Diamond Hill Investment Group Inc. (DHIL) filed Quarterly Report for the period ended 2009-09-30.
Diamond Hill Investment Group Inc. provides investment management services to institutions and financial intermediaries seeking to preserve and build capital. The firm currently manages mutual funds separate accounts and a private investment fund. Diamond Hill Investment Group Inc. has a market cap of $157.1 million; its shares were traded at around $60.27 with a P/E ratio of 37.8 and P/S ratio of 3.3.
Highlight of Business Operations:
The Company generated net income of $3,203,918 ($1.23 per diluted share) for the three months ended September 30, 2009, compared with net income of $1,224,391 ($0.50 per diluted share) for the three months ended September 30, 2008. Net income increased 162% due primarily to a positive return on the Company’s corporate investment portfolio of $2.1 million for the three months ended September 30, 2009 compared to a negative return on the Company’s corporate investment portfolio of $2.3 million for the three months ended September 30, 2008. Excluding the corporate investment return, net operating income after tax decreased $859 thousand, or 32%, for the period primarily due to a shift in composition of AUM from long-short strategies, which typically have a higher fee, to long-only strategies.
Compensation and Related Costs. Compensation expense decreased by $382 thousand, or 5%, during the three months ended September 30, 2009 over the same period a year ago. This reflects a decrease of $598 thousand in restricted stock expense due to an overall decrease in the total amount of long-term equity awards outstanding in 2009 compared to 2008 offset by an increase in base salaries and related benefits of $216 thousand due to increased employee headcount. Incentive compensation for third quarter 2009 remained flat compared to third quarter 2008.
Mutual Fund Administration. Mutual fund administration expense decreased by $49 thousand, or 7%, period over period. The majority of mutual fund administration fees are variable based on the amount of mutual fund AUM. Despite an overall decrease in mutual fund AUM of $547 thousand, or 14%, during the quarter ended September 30, 2009 compared to September 30, 2008, mutual fund administration expenses decreased only 7% due to a fee increase by the sub-administrator and timing differences of certain other administration expenses.
The Company generated net income of $7,871,645 ($3.05 per diluted share) for the nine months ended September 30, 2009, compared with net income of $4,989,453 ($2.08 per diluted share) for the nine months ended September 30, 2008. Net income increased 58% despite a 1% decrease in AUM primarily due to a positive return on the Company’s corporate investment portfolio of $4.5 million for the nine months ended September 30, 2009, offset by a loss from Beacon Hill of $822 thousand for the nine months ended September 30, 2009, compared to a negative return in the corporate investment portfolio of $4.0 million for the nine months ended September 30, 2008 and a loss from Beacon Hill of $1.0 million for the nine months ended September 30, 2008. Excluding the corporate investment return, net operating income after tax decreased $2.7 million, or 35%, for the period primarily due to an average decline in AUM of 13% decline in the first half of 2009 and a shift in composition of AUM from long-short strategies, which typically have a higher fee, to long-only strategies.
Compensation and Related Costs. Employee compensation and benefits decreased by $2.3 million, or 12%, during the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, reflecting increases in employee headcount, base salaries and related benefits offset by a lower incentive compensation accrual. Base salaries and related benefits increased by $925 thousand, or 15%, reflecting an increase in staffing from 56 to 63 employees offset by a decrease in restricted stock expense of $1 million, or 46%, due to an overall decrease in the total amount of long-term equity awards outstanding in 2009 compared to 2008. Incentive compensation decreased by $2.5 million, or 36%, reflecting a decrease in both revenue and operating income in the current fiscal year.
Mutual Fund Administration. Mutual fund administration expense increased by $64 thousand, or 4%. The majority of mutual fund administration fees are variable based on the amount of mutual fund AUM. Despite the decrease in mutual fund AUM by $547 thousand, or 14%, during the nine months ended September 30, 2009 compared to nine months ended September 30, 2008, mutual fund administration expenses increased related to a fee increase by the sub-administrator and timing difference of certain other administration expenses.
DHIL is in the portfolios of John Keeley of Keeley Fund Management.
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