Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 05, 2021 | |
Document Information [Line Items] | ||
Entity Registrant Name | PZENA INVESTMENT MANAGEMENT, INC. | |
Entity Central Index Key | 0001399249 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Title of 12(b) Security | Class A common stock, par value $0.01 per share | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | PZN | |
Security Exchange Name | NYSE | |
Entity File Number | 001-33761 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 20-8999751 | |
Entity Address, Address Line One | 320 Park Avenue | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10022 | |
City Area Code | 212 | |
Local Phone Number | 355-1600 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Amendment Flag | false | |
Common Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 17,089,896 | |
Common Class B | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 55,477,623 |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | |
ASSETS | |||
Cash and Cash Equivalents ($2,050 and $2,201) | [1] | $ 29,650 | $ 65,534 |
Restricted Cash | 1,054 | 1,050 | |
Due from Broker ($25 and $0) | [1] | 268 | 87 |
Advisory Fees Receivable | 40,798 | 36,524 | |
Investments ($5,646 and $1,131) | [1] | 41,419 | 34,104 |
Receivable from Related Parties | 3,727 | 2,880 | |
Other Receivables ($15 and $8) | [1] | 151 | 154 |
Prepaid Expenses and Other Assets | 2,185 | 2,569 | |
Right-of-use Assets | 10,989 | 11,578 | |
Deferred Tax Asset | 27,825 | 29,831 | |
Property and Equipment, Net of Accumulated Depreciation of $6,203 and $5,980, respectively | 4,092 | 4,376 | |
TOTAL ASSETS | 162,158 | 188,687 | |
Liabilities: | |||
Accounts Payable and Accrued Expenses ($30 and $28) | [1] | 19,111 | 36,317 |
Due to Broker ($0 and $2) | [1] | 0 | 56 |
Securities Sold Short, at Fair Value | 743 | 714 | |
Liability to Selling and Converting Shareholders | 25,701 | 25,701 | |
Lease Liabilities | 11,304 | 11,905 | |
Deferred Compensation Liability | 1,644 | 5,039 | |
TOTAL LIABILITIES | 58,503 | 79,732 | |
Commitments and Contingencies (see Note 12) | |||
Equity: | |||
Preferred Stock (Par Value $0.01; 200,000,000 Shares Authorized; None Outstanding) | |||
Additional Paid-In Capital | 5,042 | 5,190 | |
Retained Earnings | 25,496 | 25,611 | |
Accumulated Other Comprehensive Income | 127 | 132 | |
Total Pzena Investment Management, Inc.'s Equity | 30,835 | 31,106 | |
Non-Controlling Interests | 72,820 | 77,849 | |
TOTAL EQUITY | 103,655 | 108,955 | |
TOTAL LIABILITIES AND EQUITY | 162,158 | 188,687 | |
Common Class A | |||
Equity: | |||
Common Stock | 170 | 173 | |
TOTAL EQUITY | 170 | 173 | |
Common Class B | |||
Equity: | |||
Common Stock | $ 0 | $ 0 | |
[1] | Asset and liability amounts in parentheses represent the aggregated balances at March 31, 2021 and December 31, 2020 attributable to Pzena Investment Management Special Situations, LLC, Pzena U.S. Best Ideas (GP), LLC, Pzena Global Best Ideas (GP), LLC, and Pzena Global Focus Value Fund which were variable interest entities as of March 31, 2021 and December 31, 2020, respectively. |
CONSOLIDATED STATEMENTS OF FI_2
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | |
ASSETS | |||
Cash | [1] | $ 29,650 | $ 65,534 |
Due from Broker | [1] | 268 | 87 |
Investments | [1] | 41,419 | 34,104 |
Other Receivables | [1] | 151 | 154 |
Property and equipment, accumulated depreciation | 6,203 | 5,980 | |
LIABILITIES AND EQUITY | |||
Accounts Payable and Accrued Expenses | [1] | 19,111 | 36,317 |
Due to Broker | [1] | $ 0 | $ 56 |
Equity: | |||
Preferred Stock, Par Value (in dollars per share) | $ 0.01 | $ 0.01 | |
Preferred Stock, Shares Authorized (in shares) | 200,000,000 | 200,000,000 | |
Preferred Stock, Shares Outstanding (in shares) | 0 | 0 | |
Common Class A | |||
Equity: | |||
Common Stock, Par Value (in dollars per share) | $ 0.01 | $ 0.01 | |
Common Stock, Shares Authorized (in shares) | 750,000,000 | 750,000,000 | |
Common Stock, Shares Issued (in shares) | 17,092,573 | 17,328,899 | |
Common Stock, Shares Outstanding (in shares) | 17,092,573 | 17,328,899 | |
Common Class B | |||
Equity: | |||
Common Stock, Par Value (in dollars per share) | $ 0.000001 | $ 0.000001 | |
Common Stock, Shares Authorized (in shares) | 750,000,000 | 750,000,000 | |
Common Stock, Shares Issued (in shares) | 55,447,723 | 54,313,620 | |
Common Stock, Shares Outstanding (in shares) | 55,447,723 | 54,313,620 | |
Variable Interest Entity, Primary Beneficiary | |||
ASSETS | |||
Cash | $ 2,050 | $ 2,201 | |
Due from Broker | 25 | 0 | |
Investments | 5,646 | 1,131 | |
Other Receivables | 15 | 8 | |
LIABILITIES AND EQUITY | |||
Accounts Payable and Accrued Expenses | 30 | 28 | |
Due to Broker | $ 0 | $ 2 | |
[1] | Asset and liability amounts in parentheses represent the aggregated balances at March 31, 2021 and December 31, 2020 attributable to Pzena Investment Management Special Situations, LLC, Pzena U.S. Best Ideas (GP), LLC, Pzena Global Best Ideas (GP), LLC, and Pzena Global Focus Value Fund which were variable interest entities as of March 31, 2021 and December 31, 2020, respectively. |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | ||
Income Statement [Abstract] | |||
REVENUE | $ 45,871 | $ 34,679 | |
EXPENSES | |||
Compensation and Benefits Expense | 19,135 | 19,140 | |
General and Administrative Expense | 3,696 | 4,422 | |
Total Operating Expenses | 22,831 | 23,562 | |
Operating Income | 23,040 | 11,117 | |
OTHER INCOME | |||
Interest Income | 55 | 159 | |
Dividend Income | 142 | 81 | |
Net Realized and Unrealized Gains/ (Losses) from Investments | 2,563 | (5,247) | |
Equity in Earnings/ (Losses) of Affiliates | 1,537 | (4,262) | |
Other Income/ (Expense) | 58 | (87) | |
Total Other Income/ (Expense) | 4,355 | (9,356) | |
Income Before Income Taxes | 27,395 | 1,761 | |
Income Tax Expense | 2,366 | 992 | |
Net Income | 25,029 | 769 | |
Less: Net Income Attributable to Non-Controlling Interests | 20,842 | $ 769 | |
Net Income Attributable to Pzena Investment Management, Inc. | 4,187 | ||
Supplemental Income Statement Elements [Abstract] | |||
Net Income for Basic Earnings per Share | $ 4,187 | ||
Basic Earnings per Share | $ 0.24 | ||
Basic Weighted Average Shares Outstanding | [1] | 17,240,412 | 17,790,184 |
Net Income for Diluted Earnings per Share | $ 19,731 | $ 760 | |
Diluted Earnings per Share | $ 0.24 | ||
Diluted Weighted Average Shares Outstanding | [1] | 83,451,997 | 79,583,147 |
Cash Dividends per Share of Class A Common Stock | $ 0.25 | $ 0.46 | |
[1] | The Company issues restricted shares of Class A common stock and restricted Class B units that have non-forfeitable dividend rights. Under the "two-class method," these shares and units are considered participating securities and are required to be included in the computation of basic and diluted earnings per share. |
UNAUDITED CONSOLIDATED STATEM_2
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
NET INCOME | $ 25,029 | $ 769 |
OTHER COMPREHENSIVE GAIN | ||
Foreign Currency Translation Adjustment | (12) | (505) |
Total Other Comprehensive Gain/ (Loss) | (12) | (505) |
Comprehensive Income | 25,017 | 264 |
Less: Comprehensive Income Attributable to Non-Controlling Interests | 20,835 | 142 |
Total Comprehensive Income Attributable to Pzena Investment Management, Inc. | $ 4,182 | $ 122 |
UNAUDITED CONSOLIDATED STATEM_3
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - USD ($) $ in Thousands | Total | Common Class A | Common Class B | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Non-Controlling Interests |
Beginning Balance at Dec. 31, 2019 | $ 108,210 | $ 179 | $ 4,829 | $ (3) | $ 26,439 | $ 76,766 | |
Beginning Balance (in shares) at Dec. 31, 2019 | 18,009,350 | 52,879,323 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Amortization of Non-Cash Compensation | 2,052 | 479 | 1,573 | ||||
Amortization of Non-Cash Compensation (in shares) | 10,000 | 321,949 | |||||
Issuance of Shares under Equity Incentive Plan | 3,842 | 890 | 2,952 | ||||
Issuance of Shares under Equity Incentive Plan (in shares) | 637,349 | ||||||
Sale of Shares under Equity Incentive Plan | 1,902 | 436 | 1,466 | ||||
Sale of Shares under Equity Incentive Plan (in shares) | 430,955 | ||||||
Directors' Share Grants | 331 | 76 | 255 | ||||
Net Income | 769 | 769 | |||||
Foreign Currency Translation Adjustments | (505) | 122 | (627) | ||||
Repurchase and Retirement of Class A Common Stock | (5,648) | $ (8) | (1,283) | (4,357) | |||
Repurchase and Retirement Shares/Units (in shares) | (823,792) | (94,830) | |||||
Repurchase and Retirement of Class B Units | (565) | (131) | (434) | ||||
Class A Cash Dividends Declared and Paid | (8,172) | (8,172) | |||||
Tax Impact of Transactions with Non-Controlling Shareholders | (717) | (717) | |||||
Effect of Deconsolidation | (1,685) | (1,685) | |||||
Contributions from Non-Controlling Interests | 641 | 641 | |||||
Distributions to Non-Controlling Interests | (33,327) | (33,327) | |||||
Other | (1,224) | 1,224 | |||||
Ending Balance at Mar. 31, 2020 | 67,128 | $ 171 | 3,355 | 119 | 18,267 | 45,216 | |
Ending Balance (in shares) at Mar. 31, 2020 | 17,195,558 | 54,174,746 | |||||
Beginning Balance at Dec. 31, 2020 | 108,955 | $ 173 | 5,190 | 132 | 25,611 | 77,849 | |
Beginning Balance (in shares) at Dec. 31, 2020 | 17,328,899 | 54,313,620 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Amortization of Non-Cash Compensation | 2,145 | 462 | 1,683 | ||||
Amortization of Non-Cash Compensation (in shares) | 14,201 | 320,495 | |||||
Issuance of Shares under Equity Incentive Plan | 3,822 | 872 | 2,950 | ||||
Issuance of Shares under Equity Incentive Plan (in shares) | 12,353 | 805,987 | |||||
Sale of Shares under Equity Incentive Plan | 167 | 36 | 131 | ||||
Sale of Shares under Equity Incentive Plan (in shares) | 26,097 | ||||||
Directors' Share Grants | 247 | 53 | 194 | ||||
Directors' Share Grants (in shares) | 12,338 | ||||||
Net Income | 25,029 | 4,187 | 20,842 | ||||
Foreign Currency Translation Adjustments | (12) | (5) | (7) | ||||
Repurchase and Retirement of Class A Common Stock | (2,390) | $ (3) | (516) | (1,871) | |||
Repurchase and Retirement Shares/Units (in shares) | (275,218) | (18,476) | |||||
Repurchase and Retirement of Class B Units | (90) | (20) | (70) | ||||
Class A Cash Dividends Declared and Paid | (4,302) | (4,302) | |||||
Tax Impact of Transactions with Non-Controlling Shareholders | (494) | (494) | |||||
Contributions from Non-Controlling Interests | 303 | 303 | |||||
Distributions to Non-Controlling Interests | (29,725) | (29,725) | |||||
Other | (541) | 541 | |||||
Ending Balance at Mar. 31, 2021 | $ 103,655 | $ 170 | $ 5,042 | $ 127 | $ 25,496 | $ 72,820 | |
Ending Balance (in shares) at Mar. 31, 2021 | 17,092,573 | 55,447,723 |
UNAUDITED CONSOLIDATED STATEM_4
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Statement Of Stockholders Equity [Abstract] | ||
Class A Cash Dividends Declared and Paid (in USD per share) | $ 0.25 | $ 0.46 |
UNAUDITED CONSOLIDATED STATEM_5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
OPERATING ACTIVITIES | ||
Net Income | $ 25,029 | $ 769 |
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: | ||
Depreciation | 296 | 306 |
Non-Cash Compensation | 3,789 | 2,890 |
Directors' Share Grants | 247 | 331 |
Net Realized and Unrealized (Gains)/ Losses from Investments | (2,563) | 5,247 |
Equity in (Earnings)/ Losses of Affiliates | (1,537) | 4,262 |
Noncash Lease Expense | 589 | 596 |
Foreign Currency Translation Adjustments | (12) | (505) |
Deferred Income Taxes | 1,513 | 360 |
Changes in Operating Assets and Liabilities: | ||
Advisory Fees Receivable | (4,274) | 3,646 |
Due from Broker | (181) | 19 |
Prepaid Expenses and Other Assets | 387 | (175) |
Due to Broker | (56) | (34) |
Accounts Payable, Accrued Expenses, and Other Liabilities | (18,424) | (23,267) |
Lease Liabilities | (601) | (608) |
Purchases of Equity Securities | (10,892) | (9,479) |
Proceeds from Equity Securities | 10,792 | 5,759 |
Net Cash Provided by/ (Used in) Operating Activities | 4,102 | (9,883) |
INVESTING ACTIVITIES | ||
Purchases of Investments | (5,790) | (21,590) |
Proceeds from Sale of Investments | 2,704 | 45,735 |
Payments from/ (to) Related Parties | (847) | (886) |
Purchases of Property and Equipment | (12) | (33) |
Net Cash Provided by/ (Used in) Investing Activities | (3,945) | 23,226 |
FINANCING ACTIVITIES | ||
Repurchase and Retirement of Class A Common Stock | (2,390) | (5,648) |
Repurchase and Retirement of Class B Units | (90) | (565) |
Sale of Shares under Equity Incentive Plan | 167 | 1,902 |
Distributions to Non-Controlling Interests | (29,725) | (33,327) |
Contributions from Non-Controlling Interests | 303 | 641 |
Dividends | (4,302) | (8,172) |
Net Cash Provided by/ (Used in) Financing Activities | (36,037) | (45,169) |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (35,880) | (31,826) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - Beginning of Period | 66,584 | 53,516 |
Effect of (Deconsolidation)/ Consolidation of Affiliates | (123) | |
Net Change in Cash, Cash Equivalents and Restricted Cash | (35,880) | (31,826) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - End of Period | 30,704 | 21,567 |
Supplementary Cash Flow Information: | ||
Issuances of Shares under Equity Incentive Plan | 3,822 | 3,842 |
Income Taxes Paid | $ 121 | $ 98 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization | Note 1—Organization Pzena Investment Management, Inc. (the “Company”) is the sole managing member of its operating company, Pzena Investment Management, LLC (the “operating company”). As a result, the Company: (i) consolidates the financial results of the operating company and reflects the membership interests in the operating company that it does not own as a non-controlling interest in its consolidated financial statements; and (ii) recognizes income generated from its economic interest in the operating company’s net income. The operating company is an investment adviser registered under the Investment Advisers Act of 1940 and is headquartered in New York, New York. As of March 31, 2021, the operating company managed assets in a variety of value-oriented investment strategies across a wide range of market capitalizations in both U.S. and non-U.S. capital markets. The Company also serves as the general partner of Pzena Investment Management, LP, a partnership formed with the objective of aggregating employee ownership in the operating company into one entity. The Company, through its interest in the operating company, has consolidated the results of operations and financial condition of the following entities as of March 31, 2021: Ownership at Legal Entity Type of Entity (Date of Formation) March 31, 2021 Pzena Investment Management, Pty Australian Proprietary Limited Company (12/16/2009) 100.0% Pzena Financial Services, LLC Delaware Limited Liability Company (10/15/2013) 100.0% Pzena Investment Management, LTD England and Wales Private Limited Company (01/08/2015) 100.0% Pzena U.S. Best Ideas (GP), LLC Delaware Limited Liability Company (11/16/2017) 100.0% Pzena Global Best Ideas (GP), LLC Delaware Limited Liability Company (2/15/2018) 100.0% Pzena Investment Management International 2, LLC Delaware Limited Liability Company (1/21/2020) 100.0% Pzena Investment Management Special Situations, LLC Delaware Limited Liability Company (12/01/2010) 99.9% Pzena Global Focused Value Fund Australian Registered Investment Scheme (6/10/2016) 98.7% Pzena International Small Cap Value Fund, a series of Advisors Series Trust Open-end Management Investment Company, series of Delaware Statutory Trust (6/28/2018) 58.1% |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2—Significant Accounting Policies Basis of Presentation: The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and related Securities and Exchange Commission (“SEC”) rules and regulations. Principles of Consolidation: The Company’s policy is to consolidate those entities in which it has a direct or indirect controlling financial interest based on either the voting interest model or the variable interest model. As such, the Company consolidates majority-owned subsidiaries in which it has a controlling financial interest, and certain investment vehicles the operating company sponsors for which it is the investment adviser that are considered to be variable-interest entities (“VIEs”), and for which the Company is deemed to be the primary beneficiary. Pursuant to the Consolidation Topic of the FASB Accounting Standards Codification (“FASB ASC”), for legal entities evaluated for consolidation, the Company determines whether interests it holds and fees paid to the entity qualify as a variable interest. If it is determined that the Company does not have a variable interest in the entity, no further analysis is required and the Company does not consolidate the entity. If it is determined that the Company has a variable interest, it considers its direct interests and the proportionate indirect interests through related parties to determine if it is the primary beneficiary of the VIE. For equity investments where the Company does not control the investee, and where it is not the primary beneficiary of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operating policies of the investee requires significant judgment based on the facts and circumstances surrounding each investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms of the investment agreement, or other agreements with the investee. The Company analyzes entities structured as series funds which comply with the requirements included in the Investment Company Act of 1940 for registered mutual funds as voting interest entities because the shareholders are deemed to have the ability to direct the activities of the fund that most significantly impact the fund's economic performance. Consolidated Entities The Company consolidates the financial results of the operating company and records in its own equity its pro-rata share of transactions that impact the operating company’s net equity, including unit and option issuances, repurchases, and retirements. The operating company’s pro-rata share of such transactions are recorded as an adjustment to additional paid-in capital or non-controlling interests, as applicable, on the consolidated statements of financial condition. The majority-owned subsidiaries in which the Company, through its interest in the operating company, has a controlling financial interest and the VIEs for which the Company is deemed to be the primary beneficiary are collectively referred to as “consolidated subsidiaries.” Non-controlling interests recorded on the consolidated financial statements of the Company include the non-controlling interests of the outside investors in each of these entities, as well as those of the operating company. All significant inter-company transactions and balances have been eliminated through consolidation. On January 1, 2020, the Company redeemed its investment in the Pzena International Value Service (a series of Pzena Investment Management International, LLC). As the Company was no longer deemed the primary beneficiary of this entity, it deconsolidated the entity and removed the related assets, liabilities and non-controlling interest from the Company’s Consolidated Statements of Financial Condition. During 2020, the Company provided the initial cash investment for a Pzena-branded Australian Registered Investment Scheme, Pzena Global Focused Value Fund, in an effort to generate an investment performance track record to attract third-party investors. The Company is considered the primary beneficiary of this entity. At March 31, 2021, Pzena Global Focused Value Fund’s $4.1 million in net assets were included in the Company’s Consolidated Statements of Financial Condition. These consolidated investment partnerships are investment companies and apply specialized industry accounting for investment companies. The Company has retained this specialized accounting for these investment partnerships pursuant to U.S. GAAP. Non-Consolidated Variable Interest Entities VIEs that are not consolidated receive investment management services from the operating company and are generally private investment partnerships sponsored by the operating company. The total net assets of these VIEs was approximately $308.9 million and $265.9 million at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the operating company had $4.0 million and $3.2 million in investments in certain of these firm-sponsored vehicles, the majority of which are primarily held to satisfy certain of the Company’s obligations under its deferred compensation programs, for which the Company was not deemed to be the primary beneficiary. The Company's exposure to risk of loss in the non-consolidated VIEs is generally limited to any equity investment and any uncollected management fees. As of March 31, 2021 and December 31, 2020, the Company's maximum exposure to loss as a result of its involvement with the non-consolidated VIEs was $4.2 million and $3.6 million, respectively. Accounting Pronouncements Adopted in 2021: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. We adopted this standard prospectively on January 1, 2021. The adoption of this standard did not have a material impact on our financial condition or results of operations. Management’s Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the period. Actual results could materially differ from those estimates. Revenue Recognition: Revenue, comprised of advisory fee income, is recognized over the period in which advisory services are provided. Advisory fee income includes management fees that are calculated based on percentages of assets under management (“AUM”), generally billed quarterly, either in arrears or advance, depending on the applicable contractual terms. Advisory fee income also includes performance fees that may be earned by the Company depending on the investment return of the AUM, as well as fulcrum fee arrangements. Performance fee arrangements generally entitle the Company to participate, on a fixed-percentage basis, in any returns generated in excess of an agreed-upon benchmark. The Company’s participation percentage in such return differentials is then multiplied by AUM to determine the performance fees earned. In general, returns are calculated on an annualized basis over the contract’s measurement period, which usually extends to three years. Performance fees are generally payable annually or quarterly. Fulcrum fee arrangements require a reduction in the base fee or allow for an increase in the base fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period, which extends to three years. Fulcrum fees are generally payable quarterly. Following the Revenue Recognition Topic Revenue from advisory fees is disaggregated into categories based on the composition of the Company's client base and advisory fee structure for the three months ended March 31, 2021 and 2020: For the Three Months Ended March 31, Revenue 2021 2020 (in thousands) Separately Managed Accounts Asset-Based Fees $ 24,547 $ 18,696 Total Separately Managed Fees 24,547 18,696 Sub-Advised Accounts Asset-Based Fees $ 17,623 $ 13,723 Impact of Fulcrum Fees 1 (995 ) (1,014 ) Performance-Based Fees — — Total Sub-Advised Fees 16,628 12,709 Pzena Funds Asset-Based Fees $ 4,951 $ 3,600 Expense Cap Reimbursements (255 ) (326 ) Performance-Based Fees — — Total Pzena Funds Fees 4,696 3,274 Total $ 45,871 $ 34,679 1 Represents the net impact of fulcrum fee arrangements which require a reduction in the base fee or allow for an increase in the base fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period. Cash and Cash Equivalents: At March 31, 2021 and December 31, 2020, Cash and Cash Equivalents was $29.7 million and $65.5 million, respectively. The Company considers all money market funds and highly-liquid debt instruments with an original maturity of three months or less at the time of purchase to be cash equivalents. The Company maintains its cash in bank deposits, other accounts whose balances often exceed federally insured limits and treasury money market funds. Cash is stated at cost, which approximates fair value. Interest on cash and cash equivalents is recorded as Interest Income on an accrual basis in the consolidated statements of operations. Restricted Cash: At both March 31, 2021 and December 31, 2020, the Company had $1.1 million of compensating balances recorded in Restricted Cash in the consolidated statements of financial condition. These balances reflect a letter of credit issued by a third party in lieu of a cash security deposit, as required by the Company’s lease for its corporate headquarters. The following table reconciles cash, cash equivalents, and restricted cash per the consolidated statements of cash flows to the consolidated statements of financial condition. March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2019 (in thousands) Cash and Cash Equivalents $ 29,650 $ 65,534 $ 20,527 $ 52,480 Restricted Cash 1,054 1,050 1,040 1,036 Total $ 30,704 $ 66,584 $ 21,567 $ 53,516 Due to/from Broker: Due to/from Broker consists primarily of amounts payable/receivable for unsettled securities transactions held/initiated at the clearing brokers of the Company and its consolidated subsidiaries. Non-Cash Compensation: All non-cash compensation awards granted have varying vesting schedules and are issued at prices equal to the assessed fair market value at the time of issuance. Expenses associated with these awards are recognized over the period during which employees are required to provide service. The Company accounts for forfeitures as they occur. Investments: Investments, at Fair Value Investments, at Fair Value consist of equity securities at fair value held by the Company and its consolidated subsidiaries, as well as investments in open-ended registered mutual funds. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination on an ongoing basis. Dividends and interest income associated with the Company's investments and the investments of the Company's consolidated subsidiaries are recognized as Dividend Income on an ex-dividend basis and Interest Income, respectively, in the consolidated statements of operations. Securities Sold Short represents securities sold short at fair value, not yet purchased by the Company. Dividend expense associated with these investments is recognized in Other Income/ (Expense) on an ex-dividend basis in the consolidated statements of operations. All such investments are recorded at fair value, with net realized and unrealized gains and losses recognized as a component of Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. Investments in equity method investees The Company accounts for its investments in certain private investment partnerships in which the Company has non-controlling interests and exercises significant influence, using the equity method. These investments are included in Investments in the Company's consolidated statements of financial condition. The carrying value of these investments is recorded at the amount of capital reported by the private investment partnership or mutual fund. The capital account for each entity reflects any contributions paid to, distributions received from, and equity earnings of, the relevant entity. The earnings of these investments are recognized as Equity in Earnings/ (Losses) of Affiliates in the consolidated statements of operations. Investments in equity method investees are evaluated for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amounts of impairment losses, if any. During the three months ended March 31, 2021 and 2020, no impairment losses were recognized. Securities Valuation: Investments in equity securities and securities sold short for which market quotations are available are valued at the last reported price or closing price on the primary market or exchange on which they trade. If no reported equity sales occurred on the valuation date, equity investments are valued at the bid price. Investments in registered mutual funds are carried at fair value at their respective net asset values as of the valuation date. Otherwise, fair values for investment securities are based on Level 2 or Level 3 inputs detailed in Note 9. The net realized gain or loss on sales of equity securities and securities sold short is determined on a specific identification basis and is included in Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, amounts due from brokers, and advisory fees receivable. The Company maintains its cash in bank deposits and other accounts whose balances often exceed federally insured limits. The concentration of credit risk with respect to advisory fees receivable is generally limited due to the short payment terms extended to clients by the Company. On a periodic basis, the Company evaluates its advisory fees receivable and establishes an allowance for doubtful accounts, if necessary, based on a history of past write-offs, collections, and current credit conditions. At both March 31, 2021 and December 31, 2020, there was no allowance for doubtful accounts. Property and Equipment: Property and equipment is carried at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of the respective assets, except for leasehold improvements, which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvements or the remaining lease term. Leases: The Company determines if an arrangement is a lease at inception. Operating leases are included as a component of Right-of-use (“ROU”) Assets and Lease Liabilities on the consolidated statements of financial condition. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The lease terms may include options to extend or terminate the lease. These options to extend or terminate are assessed on a lease-by-lease basis, and the ROU assets and lease liabilities are adjusted when it is reasonably certain that an option will be exercised. If a lease arrangement does not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease expense associated with leases that have a term of 12 months or less as of the commencement date are recognized as a component of general and administrative expenses on a straight-line basis over the lease term. Share Repurchases: Share repurchases may be made from time-to-time in open market transactions or through privately negotiated transactions under the authorization approved by the Board of Directors. The Company charges the entire excess of cost over par to additional paid-in capital. If the Company’s additional paid-in capital balance is reduced to zero, any additional amounts are recognized in retained earnings. Business Segments: The Company views its operations as comprising one operating segment. Income Taxes: The Company is organized as a “C” corporation under the Internal Revenue Code, and thus liable for federal, state, and local taxes on the income derived from its economic interest in its operating company. The operating company is a limited liability company that has elected to be treated as a partnership for tax purposes. It has not made a provision for federal or state income taxes because it is the individual responsibility of each of the operating company’s members (including the Company) to separately report their proportionate share of the operating company’s taxable income or loss. The operating company has made a provision for New York City Unincorporated Business Tax (“UBT”) and its consolidated subsidiary Pzena Investment Management, LTD has made a provision for U.K. income taxes. The effective tax rate for interim periods represents the Company’s best estimate of the effective tax rate expected to be applied to the full fiscal year, adjusted for discrete items recognized during the quarter. Judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are in accordance with applicable tax laws. The Company adjusts these liabilities in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation or the change of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate. It is also the Company’s policy to recognize accrued interest, and penalties associated with uncertain tax positions in Income Tax Expense on the consolidated statements of operations. The Company and its consolidated subsidiaries account for all U.S. federal, state, local, and U.K. taxation pursuant to the asset and liability method, which requires deferred income tax assets and liabilities to be recorded for temporary differences between the carrying amount and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. At both March 31, 2021 and December 31, 2020, the Company did not have a valuation allowance recorded against its deferred tax assets. The income tax expense, or benefit, is the tax payable or refundable for the period, plus or minus the change during the period in deferred tax assets and liabilities. The Company records its deferred tax liabilities as a component of other liabilities in the consolidated statements of financial condition. All excess tax benefits or tax deficiencies related to stock- and unit-transactions are reflected in the consolidated statements of operations as a component of the provision for income taxes. Tax Receivable Agreement: The Company’s purchase of membership units of the operating company concurrent with its initial public offering, and the subsequent and future exchanges by holders of Class B units of the operating company for shares of the Company’s Class A common stock (pursuant to the exchange rights provided for in the operating company’s operating agreement), have resulted in, and are expected to continue to result in, increases in the Company’s share of the tax basis of the tangible and intangible assets of the operating company, which will increase the tax depreciation and amortization deductions that otherwise would not have been available to the Company. These increases in tax basis and tax depreciation and amortization are each deductible for tax purposes over a period of 15 years and have reduced, and are expected to continue to reduce, the amount of cash taxes that the Company would otherwise be required to pay in the future. The Company has entered into a tax receivable agreement with past, current, and future members of the operating company that requires the Company to pay to any member involved in any exchange transaction 85% of the amount of cash tax savings, if any, in U.S. federal, state and local income tax or foreign or franchise tax that it realizes as a result of these increases in tax basis and, in limited cases, transfers or prior increases in tax basis. The Company expects to benefit from the remaining 15% of cash tax savings, if any, in income tax it realizes. Payments under the tax receivable agreement will be based on the tax reporting positions that the Company will determine. The Company will not be reimbursed for any payments previously made under the tax receivable agreement if a tax basis increase is successfully challenged by the Internal Revenue Service. The Company records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the exchange. The Company records 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to the liability due under the tax receivable agreement, which is reflected as the liability to selling and converting shareholders in the accompanying consolidated financial statements. The remaining 15% of the estimated realizable tax benefit is initially recorded as an increase to the Company’s additional paid-in capital. All of the effects to the deferred tax asset of changes in any of the estimates after the tax year of the exchange will be reflected in the provision for income taxes. Similarly, the effect of subsequent changes in the enacted tax rates will be reflected in the provision for income taxes. If the Company exercises its right to terminate the tax receivable agreement early, the Company will be obligated to make an early termination payment to the selling and converting shareholders, based upon the net present value (based upon certain assumptions and deemed events set forth in the tax receivable agreement) of all payments that would be required to be paid by the Company under the tax receivable agreement. If certain change of control events were to occur, the Company would be obligated to make an early termination payment. Foreign Currency: The functional and reporting currency of the Company is the U.S. Dollar. Assets and liabilities of foreign operations whose functional currency is not the U.S. Dollar are translated at the exchange rate in effect at the applicable reporting date, and the consolidated statements of operations are translated at the average exchange rates in effect during the applicable period. A charge or credit is recorded to other comprehensive income to reflect the translation of these amounts to the extent the non-U.S. currency is designated the functional currency of the subsidiary. Non-functional currency related transaction gains and losses are immediately recorded in other income on the consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the Company recorded less than $0.1 million and $0.5 million, respectively, of other comprehensive loss associated with foreign currency translation adjustments. Investment securities and other assets and liabilities denominated in foreign currencies are remeasured into U.S. Dollar amounts at the date of valuation. Purchases and sales of investment securities, and income and expense items denominated in foreign currencies, are remeasured into U.S. Dollar amounts on the respective dates of such transactions. The Company does not isolate the portion of the results of its operations resulting from the impact of fluctuations in foreign exchange rates on its non-U.S. investments. Such fluctuations are included in Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, foreign withholding taxes, and other receivables and payables recorded on the Company’s consolidated statements of financial condition and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities resulting from changes in exchange rates. |
Compensation and Benefits
Compensation and Benefits | 3 Months Ended |
Mar. 31, 2021 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Compensation and Benefits | Note 3—Compensation and Benefits Compensation and benefits expense to employees and members is comprised of the following: For the Three Months Ended March 31, 2021 2020 (in thousands) Cash Compensation and Other Benefits $ 15,346 $ 16,250 Non-Cash Compensation 3,789 2,890 Total Compensation and Benefits Expense $ 19,135 $ 19,140 All non-cash compensation awards granted have varying vesting schedules and are issued at prices equal to the assessed fair market value at the time of issuance, as discussed below. Details of non-cash compensation awards granted during the three months ended March 31, 2021 and 2020 are as follows: For the Three Months Ended March 31, 2021 2020 Amount Fair Value 1 Amount Fair Value 1 Class B-1 Units 2 1,438,767 $ 2.40 2,092,879 $ 3.98 Options to Purchase Shares of Class A Common Stock 3 — $ — 146,804 $ 2.03 Restricted Shares of Class A Common Stock 4 — $ — 16,806 $ 4.74 1 Represents the weighted average grant date estimated fair value per share, unit, or option as of March 31, 2021 and 2020. 2 Represents Class B-1 units issued under the 2007 Equity Incentive Plan (as defined below). These Class B-1 units are entitled to receive dividends for the duration of the holder’s employment, and upon the end of employment are exchanged for shares of Class A common stock in an amount based upon the appreciation in price of the Class A common stock from the date of grant to the date of exchange. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the cancellation of 166,804 Class B-1 Units 3 Represents options to purchase shares of Class A common stock issued under the 2007 Equity Incentive Plan. These options become exercisable five years from the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 146,804 options to purchase shares of Class A common stock 4 Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. These shares vest ratably over a period of four years from the date of grant. These shares are restricted and may not be sold until the seventh anniversary of the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 16,806 restricted shares of Class A common stock As part of the Company's year-end bonus structure, certain employee members may elect to have all or part of year-end cash compensation paid in the form of cash, or equity issued pursuant to Pzena Investment Management, LLC Amended and Restated 2006 Equity Incentive Plan (“the 2006 Equity Incentive Plan”). For the year ended December 31, 2020, $3.8 million of cash compensation was elected to be paid in the form of equity, which was issued and vested immediately on January 1, 2021. Details of these awards issued on January 1, 2021 are as follows: January 1, 2021 Amount Fair Value 1 Delayed Exchange Class B Units 2 805,987 $ 4.67 Restricted Shares of Class A Common Stock 3 12,353 $ 4.67 1 Represents the weighted average grant date estimated fair value per share or unit as of December 31, 2020. 2 Represents Class B units issued under the 2006 Equity Incentive Plan. These units vest immediately upon grant, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until the seventh anniversary of the date of grant. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company. 3 Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. These shares vest immediately upon grant, but are restricted and may not be sold until the seventh anniversary of the date of grant. Pursuant to the 2006 Equity Incentive Plan, the operating company issues Class B units, phantom Class B units and options to purchase Class B units. The operating company also issues Delayed Exchange Class B units pursuant to the 2006 Equity Incentive Plan. These Delayed Exchange Class B units vest immediately upon grant, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until at least the seventh anniversary of the date of grant. These Delayed Exchange Class B units are also not entitled to any benefit under the Tax Receivable Agreement between the Company and members of the operating company. The operating company also issues phantom Delayed Exchange Class B units and options to purchase Delayed Exchange Class B units. Under the Pzena Investment Management, Inc. 2007 Equity Incentive Plan (“the 2007 Equity Incentive Plan”), the Company issues shares of restricted Class A common stock, Class B-1 units, options to purchase Class A common stock, options to purchase restricted Class A shares of common stock and contingently vesting options to acquire shares of Class A common stock. During each of the three months ended March 31, 2021 and 2020, no contingently vesting options vested. During the three months ended March 31, 2021 and 2020, 26,097 and 430,955 Delayed Exchange Class B units were issued to certain employee members, respectively, for approximately $0.1 million and $1.9 million in cash, respectively. Under the Pzena Investment Management, LLC Amended and Restated Bonus Plan (the “Bonus Plan”), eligible employees whose compensation is in excess of certain thresholds are required to defer a portion of that excess. These deferred amounts may be invested, at the employee’s discretion, in certain investment options designated by the Compensation Committee of the Company's Board of Directors. Amounts deferred in any calendar year reduce that year’s compensation expense and are amortized and vest ratably over a four-year period commencing the following year. The Company also issued to certain of its employees deferred compensation with certain investment options that also vest ratably over a four-year Pursuant to the Pzena Investment Management, Inc. Non-Employee Director Deferred Compensation Plan (the “Director Plan”), non-employee directors may elect to have all or part of their compensation otherwise payable in cash, deferred in the form of phantom shares of Class A common stock of the Company issued under the 2007 Equity Incentive Plan. Elections to defer compensation under the Director Plan are made on a year-to-year basis. Distributions under the Director Plan are made in a single distribution of shares of Class A common stock at such time as elected by the participant when the deferral was made. Since inception of the Director Plan in 2009, the majority of the Company’s directors have elected to defer 100% of their compensation in the form of phantom shares of Class A common stock. Director compensation amounts for any calendar year are amortized over the calendar year and reflected as General and Administrative Expense. As of March 31, 2021 and December 31, 2020, there were 591,640 and 533,444 phantom shares of Class A common stock outstanding, respectively. During the three months ended March 31, 2021, the Company distributed 11,070 shares of Class A common stock pursuant to the Director Plan on such date specified by the participant as elected when the deferral was made. For the three months ended March 31, 2020, no distributions were made under the Director Plan. During the three months ended March 31, 2021, the Company issued 5,074 restricted shares of Class A common stock associated with non-deferred nonemployee director compensation. These restricted shares will vest quarterly of the calendar year. As of March 31, 2021 and December 31, 2020, the Company had approximately $42.6 million and $34.8 million, respectively, in unrecorded compensation expense related to unvested awards issued pursuant to its Bonus Plan and certain agreements; Class B units, option grants, Delayed Exchange Class B units, phantom Delayed Exchange Class B units, and phantom Class B units issued under the 2006 Equity Incentive Plan; and restricted Class A common stock and contingently vesting option grants issued under the 2007 Equity Incentive Plan. The Company anticipates that this unrecorded cost will amortize over the respective vesting periods of the awards. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2021 | |
Compensation And Retirement Disclosure [Abstract] | |
Employee Benefit Plans | Note 4 – Employee Benefit Plans The operating company has a Profit Sharing and Savings Plan for the benefit of substantially all employees. The Profit Sharing and Savings Plan is a defined contribution profit sharing plan with a 401(k) deferral component. All full-time employees and certain part-time employees who have met the age and length of service requirements are eligible to participate in the plan. The plan allows participating employees to make elective deferrals of compensation up to the annual limits which are set by law. The plan provides for a discretionary annual contribution by the operating company which is determined by a formula based on the salaries of eligible employees as defined by the plan. For the three months ended March 31, 2021 and 2020, the expense recognized in connection with this plan was $0.9 million and $0.8 million, respectively. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Note 5—Earnings per Share Basic earnings per share is computed by dividing the Company’s net income attributable to its common stockholders by the weighted average number of shares outstanding during the reporting period. Under the two-class method of computing basic earnings per share, basic earnings per share is calculated by dividing net income for basic earnings per share by the weighted average number of common shares outstanding during the period. The two-class method includes an earnings allocation formula that determines earnings per share for each participating security according to dividends declared and undistributed earnings for the period. The Company’s net income for basic earnings per share is reduced by the amount allocated to participating restricted shares of Class A common stock which participate for purposes of calculating earnings per share. For the three months ended March 31, 2021 and 2020, the Company’s basic earnings per share was determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands, except share and per share amounts) Net Income for Basic Earnings per Share Allocated to: Class A Common Stock $ 4,182 $ — Participating Shares of Restricted Class A Common Stock 5 — Total Net Income for Basic Earnings per Share $ 4,187 $ — Basic Weighted-Average Shares Outstanding 17,220,424 17,790,184 Add: Participating Shares of Restricted Class A Common Stock 1 19,988 — Total Basic Weighted-Average Shares Outstanding 17,240,412 17,790,184 Basic Earnings per Share $ 0.24 $ — 1 Certain unvested shares of Class A common stock granted to employees have nonforfeitable rights to dividends and therefore participate fully in the results of the Company from the date they are granted. They are included in the computation of basic earnings per share using the two-class method for participating securities. Diluted earnings per share adjusts this calculation to reflect the impact of all outstanding membership units of the operating company, phantom Class B units, phantom Delayed Exchange Class B units, phantom Class A common stock, outstanding options to purchase Class B units, options to purchase Delayed Exchange Class B units, options to purchase Class A common stock, and restricted Class A common stock, to the extent they would have a dilutive effect on net income per share for the reporting period. Net income for diluted earnings per share assumes that all outstanding operating company membership units are converted into Company stock at the beginning of the reporting period and the resulting change to the Company's net income associated with its increased interest in the operating company is taxed at the Company’s effective tax rate, exclusive of one-time charges and adjustments associated with both the valuation allowance and the liability to selling and converting shareholders and other one-time charges. When this conversion results in an increase in earnings per share or a decrease in loss per share, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share for the reporting period. For the three months ended March 31, 2021 and 2020, the Company’s diluted net income was determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands) Net Income Attributable to Non-Controlling Interests of Pzena Investment Management, LLC $ 20,648 $ 1,084 Less: Assumed Corporate Income Taxes 5,104 324 Assumed After-Tax Income of Pzena Investment Management, LLC 15,544 760 Net Income of Pzena Investment Management, Inc. 4,187 — Diluted Net Income $ 19,731 $ 760 Under the two-class method of computing diluted earnings per share, diluted earnings per share is calculated by dividing net income for diluted earnings per share by the weighted average number of common shares outstanding during the period, plus the dilutive effect of any potential common shares outstanding during the period using the more dilutive of the treasury method or two-class method. The two-class method includes an earnings allocation formula that determines earnings per share for each participating security according to dividends declared and undistributed earnings for the period. The Company’s net income for diluted earnings per share is reduced by the amount allocated to participating restricted Class B units and Class B-1 units for purposes of calculating earnings per share. Dividend equivalent distributions paid per share on the operating company’s unvested restricted Class B units are equal to the dividends paid per share of Company Class A common stock. For the three months ended March 31, 2021 and 2020, the Company’s diluted earnings per share were determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands, except share and per share amounts) Diluted Net Income Allocated to: Class A Common Stock $ 17,938 $ 701 Participating Shares of Restricted Class A Common Stock 5 — Participating Class B Units 1,788 59 Total Diluted Net Income Attributable to Shareholders $ 19,731 $ 760 Total Basic Weighted-Average Shares Outstanding 17,240,412 17,790,184 Dilutive Effect of Class B Units 55,425,613 53,885,546 Dilutive Effect of Options 1 1,123,539 37,016 Dilutive Effect of Phantom Class B Units & Phantom Shares of Class A Common Stock 2,393,896 1,857,799 Dilutive Effect of Restricted Shares of Class A Common Stock 2 29,240 21,686 Dilutive Weighted-Average Shares Outstanding 76,212,700 73,592,231 Add: Participating Class B Units and Class B-1 Units 3 7,239,297 5,990,916 Total Dilutive Weighted-Average Shares Outstanding 83,451,997 79,583,147 Diluted Earnings per Share 4 $ 0.24 $ — 1 Represents the dilutive effect of options to purchase operating company Class B units and Company Class A common stock. 2 Certain restricted shares of Class A common stock granted to employees are not entitled to dividend or dividend equivalent payments until they are vested and are therefore non-participating securities and are not included in the computation of basic earnings per share. They are included in the computation of diluted earnings per share when the effect is dilutive using the treasury stock method. 3 Unvested Class B units granted to employees have nonforfeitable rights to dividend equivalent distributions and therefore participate fully in the results of the operating company's operations from the date they are granted. Vested and unvested Class B-1 units are entitled to receive distributions for the duration of the holder’s employment with the operating company, will participate in additional value to the extent there has been appreciation subsequent to the issuance of the Class B-1 membership unit. Unvested Class B units and vested and unvested Class B-1 units are included in the computation of diluted earnings per share using the two-class method for participating securities. 4 During the three months ended March 31, 2020, the calculation of diluted earnings per share resulted in an increase in earnings per share. Therefore, diluted earnings per share is assumed to be equal to basic earnings per share. Approximately 0.4 million options to purchase Class B units, 0.2 million options to purchase shares of Class A common stock, and 1.0 million contingent options to purchase shares of Class A common stock were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021, as their inclusion would have had an antidilutive effect based on current market prices or because the option had contingent vesting requirements that were not met. Approximately 2.9 million options to purchase Class B units, 0.1 million options to purchase shares of Class A common stock, and 1.0 million contingent options to purchase shares of Class A common stock were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2020, as their inclusion would have had an antidilutive effect based on current market prices or because the option had contingent vesting requirements that were not met. |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders Equity Note [Abstract] | |
Shareholders' Equity | Note 6—Shareholders’ Equity The Company functions as the sole managing member of the operating company. As a result, the Company: (i) consolidates the financial results of the operating company and reflects the membership interest in it that it does not own as a non-controlling interest in its consolidated financial statements; and (ii) recognizes income generated from its economic interest in the operating company’s net income. Class A and Class B units of the operating company have the same economic rights per unit. Class B-1 membership units are entitled to receive distributions for the duration of the holder’s employment with the operating company and will participate in additional value to the extent there has been appreciation in price of the Class A common stock subsequent to the issuance of the Class B-1 membership unit. The percentages presented below are subject to continued changes, including but not limited to, the price of Class A common stock, issuance of awards, and exercise of options. Based on the closing price of the Company’s Class A common stock as of March 31, 2021, the holders of Class A common stock (through the Company), the holders of Class B units of the operating company, and Class B-1 units of the operating company held approximately 23.0%, 74.6%, and 2.4% respectively, of the economic interest in the March 31, 2021 value of the operating company. As of March 31, 2021, the holders of Class A common stock (through the Company), the holders of Class B units of the operating company, and the holders of Class B-1 units of the operating company held 21.4%, 69.6%, and 9.0%, respectively, of the right to the future income and distributions. Based on the closing price of the Company’s Class A common stock as of December 31, 2020, the holders of Class A common stock of the Company, the holders of Class B units of the operating company, and the holders of Class B-1 units of the operating company held approximately 24.2%, 75.8% and 0.0%, respectively, of the December 31, 2020 economic interests in the value of the operating company. As of December 31, 2020 the holders of Class A common stock (through the Company), the holders of Class B units of the operating company, and the holders of Class B-1 units of the operating company held 22.4%, 70.1%, and 7.5%, respectively, of the right to the future income and distributions. Each Class B unit of the operating company is issued with a corresponding share of the Company’s Class B common stock, par value $0.000001 per share. Holders of Class B common stock have the right to receive the par value of the Class B common stock held by them upon our liquidation, dissolution or winding up, but do not share in dividends. Each share of the Company’s Class B common stock entitles its holder to five votes, until the first time that the number of shares of Class B common stock outstanding constitutes less than 20% of the number of all shares of the Company’s common stock outstanding. From such time and thereafter, each share of the Company’s Class B common stock entitles its holder to one vote. When a Class B unit is exchanged for a share of the Company’s Class A common stock or forfeited, a corresponding share of the Company’s Class B common stock will automatically be redeemed and canceled. Conversely, to the extent that the Company causes the operating company to issue additional Class B units to employees pursuant to its equity incentive plan, these additional holders of Class B units would be entitled to receive a corresponding number of shares of the Company’s Class B common stock (including if the Class B units awarded are subject to vesting). Class B-1 units have not been issued corresponding shares and do not have voting rights. All holders of the Company’s Class B common stock have entered into a stockholders’ agreement, pursuant to which they agreed to vote all shares of Class B common stock then held by them, with the majority of votes of Class B common stockholders taken in a preliminary vote of the Class B common stockholders. The outstanding shares of the Company’s Class A common stock represent 100% of the rights of the holders of all classes of the Company’s capital stock to receive distributions, except that holders of Class B common stock will have the right to receive the class’s par value upon the Company’s liquidation, dissolution or winding up. Pursuant to the operating agreement of the operating company, each vested Class B unit is exchangeable for a share of the Company’s Class A common stock, subject to certain exchange timing and volume limitations. Pursuant to the operating agreement of the operating company, each vested Class B-1 unit, upon the end of the holder’s employment, is exchanged for shares of Class A common stock in an amount based upon the appreciation in price of the Class A common stock from the date of grant to the date of exchange. The Company’s share repurchase program was announced on April 24, 2012. The Board of Directors authorized the Company to repurchase up to an aggregate of $10 million of the Company’s outstanding Class A common stock and the operating company’s Class B units on the open market and in private transactions in accordance with applicable securities laws. On February 11, 2014, the Company announced that its Board of Directors approved an increase of $20 million in the aggregate amount authorized under the program. On April 19, 2018, the Company announced that its Board of Directors approved an additional increase of $30 million in the aggregate amount authorized under the program. The timing, number and value of common shares and units repurchased are subject to the Company’s discretion. The Company’s share repurchase program is not subject to an expiration date and may be suspended, discontinued, or modified at any time, for any reason. During the three months ended March 31, 2021, the Company purchased and retired 275,218 shares of Class A common stock and 18,476 Class B units under the current repurchase authorization at a weighted average price per share of $8.67 and $4.87, respectively. During the three months ended March 31, 2020, the Company purchased and retired 823,792 shares of Class A common stock and 94,830 Class B units under the repurchase authorization at a weighted average price per unit of $ 6.86 and $ 5.97 , respectively. The Company records the repurchase of shares and units at cost based on the trade date of the transaction. |
Non-Controlling Interests
Non-Controlling Interests | 3 Months Ended |
Mar. 31, 2021 | |
Noncontrolling Interest [Abstract] | |
Non-Controlling Interests | Note 7—Non-Controlling Interests Net Income Attributable to Non-Controlling Interests in the operations of the Company’s operating company and consolidated subsidiaries is comprised of the following: For the Three Months Ended March 31, 2021 2020 (in thousands) Non-Controlling Interests of Pzena Investment Management, LLC $ 20,648 $ 1,084 Non-Controlling Interests of Consolidated Subsidiaries 194 (315 ) Net Income Attributable to Non-Controlling Interests $ 20,842 $ 769 Distributions to non-controlling interests represent tax allocations and dividend equivalents paid to the members of the operating company, as well as withdrawals from the Company’s consolidated subsidiaries. Contributions from non-controlling interests represent contributions to the Company's consolidated subsidiaries. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2021 | |
Investments Debt And Equity Securities [Abstract] | |
Investments | Note 8—Investments The following is a summary of Investments: As of March 31, 2021 December 31, 2020 (in thousands) Equity Investments, at Fair Value Equity Securities $ 24,208 $ 18,739 Mutual Funds 7,317 7,314 Total Equity Investments, at Fair Value 31,525 26,053 Investments in Equity Method Investees 9,894 8,051 Total $ 41,419 $ 34,104 Investment, at Fair Value Investments, at Fair Value consisted of the following at March 31, 2021: Cost Unrealized Gain/(Loss) Fair Value (in thousands) Equity Securities $ 19,648 $ 4,560 $ 24,208 Mutual Funds 7,304 13 7,317 Total Equity Investments, at Fair Value $ 26,952 $ 4,573 $ 31,525 Securities Sold Short, at Fair Value consisted of the following at March 31, 2021: Proceeds Unrealized (Gain)/Loss Fair Value (in thousands) Equity Securities $ 699 $ 44 $ 743 Total Securities Sold Short, at Fair Value $ 699 $ 44 $ 743 Investments, at Fair Value consisted of the following at December 31, 2020: Cost Unrealized Gain/(Loss) Fair Value (in thousands) Equity Securities $ 16,521 $ 2,218 $ 18,739 Mutual Funds 7,293 21 7,314 Total Equity Investments, at Fair Value $ 23,814 $ 2,239 $ 26,053 Securities Sold Short, at Fair Value consisted of the following at December 31, 2020: Proceeds Unrealized (Gain)/Loss Fair Value (in thousands) Equity Securities $ 620 $ 94 $ 714 Total Securities Sold Short, at Fair Value $ 620 $ 94 $ 714 Equity Investments, at Fair Value Equity investments, at fair value consist of equity securities held by the Company’s consolidated subsidiaries and individual investments held directly by the Company primarily for the purpose of satisfying certain of the Company’s obligations under its deferred compensation program. Equity investments, at fair value also includes investments in open-ended registered mutual funds for which the Company has neither control nor the ability to exercise significant influence. Equity investments are measured at fair value based on quoted market prices or published net asset values. Trading Securities Trading securities consists of fixed income investments held directly by the Company. Fixed income investments are carried at fair value based on quoted market prices or market prices obtained from independent pricing services engaged by management. Investments in Equity Method Investees The operating company sponsors and provides investment management services to certain private investment partnerships and Pzena mutual funds through which it offers its investment strategies. The Company has made investments in certain of these private investment partnerships and mutual funds to satisfy its obligations under the Company's deferred compensation program and provide the initial cash investment in our mutual funds. The Company holds a non-controlling interest and exercises significant influence in these entities, and accounts for its investments as equity method investments which are included in Equity Method Investments on the consolidated statements of financial condition. As of March 31, 2021, the Company's investments range between 1% and 7% of the capital of these entities and have an aggregate carrying value of $9.9 million. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 9—Fair Value Measurements The Fair Value Measurements and Disclosures Topic Fair Value Measurements and Disclosures Topic Level 1 assets consist primarily of cash equivalents , equity investments at fair value , and securities sold short at fair value . Cash equivalent investments in actively traded money market funds are measured at amortiz ed cost that approximates fair value . Equity securities and securities sold short are exchange-traded securities with quoted prices in active markets. The fair value of investments in mutual funds are based on a published net asset values. Level 2 assets consist of debt securities for which the fair values are determined using independent third-party broker or dealer price quotes. U.S. Treasury bills are valued upon quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active and inputs other than quoted prices that are observable or corroborated by observable market data. The fair value of corporate bonds is measured using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer. Also included in equity investments, at fair value, in the Company's consolidated statements of financial condition are investments in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”). Certain of the Company’s ADRs and GDRs may not be listed on a public exchange and may be valued using an evaluated price based on a compilation of observable market information. Inputs used include currency factors, depositary receipt ratios, exchange prices of underlying and common stock of the same issuer, and adjustments for corporate actions. ADRs and GDRs valued using an evaluated price have been classified as Level 2. The investments in equity method investees are held at their carrying value. The following table presents these instruments’ fair value at March 31, 2021: Level 1 Level 2 Level 3 Total Assets (in thousands) Cash Equivalents: Money Market Funds $ 8 $ — $ — $ 8 Equity Investments, at Fair Value: Equity Securities 23,371 837 — 24,208 Mutual Funds 7,317 — — 7,317 Total Assets $ 30,696 $ 837 $ — $ 31,533 Liabilities Securities Sold Short $ 743 — — $ 743 Total Liabilities $ 743 $ — $ — $ 743 The following table presents these instruments’ fair value at December 31, 2020: Level 1 Level 2 Level 3 Total Assets (in thousands) Cash Equivalents: Money Market Funds $ 8 $ — $ — $ 8 Equity Investments, at Fair Value: Equity Securities 18,006 733 — 18,739 Mutual Funds 7,314 — — 7,314 Total Assets $ 25,328 $ 733 $ — $ 26,061 Liabilities Securities Sold Short 714 — — 714 Total Liabilities $ 714 $ — $ — $ 714 Transfers among levels, if any, are recorded as of the beginning of the reporting period. For each of the three months ended March 31, 2021 and 2020, there were no transfers between levels. In addition, the Company did not hold any Level 3 securities during the three months ended March 31, 2021 or during the year ended December 31, 2020. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2021 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Note 10—Property and Equipment Property and Equipment, Net of Accumulated Depreciation is comprised of the following: As of March 31, 2021 December 31, 2020 (in thousands) Leasehold Improvements $ 6,929 $ 6,929 Furniture and Fixtures 1,591 1,591 Computer Hardware 684 745 Computer Software 879 879 Office Equipment 212 212 Total 10,295 10,356 Less: Accumulated Depreciation and Amortization (6,203 ) (5,980 ) Total $ 4,092 $ 4,376 Depreciation is included in general and administrative expense and totaled approximately $0.3 million for both the three months ended March 31, 2021 and 2020. . |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11—Related Party Transactions For the three months ended March 31, 2021 and 2020, the Company earned $0.2 million and $0.3 million, respectively, in investment advisory fees, net of expense reimbursements from unconsolidated VIEs that receive investment management services from the Company. The Company offers loans to employees, excluding executive officers, for the purpose of financing tax obligations associated with compensatory stock and unit vesting. Loans are generally written for a seven-year The operating company, as investment adviser for certain Pzena branded SEC-registered mutual funds, private placement funds, and non-U.S. funds, has contractually agreed to waive a portion or all of its management fees and pay fund expenses to ensure that the annual operating expenses of the funds stay below certain established total expense ratio thresholds. For both of the three months ended March 31, 2021 and 2020, the Company recognized $0.3 million in such expenses. The operating company manages personal funds of certain of the Company’s employees, including the CEO, and its two Presidents. The operating company also manages accounts beneficially owned by a private fund in which certain of the Company’s executive officers invest. Investments by employees in individual accounts are permitted only at the discretion of the executive committee of the operating company, but are generally not subject to the same minimum investment levels that are required of outside investors. The operating company also manages personal funds of some of its employees’ family members. Pursuant to the respective investment management agreements, the operating company waives or reduces its regular advisory fees for these accounts and personal funds. In addition, the operating company pays custody and administrative fees for certain of these accounts and personal funds in order to incubate products or preserve performance history. The aggregate value of the fees that the Company waived related to the Company’s executive officers, other employees, and family members, was approximately $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 12—Commitments and Contingencies In the normal course of business, the Company enters into agreements that include indemnities in favor of third parties, such as engagement letters with advisers and consultants. In certain cases, the Company may have recourse against third parties with respect to these indemnities. The Company maintains insurance policies that may provide coverage against certain claims under these indemnities. The Company has had no claims or payments pursuant to these agreements, and it believes the likelihood of a claim being made is remote. Utilizing the methodology in the Guarantees Topic The Company leases office space under a non-cancelable operating lease agreement, which expires on December 31, 2025. The Company recognizes minimum lease expense for its headquarters on a straight-line basis over the lease term. The Company entered into a four-year During December 2018, the Company signed a non-cancellable amendment to the corporate headquarters lease to obtain additional space that expires on December 31, 2025. In accordance with ASC 842, Leases During June 2019, the Company signed a non-cancellable lease to the business development and client service office in London to obtain additional space that expires on October 31, 2021. In accordance with ASC 842, Leases, the lease term commenced on November 1, 2019 and the Company recorded a Right-of-use Asset and Lease Liability on the consolidated statements of financial condition associated with the new lease. During each of the three months ended March 31, 2021 and 2020, lease expenses of $0.7 million are included in general and administrative expense. This lease expense includes short-term lease expenses associated with the Company's office space in Australia. Short-term lease expense was $0.1 million for the three months ended March 31, 2021. Lease expenses for both the three months ended March 31, 2021 and 2020, were net of $0.1 million of sublease income. The following table presents the components of operating lease expense, as well as supplemental cash flow information, related to the Company’s leases: For the Three Months Ended March 31, 2021 (in thousands) Operating lease expense 1 $ 589 Supplemental cash flow information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 601 Right-of-use assets obtained in exchange for lease obligations $ — 1 Amounts have not been reduced by sublease income of $0.1 million recognized during the three months ended March 31, 2021. The following table presents information regarding the Company’s operating leases: As of March 31, 2021 (in thousands) Operating lease right-of-use assets $ 10,989 Operating lease liabilities $ 11,304 Weighted-average remaining lease term (in years) 4.7 Weighted-average discount rate 4.3 % The maturities of lease liabilities are as follows (in thousands): Year Ending December 31, Operating Leases 2021 (excluding the three months ended March 31, 2021) $ 2,134 2022 2,574 2023 2,574 2024 2,596 2025 2,607 2026 and thereafter - Total undiscounted lease payments $ 12,485 Less discount (1,181 ) Total lease liabilities $ 11,304 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 13—Income Taxes The operating company is a limited liability company that has elected to be treated as a partnership for tax purposes. The operating company has made a provision for New York City Unincorporated Business Tax (“UBT”) and its consolidated subsidiary Pzena Investment Management, LTD has made a provision for U.K. income taxes. The Company's provision for income taxes reflects U.S. federal, state, and local incomes taxes on its allocable portion of the operating company's income. The Company's effective tax rate for the three months ended March 31, 2021 and 2020 was 8.6% and 56.3%, respectively. The effective tax rate includes a rate benefit attributable to the fact that approximately 78.4% and 77.1% of the operating company's earnings were not subject to corporate-level taxes for the three months ended March 31, 2021 and 2020, respectively. Income before income taxes includes net income attributable to non-controlling interests and not taxable to the Company, which reduces the effective tax rate. The Income Taxes Topic As of March 31, 2021 and December 31, 2020, the Company had $8.1 million and $7.6 million in unrecognized tax benefits that, if recognized, would affect the provision for income taxes. As of March 31, 2021 and December 31, 2020, the Company had interest related to unrecognized tax benefits of $1.4 million and $1.2 million, respectively. As of March 31, 2021 and December 31, 2020, no penalty accruals were recorded. As of March 31, 2021 and December 31, 2020, the net values of all deferred tax assets were approximately $27.8 million and $29.8 million, respectively. These deferred tax assets primarily reflect the future tax benefits associated with the Company's initial public offering, and the subsequent and future exchanges by holders of Class B units of the operating company for shares of Class A common stock. At March 31, 2021 and December 31, 2020, the Company did not have a valuation allowance recorded against its deferred tax assets. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 14—Subsequent Events On April 20, 2021, the Company’s Board of Directors approved and declared a quarterly dividend of $0.03 per share of its Class A common stock that will be paid on May 21, 2021 to holders of record on April 30, 2021. No other subsequent events necessitated disclosures and/or adjustments. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and related Securities and Exchange Commission (“SEC”) rules and regulations. Principles of Consolidation: The Company’s policy is to consolidate those entities in which it has a direct or indirect controlling financial interest based on either the voting interest model or the variable interest model. As such, the Company consolidates majority-owned subsidiaries in which it has a controlling financial interest, and certain investment vehicles the operating company sponsors for which it is the investment adviser that are considered to be variable-interest entities (“VIEs”), and for which the Company is deemed to be the primary beneficiary. Pursuant to the Consolidation Topic of the FASB Accounting Standards Codification (“FASB ASC”), for legal entities evaluated for consolidation, the Company determines whether interests it holds and fees paid to the entity qualify as a variable interest. If it is determined that the Company does not have a variable interest in the entity, no further analysis is required and the Company does not consolidate the entity. If it is determined that the Company has a variable interest, it considers its direct interests and the proportionate indirect interests through related parties to determine if it is the primary beneficiary of the VIE. For equity investments where the Company does not control the investee, and where it is not the primary beneficiary of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operating policies of the investee requires significant judgment based on the facts and circumstances surrounding each investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms of the investment agreement, or other agreements with the investee. The Company analyzes entities structured as series funds which comply with the requirements included in the Investment Company Act of 1940 for registered mutual funds as voting interest entities because the shareholders are deemed to have the ability to direct the activities of the fund that most significantly impact the fund's economic performance. Consolidated Entities The Company consolidates the financial results of the operating company and records in its own equity its pro-rata share of transactions that impact the operating company’s net equity, including unit and option issuances, repurchases, and retirements. The operating company’s pro-rata share of such transactions are recorded as an adjustment to additional paid-in capital or non-controlling interests, as applicable, on the consolidated statements of financial condition. The majority-owned subsidiaries in which the Company, through its interest in the operating company, has a controlling financial interest and the VIEs for which the Company is deemed to be the primary beneficiary are collectively referred to as “consolidated subsidiaries.” Non-controlling interests recorded on the consolidated financial statements of the Company include the non-controlling interests of the outside investors in each of these entities, as well as those of the operating company. All significant inter-company transactions and balances have been eliminated through consolidation. On January 1, 2020, the Company redeemed its investment in the Pzena International Value Service (a series of Pzena Investment Management International, LLC). As the Company was no longer deemed the primary beneficiary of this entity, it deconsolidated the entity and removed the related assets, liabilities and non-controlling interest from the Company’s Consolidated Statements of Financial Condition. During 2020, the Company provided the initial cash investment for a Pzena-branded Australian Registered Investment Scheme, Pzena Global Focused Value Fund, in an effort to generate an investment performance track record to attract third-party investors. The Company is considered the primary beneficiary of this entity. At March 31, 2021, Pzena Global Focused Value Fund’s $4.1 million in net assets were included in the Company’s Consolidated Statements of Financial Condition. These consolidated investment partnerships are investment companies and apply specialized industry accounting for investment companies. The Company has retained this specialized accounting for these investment partnerships pursuant to U.S. GAAP. Non-Consolidated Variable Interest Entities VIEs that are not consolidated receive investment management services from the operating company and are generally private investment partnerships sponsored by the operating company. The total net assets of these VIEs was approximately $308.9 million and $265.9 million at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the operating company had $4.0 million and $3.2 million in investments in certain of these firm-sponsored vehicles, the majority of which are primarily held to satisfy certain of the Company’s obligations under its deferred compensation programs, for which the Company was not deemed to be the primary beneficiary. The Company's exposure to risk of loss in the non-consolidated VIEs is generally limited to any equity investment and any uncollected management fees. As of March 31, 2021 and December 31, 2020, the Company's maximum exposure to loss as a result of its involvement with the non-consolidated VIEs was $4.2 million and $3.6 million, respectively. |
Accounting Pronouncements Adopted in 2021 | Accounting Pronouncements Adopted in 2021: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. We adopted this standard prospectively on January 1, 2021. The adoption of this standard did not have a material impact on our financial condition or results of operations. |
Management's Use of Estimates | Management’s Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the period. Actual results could materially differ from those estimates. |
Revenue Recognition | Revenue Recognition: Revenue, comprised of advisory fee income, is recognized over the period in which advisory services are provided. Advisory fee income includes management fees that are calculated based on percentages of assets under management (“AUM”), generally billed quarterly, either in arrears or advance, depending on the applicable contractual terms. Advisory fee income also includes performance fees that may be earned by the Company depending on the investment return of the AUM, as well as fulcrum fee arrangements. Performance fee arrangements generally entitle the Company to participate, on a fixed-percentage basis, in any returns generated in excess of an agreed-upon benchmark. The Company’s participation percentage in such return differentials is then multiplied by AUM to determine the performance fees earned. In general, returns are calculated on an annualized basis over the contract’s measurement period, which usually extends to three years. Performance fees are generally payable annually or quarterly. Fulcrum fee arrangements require a reduction in the base fee or allow for an increase in the base fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period, which extends to three years. Fulcrum fees are generally payable quarterly. Following the Revenue Recognition Topic Revenue from advisory fees is disaggregated into categories based on the composition of the Company's client base and advisory fee structure for the three months ended March 31, 2021 and 2020: For the Three Months Ended March 31, Revenue 2021 2020 (in thousands) Separately Managed Accounts Asset-Based Fees $ 24,547 $ 18,696 Total Separately Managed Fees 24,547 18,696 Sub-Advised Accounts Asset-Based Fees $ 17,623 $ 13,723 Impact of Fulcrum Fees 1 (995 ) (1,014 ) Performance-Based Fees — — Total Sub-Advised Fees 16,628 12,709 Pzena Funds Asset-Based Fees $ 4,951 $ 3,600 Expense Cap Reimbursements (255 ) (326 ) Performance-Based Fees — — Total Pzena Funds Fees 4,696 3,274 Total $ 45,871 $ 34,679 1 Represents the net impact of fulcrum fee arrangements which require a reduction in the base fee or allow for an increase in the base fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period. |
Cash and Cash Equivalents | Cash and Cash Equivalents: At March 31, 2021 and December 31, 2020, Cash and Cash Equivalents was $29.7 million and $65.5 million, respectively. The Company considers all money market funds and highly-liquid debt instruments with an original maturity of three months or less at the time of purchase to be cash equivalents. The Company maintains its cash in bank deposits, other accounts whose balances often exceed federally insured limits and treasury money market funds. Cash is stated at cost, which approximates fair value. Interest on cash and cash equivalents is recorded as Interest Income on an accrual basis in the consolidated statements of operations. |
Restricted Cash | Restricted Cash: At both March 31, 2021 and December 31, 2020, the Company had $1.1 million of compensating balances recorded in Restricted Cash in the consolidated statements of financial condition. These balances reflect a letter of credit issued by a third party in lieu of a cash security deposit, as required by the Company’s lease for its corporate headquarters. The following table reconciles cash, cash equivalents, and restricted cash per the consolidated statements of cash flows to the consolidated statements of financial condition. March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2019 (in thousands) Cash and Cash Equivalents $ 29,650 $ 65,534 $ 20,527 $ 52,480 Restricted Cash 1,054 1,050 1,040 1,036 Total $ 30,704 $ 66,584 $ 21,567 $ 53,516 |
Due to/from Broker | Due to/from Broker: Due to/from Broker consists primarily of amounts payable/receivable for unsettled securities transactions held/initiated at the clearing brokers of the Company and its consolidated subsidiaries. |
Non-Cash Compensation | Non-Cash Compensation: All non-cash compensation awards granted have varying vesting schedules and are issued at prices equal to the assessed fair market value at the time of issuance. Expenses associated with these awards are recognized over the period during which employees are required to provide service. The Company accounts for forfeitures as they occur. |
Investments | Investments: Investments, at Fair Value Investments, at Fair Value consist of equity securities at fair value held by the Company and its consolidated subsidiaries, as well as investments in open-ended registered mutual funds. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination on an ongoing basis. Dividends and interest income associated with the Company's investments and the investments of the Company's consolidated subsidiaries are recognized as Dividend Income on an ex-dividend basis and Interest Income, respectively, in the consolidated statements of operations. Securities Sold Short represents securities sold short at fair value, not yet purchased by the Company. Dividend expense associated with these investments is recognized in Other Income/ (Expense) on an ex-dividend basis in the consolidated statements of operations. All such investments are recorded at fair value, with net realized and unrealized gains and losses recognized as a component of Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. Investments in equity method investees The Company accounts for its investments in certain private investment partnerships in which the Company has non-controlling interests and exercises significant influence, using the equity method. These investments are included in Investments in the Company's consolidated statements of financial condition. The carrying value of these investments is recorded at the amount of capital reported by the private investment partnership or mutual fund. The capital account for each entity reflects any contributions paid to, distributions received from, and equity earnings of, the relevant entity. The earnings of these investments are recognized as Equity in Earnings/ (Losses) of Affiliates in the consolidated statements of operations. Investments in equity method investees are evaluated for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amounts of impairment losses, if any. During the three months ended March 31, 2021 and 2020, no impairment losses were recognized. |
Securities Valuation | Securities Valuation: Investments in equity securities and securities sold short for which market quotations are available are valued at the last reported price or closing price on the primary market or exchange on which they trade. If no reported equity sales occurred on the valuation date, equity investments are valued at the bid price. Investments in registered mutual funds are carried at fair value at their respective net asset values as of the valuation date. Otherwise, fair values for investment securities are based on Level 2 or Level 3 inputs detailed in Note 9. The net realized gain or loss on sales of equity securities and securities sold short is determined on a specific identification basis and is included in Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. |
Concentrations of Credit Risk | Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, amounts due from brokers, and advisory fees receivable. The Company maintains its cash in bank deposits and other accounts whose balances often exceed federally insured limits. The concentration of credit risk with respect to advisory fees receivable is generally limited due to the short payment terms extended to clients by the Company. On a periodic basis, the Company evaluates its advisory fees receivable and establishes an allowance for doubtful accounts, if necessary, based on a history of past write-offs, collections, and current credit conditions. At both March 31, 2021 and December 31, 2020, there was no allowance for doubtful accounts. |
Property and Equipment | Property and Equipment: Property and equipment is carried at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of the respective assets, except for leasehold improvements, which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvements or the remaining lease term. |
Leases | Leases: The Company determines if an arrangement is a lease at inception. Operating leases are included as a component of Right-of-use (“ROU”) Assets and Lease Liabilities on the consolidated statements of financial condition. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The lease terms may include options to extend or terminate the lease. These options to extend or terminate are assessed on a lease-by-lease basis, and the ROU assets and lease liabilities are adjusted when it is reasonably certain that an option will be exercised. If a lease arrangement does not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease expense associated with leases that have a term of 12 months or less as of the commencement date are recognized as a component of general and administrative expenses on a straight-line basis over the lease term. |
Share Repurchases | Share Repurchases: Share repurchases may be made from time-to-time in open market transactions or through privately negotiated transactions under the authorization approved by the Board of Directors. The Company charges the entire excess of cost over par to additional paid-in capital. If the Company’s additional paid-in capital balance is reduced to zero, any additional amounts are recognized in retained earnings. |
Business Segments | Business Segments: The Company views its operations as comprising one operating segment. |
Income Taxes | Income Taxes: The Company is organized as a “C” corporation under the Internal Revenue Code, and thus liable for federal, state, and local taxes on the income derived from its economic interest in its operating company. The operating company is a limited liability company that has elected to be treated as a partnership for tax purposes. It has not made a provision for federal or state income taxes because it is the individual responsibility of each of the operating company’s members (including the Company) to separately report their proportionate share of the operating company’s taxable income or loss. The operating company has made a provision for New York City Unincorporated Business Tax (“UBT”) and its consolidated subsidiary Pzena Investment Management, LTD has made a provision for U.K. income taxes. The effective tax rate for interim periods represents the Company’s best estimate of the effective tax rate expected to be applied to the full fiscal year, adjusted for discrete items recognized during the quarter. Judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are in accordance with applicable tax laws. The Company adjusts these liabilities in light of changing facts and circumstances, such as the closing of a tax audit, new tax legislation or the change of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate. It is also the Company’s policy to recognize accrued interest, and penalties associated with uncertain tax positions in Income Tax Expense on the consolidated statements of operations. The Company and its consolidated subsidiaries account for all U.S. federal, state, local, and U.K. taxation pursuant to the asset and liability method, which requires deferred income tax assets and liabilities to be recorded for temporary differences between the carrying amount and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized. At both March 31, 2021 and December 31, 2020, the Company did not have a valuation allowance recorded against its deferred tax assets. The income tax expense, or benefit, is the tax payable or refundable for the period, plus or minus the change during the period in deferred tax assets and liabilities. The Company records its deferred tax liabilities as a component of other liabilities in the consolidated statements of financial condition. All excess tax benefits or tax deficiencies related to stock- and unit-transactions are reflected in the consolidated statements of operations as a component of the provision for income taxes. |
Tax Receivable Agreement | Tax Receivable Agreement: The Company’s purchase of membership units of the operating company concurrent with its initial public offering, and the subsequent and future exchanges by holders of Class B units of the operating company for shares of the Company’s Class A common stock (pursuant to the exchange rights provided for in the operating company’s operating agreement), have resulted in, and are expected to continue to result in, increases in the Company’s share of the tax basis of the tangible and intangible assets of the operating company, which will increase the tax depreciation and amortization deductions that otherwise would not have been available to the Company. These increases in tax basis and tax depreciation and amortization are each deductible for tax purposes over a period of 15 years and have reduced, and are expected to continue to reduce, the amount of cash taxes that the Company would otherwise be required to pay in the future. The Company has entered into a tax receivable agreement with past, current, and future members of the operating company that requires the Company to pay to any member involved in any exchange transaction 85% of the amount of cash tax savings, if any, in U.S. federal, state and local income tax or foreign or franchise tax that it realizes as a result of these increases in tax basis and, in limited cases, transfers or prior increases in tax basis. The Company expects to benefit from the remaining 15% of cash tax savings, if any, in income tax it realizes. Payments under the tax receivable agreement will be based on the tax reporting positions that the Company will determine. The Company will not be reimbursed for any payments previously made under the tax receivable agreement if a tax basis increase is successfully challenged by the Internal Revenue Service. The Company records an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the exchange. The Company records 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to the liability due under the tax receivable agreement, which is reflected as the liability to selling and converting shareholders in the accompanying consolidated financial statements. The remaining 15% of the estimated realizable tax benefit is initially recorded as an increase to the Company’s additional paid-in capital. All of the effects to the deferred tax asset of changes in any of the estimates after the tax year of the exchange will be reflected in the provision for income taxes. Similarly, the effect of subsequent changes in the enacted tax rates will be reflected in the provision for income taxes. If the Company exercises its right to terminate the tax receivable agreement early, the Company will be obligated to make an early termination payment to the selling and converting shareholders, based upon the net present value (based upon certain assumptions and deemed events set forth in the tax receivable agreement) of all payments that would be required to be paid by the Company under the tax receivable agreement. If certain change of control events were to occur, the Company would be obligated to make an early termination payment. |
Foreign Currency | Foreign Currency: The functional and reporting currency of the Company is the U.S. Dollar. Assets and liabilities of foreign operations whose functional currency is not the U.S. Dollar are translated at the exchange rate in effect at the applicable reporting date, and the consolidated statements of operations are translated at the average exchange rates in effect during the applicable period. A charge or credit is recorded to other comprehensive income to reflect the translation of these amounts to the extent the non-U.S. currency is designated the functional currency of the subsidiary. Non-functional currency related transaction gains and losses are immediately recorded in other income on the consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the Company recorded less than $0.1 million and $0.5 million, respectively, of other comprehensive loss associated with foreign currency translation adjustments. Investment securities and other assets and liabilities denominated in foreign currencies are remeasured into U.S. Dollar amounts at the date of valuation. Purchases and sales of investment securities, and income and expense items denominated in foreign currencies, are remeasured into U.S. Dollar amounts on the respective dates of such transactions. The Company does not isolate the portion of the results of its operations resulting from the impact of fluctuations in foreign exchange rates on its non-U.S. investments. Such fluctuations are included in Net Realized and Unrealized Gains/ (Losses) from Investments in the consolidated statements of operations. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, foreign withholding taxes, and other receivables and payables recorded on the Company’s consolidated statements of financial condition and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities resulting from changes in exchange rates. |
Fair Value Measurements | The Fair Value Measurements and Disclosures Topic Fair Value Measurements and Disclosures Topic Level 1 assets consist primarily of cash equivalents , equity investments at fair value , and securities sold short at fair value . Cash equivalent investments in actively traded money market funds are measured at amortiz ed cost that approximates fair value . Equity securities and securities sold short are exchange-traded securities with quoted prices in active markets. The fair value of investments in mutual funds are based on a published net asset values. Level 2 assets consist of debt securities for which the fair values are determined using independent third-party broker or dealer price quotes. U.S. Treasury bills are valued upon quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active and inputs other than quoted prices that are observable or corroborated by observable market data. The fair value of corporate bonds is measured using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer. Also included in equity investments, at fair value, in the Company's consolidated statements of financial condition are investments in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”). Certain of the Company’s ADRs and GDRs may not be listed on a public exchange and may be valued using an evaluated price based on a compilation of observable market information. Inputs used include currency factors, depositary receipt ratios, exchange prices of underlying and common stock of the same issuer, and adjustments for corporate actions. ADRs and GDRs valued using an evaluated price have been classified as Level 2. The investments in equity method investees are held at their carrying value. |
Organization (Tables)
Organization (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Summary of entities | The Company, through its interest in the operating company, has consolidated the results of operations and financial condition of the following entities as of March 31, 2021: Ownership at Legal Entity Type of Entity (Date of Formation) March 31, 2021 Pzena Investment Management, Pty Australian Proprietary Limited Company (12/16/2009) 100.0% Pzena Financial Services, LLC Delaware Limited Liability Company (10/15/2013) 100.0% Pzena Investment Management, LTD England and Wales Private Limited Company (01/08/2015) 100.0% Pzena U.S. Best Ideas (GP), LLC Delaware Limited Liability Company (11/16/2017) 100.0% Pzena Global Best Ideas (GP), LLC Delaware Limited Liability Company (2/15/2018) 100.0% Pzena Investment Management International 2, LLC Delaware Limited Liability Company (1/21/2020) 100.0% Pzena Investment Management Special Situations, LLC Delaware Limited Liability Company (12/01/2010) 99.9% Pzena Global Focused Value Fund Australian Registered Investment Scheme (6/10/2016) 98.7% Pzena International Small Cap Value Fund, a series of Advisors Series Trust Open-end Management Investment Company, series of Delaware Statutory Trust (6/28/2018) 58.1% |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Disaggregation of Revenue | Revenue from advisory fees is disaggregated into categories based on the composition of the Company's client base and advisory fee structure for the three months ended March 31, 2021 and 2020: For the Three Months Ended March 31, Revenue 2021 2020 (in thousands) Separately Managed Accounts Asset-Based Fees $ 24,547 $ 18,696 Total Separately Managed Fees 24,547 18,696 Sub-Advised Accounts Asset-Based Fees $ 17,623 $ 13,723 Impact of Fulcrum Fees 1 (995 ) (1,014 ) Performance-Based Fees — — Total Sub-Advised Fees 16,628 12,709 Pzena Funds Asset-Based Fees $ 4,951 $ 3,600 Expense Cap Reimbursements (255 ) (326 ) Performance-Based Fees — — Total Pzena Funds Fees 4,696 3,274 Total $ 45,871 $ 34,679 1 Represents the net impact of fulcrum fee arrangements which require a reduction in the base fee or allow for an increase in the base fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period. |
Schedule of Cash and Cash Equivalents | The following table reconciles cash, cash equivalents, and restricted cash per the consolidated statements of cash flows to the consolidated statements of financial condition. March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2019 (in thousands) Cash and Cash Equivalents $ 29,650 $ 65,534 $ 20,527 $ 52,480 Restricted Cash 1,054 1,050 1,040 1,036 Total $ 30,704 $ 66,584 $ 21,567 $ 53,516 |
Schedule of Restricted Cash | The following table reconciles cash, cash equivalents, and restricted cash per the consolidated statements of cash flows to the consolidated statements of financial condition. March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2019 (in thousands) Cash and Cash Equivalents $ 29,650 $ 65,534 $ 20,527 $ 52,480 Restricted Cash 1,054 1,050 1,040 1,036 Total $ 30,704 $ 66,584 $ 21,567 $ 53,516 |
Compensation and Benefits (Tabl
Compensation and Benefits (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of compensation and benefits expense to employees and members | Compensation and benefits expense to employees and members is comprised of the following: For the Three Months Ended March 31, 2021 2020 (in thousands) Cash Compensation and Other Benefits $ 15,346 $ 16,250 Non-Cash Compensation 3,789 2,890 Total Compensation and Benefits Expense $ 19,135 $ 19,140 |
Schedule of share based compensation activity | Details of non-cash compensation awards granted during the three months ended March 31, 2021 and 2020 are as follows: For the Three Months Ended March 31, 2021 2020 Amount Fair Value 1 Amount Fair Value 1 Class B-1 Units 2 1,438,767 $ 2.40 2,092,879 $ 3.98 Options to Purchase Shares of Class A Common Stock 3 — $ — 146,804 $ 2.03 Restricted Shares of Class A Common Stock 4 — $ — 16,806 $ 4.74 1 Represents the weighted average grant date estimated fair value per share, unit, or option as of March 31, 2021 and 2020. 2 Represents Class B-1 units issued under the 2007 Equity Incentive Plan (as defined below). These Class B-1 units are entitled to receive dividends for the duration of the holder’s employment, and upon the end of employment are exchanged for shares of Class A common stock in an amount based upon the appreciation in price of the Class A common stock from the date of grant to the date of exchange. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the cancellation of 166,804 Class B-1 Units 3 Represents options to purchase shares of Class A common stock issued under the 2007 Equity Incentive Plan. These options become exercisable five years from the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 146,804 options to purchase shares of Class A common stock 4 Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. These shares vest ratably over a period of four years from the date of grant. These shares are restricted and may not be sold until the seventh anniversary of the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 16,806 restricted shares of Class A common stock January 1, 2021 Amount Fair Value 1 Delayed Exchange Class B Units 2 805,987 $ 4.67 Restricted Shares of Class A Common Stock 3 12,353 $ 4.67 1 Represents the weighted average grant date estimated fair value per share or unit as of December 31, 2020. 2 Represents Class B units issued under the 2006 Equity Incentive Plan. These units vest immediately upon grant, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until the seventh anniversary of the date of grant. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company. 3 Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. These shares vest immediately upon grant, but are restricted and may not be sold until the seventh anniversary of the date of grant. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Summary of basic earnings per share | For the three months ended March 31, 2021 and 2020, the Company’s basic earnings per share was determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands, except share and per share amounts) Net Income for Basic Earnings per Share Allocated to: Class A Common Stock $ 4,182 $ — Participating Shares of Restricted Class A Common Stock 5 — Total Net Income for Basic Earnings per Share $ 4,187 $ — Basic Weighted-Average Shares Outstanding 17,220,424 17,790,184 Add: Participating Shares of Restricted Class A Common Stock 1 19,988 — Total Basic Weighted-Average Shares Outstanding 17,240,412 17,790,184 Basic Earnings per Share $ 0.24 $ — 1 Certain unvested shares of Class A common stock granted to employees have nonforfeitable rights to dividends and therefore participate fully in the results of the Company from the date they are granted. They are included in the computation of basic earnings per share using the two-class method for participating securities. |
Summary of diluted net income | For the three months ended March 31, 2021 and 2020, the Company’s diluted net income was determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands) Net Income Attributable to Non-Controlling Interests of Pzena Investment Management, LLC $ 20,648 $ 1,084 Less: Assumed Corporate Income Taxes 5,104 324 Assumed After-Tax Income of Pzena Investment Management, LLC 15,544 760 Net Income of Pzena Investment Management, Inc. 4,187 — Diluted Net Income $ 19,731 $ 760 |
Summary of diluted earnings per share | For the three months ended March 31, 2021 and 2020, the Company’s diluted earnings per share were determined as follows: For the Three Months Ended March 31, 2021 2020 (in thousands, except share and per share amounts) Diluted Net Income Allocated to: Class A Common Stock $ 17,938 $ 701 Participating Shares of Restricted Class A Common Stock 5 — Participating Class B Units 1,788 59 Total Diluted Net Income Attributable to Shareholders $ 19,731 $ 760 Total Basic Weighted-Average Shares Outstanding 17,240,412 17,790,184 Dilutive Effect of Class B Units 55,425,613 53,885,546 Dilutive Effect of Options 1 1,123,539 37,016 Dilutive Effect of Phantom Class B Units & Phantom Shares of Class A Common Stock 2,393,896 1,857,799 Dilutive Effect of Restricted Shares of Class A Common Stock 2 29,240 21,686 Dilutive Weighted-Average Shares Outstanding 76,212,700 73,592,231 Add: Participating Class B Units and Class B-1 Units 3 7,239,297 5,990,916 Total Dilutive Weighted-Average Shares Outstanding 83,451,997 79,583,147 Diluted Earnings per Share 4 $ 0.24 $ — 1 Represents the dilutive effect of options to purchase operating company Class B units and Company Class A common stock. 2 Certain restricted shares of Class A common stock granted to employees are not entitled to dividend or dividend equivalent payments until they are vested and are therefore non-participating securities and are not included in the computation of basic earnings per share. They are included in the computation of diluted earnings per share when the effect is dilutive using the treasury stock method. 3 Unvested Class B units granted to employees have nonforfeitable rights to dividend equivalent distributions and therefore participate fully in the results of the operating company's operations from the date they are granted. Vested and unvested Class B-1 units are entitled to receive distributions for the duration of the holder’s employment with the operating company, will participate in additional value to the extent there has been appreciation subsequent to the issuance of the Class B-1 membership unit. Unvested Class B units and vested and unvested Class B-1 units are included in the computation of diluted earnings per share using the two-class method for participating securities. 4 During the three months ended March 31, 2020, the calculation of diluted earnings per share resulted in an increase in earnings per share. Therefore, diluted earnings per share is assumed to be equal to basic earnings per share. |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Noncontrolling Interest [Abstract] | |
Non-controlling interest income | Net Income Attributable to Non-Controlling Interests in the operations of the Company’s operating company and consolidated subsidiaries is comprised of the following: For the Three Months Ended March 31, 2021 2020 (in thousands) Non-Controlling Interests of Pzena Investment Management, LLC $ 20,648 $ 1,084 Non-Controlling Interests of Consolidated Subsidiaries 194 (315 ) Net Income Attributable to Non-Controlling Interests $ 20,842 $ 769 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Investments Debt And Equity Securities [Abstract] | |
Summary of investments | The following is a summary of Investments: As of March 31, 2021 December 31, 2020 (in thousands) Equity Investments, at Fair Value Equity Securities $ 24,208 $ 18,739 Mutual Funds 7,317 7,314 Total Equity Investments, at Fair Value 31,525 26,053 Investments in Equity Method Investees 9,894 8,051 Total $ 41,419 $ 34,104 |
Investments, at Fair Value | Investments, at Fair Value consisted of the following at March 31, 2021: Cost Unrealized Gain/(Loss) Fair Value (in thousands) Equity Securities $ 19,648 $ 4,560 $ 24,208 Mutual Funds 7,304 13 7,317 Total Equity Investments, at Fair Value $ 26,952 $ 4,573 $ 31,525 Securities Sold Short, at Fair Value consisted of the following at March 31, 2021: Proceeds Unrealized (Gain)/Loss Fair Value (in thousands) Equity Securities $ 699 $ 44 $ 743 Total Securities Sold Short, at Fair Value $ 699 $ 44 $ 743 Investments, at Fair Value consisted of the following at December 31, 2020: Cost Unrealized Gain/(Loss) Fair Value (in thousands) Equity Securities $ 16,521 $ 2,218 $ 18,739 Mutual Funds 7,293 21 7,314 Total Equity Investments, at Fair Value $ 23,814 $ 2,239 $ 26,053 Securities Sold Short, at Fair Value consisted of the following at December 31, 2020: Proceeds Unrealized (Gain)/Loss Fair Value (in thousands) Equity Securities $ 620 $ 94 $ 714 Total Securities Sold Short, at Fair Value $ 620 $ 94 $ 714 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value Measurements | The following table presents these instruments’ fair value at March 31, 2021: Level 1 Level 2 Level 3 Total Assets (in thousands) Cash Equivalents: Money Market Funds $ 8 $ — $ — $ 8 Equity Investments, at Fair Value: Equity Securities 23,371 837 — 24,208 Mutual Funds 7,317 — — 7,317 Total Assets $ 30,696 $ 837 $ — $ 31,533 Liabilities Securities Sold Short $ 743 — — $ 743 Total Liabilities $ 743 $ — $ — $ 743 The following table presents these instruments’ fair value at December 31, 2020: Level 1 Level 2 Level 3 Total Assets (in thousands) Cash Equivalents: Money Market Funds $ 8 $ — $ — $ 8 Equity Investments, at Fair Value: Equity Securities 18,006 733 — 18,739 Mutual Funds 7,314 — — 7,314 Total Assets $ 25,328 $ 733 $ — $ 26,061 Liabilities Securities Sold Short 714 — — 714 Total Liabilities $ 714 $ — $ — $ 714 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Property Plant And Equipment [Abstract] | |
Property and equipment | Property and Equipment, Net of Accumulated Depreciation is comprised of the following: As of March 31, 2021 December 31, 2020 (in thousands) Leasehold Improvements $ 6,929 $ 6,929 Furniture and Fixtures 1,591 1,591 Computer Hardware 684 745 Computer Software 879 879 Office Equipment 212 212 Total 10,295 10,356 Less: Accumulated Depreciation and Amortization (6,203 ) (5,980 ) Total $ 4,092 $ 4,376 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Components of Operating Lease Expense and Supplemental Cash Flow Information | The following table presents the components of operating lease expense, as well as supplemental cash flow information, related to the Company’s leases: For the Three Months Ended March 31, 2021 (in thousands) Operating lease expense 1 $ 589 Supplemental cash flow information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 601 Right-of-use assets obtained in exchange for lease obligations $ — 1 Amounts have not been reduced by sublease income of $0.1 million recognized during the three months ended March 31, 2021. |
Information Regarding Operating Leases | The following table presents information regarding the Company’s operating leases: As of March 31, 2021 (in thousands) Operating lease right-of-use assets $ 10,989 Operating lease liabilities $ 11,304 Weighted-average remaining lease term (in years) 4.7 Weighted-average discount rate 4.3 % |
Maturities of Lease Liabilities | The maturities of lease liabilities are as follows (in thousands): Year Ending December 31, Operating Leases 2021 (excluding the three months ended March 31, 2021) $ 2,134 2022 2,574 2023 2,574 2024 2,596 2025 2,607 2026 and thereafter - Total undiscounted lease payments $ 12,485 Less discount (1,181 ) Total lease liabilities $ 11,304 |
Organization (Details)
Organization (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Pzena Investment Management, Pty | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Australian Proprietary Limited Company (12/16/2009) |
Operating company's ownership | 100.00% |
Pzena Financial Services, LLC | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Delaware Limited Liability Company (10/15/2013) |
Operating company's ownership | 100.00% |
Pzena Investment Management, LTD | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | England and Wales Private Limited Company (01/08/2015) |
Operating company's ownership | 100.00% |
Pzena U.S. Best Ideas (GP), LLC | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Delaware Limited Liability Company (11/16/2017) |
Operating company's ownership | 100.00% |
Pzena Global Best Ideas (GP), LLC | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Delaware Limited Liability Company (2/15/2018) |
Operating company's ownership | 100.00% |
Pzena Investment Management International 2, LLC | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Delaware Limited Liability Company (1/21/2020) |
Operating company's ownership | 100.00% |
Pzena Investment Management Special Situations, LLC | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Delaware Limited Liability Company (12/01/2010) |
Operating company's ownership | 99.90% |
Pzena Global Focused Value Fund | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Australian Registered Investment Scheme (6/10/2016) |
Operating company's ownership | 98.70% |
Pzena International Small Cap Value Fund, a Series of Advisors Series Trust | |
Entity Information [Line Items] | |
Type of Entity (Date of Formation) | Open-end Management Investment Company, series of Delaware Statutory Trust (6/28/2018) |
Operating company's ownership | 58.10% |
Significant Accounting Polici_4
Significant Accounting Policies - Basis of Presentation (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Variable Interest Entity [Line Items] | ||
Equity method investment, assets | $ 162,158,000 | $ 188,687,000 |
Maximum loss exposure | 4,200,000 | 3,600,000 |
Variable Interest Entity, Not Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
Equity method investment, assets | 4,000,000 | 3,200,000 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees | Pzena Global Focused Value Fund | ||
Variable Interest Entity [Line Items] | ||
Equity method investment, assets | 4,100,000 | |
Equity Method Investment, Nonconsolidated Investee or Group of Investees | VIEs that are not consolidated | ||
Variable Interest Entity [Line Items] | ||
Equity method investment, assets | $ 308,900,000 | $ 265,900,000 |
Significant Accounting Polici_5
Significant Accounting Policies - Additional Information (Details) | 3 Months Ended | |||||
Mar. 31, 2021USD ($)segment | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |||
Revenue Recognition | ||||||
Contract measurement period (in years) | 3 years | |||||
Cash and Cash Equivalents | ||||||
Cash | $ 29,650,000 | [1] | $ 20,527,000 | $ 65,534,000 | [1] | $ 52,480,000 |
Restricted Cash | 1,054,000 | 1,040,000 | 1,050,000 | $ 1,036,000 | ||
Investments | ||||||
Impairment losses recognized | 0 | 0 | ||||
Concentration of Credit Risk | ||||||
Allowance for doubtful accounts receivable | $ 0 | 0 | ||||
Leases | ||||||
Lease term | 12 months | |||||
Business Segments | ||||||
Number of operating segments (in segments) | segment | 1 | |||||
Income Taxes | ||||||
Valuation allowance on deferred tax assets | $ 0 | $ 0 | ||||
Section 754 election tax deduction period | 15 years | |||||
Cash savings generated by this election will be distributed to selling and converting shareholders upon realization (in hundredth) | 85.00% | |||||
Percentage of cash tax savings in income tax if realizes company expects to benefit | 15.00% | |||||
Percentage of estimated realizable tax benefit added to liability due under tax receivable agreement | 85.00% | |||||
Cash savings generated by this election will increase additional paid-in capital | 15.00% | |||||
Foreign Currency | ||||||
Other comprehensive loss associated with foreign currency translation adjustments | $ 12,000 | 505,000 | ||||
Maximum | ||||||
Foreign Currency | ||||||
Other comprehensive loss associated with foreign currency translation adjustments | $ 100,000 | $ 500,000 | ||||
Equipment | Minimum | ||||||
Property Plant and Equipment | ||||||
Property and equipment, useful life (years) | 3 years | |||||
Equipment | Maximum | ||||||
Property Plant and Equipment | ||||||
Property and equipment, useful life (years) | 7 years | |||||
[1] | Asset and liability amounts in parentheses represent the aggregated balances at March 31, 2021 and December 31, 2020 attributable to Pzena Investment Management Special Situations, LLC, Pzena U.S. Best Ideas (GP), LLC, Pzena Global Best Ideas (GP), LLC, and Pzena Global Focus Value Fund which were variable interest entities as of March 31, 2021 and December 31, 2020, respectively. |
Significant Accounting Polici_6
Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 45,871 | $ 34,679 |
Asset-Based Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 24,547 | 18,696 |
Separately Managed Accounts | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 24,547 | 18,696 |
Asset-Based Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 17,623 | 13,723 |
Impact of Fulcrum Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | (995) | (1,014) |
Performance-Based Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0 | |
Sub-Advised Accounts | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 16,628 | 12,709 |
Asset-Based Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 4,951 | 3,600 |
Expense Cap Reimbursements | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | (255) | (326) |
Performance-Based Fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0 | |
Pzena Funds | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 4,696 | $ 3,274 |
Significant Accounting Polici_7
Significant Accounting Policies - Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | ||
Cash and Cash Equivalents | ||||||
Cash | $ 29,650 | [1] | $ 65,534 | [1] | $ 20,527 | $ 52,480 |
Restricted Cash | 1,054 | 1,050 | 1,040 | 1,036 | ||
Total | $ 30,704 | $ 66,584 | $ 21,567 | $ 53,516 | ||
[1] | Asset and liability amounts in parentheses represent the aggregated balances at March 31, 2021 and December 31, 2020 attributable to Pzena Investment Management Special Situations, LLC, Pzena U.S. Best Ideas (GP), LLC, Pzena Global Best Ideas (GP), LLC, and Pzena Global Focus Value Fund which were variable interest entities as of March 31, 2021 and December 31, 2020, respectively. |
Compensation and Benefits - Sch
Compensation and Benefits - Schedule Compensation and Benefits Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||
Cash Compensation and Other Benefits | $ 15,346 | $ 16,250 |
Non-Cash Compensation | 3,789 | 2,890 |
Total Compensation and Benefits Expense | $ 19,135 | $ 19,140 |
Compensation and Benefits - Non
Compensation and Benefits - Non-cash Compensation Awards (Details) - $ / shares | Jan. 01, 2021 | May 01, 2020 | Mar. 31, 2021 | Mar. 31, 2020 |
2007 Equity Incentive Plan | Options to Purchase Shares of Class A Common Stock | ||||
Compensation Arrangements [Line Items] | ||||
Grants in period (in shares) | 0 | 146,804 | ||
Grants in period, weighted average grant date fair value (USD per share) | $ 0 | $ 2.03 | ||
Vesting period for units (in years) | 5 years | |||
Shares available for future issuance | 146,804 | |||
2007 Equity Incentive Plan | Class B-1 Units | ||||
Compensation Arrangements [Line Items] | ||||
Grants in period (in shares) | 1,438,767 | 2,092,879 | ||
Grants in period, weighted average grant date fair value (USD per share) | $ 2.40 | $ 3.98 | ||
Shares cancelled | 166,804 | |||
2007 Equity Incentive Plan | Restricted Shares of Class A Common Stock | ||||
Compensation Arrangements [Line Items] | ||||
Grants in period (in shares) | 0 | 16,806 | ||
Grants in period, weighted average grant date fair value (USD per share) | $ 0 | $ 4.74 | ||
Vesting period for units (in years) | 4 years | |||
Shares available for future issuance | 16,806 | |||
Equity Incentive Plan 2006 | Restricted Shares of Class A Common Stock | ||||
Compensation Arrangements [Line Items] | ||||
Grants in period (in shares) | 12,353 | |||
Grants in period, weighted average grant date fair value (USD per share) | $ 4.67 | |||
Equity Incentive Plan 2006 | Delayed Exchange Unit | ||||
Compensation Arrangements [Line Items] | ||||
Grants in period (in shares) | 805,987 | |||
Grants in period, weighted average grant date fair value (USD per share) | $ 4.67 |
Compensation and Benefits - Nar
Compensation and Benefits - Narrative (Details) - USD ($) $ in Thousands | May 01, 2020 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Compensation Arrangements [Line Items] | ||||
Employee deferred compensation liability | $ 1,644 | $ 5,039 | ||
Unrecorded compensation expense | $ 42,600 | $ 34,800 | ||
Phantom Shares of Class A Common Stock | Director Plan | ||||
Compensation Arrangements [Line Items] | ||||
Deferred compensation percentage of compensation directors elected | 100.00% | |||
Shares outstanding (in shares) | 591,640 | 533,444 | ||
Distributions made under Director Plan (in shares) | 11,070 | 0 | ||
Restricted Shares of Class A Common Stock | Director Plan | ||||
Compensation Arrangements [Line Items] | ||||
Number of shares issued under plan | 5,074 | |||
Common Class B | ||||
Compensation Arrangements [Line Items] | ||||
Delayed Exchange Class B units issued (in shares) | 26,097 | 430,955 | ||
Delayed Exchange Class B units issued | $ 100 | $ 1,900 | ||
Equity Incentive Plan 2006 | ||||
Compensation Arrangements [Line Items] | ||||
Cash compensation paid in the form of equity | $ 3,800 | |||
2007 Equity Incentive Plan | Restricted Shares of Class A Common Stock | ||||
Compensation Arrangements [Line Items] | ||||
Vesting period for units (in years) | 4 years | |||
Number of shares issued under plan | 16,806 | |||
2007 Equity Incentive Plan | Contingent Options to Purchase Shares of Class A Common Stock | ||||
Compensation Arrangements [Line Items] | ||||
Number of shares vested during period | 0 | 0 | ||
Bonus plan | ||||
Compensation Arrangements [Line Items] | ||||
Vesting period for units (in years) | 4 years |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | ||
Profit sharing and savings plan expenses recognized | $ 0.9 | $ 0.8 |
Earnings per Share - Calculatio
Earnings per Share - Calculation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | ||
Computation of basic earnings per share [Abstract] | |||
Net Income for Basic Earnings per Share | $ 4,187 | ||
Basic Weighted Average Shares Outstanding (in shares) | [1] | 17,240,412 | 17,790,184 |
Basic Earnings per Share (in dollars per share) | $ 0.24 | ||
Common Class A | |||
Computation of basic earnings per share [Abstract] | |||
Net Income for Basic Earnings per Share | $ 4,182 | ||
Basic Weighted Average Shares Outstanding (in shares) | 17,220,424 | 17,790,184 | |
Participating Shares of Restricted Class A Common Stock | |||
Computation of basic earnings per share [Abstract] | |||
Net Income for Basic Earnings per Share | $ 5 | ||
Basic Weighted Average Shares Outstanding (in shares) | [2] | 19,988 | |
[1] | The Company issues restricted shares of Class A common stock and restricted Class B units that have non-forfeitable dividend rights. Under the "two-class method," these shares and units are considered participating securities and are required to be included in the computation of basic and diluted earnings per share. | ||
[2] | Certain unvested shares of Class A common stock granted to employees have nonforfeitable rights to dividends and therefore participate fully in the results of the Company from the date they are granted. They are included in the computation of basic earnings per share using the two-class method for participating securities. |
Earnings per Share - Diluted Ne
Earnings per Share - Diluted Net Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Diluted Net Income [Abstract] | ||
Less: Net Income Attributable to Non-Controlling Interests | $ 20,842 | $ 769 |
Net Income of Pzena Investment Management, Inc. | 4,187 | |
Diluted Net Income | 19,731 | 760 |
Pzena Investment Management, LLC | ||
Diluted Net Income [Abstract] | ||
Net Income Attributable to Non-Controlling Interests | 20,648 | 1,084 |
Less: Assumed Corporate Income Taxes | 5,104 | 324 |
Less: Net Income Attributable to Non-Controlling Interests | 15,544 | 760 |
Net Income of Pzena Investment Management, Inc. | 4,187 | |
Diluted Net Income | $ 19,731 | $ 760 |
Earnings per Share - Diluted Ea
Earnings per Share - Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | ||
Diluted Net Income Allocated to: | |||
Total Diluted Net Income Attributable to Shareholders | $ 19,731 | $ 760 | |
Total Basic Weighted-Average Shares Outstanding (in shares) | [1] | 17,240,412 | 17,790,184 |
Dilutive Effect of B Units (in shares) | 55,425,613 | 53,885,546 | |
Dilutive Effect of Options (in shares) | 1,123,539 | 37,016 | |
Dilutive Effect of Phantom Class B Units & Phantom Shares of Class A Common Stock (in shares) | 2,393,896 | 1,857,799 | |
Dilutive Effect of Restricted Shares of Class A Common Stock (in shares) | 29,240 | 21,686 | |
Diluted Weighted Average Common Shares Outstanding (in shares) | 76,212,700 | 73,592,231 | |
Participating Class B Units and Class B-1 Units (in shares) | 7,239,297 | 5,990,916 | |
Diluted Weighted-Average Shares Outstanding (in shares) | [1] | 83,451,997 | 79,583,147 |
Diluted Earnings per Share (in dollars per share) | $ 0.24 | ||
Options to Purchase Class B Units | |||
Diluted Net Income Allocated to: | |||
Antidilutive securities excluded from diluted EPS (in shares) | 400,000 | 2,900,000 | |
Options to Purchase Shares of Class A Common Stock | |||
Diluted Net Income Allocated to: | |||
Antidilutive securities excluded from diluted EPS (in shares) | 200,000 | 100,000 | |
Contingent Options to Purchase Shares of Class A Common Stock | |||
Diluted Net Income Allocated to: | |||
Antidilutive securities excluded from diluted EPS (in shares) | 1,000,000 | 1,000,000 | |
Common Class A | |||
Diluted Net Income Allocated to: | |||
Total Diluted Net Income Attributable to Shareholders | $ 17,938 | $ 701 | |
Total Basic Weighted-Average Shares Outstanding (in shares) | 17,220,424 | 17,790,184 | |
Participating Shares of Restricted Class A Common Stock | |||
Diluted Net Income Allocated to: | |||
Total Diluted Net Income Attributable to Shareholders | $ 5 | ||
Total Basic Weighted-Average Shares Outstanding (in shares) | [2] | 19,988 | |
Participating Class B Units | |||
Diluted Net Income Allocated to: | |||
Total Diluted Net Income Attributable to Shareholders | $ 1,788 | $ 59 | |
[1] | The Company issues restricted shares of Class A common stock and restricted Class B units that have non-forfeitable dividend rights. Under the "two-class method," these shares and units are considered participating securities and are required to be included in the computation of basic and diluted earnings per share. | ||
[2] | Certain unvested shares of Class A common stock granted to employees have nonforfeitable rights to dividends and therefore participate fully in the results of the Company from the date they are granted. They are included in the computation of basic earnings per share using the two-class method for participating securities. |
Shareholders' Equity (Details)
Shareholders' Equity (Details) | 3 Months Ended | |||||
Mar. 31, 2021vote$ / sharesshares | Mar. 31, 2020$ / sharesshares | Dec. 31, 2020$ / shares | Apr. 19, 2018USD ($) | Feb. 11, 2014USD ($) | Apr. 24, 2012USD ($) | |
Class of Stock [Line Items] | ||||||
Amount authorized under stock repurchase program | $ | $ 30,000,000 | $ 20,000,000 | $ 10,000,000 | |||
Common Class A | ||||||
Class of Stock [Line Items] | ||||||
Economic interest held in company by class of stock (in hundredths) | 23.00% | 24.20% | ||||
Percentage of right to future income and distributions | 21.40% | 22.40% | ||||
Par value (in dollars per share) | $ 0.01 | $ 0.01 | ||||
Percentage of outstanding shares that represents rights of holders to receive distribution (in hundredths) | 100.00% | |||||
Common stock purchased and retired (in shares) | shares | 275,218 | 823,792 | ||||
Purchased under repurchase authorization at an average price per share (in dollars per share) | $ 8.67 | $ 6.86 | ||||
Common Class B | ||||||
Class of Stock [Line Items] | ||||||
Percentage of right to future income and distributions | 69.60% | 70.10% | ||||
Par value (in dollars per share) | $ 0.000001 | $ 0.000001 | ||||
Voting rights (in votes) | vote | 5 | |||||
Percentage of stock holding that will entitle holders to one vote (in hundredths) | 20.00% | |||||
Voting rights when class of stock constitutes less than 20% of all shares outstanding (in votes) | vote | 1 | |||||
Common stock purchased and retired (in shares) | shares | 18,476 | 94,830 | ||||
Purchased under repurchase authorization at an average price per share (in dollars per share) | $ 4.87 | $ 5.97 | ||||
Class B-1 Units | ||||||
Class of Stock [Line Items] | ||||||
Percentage of right to future income and distributions | 9.00% | 7.50% | ||||
Voting rights (in votes) | vote | 0 | |||||
Number of shares issued | shares | 0 | |||||
Pzena Investment Management, LLC | Common Class B | ||||||
Class of Stock [Line Items] | ||||||
Economic interest held in company by class of stock (in hundredths) | 74.60% | 75.80% | ||||
Pzena Investment Management, LLC | Class B-1 Units | ||||||
Class of Stock [Line Items] | ||||||
Economic interest held in company by class of stock (in hundredths) | 2.40% | 0.00% |
Non-Controlling Interests (Deta
Non-Controlling Interests (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Noncontrolling Interest [Line Items] | ||
Net Income Attributable to Non-Controlling Interests | $ 20,842 | $ 769 |
Non-Controlling Interests of Pzena Investment Management, LLC | ||
Noncontrolling Interest [Line Items] | ||
Net Income Attributable to Non-Controlling Interests | 20,648 | 1,084 |
Non-Controlling Interests of Consolidated Subsidiaries | ||
Noncontrolling Interest [Line Items] | ||
Net Income Attributable to Non-Controlling Interests | $ 194 | $ (315) |
Investments - Summary of Invest
Investments - Summary of Investments (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total Equity Investments, at Fair Value | $ 31,525 | $ 26,053 | |
Investments in Equity Method Investees | 9,894 | 8,051 | |
Total | [1] | 41,419 | 34,104 |
Equity Securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total Equity Investments, at Fair Value | 24,208 | 18,739 | |
Mutual Funds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total Equity Investments, at Fair Value | $ 7,317 | $ 7,314 | |
[1] | Asset and liability amounts in parentheses represent the aggregated balances at March 31, 2021 and December 31, 2020 attributable to Pzena Investment Management Special Situations, LLC, Pzena U.S. Best Ideas (GP), LLC, Pzena Global Best Ideas (GP), LLC, and Pzena Global Focus Value Fund which were variable interest entities as of March 31, 2021 and December 31, 2020, respectively. |
Investments - Investments, Fair
Investments - Investments, Fair Value (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Equity Investments, at Fair Value, Cost | $ 26,952 | $ 23,814 |
Equity Investments, at Fair Value, Unrealized Gain/(Loss) | 4,573 | 2,239 |
Equity Investments, at Fair Value | 31,525 | 26,053 |
Securities Short Sold Proceeds | 699 | 620 |
Securities Short Sold Unrealized (Gain)/Loss | 44 | 94 |
Securities Short Sold,Fair Value | 743 | 714 |
Equity Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Equity Investments, at Fair Value, Cost | 19,648 | 16,521 |
Equity Investments, at Fair Value, Unrealized Gain/(Loss) | 4,560 | 2,218 |
Equity Investments, at Fair Value | 24,208 | 18,739 |
Securities Short Sold Proceeds | 699 | 620 |
Securities Short Sold Unrealized (Gain)/Loss | 44 | 94 |
Securities Short Sold,Fair Value | 743 | 714 |
Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Equity Investments, at Fair Value, Cost | 7,304 | 7,293 |
Equity Investments, at Fair Value, Unrealized Gain/(Loss) | 13 | 21 |
Equity Investments, at Fair Value | $ 7,317 | $ 7,314 |
Investments - Narrative (Detail
Investments - Narrative (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments in equity method investees | $ 9,894 | $ 8,051 |
Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Operating company's ownership | 1.00% | |
Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Operating company's ownership | 7.00% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | $ 31,525 | $ 26,053 |
Total Assets | 31,533 | 26,061 |
Securities Sold Short, at Fair Value | 743 | 714 |
Total Liabilities | 743 | 714 |
Money Market Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash Equivalents | 8 | 8 |
Equity Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | 24,208 | 18,739 |
Mutual Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | 7,317 | 7,314 |
Fair Value | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | 30,696 | 25,328 |
Securities Sold Short, at Fair Value | 743 | 714 |
Total Liabilities | 743 | 714 |
Fair Value | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | 837 | 733 |
Fair Value | Money Market Funds | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash Equivalents | 8 | 8 |
Fair Value | Equity Securities | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | 23,371 | 18,006 |
Fair Value | Equity Securities | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | 837 | 733 |
Fair Value | Mutual Funds | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity Investments, at Fair Value | $ 7,317 | $ 7,314 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 10,295 | $ 10,356 |
Accumulated Depreciation and Amortization | (6,203) | (5,980) |
Total | 4,092 | 4,376 |
Leasehold Improvements | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 6,929 | 6,929 |
Furniture and Fixtures | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 1,591 | 1,591 |
Computer Hardware | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 684 | 745 |
Computer Software | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 879 | 879 |
Office Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 212 | $ 212 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Property Plant And Equipment [Line Items] | ||
Depreciation expense | $ 296 | $ 306 |
General and Administrative Expense | ||
Property Plant And Equipment [Line Items] | ||
Depreciation expense | $ 300 | $ 300 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Related Party Transaction [Line Items] | |||
Investment advisory fees | $ 45,871 | $ 34,679 | |
Loan write-off period | 7 years | ||
Net of Expense Reimbursement | VIEs That are Not Consolidated | |||
Related Party Transaction [Line Items] | |||
Investment advisory fees | $ 200 | 300 | |
Employees | |||
Related Party Transaction [Line Items] | |||
Loans to employees | 3,300 | $ 2,600 | |
Pzena Mutual Funds | |||
Related Party Transaction [Line Items] | |||
Investment advisory fees waived | 300 | 300 | |
Company's Executive Officers and Other Employees | |||
Related Party Transaction [Line Items] | |||
Investment advisory fees waived | $ 300 | $ 200 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) | Feb. 01, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | Oct. 01, 2016 | |
Other Commitments [Line Items] | |||||
Claims or payments to agreements | $ 0 | ||||
Accrual made in consolidated financial statements | $ 0 | ||||
Operating leases, contract term | 4 years | ||||
Company or sublessee, prior notice period for cancellation of sublease agreement | 6 months | ||||
Expected annual sublease income | $ 300,000 | ||||
Lease expenses | [1] | $ 589,000 | |||
Short-term lease expense | 100,000 | ||||
Sublease income | 100,000 | $ 100,000 | |||
General and Administrative Expense | |||||
Other Commitments [Line Items] | |||||
Lease expenses | $ 700,000 | $ 700,000 | |||
[1] | Amounts have not been reduced by sublease income of $0.1 million recognized during the three months ended March 31, 2021. |
Commitments and Contingencies_2
Commitments and Contingencies - Components of Operating Lease Expense and Supplemental Cash Flow Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021USD ($) | ||
Leases [Abstract] | ||
Operating lease expense | $ 589 | [1] |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 601 | |
[1] | Amounts have not been reduced by sublease income of $0.1 million recognized during the three months ended March 31, 2021. |
Commitments and Contingencies_3
Commitments and Contingencies - Components of Operating Lease Expense and Supplemental Cash Flow Information (Parenthetical) (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Leases [Abstract] | |
Sublease Income | $ 0.1 |
Commitments and Contingencies_4
Commitments and Contingencies - Information Regarding Operating Leases (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 10,989 | $ 11,578 |
Operating lease liabilities | $ 11,304 | $ 11,905 |
Weighted-average remaining lease term (in years) | 4 years 8 months 12 days | |
Weighted-average discount rate | 4.30% |
Commitments and Contingencies_5
Commitments and Contingencies - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Operating Leases | ||
2021 (excluding the three months ended March 31, 2021) | $ 2,134 | |
2022 | 2,574 | |
2023 | 2,574 | |
2024 | 2,596 | |
2025 | 2,607 | |
Total undiscounted lease payments | 12,485 | |
Less discount | (1,181) | |
Lease Liabilities | $ 11,304 | $ 11,905 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
Effective tax rate | 8.60% | 56.30% | |
Economic interest held in company by class of stock (in hundredths) | 78.40% | 77.10% | |
Unrecognized tax benefits | $ 8,100,000 | $ 7,600,000 | |
Interest related to unrecognized tax benefits | 1,400,000 | 1,200,000 | |
Penalty accruals | 0 | 0 | |
Deferred tax assets | 27,800,000 | 29,800,000 | |
Valuation allowance on deferred tax assets | $ 0 | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Apr. 20, 2021 | Mar. 31, 2021 | Mar. 31, 2020 |
Subsequent Event [Line Items] | |||
Cash dividends declared (in dollars per share) | $ 0.25 | $ 0.46 | |
Common Class A | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Cash dividends declared (in dollars per share) | $ 0.03 | ||
Dividend declared date | Apr. 20, 2021 | ||
Dividend payable date | May 21, 2021 | ||
Dividend record date | Apr. 30, 2021 |