16.6 million.

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Working Capital

As of ~~March 31,~~September 30, 2022, the Company had working capital of approximately ~~$166.2~~$147.1 million, compared to $168.5 million as of December 31, 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 investments as of ~~March 31,~~September 30, 2022 and December 31, 2021.


		As of					As of
		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Corporate Investments:	Corporate Investments:					Corporate Investments:
Diamond Hill Core Bond Fund	Diamond Hill Core Bond Fund	$	44,478,411	$	46,755,404	Diamond Hill Core Bond Fund	$	41,010,139	$	46,755,404
Diamond Hill International Fund	Diamond Hill International Fund	39,862,331		41,673,154		Diamond Hill International Fund	30,783,521		41,673,154
Diamond Hill Large Cap Concentrated Fund	Diamond Hill Large Cap Concentrated Fund	11,489,086		12,098,049		Diamond Hill Large Cap Concentrated Fund	9,418,581		12,098,049
Diamond Hill Micro Cap Fund, LP	Diamond Hill Micro Cap Fund, LP	9,728,578		10,703,473		Diamond Hill Micro Cap Fund, LP	8,649,384		10,703,473
Total Corporate Investments	Total Corporate Investments	105,558,406		111,230,080		Total Corporate Investments	89,861,625		111,230,080
Deferred Compensation Plan Investments in the Funds	Deferred Compensation Plan Investments in the Funds	33,968,699		37,348,294		Deferred Compensation Plan Investments in the Funds	28,226,669		37,348,294
Total investments held by DHCM	Total investments held by DHCM	139,527,105		148,578,374		Total investments held by DHCM	118,088,294		148,578,374
Redeemable noncontrolling interest in Consolidated Funds	Redeemable noncontrolling interest in Consolidated Funds	22,403,063		18,077,627		Redeemable noncontrolling interest in Consolidated Funds	18,153,305		18,077,627
Total investments	Total investments	$	161,930,168	$	166,656,001	Total investments	$	136,241,599	$	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 ~~three~~nine months ended ~~March 31,~~September 30, 2022, net cash ~~used in~~provided by operating activities totaled ~~$13.7~~$16.2 million. Cash ~~outflows~~inflows from operating activities were primarily driven by net income of $19.9 million, and the add backs of net investment losses of $35.0 million, share-based compensation of $8.0 million, and depreciation of $1.0 million. These inflows were partially offset by a ~~$27.3~~$12.5 million decrease in the incentive compensation accrual primarily due to the payment of annual incentive compensation ~~payment made~~ in the first quarter of 2022, a net change in securities held by the Consolidated Funds of ~~$5.1~~$17.5 million, the cash impact of timing differences in the settlement of other assets and liabilities of $10.9 million, and the adjustment to net income of $6.8 million for the gain on sale of the High Yield-Focused Advisory Contracts. Net cash provided by operating activities of $16.2 million is inclusive of $10.4 million of cash used in operations by the Consolidated Funds.

For the nine months ended September 30, 2021, net cash provided by operating activities totaled $15.3 million. Cash inflows from operating activities were primarily driven by net income of $56.8 million, the add back of share-based compensation of $5.4 million, depreciation of $0.9 million, and a $1.0 million increase in the incentive compensation accrual. These inflows

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were partially offset by the adjustment to net income of $9.0 million for the gain on sale of the High Yield-Focused Advisory Contracts, securities purchased by the Consolidated Funds of $23.5 million, and the cash impact of timing differences in the settlement of other assets and liabilities of ~~$0.3~~$16.3 million. ~~These outflows were partially offset~~Net cash provided by ~~net income~~operating activities of ~~$8.3~~$15.3 million ~~and the add backs~~is inclusive of ~~net investment losses~~$23.0 million 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 used for operations were $9.9 million.~~

For the three months ended March 31, 2021, net cash used in operating activities totaled $15.7 million. Cash outflows from operating activities 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 change in securities held by the Consolidated Funds of $11.5 million, and the cash impact of timing differences in the settlement of assets and liabilities of $0.6 million. These outflows were partially offset by net income of $14.3 million, and the add backs of share-based compensation of $1.5 million and depreciation of $0.2 million. Absent the cash used in operations by the Consolidated Funds, cash flows used for operations were $5.5 million.Funds.

Cash Flows from Investing Activities

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

Cash flows provided by investing activities totaled ~~$1.8~~$8.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Cash flows provided by investing activities were ~~primarily~~ driven by proceeds from the sale of Company sponsored investments totaling ~~$3.5~~$6.8 million, ~~which~~and $6.8 million of proceeds received from the final payment for the sale of the High Yield-Focused Advisory Contracts. These proceeds were partially offset by purchases of ~~Company sponsored~~Company-sponsored investments of ~~$1.7~~$5.1 million.

~~Table~~ During the nine months ended September 30, 2022, all purchases and sales of ~~Contents~~

investments were in the Company's deferred compensation plans.

Cash flows ~~provided by~~used in investing activities totaled ~~$1.6~~$0.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. Cash flows ~~provided by~~used in 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~~Company-sponsored investments of ~~$1.9~~$17.0 million and property and equipment purchases ~~(primarily capitalized software)~~ of ~~$0.4~~$1.0 million. These outflows were partially offset by proceeds from the sale of Company-sponsored investments totaling $8.5 million and $9.0 million of proceeds received from the sale of the High Yield-Focused Advisory Contracts.

Cash Flows from Financing Activities

The Company’s cash flows from financing activities consist primarily of the repurchase of its common 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 ~~three~~nine months ended ~~March 31,~~September 30, 2022, net cash used in financing activities totaled ~~$9.9~~$42.0 million, consisting of cash ~~outlfows~~outflows for repurchases of the Company’s common stock of ~~$9.3~~$35.7 million, ~~and~~ the payment of quarterly dividends totaling ~~$4.8~~$14.1 million, and the value of shares withheld to cover employee tax withholding of $2.6 million. These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable noncontrolling interest holders of ~~$3.8~~$9.9 million and proceeds received under the ESPP of ~~$0.4~~$0.5 million.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, net cash used in financing activities totaled ~~$4.2~~$14.7 million, consisting of ~~cash outflows for~~ the payment of quarterly dividends totaling ~~$3.1~~$9.5 million, repurchases of the Company’s common stock of ~~$1.9~~$7.5 million, and the value of shares withheld related to employee tax withholding of ~~$0.3~~$1.5 million. These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable noncontrolling interest holders of ~~$0.7~~$3.4 million and proceeds received under ~~our~~the ESPP of ~~$0.3~~$0.5 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~~the Company's general creditors.

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


		Three Months Ended March 31, 2022									Nine Months Ended September 30, 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:	Cash flows from operating activities:									Cash flows from operating activities:
Net income		$	9,129,952	$	(3,363,869)	$	2,508,933	$	8,275,016
Net income (loss)										Net income (loss)	$	25,557,278	$	(19,432,249)	$	13,738,151	$	19,863,180
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	362,902		—		—		362,902		Depreciation	1,046,949		—		—		1,046,949
Share-based compensation	Share-based compensation	2,333,530		—		—		2,333,530		Share-based compensation	8,040,241		—		—		8,040,241

Gain on sale of high yield-focused advisory contracts										Gain on sale of high yield-focused advisory contracts	(6,813,579)		—		—		(6,813,579)
Net (gains)/losses on investments	Net (gains)/losses on investments	7,143,606		3,363,862		(2,508,933)		7,998,535		Net (gains)/losses on investments	29,313,847		19,432,249		(13,738,151)		35,007,945
Net change in securities held by Consolidated Funds	Net change in securities held by Consolidated Funds	—		(5,129,789)		—		(5,129,789)		Net change in securities held by Consolidated Funds	—		(17,490,298)		—		(17,490,298)
Other changes in assets and liabilities	Other changes in assets and liabilities	(28,861,616)		1,343,252		—		(27,518,364)		Other changes in assets and liabilities	(30,598,890)		7,136,795		—		(23,462,095)
Net cash used in operating activities		(9,891,626)		(3,786,544)		—		(13,678,170)
Net cash (used in) provided by investing activities		1,884,750		—		(50,576)		1,834,174
Net cash (used in) provided by financing activities		(13,764,235)		$	3,786,544	$	50,576	(9,927,115)
Net cash provided by (used in) operating activities										Net cash provided by (used in) operating activities	26,545,846		(10,353,503)		—		16,192,343
Net cash provided by (used in) investing activities										Net cash provided by (used in) investing activities	7,966,900		—		494,185		8,461,085
Net cash provided by (used in) financing activities										Net cash provided by (used in) financing activities	(51,873,366)		$	10,353,503	$	(494,185)	(42,014,048)
Net change during the period	Net change during the period	(21,771,111)		—		—		(21,771,111)		Net change during the period	(17,360,620)		—		—		(17,360,620)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	80,550,393		—		—		80,550,393		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	$	58,779,282	—		—		$	58,779,282	Cash and cash equivalents at end of period	$	63,189,773	—		—		$	63,189,773

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Use of Supplemental Data as Non-GAAP ~~Performance Measure~~Financial Measures

As supplemental information, the Company is providing ~~performance~~certain financial measures that are based on methodologies other than ~~GAAP (“non-GAAP”~~U.S. generally accepted accounting principles ("non-GAAP"). ~~The Company~~Management believes ~~that~~ the non-GAAP financial 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~~help facilitate comparisons to ~~its peers.~~Company operating performance across periods. These non-GAAP financial measures should not be used as a substitute for financial measures calculated in accordance with ~~GAAP~~U.S. generally accepted accounting principles ("GAAP") and may be calculated differently by other companies. The following schedule reconciles financial measures calculated in accordance with GAAP ~~measures~~ to non-GAAP financial measures for the ~~three months~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021, respectively.


		Three Months Ended March 31,				Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except percentages and per share data)	(in thousands, except percentages and per share data)		2022				2021			(in thousands, except percentages and per share data)	2022			2021			2022			2021
Total revenue	Total revenue		$	42,256			$	39,014		Total revenue	$	38,265		$	55,055		$	119,542		$	139,139

Net operating income, GAAP basis	Net operating income, GAAP basis		$	19,073			$	13,532		Net operating income, GAAP basis	$	16,033		$	28,321		$	55,357		$	59,620
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)		(1,179)				3,103			Gains (losses) on deferred compensation plan investments, net(1)	(1,052)			3			(6,921)			4,618
Net operating income, as adjusted, non-GAAP basis(2)	Net operating income, as adjusted, non-GAAP basis(2)		17,894				16,635			Net operating income, as adjusted, non-GAAP basis(2)	14,981			28,324			48,436			64,238
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)		(4,650)				(4,402)			Tax provision on net operating income, as adjusted, non-GAAP basis(3)	(4,044)			(7,844)			(12,620)			(17,332)
Net operating income, as adjusted, after tax, non-GAAP basis(4)	Net operating income, as adjusted, after tax, non-GAAP basis(4)		$	13,244			$	12,233		Net operating income, as adjusted, after tax, non-GAAP basis(4)	$	10,937		$	20,480		$	35,816		$	46,906

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)		$	4.16			$	3.87		Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)	$	3.55		$	6.41		$	11.41		$	14.74
Diluted weighted average shares outstanding, GAAP basis	Diluted weighted average shares outstanding, GAAP basis		3,186				3,157			Diluted weighted average shares outstanding, GAAP basis	3,079			3,193			3,139			3,182

Operating profit margin, GAAP basis	Operating profit margin, GAAP basis		45		%		35		%	Operating profit margin, GAAP basis	42		%	51		%	46		%	43		%
Operating profit margin, as adjusted, non-GAAP basis(6)	Operating profit margin, as adjusted, non-GAAP basis(6)		42		%		43		%	Operating profit margin, as adjusted, non-GAAP basis(6)	39		%	51		%	41		%	46		%

(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 financial 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 financial measure represents the tax provision, excluding the impact of investment related activity, and the gain on sale of High Yield-Focused Advisory Contracts, 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 financial 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 financial 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 financial 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.

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities. The Company evaluates such estimates, judgments, and assumptions on an ongoing basis, and bases its estimates, judgements, and assumptions on historical experiences, current trends, and various other factors that it believes to be reasonable under the circumstances. By their nature, these estimates, judgments, and assumptions are subject to uncertainty, and actual results may differ materially from these 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 2021 Form 10-K.

There have been no material changes to the Company's critical accounting estimates during the quarter ended September 30, 2022, as compared to those disclosed in Critical Accounting Policies and Estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 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 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~~the Company's December 31, 2021 year end.


ITEM 4:			Controls and Procedures

Evaluation of Disclosure 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) ofunder 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. In designing and evaluating the disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, the Company’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter ended ~~March 31,~~September 30, 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, its after effects, and the related economic impacts could have on the design and operating effectiveness of ~~our internal~~the Company's controls.


PART II:			OTHER INFORMATION

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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 2021 Form 10-K.


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

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

~~Table of Contents~~

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


Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share		Total Number of Shares Purchased as part of Publicly Announced Programs(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs(b)
July 1, 2022 through July 31, 2022	24,392	$	178.22	19,791	$	28,854,467
August 1, 2022 through August 31, 2022	36,301	179.25		36,301	22,347,677
September 1, 2022 through September 30, 2022	22,844	$	171.44	22,844	18,431,389
Total	83,537			78,936	$	18,431,389

(a)~~On February 27, 2020,~~The Company regularly withholds shares for tax payments due upon the ~~Board approved~~vesting of employee restricted stock. During the ~~2020 Repurchase Program, authorizing management to repurchase up to $50.0 million~~quarter ended September 30, 2022, the Company withheld 4,601 shares of ~~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.~~ stock for employee tax withholding at an average price paid per share of $173.64.

(b)On February 25, 2022, the Board ~~approved the 2022 Repurchase Program, authorizing~~authorized 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.~~laws (the "2022 Repurchase Program"). The 2022 Repurchase Program will expire in February 2024, or upon the earlier completion of all authorized purchases under such program.

~~The~~In connection with the 2022 Repurchase 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 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 March 31, 2022, the Company has repurchased 27,307 shares of the Company's common stock under the 2022 Repurchase Program at a total cost of $5.2 million.~~


ITEM 3:			Defaults Upon Senior Securities

None.


ITEM 4:			Mine Safety Disclosures

Not applicable.

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ITEM 5:			Other Information

None.

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ITEM 6:			Exhibits


3.1						Amended and Restated Articles of Incorporation of the Company ~~(Incorporated~~(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~~(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~~(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~~(f iled herewith).

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

32.1						Section 1350 ~~Certifications. (Filed~~Certification . (f iled 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

~~April~~October 26, 2022

Chief Executive Officer and President

/s/ Heather E. Brilliant

Heather E. Brilliant

~~April~~October 26, 2022

Chief Financial Officer and Treasurer

/s/ Thomas E. Line

Thomas E. Line

3140


	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


	Three Months Ended March 31,
		2022		2021
Realized gains		$	1,443,747	$	2,523,505
Change in unrealized		(9,750,856)		2,505,344
Dividends		767,885		665,009

Other		(53,033)		(30,404)
Investment income (loss), net		$	(7,592,257)	$	5,663,454


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


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