Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2021 | Apr. 26, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 000-24498 | |
Entity Registrant Name | DIAMOND HILL INVESTMENT GROUP, INC | |
Entity Incorporation, State or Country Code | OH | |
Entity Tax Identification Number | 65-0190407 | |
Entity Address, Address Line One | 325 John H. McConnell Blvd., Suite 200 | |
Entity Address, City or Town | Columbus | |
Entity Address, State or Province | OH | |
Entity Address, Postal Zip Code | 43215 | |
City Area Code | 614 | |
Local Phone Number | 255-3333 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, no par value | |
Trading Symbol | DHIL | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 3,193,930 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000909108 | |
Current Fiscal Year End Date | --12-31 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company indemnifies its directors, officers, and certain employees for certain liabilities that may arise from performance of their duties to the Company. From time to time, the Company is 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. |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 |
ASSETS | |||
Cash and cash equivalents | $ 80,187,685 | $ 98,478,202 | |
Investments | 142,695,192 | 128,401,136 | |
Accounts receivable | 19,717,837 | 17,805,864 | |
Prepaid expenses | 2,810,871 | 2,977,759 | |
Income taxes receivable | 0 | 256,538 | |
Property and equipment, net of accumulated depreciation | 6,820,446 | 6,740,396 | |
Deferred taxes | 7,433,362 | 8,437,446 | |
Total assets | 259,665,393 | 263,097,341 | |
Liabilities | |||
Accounts payable and accrued expenses | 9,306,239 | 8,002,303 | |
Accrued incentive compensation | 8,236,156 | 28,400,000 | |
Income taxes payable | 3,647,687 | $ 0 | |
Deferred compensation | 33,369,087 | 33,241,952 | |
Total liabilities | 54,559,169 | 69,644,255 | |
Redeemable noncontrolling interest | 10,665,146 | 9,372,333 | |
Permanent Shareholders’ equity | |||
Common stock, no par value: 7,000,000 shares authorized; 3,197,634 issued and outstanding at March 31, 2021 (inclusive of 215,352 unvested shares); 3,168,823 issued and outstanding at December 31, 2020 (inclusive of 183,718 unvested shares) | 85,303,452 | 80,810,946 | |
Preferred stock, undesignated, 1,000,000 shares authorized and unissued | 0 | 0 | |
Deferred equity compensation | (19,440,920) | (14,748,118) | |
Retained earnings | 128,578,546 | 118,017,925 | |
Total permanent shareholders’ equity | 194,441,078 | 184,080,753 | $ 190,779,920 |
Total liabilities and shareholders’ equity | $ 259,665,393 | $ 263,097,341 | |
Book value per share (usd per share) | $ 60.81 | $ 58.09 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - shares | Mar. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Common stock, shares authorized | 7,000,000 | 7,000,000 |
Common stock, shares issued | 3,197,634 | 3,168,823 |
Common stock, shares outstanding | 3,197,634 | 3,168,823 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Unvested shares | 215,352 | 183,718 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited) - USD ($) | Total | Common Stock | Deferred Equity Compensation | Retained Earnings |
Beginning balance (shares) at Dec. 31, 2019 | 3,294,672 | |||
Beginning Balance at Dec. 31, 2019 | $ 192,855,681 | $ 95,853,477 | $ (20,331,890) | $ 117,334,094 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of restricted stock grants (shares) | 3,850 | |||
Issuance of restricted stock grants | $ 347,424 | (347,424) | ||
Amortization of restricted stock grants | 1,786,217 | 1,786,217 | ||
Issuance of stock grants (in shares) | 23,640 | |||
Issuance of stock grants | 3,396,359 | $ 3,396,359 | ||
Issuance of common stock related to 401k plan match (in shares) | 5,316 | |||
Issuance of common stock related to 401k plan match | 647,100 | $ 647,100 | ||
Shares withheld related to employee tax withholding (in shares) | (1,801) | |||
Shares withheld related to employee tax withholding | (252,968) | $ (252,968) | ||
Forfeiture of restricted stock grants (shares) | (1,225) | |||
Forfeiture of restricted stock grants | $ (206,347) | 206,347 | ||
Repurchase of common stock (shares) | (76,937) | |||
Repurchase of common stock | (9,182,577) | $ (9,182,577) | ||
Net income | 1,530,108 | 1,530,108 | ||
Ending balance (shares) at Mar. 31, 2020 | 3,247,515 | |||
Ending Balance at Mar. 31, 2020 | 190,779,920 | $ 90,602,468 | (18,686,750) | 118,864,202 |
Beginning balance attributable to redeemable noncontrolling Interests at Dec. 31, 2019 | 14,178,824 | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||
Net Income Attributable to Redeemable Noncontrolling Interest | 4,058,476 | |||
Net subscriptions of consolidated funds | (565,998) | |||
Ending balance attributable to redeemable noncontrolling Interests at Mar. 31, 2020 | $ 9,554,350 | |||
Beginning balance (shares) at Dec. 31, 2020 | 3,168,823 | 3,168,823 | ||
Beginning Balance at Dec. 31, 2020 | $ 184,080,753 | $ 80,810,946 | (14,748,118) | 118,017,925 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of restricted stock grants (shares) | 52,434 | |||
Issuance of restricted stock grants | $ 8,160,714 | (8,160,714) | ||
Amortization of restricted stock grants | 1,397,132 | 1,397,132 | ||
Issuance of stock grants (in shares) | 3,681 | |||
Issuance of stock grants | 529,806 | $ 529,806 | ||
Issuance of common stock related to 401k plan match (in shares) | 154 | |||
Issuance of common stock related to 401k plan match | 24,000 | $ 24,000 | ||
Shares withheld related to employee tax withholding (in shares) | (1,729) | |||
Shares withheld related to employee tax withholding | (258,088) | $ (258,088) | ||
Forfeiture of restricted stock grants (shares) | (13,200) | |||
Forfeiture of restricted stock grants | $ (2,070,780) | 2,070,780 | ||
Repurchase of common stock (shares) | (12,529) | |||
Repurchase of common stock | (1,893,146) | $ (1,893,146) | ||
Cash dividend paid of $1.00 per share | (3,147,890) | (3,147,890) | ||
Net income | $ 13,708,511 | 13,708,511 | ||
Ending balance (shares) at Mar. 31, 2021 | 3,197,634 | 3,197,634 | ||
Ending Balance at Mar. 31, 2021 | $ 194,441,078 | $ 85,303,452 | $ (19,440,920) | $ 128,578,546 |
Beginning balance attributable to redeemable noncontrolling Interests at Dec. 31, 2020 | 9,372,333 | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||
Net Income Attributable to Redeemable Noncontrolling Interest | (554,102) | |||
Net subscriptions of consolidated funds | 738,711 | |||
Ending balance attributable to redeemable noncontrolling Interests at Mar. 31, 2021 | $ 10,665,146 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income (Loss) | $ 14,262,613 | $ (2,528,368) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 218,731 | 265,084 |
Share-based compensation | 1,481,578 | 2,433,317 |
Decrease (increase) in accounts receivable | (1,911,973) | 3,873,142 |
Change in current income taxes | 3,904,225 | 3,297,343 |
Change in deferred income taxes | 1,004,084 | (2,691,713) |
Net (gains) losses on investments | (5,205,321) | 23,246,116 |
Net change in securities held by Consolidated Funds | (11,456,604) | (589,071) |
Decrease in accrued incentive compensation | (19,634,038) | (15,799,928) |
Increase (decrease) in deferred compensation | 127,135 | (7,475,032) |
Other changes in assets and liabilities | 1,549,065 | (2,039,894) |
Net cash (used in) provided by operating activities | (15,660,505) | 1,990,996 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (413,441) | (115,218) |
Purchase of Company sponsored investments | (1,890,082) | (10,948,903) |
Proceeds from sale of Company sponsored investments | 3,891,396 | 23,209,972 |
Net cash provided by investing activities | 1,587,873 | 12,145,851 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Value of shares withheld related to employee tax withholding | (258,088) | (252,968) |
Payment of dividends | (3,147,890) | 0 |
Net subscriptions (redemptions) received from redeemable noncontrolling interest holders | 738,711 | (565,998) |
Repurchase of common stock | (1,893,146) | (9,182,577) |
Proceeds received under employee stock purchase plan | 342,528 | 0 |
Net cash used in financing activities | (4,217,885) | (10,001,543) |
CASH AND CASH EQUIVALENTS | ||
Net change during the period | (18,290,517) | 4,135,304 |
At beginning of period | 98,478,202 | 93,176,253 |
At end of period | 80,187,685 | 97,311,557 |
Supplemental cash flow information: | ||
Income taxes paid | 24,653 | 0 |
Supplemental disclosure of non-cash transactions: | ||
Common stock issued as incentive compensation | 529,806 | 3,396,359 |
Charitable donation of corporate investments | $ 366,555 | $ 0 |
Consolidated Statements of Inco
Consolidated Statements of Income (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
REVENUES: | ||
Revenue | $ 39,014,433 | $ 31,925,745 |
OPERATING EXPENSES: | ||
Compensation and related costs, excluding deferred compensation expense (benefit) | 16,814,941 | 15,417,176 |
Deferred compensation expense (benefit) | 3,102,946 | (8,155,881) |
General and administrative | 2,815,678 | 1,928,656 |
Sales and marketing | 1,868,026 | 1,455,682 |
Mutual fund administration | 880,721 | 814,953 |
Total operating expenses | 25,482,312 | 11,460,586 |
NET OPERATING INCOME | 13,532,121 | 20,465,159 |
Investment income (loss), net | 5,663,454 | (22,398,092) |
NET INCOME (LOSS) BEFORE TAXES | 19,195,575 | (1,932,933) |
Income tax expense | 4,932,962 | 595,435 |
NET INCOME (LOSS) | 14,262,613 | (2,528,368) |
Net loss (income) attributable to redeemable noncontrolling interest | 554,102 | (4,058,476) |
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 13,708,511 | $ 1,530,108 |
Earnings per share attributable to common shareholders | ||
Basic (USD per share) | $ 4.34 | $ 0.47 |
Diluted (USD per share) | $ 4.34 | $ 0.47 |
Weighted average shares outstanding | ||
Basic (in shares) | 3,156,768 | 3,272,761 |
Diluted (in shares) | 3,156,768 | 3,272,761 |
Investment advisory | ||
REVENUES: | ||
Revenue | $ 36,569,103 | $ 30,157,680 |
Mutual fund administration revenue, net | ||
REVENUES: | ||
Revenue | $ 2,445,330 | $ 1,768,065 |
Business and Organization
Business and Organization | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Organization | Business and OrganizationDiamond Hill Investment Group, Inc. (the "Company"), an Ohio corporation, derives consolidated revenue and net income from investment advisory and fund administration services. Diamond Hill Capital Management, Inc. ("DHCM"), an Ohio corporation, is a wholly owned subsidiary of the Company and a registered investment adviser. DHCM is the investment adviser and administrator for the Diamond Hill Funds (the "Funds"), a series of open-end mutual funds. The Company also provides investment advisory services to separately managed accounts and provides sub-advisory services to other mutual funds. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Presentation The accompanying unaudited, condensed, consolidated financial statements as of March 31, 2021 and December 31, 2020, and for the three-month periods ended March 31, 2021 and March 31, 2020, for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in these notes to the condensed consolidated financial statements as "the Company," "management," "we," "us," and "our"), have been prepared in accordance with United States generally accepted accounting principles ("GAAP"), with the instructions to Form 10-Q, and with Article 10 of Securities and Exchange Commission (the "SEC") Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting 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, consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"), as filed with the SEC. Operating results for the three-month period ended March 31, 2021 are not necessarily indicative of the results the Company may expect for the full fiscal year ending December 31, 2021 (“fiscal 2021”). For further information regarding the risks to the Company's business, refer to the consolidated financial statements and notes thereto included in the 2020 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 and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. Reclassification Certain prior period amounts and disclosures 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 for general corporate investment purposes, to provide seed capital for newly formed strategies, or to add capital to existing strategies. The Funds are organized in a series fund structure in which there are multiple mutual funds within one trust (the "Trust"). The Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the"1940 Act"). 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%. The Company has consolidated the Diamond Hill Large Cap Concentrated Fund, the Diamond Hill International Fund, and the Diamond Hill Global Fund (collectively, the "Consolidated Funds") as of March 31, 2021. 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 one business segment, which is providing investment management and administration services to mutual funds and separately managed accounts. 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, 2021, or December 31, 2020. Accounts receivable from the Funds were $12.3 million as of March 31, 2021, and $10.5 million as of December 31, 2020. Investments Management determines the appropriate classification of its investments at the time of purchase and re-evaluates its determination for each reporting period. Investments in the Funds that DHCM advises, where the Company has neither control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income (loss) in the Company's consolidated statements of income. Investments classified as equity method investments represent investments in which the Company owns between 20-50% of the outstanding voting interests in the entity or when 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. As of March 31, 2021, the Company did not have any investments classified as equity method investments. 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. 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 investment advisory and fund administration contracts. Investment advisory and administration fees, generally calculated as a percentage of assets under management ("AUM"), are recorded as revenue as services are performed. In addition to fixed fees based on a percentage of AUM, certain client accounts also provide periodic performance-based fees. Revenue earned during the three months ended March 31, 2021 and 2020 under contracts with clients include: Three Months Ended March 31, 2021 Investment advisory Mutual fund Total revenue Proprietary funds $ 26,510,701 $ 2,445,330 $ 28,956,031 Sub-advised funds and separately managed accounts 10,058,402 — 10,058,402 $ 36,569,103 $ 2,445,330 $ 39,014,433 Three Months Ended March 31, 2020 Investment advisory Mutual fund Total revenue Proprietary funds $ 23,454,563 $ 1,768,065 $ 25,222,628 Sub-advised funds and separately managed accounts 6,703,117 — 6,703,117 $ 30,157,680 $ 1,768,065 $ 31,925,745 Revenue Recognition – Investment Advisory Fees The Company's investment advisory contracts with clients have a single performance obligation because the contracted services are not separately identifiable from other obligations in the contracts and, therefore, are not distinct. All performance obligations to provide advisory services are satisfied over time and the Company recognizes revenue as time passes. The fees the Company receives for its services under its investment advisory contracts are based on AUM, which changes based on the value of securities held under each advisory contract. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which the Company's client is billed is no longer subject to market fluctuations. The Company also provides services to model delivery programs in which the Company provides its strategy model portfolio to the sponsor of the model delivery. The Company is paid a portion of the model delivery fee for its services by the program sponsor at a pre-determined rate based on assets in the program. Model delivery program revenues were $0.9 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively. Model delivery program revenue is included in investment advisory fees in the consolidated statements of income. Revenue Recognition – Performance-Based Fees The Company manages certain client accounts that provide for performance-based fees. These fees are calculated based on client investment results over rolling five-year periods. The Company records performance-based fees when it is probable that a significant reversal of the revenue will not occur. The Company did not record any performance-based fees during either of the three-month periods ended March 31, 2021 and 2020. 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, 2021: As of March 31, 2021 AUM subject to performance-based fees Unearned performance-based fees Contractual Period Ending: Quarter Ended September 30, 2021 $ 375,886,495 $ 9,928,373 Quarter Ended December 31, 2021 67,514,790 125,672 Total $ 443,401,285 $ 10,054,045 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, 2021, will increase or decrease based on future client investment results through the end of the contractual period. The Company cannot assure that it will earn the unearned amounts set forth above. Revenue Recognition – Mutual Fund Administration DHCM has an administrative and transfer agency services agreement with the Funds under which DHCM performs certain services for each Fund. These services include performance obligations such as mutual fund administration, fund accounting, transfer agency, and other related functions. These services are performed concurrently under DHCM's agreement with the Funds, all performance obligations to provide these administrative services are satisfied over time, and the Company recognizes the related revenue as time progresses. Each Fund pays DHCM a fee for performing these services, which is calculated using an annual rate multiplied by the average daily net assets of each respective Fund share class. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which DHCM bills the Funds is no longer subject to market fluctuations. The Funds have selected and contractually engaged certain vendors to fulfill various services to benefit the Funds’ shareholders or to satisfy regulatory requirements of the Funds. These services include, among others, required shareholder mailings, federal and state registrations, and legal and audit services. In fulfilling a portion of its role under the administration agreement with the Funds, DHCM acts as agent and pays for these services on behalf of the Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates its fees and terms directly with the management and board of trustees of the Funds. Each year, the Funds' board of trustees reviews the fee that each Fund pays to DHCM, and specifically considers the contractual expenses that DHCM pays on behalf of the Funds. As a result, DHCM is not involved in the delivery or pricing of these services, and bears no risk related to these services. Revenue has been recorded net of these Fund-related expenses. In addition, DHCM advances the upfront commissions that are paid to brokers who sell Class C shares of the Funds. These advances are capitalized and amortized over 12 months to correspond with the repayments DHCM receives from the principal underwriter to recoup this commission advancement. During the first quarter of 2021, Class C shares were eliminated and converted to Investor Class shares. As a result, no material financing activity will be recognized in future periods. Mutual fund administration gross and net revenue are summarized below: Three Months Ended 2021 2020 Mutual fund administration: Administration revenue, gross $ 6,926,414 $ 5,592,658 Fund related expense (4,466,157) (3,827,249) Revenue, net of related expenses 2,460,257 1,765,409 C-Share financing: Broker commission advance repayments 33,594 63,542 Broker commission amortization (48,521) (60,886) Financing activity, net (14,927) 2,656 Mutual fund administration revenue, net $ 2,445,330 $ 1,768,065 Income Taxes The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ from actual payments or assessments. The Company regularly assesses its positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes . The Company records interest and penalties within income tax expense on the income statement. See Note 8. Earnings Per Share Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, which includes unvested restricted shares. See Note 9. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments The following table summarizes the carrying value of the Company's investments as of March 31, 2021 and December 31, 2020: As of March 31, 2021 December 31, 2020 Fair value investments: Securities held in Consolidated Funds (a) $ 47,164,927 $ 33,233,307 Company sponsored investments 95,530,265 95,167,829 Total Investments $ 142,695,192 $ 128,401,136 (a) Of the securities held in the Consolidated Funds as of March 31, 2021, the Company directly held $35.0 million and noncontrolling shareholders held $12.2 million. Of the securities held in the Consolidated Funds as of December 31, 2020, the Company directly held $23.6 million and noncontrolling shareholders held $9.6 million. The components of net investment income (loss) are as follows: Three Months Ended March 31, 2021 2020 Realized gains (losses) $ 2,523,505 $ (817,539) Unrealized gains (losses) 2,505,344 (22,467,598) Dividends 665,009 894,413 Other (30,404) (7,368) Investment income (loss), net $ 5,663,454 $ (22,398,092) |
Fair Value Measurements (Notes)
Fair Value Measurements (Notes) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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. We do 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 determined based upon the differing levels as of March 31, 2021: Level 1 Level 2 Level 3 Total Cash equivalents $ 77,122,682 $ — $ — $ 77,122,682 Fair value investments: Securities held in Consolidated Funds (a) 29,702,152 17,462,775 — $ 47,164,927 Company-sponsored investments $ 95,530,265 $ — $ — $ 95,530,265 (a) Of the securities held in the Consolidated Funds as of March 31, 2021, the Company directly held $35.0 million and noncontrolling shareholders held $12.2 million. The Company determines transfers between fair value hierarchy levels at the end of the reporting period. There were no transfers in or out of the levels during the three months ended March 31, 2021. Changes to fair values of the investments are recorded in the Company’s consolidated statements of income as investment income (loss), net. |
Line of Credit
Line of Credit | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Line of Credit | Line of Credit The Company has a committed line of credit agreement (the "Credit Agreement") with a commercial bank that matures on December 24, 2021, which permits the Company to borrow up to $25.0 million. Borrowings under the Credit Agreement bear interest at a rate equal to LIBOR plus 1.00%. 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. |
Compensation Plans
Compensation Plans | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Compensation Plans | Compensation Plans Share-Based Payment Transactions The Company issues restricted stock grants under the 2014 Equity and Cash Incentive Plan (the "2014 Plan"). Restricted stock grants represent common shares issued and outstanding upon grant subject to vesting restrictions. The Company has historically issued stock grants that cliff vest after five years to all new employees upon hire and as additional grants to key employees on a periodic basis. While the Company currently plans to continue to issue five-year cliff vest grants to new employees, beginning in 2021, new long-term incentive awards to existing employees were made 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. The following table represents a roll-forward of outstanding restricted stock and related activity for the three months ended March 31, 2021: Shares Weighted-Average Outstanding restricted stock as of December 31, 2020 183,718 $ 173.80 Grants issued 52,434 155.64 Grants vested (7,600) 174.98 Grants forfeited (13,200) 156.88 Total outstanding restricted stock as of March 31, 2021 215,352 $ 168.34 As of March 31, 2021, 181,471 common shares remained available for grants under the 2014 Plan. Total deferred equity compensation related to unvested restricted stock was $19.4 million as of March 31, 2021. The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows: Nine Months 2021 2022 2023 2024 2025 Thereafter Total $ 5,926,670 $ 6,730,500 $ 4,765,545 $ 1,719,462 $ 297,487 $ 1,256 $ 19,440,920 Employee Stock Purchase Plan The Company adopted the Diamond Hill Investment Group, Inc. Employee Stock Purchase Plan (the "ESPP") effective October 27, 2020. Under the ESPP, eligible employees may purchase shares of the Company's common stock at 85% of the fair market value on the last day of each offering period. Each offering period is approximately three months coinciding with the Company's fiscal quarters. During the three-month period ended March 31, 2021, ESPP participants purchased 2,583 shares of common stock for $0.3 million and the Company recorded $0.1 million of share based payment expense related to these purchases. Stock Grant Transactions The following table represents common shares issued as part of the Company's incentive compensation program during the three-month period ended March 31, 2021, and 2020: Shares Issued Grant Date Value March 31, 2021 3,681 $ 529,806 March 31, 2020 23,640 $ 3,396,359 401(k) Plan The Company sponsors a 401(k) plan in which all employees are eligible to participate. Employees may contribute a portion of their compensation subject to certain limits based on federal tax laws. The Company matches employee contributions equal to 250 percent of the first six percent of an employee’s compensation contributed to the plan. As of January 1, 2021, the Company settles the 401(k) plan matching contributions in cash or common shares of the Company based on the election of the employees. Prior to January 1, 2021, the Company made all matching contributions in common shares of the Company. Deferred Compensation Plans The Company offers two deferred compensation plans, the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (together, the “Plans”). Under the Plans, participants may elect to voluntarily defer, for a minimum of five years, certain incentive compensation that the Company then contributes into the Plans. Participants are responsible for designating investment options for the assets they contribute, and the distribution paid to each participant reflects any gains or losses on the assets realized in connection with the Plans. Assets held in the Plans are included in the Company’s investment portfolio, and the associated obligation to participants is included in deferred compensation liability. Deferred compensation liability was $33.4 million and $33.2 million as of March 31, 2021 and December 31, 2020, respectively. |
Operating Lease
Operating Lease | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Operating Lease | Operating Lease The Company currently leases office space of approximately 37,829 square feet at one location. As of March 31, 2021, the carrying value of this right-of-use asset, which is included in property and equipment, was approximately $1.9 million net of deferred rent on the consolidated balance sheets. As of March 31, 2021, the carrying value of the lease liability was approximately $2.4 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 periods ended March 31, 2021 and 2020: March 31, March 31, Three Months Ended $ 209,042 $ 225,858 The approximate future minimum lease payments under the operating lease are as follows: Future Minimum Lease Payments Nine Months 2021 2022 2023 2024 2025 Total $ 468,134 $ 624,179 $ 624,179 $ 624,179 $ 156,045 $ 2,496,716 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 2021 2020 Statutory U.S. federal income tax rate 21.0 % 21.0 % State and local income taxes, net of federal benefit 4.4 % 4.5 % Internal revenue code section 162 limitations 1.1 % 2.3 % Other — % 0.2 % Unconsolidated effective income tax rate 26.5 % 28.0 % Impact attributable to redeemable noncontrolling interests (a) (0.8) % (58.8) % Effective income tax rate 25.7 % (30.8) % (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 interests, the estimated unconsolidated effective income tax rate would have been 26.5%. The Company's actual effective tax rate for fiscal year ended December 31, 2021 could be materially different from the projected rate as of March 31, 2021. The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2021 and December 31, 2020, no valuation allowance was deemed necessary. 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 derecognition, 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, 2021 or December 31, 2020. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The Company’s common shares outstanding consist of all shares issued and outstanding, including unvested restricted shares. Basic and diluted EPS are calculated under the two-class method. The following table sets forth the computation for basic and diluted EPS: Three Months Ended 2021 2020 Net Income (Loss) $ 14,262,613 $ (2,528,368) Less: Net loss (income) attributable to redeemable noncontrolling interest (554,102) 4,058,476 Net income attributable to common shareholders $ 13,708,511 $ 1,530,108 Weighted average number of outstanding shares - Basic 3,156,768 3,272,761 Weighted average number of outstanding shares - Diluted 3,156,768 3,272,761 Earnings per share attributable to common shareholders Basic $ 4.34 $ 0.47 Diluted $ 4.34 $ 0.47 |
Sale of Assets of Diamond Hill'
Sale of Assets of Diamond Hill's High Yield-Focused Fund | 3 Months Ended |
Mar. 31, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Sale of Assets of Diamond Hill's High Yield-Focused Fund | Sale of Assets of Diamond Hill's High Yield-Focused Funds DHCM entered into an asset purchase agreement dated February 2, 2021 (the “Purchase Agreement”) with Brandywine Global Investment Management, LLC (“Brandywine Global”), a specialist investment manager of Franklin Resources, Inc. Pursuant to the Purchase Agreement, Brandywine Global will acquire the businesses of DHCM’s two high yield-focused mutual funds - the Corporate Credit Fund and the High Yield Fund (the “Acquired Funds”). In connection with the transaction, two of the Company’s portfolio managers and a research analyst will join Brandywine Global’s fixed income team. Pursuant to the Purchase Agreement, DHCM will receive an initial cash payment at closing of up to $9.0 million based upon the closing date net revenue of the Acquired Funds, and may receive two additional payments of up to $13.0 million in the aggregate based on the net revenue of the Acquired Funds on the one-year anniversary of the closing date. There can be no assurance that all or any of these additional payment amounts will be received by DHCM. The Purchase Agreement contains customary representations, warranties, and covenants and is subject to customary closing conditions, including a minimum net revenue requirement as of the closing date and approval by the shareholders of the Acquired Funds. The sale is expected to close on July 30, 2021, subject to approval of each Acquired Fund’s shareholders. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn April 26, 2021, the Company’s board of directors approved a cash dividend of $1.00 per share payable June 18, 2021, to shareholders of record as of June 3, 2021. This dividend will reduce shareholders' equity by approximately $3.2 million. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited, condensed, consolidated financial statements as of March 31, 2021 and December 31, 2020, and for the three-month periods ended March 31, 2021 and March 31, 2020, for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in these notes to the condensed consolidated financial statements as "the Company," "management," "we," "us," and "our"), have been prepared in accordance with United States generally accepted accounting principles ("GAAP"), with the instructions to Form 10-Q, and with Article 10 of Securities and Exchange Commission (the "SEC") Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting 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, consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"), as filed with the SEC. |
Use of Estimates | 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 and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. |
Reclassification | Reclassification Certain prior period amounts and disclosures may have been reclassified to conform to the current period's financial presentation. |
Principles of Consolidation | 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 for general corporate investment purposes, to provide seed capital for newly formed strategies, or to add capital to existing strategies. The Funds are organized in a series fund structure in which there are multiple mutual funds within one trust (the "Trust"). The Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the"1940 Act"). 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, |
Redeemable Noncontrolling Interest | 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 | Segment Information Management has determined that the Company operates in one business segment, which is providing investment management and administration services to mutual funds and separately managed accounts. Therefore, the Company does not present disclosures relating to operating segments in annual or interim financial statements. |
Cash and Cash Equivalents | Cash and Cash EquivalentsCash and cash equivalents include demand deposits and money market mutual funds held by DHCM. |
Accounts Receivable | Accounts ReceivableThe 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. |
Investments | Investments Management determines the appropriate classification of its investments at the time of purchase and re-evaluates its determination for each reporting period. Investments in the Funds that DHCM advises, where the Company has neither control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income (loss) in the Company's consolidated statements of income. Investments classified as equity method investments represent investments in which the Company owns between 20-50% of the outstanding voting interests in the entity or when 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. As of March 31, 2021, the Company did not have any investments classified as equity method investments. |
Property and Equipment | 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. |
Revenue Recognition | Revenue Recognition – GeneralThe 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 investment advisory and fund administration contracts. Investment advisory and administration fees, generally calculated as a percentage of assets under management ("AUM"), are recorded as revenue as services are performed. In addition to fixed fees based on a percentage of AUM, certain client accounts also provide periodic performance-based fees. Revenue Recognition – Investment Advisory Fees The Company's investment advisory contracts with clients have a single performance obligation because the contracted services are not separately identifiable from other obligations in the contracts and, therefore, are not distinct. All performance obligations to provide advisory services are satisfied over time and the Company recognizes revenue as time passes. The fees the Company receives for its services under its investment advisory contracts are based on AUM, which changes based on the value of securities held under each advisory contract. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which the Company's client is billed is no longer subject to market fluctuations. The Company also provides services to model delivery programs in which the Company provides its strategy model portfolio to the sponsor of the model delivery. The Company is paid a portion of the model delivery fee for its services by the program sponsor at a pre-determined rate based on assets in the program. Model delivery program revenues were $0.9 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively. Model delivery program revenue is included in investment advisory fees in the consolidated statements of income. Revenue Recognition – Performance-Based Fees 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. |
Income Taxes | Income Taxes The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ from actual payments or assessments. The Company regularly assesses its positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes |
Earnings Per Share | 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. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Disaggregation of Revenue | Revenue earned during the three months ended March 31, 2021 and 2020 under contracts with clients include: Three Months Ended March 31, 2021 Investment advisory Mutual fund Total revenue Proprietary funds $ 26,510,701 $ 2,445,330 $ 28,956,031 Sub-advised funds and separately managed accounts 10,058,402 — 10,058,402 $ 36,569,103 $ 2,445,330 $ 39,014,433 Three Months Ended March 31, 2020 Investment advisory Mutual fund Total revenue Proprietary funds $ 23,454,563 $ 1,768,065 $ 25,222,628 Sub-advised funds and separately managed accounts 6,703,117 — 6,703,117 $ 30,157,680 $ 1,768,065 $ 31,925,745 |
Assets under Management (AUM) Subject to Incentive Fees and Incentive Fees | 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, 2021: As of March 31, 2021 AUM subject to performance-based fees Unearned performance-based fees Contractual Period Ending: Quarter Ended September 30, 2021 $ 375,886,495 $ 9,928,373 Quarter Ended December 31, 2021 67,514,790 125,672 Total $ 443,401,285 $ 10,054,045 |
Mutual Fund Administration Gross and Net Revenue | Mutual fund administration gross and net revenue are summarized below: Three Months Ended 2021 2020 Mutual fund administration: Administration revenue, gross $ 6,926,414 $ 5,592,658 Fund related expense (4,466,157) (3,827,249) Revenue, net of related expenses 2,460,257 1,765,409 C-Share financing: Broker commission advance repayments 33,594 63,542 Broker commission amortization (48,521) (60,886) Financing activity, net (14,927) 2,656 Mutual fund administration revenue, net $ 2,445,330 $ 1,768,065 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Market Value of Investments | The following table summarizes the carrying value of the Company's investments as of March 31, 2021 and December 31, 2020: As of March 31, 2021 December 31, 2020 Fair value investments: Securities held in Consolidated Funds (a) $ 47,164,927 $ 33,233,307 Company sponsored investments 95,530,265 95,167,829 Total Investments $ 142,695,192 $ 128,401,136 (a) Of the securities held in the Consolidated Funds as of March 31, 2021, the Company directly held $35.0 million and noncontrolling shareholders held $12.2 million. Of the securities held in the Consolidated Funds as of December 31, 2020, the Company directly held $23.6 million and noncontrolling shareholders held $9.6 million. |
Schedule of Investment Income | The components of net investment income (loss) are as follows: Three Months Ended March 31, 2021 2020 Realized gains (losses) $ 2,523,505 $ (817,539) Unrealized gains (losses) 2,505,344 (22,467,598) Dividends 665,009 894,413 Other (30,404) (7,368) Investment income (loss), net $ 5,663,454 $ (22,398,092) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets Measured on Recurring Basis | The following table summarizes investments that are recognized in the Company's consolidated balance sheet using fair value measurements determined based upon the differing levels as of March 31, 2021: Level 1 Level 2 Level 3 Total Cash equivalents $ 77,122,682 $ — $ — $ 77,122,682 Fair value investments: Securities held in Consolidated Funds (a) 29,702,152 17,462,775 — $ 47,164,927 Company-sponsored investments $ 95,530,265 $ — $ — $ 95,530,265 (a) Of the securities held in the Consolidated Funds as of March 31, 2021, the Company directly held $35.0 million and noncontrolling shareholders held $12.2 million. |
Compensation Plans (Tables)
Compensation Plans (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Roll-Forward of Outstanding Restricted Stock Grants Issued | The following table represents a roll-forward of outstanding restricted stock and related activity for the three months ended March 31, 2021: Shares Weighted-Average Outstanding restricted stock as of December 31, 2020 183,718 $ 173.80 Grants issued 52,434 155.64 Grants vested (7,600) 174.98 Grants forfeited (13,200) 156.88 Total outstanding restricted stock as of March 31, 2021 215,352 $ 168.34 |
Expense Recognition of Deferred Compensation | The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows: Nine Months 2021 2022 2023 2024 2025 Thereafter Total $ 5,926,670 $ 6,730,500 $ 4,765,545 $ 1,719,462 $ 297,487 $ 1,256 $ 19,440,920 |
Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value | The following table represents common shares issued as part of the Company's incentive compensation program during the three-month period ended March 31, 2021, and 2020: Shares Issued Grant Date Value March 31, 2021 3,681 $ 529,806 March 31, 2020 23,640 $ 3,396,359 |
Operating Lease (Tables)
Operating Lease (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Summary of Total Lease and Operating Expenses | The following table summarizes the total lease and operating expenses for the three-month periods ended March 31, 2021 and 2020: March 31, March 31, Three Months Ended $ 209,042 $ 225,858 |
Future Minimum Lease Payments under Operating Leases | The approximate future minimum lease payments under the operating lease are as follows: Future Minimum Lease Payments Nine Months 2021 2022 2023 2024 2025 Total $ 468,134 $ 624,179 $ 624,179 $ 624,179 $ 156,045 $ 2,496,716 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of the statutory federal tax rate to effective income tax rate | A reconciliation of the statutory federal tax rate to the Company’s effective income tax rate is as follows: Three Months Ended 2021 2020 Statutory U.S. federal income tax rate 21.0 % 21.0 % State and local income taxes, net of federal benefit 4.4 % 4.5 % Internal revenue code section 162 limitations 1.1 % 2.3 % Other — % 0.2 % Unconsolidated effective income tax rate 26.5 % 28.0 % Impact attributable to redeemable noncontrolling interests (a) (0.8) % (58.8) % Effective income tax rate 25.7 % (30.8) % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Computation for Earnings Per Share | The following table sets forth the computation for basic and diluted EPS: Three Months Ended 2021 2020 Net Income (Loss) $ 14,262,613 $ (2,528,368) Less: Net loss (income) attributable to redeemable noncontrolling interest (554,102) 4,058,476 Net income attributable to common shareholders $ 13,708,511 $ 1,530,108 Weighted average number of outstanding shares - Basic 3,156,768 3,272,761 Weighted average number of outstanding shares - Diluted 3,156,768 3,272,761 Earnings per share attributable to common shareholders Basic $ 4.34 $ 0.47 Diluted $ 4.34 $ 0.47 |
Significant Accounting Polici_4
Significant Accounting Policies - Narrative (Detail) | 3 Months Ended | ||
Mar. 31, 2021USD ($)Segment | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) | |
Business Organization And Significant Accounting Policies [Line Items] | |||
Number of business segment | Segment | 1 | ||
Accounts receivable, related parties | $ 12,300,000 | $ 10,500,000 | |
Client performance period | 5 years | ||
Revenue | $ 39,014,433 | $ 31,925,745 | |
Advance commissions amortization period | 12 months | ||
Variable Rate Fees | |||
Business Organization And Significant Accounting Policies [Line Items] | |||
Revenue | $ 900,000 | $ 700,000 |
Significant Accounting Polici_5
Significant Accounting Policies - Revenues From Contracts with Customers (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 39,014,433 | $ 31,925,745 |
Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 36,569,103 | 30,157,680 |
Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 2,445,330 | 1,768,065 |
Proprietary funds | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 28,956,031 | 25,222,628 |
Proprietary funds | Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 26,510,701 | 23,454,563 |
Proprietary funds | Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 2,445,330 | 1,768,065 |
Sub-advised funds and separately managed accounts | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 10,058,402 | 6,703,117 |
Sub-advised funds and separately managed accounts | Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 10,058,402 | 6,703,117 |
Sub-advised funds and separately managed accounts | Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 0 | $ 0 |
Significant Accounting Polici_6
Significant Accounting Policies - Assets under Management (AUM) Subject to Incentive Fees and Incentive Fees (Detail) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Quarter Ending December 31, 2019 | |
Principal Transaction Revenue [Line Items] | |
AUM subject to performance-based fees | $ 67,514,790 |
Unearned performance-based fees | 125,672 |
Quarter Ending September 30, 2021 | |
Principal Transaction Revenue [Line Items] | |
AUM subject to performance-based fees | 375,886,495 |
Unearned performance-based fees | 9,928,373 |
Total | |
Principal Transaction Revenue [Line Items] | |
AUM subject to performance-based fees | 443,401,285 |
Unearned performance-based fees | $ 10,054,045 |
Significant Accounting Polici_7
Significant Accounting Policies - Mutual Fund Administration Gross and Net Revenue (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue from External Customer [Line Items] | ||
Revenue | $ 39,014,433 | $ 31,925,745 |
Administration revenue, gross | ||
Revenue from External Customer [Line Items] | ||
Revenue | 6,926,414 | 5,592,658 |
Fund related expense | ||
Revenue from External Customer [Line Items] | ||
Expenses | 4,466,157 | 3,827,249 |
Revenue, net of related expenses | ||
Revenue from External Customer [Line Items] | ||
Revenue | 2,460,257 | 1,765,409 |
Broker Commission | ||
Revenue from External Customer [Line Items] | ||
Revenue | 33,594 | 63,542 |
Expenses | 48,521 | 60,886 |
Financing activity, net | ||
Revenue from External Customer [Line Items] | ||
Revenue | (14,927) | 2,656 |
Mutual fund administration revenue, net | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 2,445,330 | $ 1,768,065 |
Investments - Summary of Market
Investments - Summary of Market Value of Investments (Detail) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Investment Holdings [Line Items] | ||
Total Investments | $ 142,695,192 | $ 128,401,136 |
Securities held in Consolidated Funds | ||
Investment Holdings [Line Items] | ||
Fair value investments | 47,164,927 | 33,233,307 |
Securities held in Consolidated Funds | Parent | ||
Investment Holdings [Line Items] | ||
Fair value investments | 35,000,000 | 23,600,000 |
Securities held in Consolidated Funds | Redeemable Noncontrolling Interest | ||
Investment Holdings [Line Items] | ||
Fair value investments | 12,200,000 | 9,600,000 |
Company sponsored investments | ||
Investment Holdings [Line Items] | ||
Fair value investments | $ 95,530,265 | $ 95,167,829 |
Investments - Investment Income
Investments - Investment Income (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | ||
Realized gains (losses) | $ 2,523,505 | $ (817,539) |
Unrealized gains (losses) | 2,505,344 | (22,467,598) |
Dividends | 665,009 | 894,413 |
Other | (30,404) | (7,368) |
Investment income (loss), net | $ 5,663,454 | $ (22,398,092) |
Fair Value Measurements Summary
Fair Value Measurements Summary of Investment Values Based Upon Fair Value Hierarchy (Detail) | Mar. 31, 2021USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | $ 77,122,682 |
Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 77,122,682 |
Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Securities held in Consolidated Funds | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 47,164,927 |
Securities held in Consolidated Funds | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 29,702,152 |
Securities held in Consolidated Funds | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 17,462,775 |
Securities held in Consolidated Funds | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 0 |
Company sponsored investments | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 95,530,265 |
Company sponsored investments | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 95,530,265 |
Company sponsored investments | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | 0 |
Company sponsored investments | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments: | $ 0 |
Fair Value Measurements Textual
Fair Value Measurements Textual (Details) - Securities held in Consolidated Funds - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | $ 47,164,927 | $ 33,233,307 |
Parent | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | 35,000,000 | 23,600,000 |
Redeemable Noncontrolling Interest | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | $ 12,200,000 | $ 9,600,000 |
Line of Credit (Details)
Line of Credit (Details) - The Credit Agreement - Line of Credit | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Line of Credit Facility [Line Items] | |
Maximum borrowing amount | $ 25,000,000 |
Commitment fee rate on unused borrowings | 0.10% |
London Interbank Offered Rate (LIBOR) | |
Line of Credit Facility [Line Items] | |
Line of credit facility, interest rate description | 1.00% |
Compensation Plans - Roll-Forwa
Compensation Plans - Roll-Forward of Outstanding Restricted Stock Grants Issued (Detail) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Shares | |
Outstanding shares, Beginning Balance (shares) | 183,718 |
Outstanding shares, Ending Balance (shares) | 215,352 |
Restricted stock | |
Shares | |
Outstanding shares, Beginning Balance (shares) | 183,718 |
Shares issued (shares) | 52,434 |
Grants vested (shares) | (7,600) |
Grants forfeited (shares) | (13,200) |
Outstanding shares, Ending Balance (shares) | 215,352 |
Weighted-Average Grant Date Price per Share | |
Outstanding, Beginning of Period (usd per share) | $ / shares | $ 173.80 |
Grants issued (usd per share) | $ / shares | 155.64 |
Grants vested (usd per share) | $ / shares | 174.98 |
Grants forfeited (usd per share) | $ / shares | 156.88 |
Outstanding, End of Period (usd per share) | $ / shares | $ 168.34 |
Compensation Plans - Expense Re
Compensation Plans - Expense Recognition of Deferred Compensation (Detail) - Restricted stock | Mar. 31, 2021USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2019 (Remaining Period) | $ 5,926,670 |
2020 | 6,730,500 |
2021 | 4,765,545 |
2022 | 1,719,462 |
2023 | 297,487 |
Thereafter | 1,256 |
Total | $ 19,440,920 |
Compensation Plans - Schedule o
Compensation Plans - Schedule of Grants Issued and Grant Date Fair Value (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Issuance of stock grants | $ 529,806 | $ 3,396,359 |
Shares Issued | ||
Shares issued (shares) | 3,681 | 23,640 |
Grant Date Value | ||
Shares issued (shares) | 3,681 | 23,640 |
Issuance of stock grants | $ 529,806 | $ 3,396,359 |
Compensation Plans - Narrative
Compensation Plans - Narrative (Detail) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Deferred compensation equity | $ (19,440,920) | $ (14,748,118) | |
Fully vested employee elected deferral period | 5 years | ||
Deferred compensation liability | $ 33,369,087 | $ 33,241,952 | |
Proceeds received under employee stock purchase plan | $ 342,528 | $ 0 | |
2014 Equity and Cash Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Common shares available for issuance (in shares) | 181,471 | ||
Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock Purchased During Period, Shares, Employee Stock Purchase Plans | 2,583 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent | 85.00% | ||
Proceeds received under employee stock purchase plan | $ 300,000 | ||
Share-based payment expense | $ 100,000 |
Operating Lease - Narrative (De
Operating Lease - Narrative (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($)ft²location | |
Leases [Abstract] | |
Area of operating lease | ft² | 37,829 |
Number of office space locations | location | 1 |
Operating lease, right-of-use asset | $ 1.9 |
Operating lease, liability | $ 2.4 |
Operating Lease - Summary of To
Operating Lease - Summary of Total Lease and Operating Expenses (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Leases [Abstract] | ||
Lease and operating expenses | $ 209,042 | |
Lease and operating expenses | $ 225,858 |
Operating Lease - Future Minimu
Operating Lease - Future Minimum Lease Payments under Operating Leases (Detail) | Mar. 31, 2021USD ($) |
Leases [Abstract] | |
Remainder of 2019 | $ 468,134 |
2021 | 624,179 |
2022 | 624,179 |
2023 | 624,179 |
2024 | 156,045 |
Total future lease payments due | $ 2,496,716 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Detail) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Unconsolidated effective income tax rate | 26.50% | 28.00% |
Income Taxes - Effective Tax Ra
Income Taxes - Effective Tax Rate Reconciliation (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. federal income tax rate | 21.00% | 21.00% |
State and local income taxes, net of federal benefit | 4.40% | 4.50% |
Internal revenue code section 162 limitations | 1.10% | 2.30% |
Other | 0.00% | 0.20% |
Unconsolidated effective income tax rate | 26.50% | 28.00% |
Impact attributable to redeemable noncontrolling interests(a) | (0.80%) | (58.80%) |
Effective income tax rate | 25.70% | (30.80%) |
Earnings Per Share - Computatio
Earnings Per Share - Computation for Earnings Per Share (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Earnings Per Share [Abstract] | ||
Net Income (Loss) | $ 14,262,613 | $ (2,528,368) |
Less: Net loss (income) attributable to redeemable noncontrolling interest | (554,102) | 4,058,476 |
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 13,708,511 | $ 1,530,108 |
Weighted average shares outstanding | ||
Weighted average number of outstanding shares - Basic (in shares) | 3,156,768 | 3,272,761 |
Weighted average number of outstanding shares - Diluted (in shares) | 3,156,768 | 3,272,761 |
Earnings per share | ||
Basic (USD per share) | $ 4.34 | $ 0.47 |
Diluted (USD per share) | $ 4.34 | $ 0.47 |
Sale of Assets of Diamond Hil_2
Sale of Assets of Diamond Hill's High Yield-Focused Fund (Details) - Disposal Group, Disposed of by Sale, Not Discontinued Operations - Acquired Funds $ in Millions | Feb. 02, 2021USD ($)payment |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Consideration transferred | $ 9 |
Number of additional payments | payment | 2 |
Additional consideration | $ 13 |
Additional consideration, term | 1 year |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ / shares in Units, $ in Millions | Apr. 26, 2021USD ($)$ / shares |
Subsequent Event [Line Items] | |
Dividend per share | $ / shares | $ 1 |
Reduction to stockholders' equity from dividend | $ | $ 3.2 |