Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 27, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-24498 | |
Entity Registrant Name | DIAMOND HILL INVESTMENT GROUP INC | |
Entity Incorporation, State or Country Code | OH | |
Entity Tax Identification Number | 65-0190407 | |
Entity Address, Address Line One | 325 John H. McConnell Blvd, Suite 200 | |
Entity Address, City or Town | Columbus | |
Entity Address, State or Province | OH | |
Entity Address, Postal Zip Code | 43215 | |
City Area Code | 614 | |
Local Phone Number | 255-3333 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, no par value | |
Trading Symbol | DHIL | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 3,235,192 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000909108 | |
Current Fiscal Year End Date | --12-31 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 97,311,557 | $ 93,176,253 |
Investments | 104,519,064 | 139,437,178 |
Accounts receivable | 13,350,220 | 17,223,362 |
Prepaid expenses | 2,958,185 | 2,857,468 |
Income taxes receivable | 551,756 | 3,849,099 |
Property and equipment, net of depreciation | 5,472,268 | 5,733,737 |
Deferred taxes | 13,078,566 | 10,386,853 |
Total assets | 237,241,616 | 272,663,950 |
Liabilities | ||
Accounts payable and accrued expenses | 6,620,951 | 8,671,731 |
Accrued incentive compensation | 7,419,223 | 26,615,510 |
Deferred compensation | 22,867,172 | 30,342,204 |
Total liabilities | 36,907,346 | 65,629,445 |
Redeemable noncontrolling interest | 9,554,350 | 14,178,824 |
Permanent Shareholders’ equity | ||
Common stock, no par value: 7,000,000 shares authorized; 3,247,515 issued and outstanding at March 31, 2020 (inclusive of 226,369 unvested shares); 3,294,672 issued and outstanding at December 31, 2019 (inclusive of 227,844 unvested shares) | 90,602,468 | 95,853,477 |
Preferred stock, undesignated, 1,000,000 shares authorized and unissued | 0 | 0 |
Deferred equity compensation | (18,686,750) | (20,331,890) |
Retained earnings | 118,864,202 | 117,334,094 |
Total permanent shareholders’ equity | 190,779,920 | 192,855,681 |
Total liabilities and shareholders’ equity | $ 237,241,616 | $ 272,663,950 |
Book value per share (usd per share) | $ 58.75 | $ 58.54 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, shares authorized | 7,000,000 | 7,000,000 |
Common stock, shares issued | 3,247,515 | 3,499,285 |
Common stock, shares outstanding | 3,247,515 | 3,470,428 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Preferred Stock, shares Outstanding | ||
Unvested shares | 226,369 | 211,575 |
Consolidated Statements of Inco
Consolidated Statements of Income (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
REVENUES: | ||
Revenue | $ 31,925,745 | $ 32,579,373 |
OPERATING EXPENSES: | ||
Compensation and related costs, excluding deferred compensation (benefit) expense | 15,417,176 | 13,557,122 |
Deferred compensation expense (benefit) | (8,155,881) | 2,412,260 |
General and administrative | 1,928,656 | 3,244,532 |
Sales and marketing | 1,455,682 | 1,370,716 |
Mutual fund administration | 814,953 | 861,040 |
Total operating expenses | 11,460,586 | 21,445,670 |
NET OPERATING INCOME | 20,465,159 | 11,133,703 |
Investment income (loss), net | (22,398,092) | 14,284,877 |
NET INCOME (LOSS) BEFORE TAXES | (1,932,933) | 25,418,580 |
Income tax expense | 595,435 | 5,862,733 |
NET INCOME (LOSS) | (2,528,368) | 19,555,847 |
Net loss (income) attributable to redeemable noncontrolling interest | (4,058,476) | 2,623,205 |
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 1,530,108 | $ 16,932,642 |
Earnings per share attributable to common shareholders | ||
Basic (USD per share) | $ 0.47 | $ 4.85 |
Diluted (USD per share) | $ 0.47 | $ 4.84 |
Weighted average shares outstanding | ||
Basic (in shares) | 3,272,761 | 3,493,843 |
Diluted (in shares) | 3,272,761 | 3,496,534 |
Investment advisory | ||
REVENUES: | ||
Revenue | $ 30,157,680 | $ 30,512,718 |
Mutual fund administration revenue, net | ||
REVENUES: | ||
Revenue | $ 1,768,065 | $ 2,066,655 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited) - USD ($) | Total | Common Stock | Deferred Equity Compensation | Retained Earnings |
Beginning balance (shares) at Dec. 31, 2018 | 3,499,285 | |||
Beginning Balance at Dec. 31, 2018 | $ 195,575,943 | $ 124,933,060 | $ (22,008,054) | $ 92,650,937 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of restricted stock grants (shares) | 24,875 | |||
Issuance of restricted stock grants | $ 3,859,300 | (3,859,300) | ||
Amortization of restricted stock grants | 1,521,974 | 1,521,974 | ||
Issuance of stock grants (in shares) | 24,048 | |||
Issuance of stock grants | 3,655,296 | $ 3,655,296 | ||
Issuance of common stock related to 401k plan match (in shares) | 4,286 | |||
Issuance of common stock related to 401k plan match | 632,050 | $ 632,050 | ||
Forfeiture of restricted stock grants (shares) | (4,250) | |||
Forfeiture of restricted stock grants | $ (688,606) | 688,606 | ||
Repurchase of common stock (shares) | (53,645) | |||
Repurchase of common stock | (7,907,055) | $ (7,907,055) | ||
Net income | 16,932,642 | 16,932,642 | ||
Ending balance (shares) at Mar. 31, 2019 | 3,494,599 | |||
Ending Balance at Mar. 31, 2019 | 210,410,850 | $ 124,484,045 | (23,656,774) | 109,583,579 |
Beginning balance attributable to redeemable noncontrolling Interests at Dec. 31, 2018 | 62,679,687 | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||
Net Income Attributable to Redeemable Noncontrolling Interest | (2,623,205) | |||
Net subscriptions of consolidated funds | (1,728,877) | |||
Net consolidations (deconsolidations) of Company sponsored investments | (27,324,561) | |||
Ending balance attributable to redeemable noncontrolling Interests at Mar. 31, 2019 | $ 36,249,454 | |||
Beginning balance (shares) at Dec. 31, 2019 | 3,470,428 | 3,294,672 | ||
Beginning Balance at Dec. 31, 2019 | $ 192,855,681 | $ 95,853,477 | (20,331,890) | 117,334,094 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of restricted stock grants (shares) | 3,850 | |||
Issuance of restricted stock grants | $ 347,424 | (347,424) | ||
Amortization of restricted stock grants | 1,786,217 | 1,786,217 | ||
Issuance of stock grants (in shares) | 23,640 | |||
Issuance of stock grants | 3,396,359 | $ 3,396,359 | ||
Issuance of common stock related to 401k plan match (in shares) | 5,316 | |||
Issuance of common stock related to 401k plan match | 647,100 | $ 647,100 | ||
Shares withheld related to employee tax withholding (in shares) | (1,801) | |||
Shares withheld related to employee tax withholding | (252,968) | $ (252,968) | ||
Forfeiture of restricted stock grants (shares) | (1,225) | |||
Forfeiture of restricted stock grants | $ (206,347) | 206,347 | ||
Repurchase of common stock | (9,182,577) | $ (9,182,577) | ||
Net income | $ 1,530,108 | 1,530,108 | ||
Ending balance (shares) at Mar. 31, 2020 | 3,247,515 | 3,247,515 | ||
Ending Balance at Mar. 31, 2020 | $ 190,779,920 | $ 90,602,468 | $ (18,686,750) | $ 118,864,202 |
Beginning balance attributable to redeemable noncontrolling Interests at Dec. 31, 2019 | 14,178,824 | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||
Net Income Attributable to Redeemable Noncontrolling Interest | 4,058,476 | |||
Net subscriptions of consolidated funds | (565,998) | |||
Ending balance attributable to redeemable noncontrolling Interests at Mar. 31, 2020 | $ 9,554,350 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income (Loss) | $ (2,528,368) | $ 19,555,847 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 265,084 | 282,565 |
Share-based compensation | 2,433,317 | 2,154,024 |
Decrease in accounts receivable | 3,873,142 | 1,714,531 |
Change in current income taxes | 3,297,343 | 2,150,248 |
Change in deferred income taxes | (2,691,713) | (490,645) |
Net losses (gains) on investments | 23,246,116 | (13,053,857) |
Net change in securities held by Consolidated Funds | (589,071) | 18,908,654 |
Decrease in accrued incentive compensation | (15,799,928) | (18,598,871) |
(Decrease) Increase in deferred compensation | (7,475,032) | 4,389,652 |
Other changes in assets and liabilities | (2,039,894) | (934,288) |
Net cash provided by operating activities | 1,990,996 | 16,077,860 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (115,218) | (91,015) |
Purchase of Company sponsored investments | (10,948,903) | (4,560,693) |
Proceeds from sale of Company-sponsored investments | 23,209,972 | 2,683,935 |
Net cash provided by (used in) investing activities | 12,145,851 | (1,967,773) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Value of shares withheld related to employee tax withholding | (252,968) | 0 |
Net (redemptions) subscriptions received from redeemable noncontrolling interest holders | (565,998) | 1,516,063 |
Repurchase of common stock | (9,182,577) | (7,907,055) |
Net cash used in financing activities | (10,001,543) | (6,390,992) |
CASH AND CASH EQUIVALENTS | ||
Net change during the period | 4,135,304 | 7,719,095 |
At beginning of period | 93,176,253 | 84,430,059 |
At end of period | 97,311,557 | 92,149,154 |
Supplemental cash flow information: | ||
Income taxes paid | 0 | 4,203,130 |
Supplemental disclosure of non-cash transactions: | ||
Common stock issued as incentive compensation | 3,396,359 | 3,655,296 |
Net redemptions of ETF shares for marketable securities | $ 0 | $ (3,244,940) |
Business and Organization
Business and Organization | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Organization | Business and Organization Diamond Hill Investment Group, Inc. (the "Company"), an Ohio corporation, derives consolidated revenue and net income from investment advisory and fund administration services. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 , and for the three- month periods ended March 31, 2020 and 2019 , for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in these notes to the condensed consolidated financial statements as "the Company," "management," "we," "us," and "our") have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (the "SEC") Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair statement of the financial condition and results of operations at the dates and for the interim periods presented have been included. These unaudited condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the " 2019 Form 10-K") as filed with the SEC. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results the Company may expect for the fiscal year ending December 31, 2020 (“fiscal 2020”), particularly in light of the novel coronavirus (“COVID-19”) and its effects on the U.S. and global economies. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations, disrupting the global supply chain, and creating a reduction in demand for many products. This has negatively affected global financial markets and has caused significant financial market depreciation, thus reducing our assets under management ("AUM"), the revenue derived from our AUM, and the returns on corporate investments. While we expect the effects of the pandemic and the related responses to negatively affect our results of operations, cash flows and financial position, at this time we cannot reasonably estimate the full impact, given the uncertainty over the duration and severity of the economic crisis. For further information, refer to the consolidated financial statements and notes thereto included in the 2019 Form 10-K and “Part II – Item 1A – Risk Factors” of this Form 10-Q. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions related to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. Reclassification Certain prior period amounts and disclosures may have been reclassified to conform to the current period's financial presentation. Principles of Consolidation The accompanying consolidated financial statements include the operations of the Company and its controlled subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. The Company holds certain investments in the Funds for general corporate investment purposes, to provide seed capital for newly formed strategies or to add capital to existing strategies. The Funds are organized in a series fund structure in which there are multiple mutual funds within one Trust. The Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the"1940 Act"). The Company performs its analysis at the individual mutual fund level and has concluded the mutual funds are voting rights entities ("VREs") because the structure of the investment product is such that the shareholders are deemed to have the power through voting rights to direct the activities that most significantly impact the entity's economic performance. To the extent material, these investment products are consolidated if Company ownership, directly or indirectly, represents a majority interest (greater than 50%). The Company records redeemable noncontrolling interests in consolidated investments for which the Company's ownership is less than 100%. The Company has consolidated the Diamond Hill International Fund and the Diamond Hill Global Fund (collectively the "Consolidated Funds") as of March 31, 2020 . Redeemable Noncontrolling Interest Redeemable noncontrolling interest represents third-party interests in the Consolidated Funds. This interest is redeemable at the option of the investors and therefore is not treated as permanent equity. Redeemable noncontrolling interest is recorded at redemption value, which approximates the fair value each reporting period. Segment Information Management has determined that the Company operates in one business segment, which is providing investment management and administration services to mutual funds, separately managed accounts, and a private investment fund. Therefore, the Company does not present disclosures relating to operating segments in annual or interim financial statements. Cash and Cash Equivalents Cash and cash equivalents include demand deposits and money market mutual funds held by DHCM. Accounts Receivable The Company records accounts receivable when they are due and presents them on the balance sheet net of any allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical losses, existing conditions in the industry, and the financial stability of the individual or entity that owes the receivable. No allowance for doubtful accounts was deemed necessary at March 31, 2020 or December 31, 2019 . Accounts receivable from the Funds were $8.4 million as of March 31, 2020 and $10.7 million as of December 31, 2019 . Investments Management determines the appropriate classification of its investments at the time of purchase and re-evaluates its determination at each reporting period. Investments in the Funds we advise where the Company has neither control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds, are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income (loss) in the Company's consolidated statements of income. Investments classified as equity method investments represent investments in which the Company owns between 20-50% of the outstanding voting interests in the entity or when it is determined that the Company is able to exercise significant influence but not control over the investments. When using the equity method, the Company recognizes its respective share of the investee's net income or loss for the period, which is recorded as investment income in the Company's consolidated statements of income. Property and Equipment Property and equipment, consisting of leasehold improvements, right-of use lease assets, computer equipment, furniture, and fixtures, are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated lives of the assets. Revenue Recognition – General The Company recognizes revenue when it satisfies performance obligations under the terms of a contract with a client. The Company earns substantially all of its revenue from investment advisory and fund administration contracts. Investment advisory and administration fees, generally calculated as a percentage of AUM, are recorded as revenue as services are performed. In addition to fixed fees based on a percentage of AUM, certain client accounts also provide periodic variable rate fees. Revenue earned during the three months ended March 31, 2020 and 2019 under contracts with clients include: Three Months Ended March 31, 2020 Investment advisory Mutual fund administration, net Total revenue Proprietary funds $ 23,454,563 $ 1,768,065 $ 25,222,628 Sub-advised funds and separately managed accounts 6,703,117 — 6,703,117 $ 30,157,680 $ 1,768,065 $ 31,925,745 Three Months Ended March 31, 2019 Investment advisory Mutual fund Total revenue Proprietary funds $ 23,579,877 $ 2,066,655 $ 25,646,532 Sub-advised funds and separately managed accounts 6,932,841 — 6,932,841 $ 30,512,718 $ 2,066,655 $ 32,579,373 Revenue Recognition – Investment Advisory Fees The Company's investment advisory contracts have a single performance obligation (the investment advisory services provided to the client) as the promised services are not separately identifiable from other promises in the contracts and, therefore, are not distinct. All performance obligations to provide advisory services are satisfied over time and the Company recognizes revenue as time passes. The fees we receive for our services under our investment advisory contracts are based on AUM, which changes based on the value of securities held under each advisory contract. These fees are thereby constrained and represent variable consideration, and are excluded from revenue until the AUM on which our client is billed is no longer subject to market fluctuations. The Company also provides services to Unified Managed Account ("UMA") programs in which an investment manager provides its strategy model portfolio to the sponsor of the UMA. The Company is paid a portion of the UMA fee for our services by the program sponsor at a pre-determined rate based on assets in the program. UMA program revenue was $0.7 million and $0.4 million for the three months ended March 31, 2020 and 2019 , respectively, and are included in investment advisory fees in the consolidated statements of income. Revenue Recognition – Variable Rate Fees The Company manages certain client accounts that provide for variable rate fees. These fees are calculated based on client investment results over rolling five -year periods. The Company records variable rate fees at the end of the contract measurement period because the variable fees earned are constrained based on movements in the financial markets. The Company did not record any variable rate fees during either of the three -month periods ended March 31, 2020 and March 31, 2019 . The table below shows AUM subject to variable rate fees and the amount of variable rate fees that would be recognized based upon investment results as of March 31, 2020 : As of March 31, 2020 AUM subject to variable rate fees Unearned variable rate fees Contractual Period Ending: Quarter Ending December 31, 2020 $ 48,120,435 $ 357,648 Quarter Ending September 30, 2021 227,221,875 7,465,020 Total $ 275,342,310 $ 7,822,668 The contractual end dates highlight the time remaining until the variable rate fees are scheduled to be earned. The amount of variable rate fees that would be recognized based upon investment results as of March 31, 2020 , will increase or decrease based on future client investment results through the contractual period end. We cannot assure that we will earn the unearned amounts. Revenue Recognition – Mutual Fund Administration DHCM has an administrative and transfer agency services agreement with the Funds under which DHCM performs certain services for each Fund. These services include performance obligations such as mutual fund administration, fund accounting, transfer agency, and other related functions. These services are performed concurrently under our agreement with the Funds, all performance obligations to provide these administrative services are satisfied over time, and the Company recognizes the related revenue as time passes. Each Fund pays DHCM a fee for performing these services , which is calculated using an annual rate times the average daily net assets of each respective share class. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which we bill the Funds is no longer subject to market fluctuations. The Funds have selected and contractually engaged certain vendors to fulfill various services to benefit the Funds’ shareholders or to satisfy regulatory requirements of the Funds. These services include, among others, required shareholder mailings, federal and state registrations, and legal and audit services. DHCM, in fulfilling a portion of its role under the administration agreement with the Funds, acts as agent to pay these obligations of the Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates its fees and terms directly with the management and board of trustees of the Funds. Each year the Funds' board of Trustees reviews the fee that each Fund pays to DHCM and specifically takes into account the contractual expenses that DHCM pays on behalf of the Funds. As a result, DHCM is not involved in the delivery or pricing of these services, and bears no risk related to these services. Revenue has been recorded net of these Fund related expenses. In addition, DHCM advances the upfront commissions that are paid to brokers who sell Class C shares of the Funds. These advances are capitalized and amortized over 12 months to correspond with the repayments DHCM receives from the principal underwriter to recoup this commission advancement. Mutual fund administration gross and net revenue are summarized below: Three Months Ended 2020 2019 Mutual fund administration: Administration revenue, gross $ 5,592,658 $ 5,402,728 Fund related expense (3,827,249 ) (3,349,541 ) Revenue, net of related expenses 1,765,409 2,053,187 C-Share financing: Broker commission advance repayments 63,542 65,212 Broker commission amortization (60,886 ) (51,744 ) Financing activity, net 2,656 13,468 Mutual fund administration revenue, net $ 1,768,065 $ 2,066,655 Income Taxes The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ from actual payments or assessments. The Company regularly assesses positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes . The Company records interest and penalties within income tax expense on the income statement. See Note 8 . On March 27, 2020, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act, “the CARES Act”, was signed into legislation which includes various tax provisions. The Company is evaluating the impact of the CARES Act and does not expect a material impact to the Company's consolidated financial statements. Earnings Per Share Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, which includes unvested restricted shares. Diluted EPS reflects the dilutive effect of any outstanding and unvested restricted stock units. See Note 9 . Recently Adopted Accounting Guidance In August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-13, “Fair Value Measurements.” This update makes certain revisions to existing disclosure requirements for fair value measurement. ASU 2018-13 does not change fair value measurements already required or permitted by existing standards. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020 without any impact on the Company’s consolidated financial statements. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments The following table summarizes the carrying value of these investments as of March 31, 2020 and December 31, 2019 : As of March 31, 2020 December 31, 2019 Fair value investments: Securities held in Consolidated Funds (a) $ 26,043,249 $ 36,248,360 Company sponsored investments 21,579,691 42,039,044 Company sponsored equity method investments 56,896,124 61,149,774 Total Investments $ 104,519,064 $ 139,437,178 (a) Of the securities held in the Consolidated Funds as of March 31, 2020 , the Company directly held $16.3 million and noncontrolling shareholders held $9.7 million . Of the securities held in the Consolidated Funds as of December 31, 2019 , the Company directly held $21.1 million and noncontrolling shareholders held $15.1 million . The components of net investment income (loss) are as follows: Three Months Ended 2020 2019 Realized gains (losses) $ (817,539 ) $ 2,907,366 Unrealized gains (losses) (22,467,598 ) 9,777,692 Dividends 894,413 1,496,439 Other investment income (loss) (7,368 ) 103,380 Investment income (loss), net $ (22,398,092 ) $ 14,284,877 Company Sponsored Equity Method Investments As of March 31, 2020 , our equity method investments consisted of the Diamond Hill Research Opportunities Fund and the Diamond Hill Core Bond Fund, and our ownership percentage in each of these investments was 29% and 30% , respectively. The following table includes the condensed summary financial information from the Company's equity method investments as of and for the period ended March 31, 2020 : As of March 31, 2020 Total assets $ 213,264,977 Total liabilities 23,227,019 Net assets 190,037,958 DHCM's portion of net assets 56,896,124 For the Three Months Ended March 31, 2020 Investment income $ 1,199,720 Expenses 340,399 Net realized gains (2,258,700 ) Net unrealized depreciation (14,319,744 ) Net loss (15,719,123 ) DHCM's portion of net loss (3,675,555 ) |
Fair Value Measurements (Notes)
Fair Value Measurements (Notes) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company determines the fair value of our cash equivalents and certain investments using the following broad levels listed below: Level 1 - Unadjusted quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations in which all significant inputs are observable. Level 3 - Valuations derived from techniques in which significant inputs are unobservable. We do not value any investments using Level 3 inputs. These levels are not necessarily an indication of the risk or liquidity associated with investments. The following table summarizes investments that are recognized in our consolidated balance sheet using fair value measurements (excluding investments classified as equity method investments) determined based upon the differing levels as of March 31, 2020 : Level 1 Level 2 Level 3 Total Cash equivalents (money market mutual funds) $ 94,884,074 $ — $ — $ 94,884,074 Fair value investments Securities held in Consolidated Funds (a) 13,103,369 12,939,880 — $ 26,043,249 Company sponsored investments 21,579,691 — — $ 21,579,691 (a) Of the securities held in the Consolidated Funds as of March 31, 2020 , the Company directly held $16.3 million and noncontrolling shareholders held $9.7 million . The Company determines transfers between fair value hierarchy levels at the end of the reporting period. There were no transfers in or out of the levels during the three months ended March 31, 2020 . Changes to fair values of the investments are recorded in the Company’s consolidated statements of income as investment income (loss), net. |
Line of Credit
Line of Credit | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Line of Credit | Line of Credit The Company has a committed Line of Credit Agreement (the "Credit Agreement") with a commercial bank that matures on December 25, 2020 and permits the Company to borrow up to $25.0 million . Borrowings under the Credit Agreement bear interest at a rate equal to LIBOR plus 1.00% . The Company pays a commitment fee on the unused portion of the facility, accruing at a rate per annum of 0.10% . The Company has no t borrowed under the Credit Agreement as of and for the period ended March 31, 2020 . The proceeds of the Credit Agreement may be used by the Company and its subsidiaries for ongoing working capital needs, to seed new and existing investment strategies, and for other general corporate purposes. The Credit Agreement contains representations, warranties and covenants that are customary for agreements of this type. |
Compensation Plans
Compensation Plans | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Compensation Plans | Compensation Plans Share-Based Payment Transactions The Company issues restricted stock awards under the 2014 Equity and Cash Incentive Plan (the "2014 Plan"). Restricted stock awards represent common shares issued and outstanding upon grant subject to vesting restrictions. The following table represents a roll-forward of outstanding restricted stock and related activity during the three months ended March 31, 2020 : Shares Weighted-Average Grant Date Price per Share Outstanding restricted stock as of December 31, 2019 227,844 $ 175.49 Grants issued 3,850 90.24 Grants vested (4,100 ) 138.04 Grants forfeited (1,225 ) 168.45 Total outstanding restricted stock as of March 31, 2020 226,369 $ 174.76 As of March 31, 2020 , 209,118 common shares remained available for awards under the 2014 Plan. Total deferred equity compensation related to unvested restricted stock was $18.7 million as of March 31, 2020 . Compensation expense related to restricted stock is calculated based upon the fair market value of the common shares on grant date. The Company's policy is to adjust compensation expense for forfeitures as they occur. The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows: Nine Months 2020 2021 2022 2023 2024 Thereafter Total $ 4,676,431 $ 5,257,317 $ 4,277,823 $ 2,226,661 $ 1,112,714 $ 1,135,804 $ 18,686,750 Stock Grant Transactions The following table represents common shares issued as part of our incentive compensation program during the three months ended March 31, 2020 and 2019 : Shares Issued Grant Date Value March 31, 2020 23,640 $ 3,396,359 March 31, 2019 24,048 $ 3,655,296 Deferred Compensation Plans The Company offers two deferred compensation plans, the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (collectively the “Plans”). Under the Plans, participants may elect to voluntarily defer, for a minimum of five years , certain incentive compensation, that the Company then contributes into the Plans. Participants are responsible for designating investment options for assets they contribute, and the distribution paid to each participant reflects any gains or losses on the assets realized while in the Plans. Assets held in the Plans are included in the Company’s investment portfolio, and the associated obligation to participants is included in deferred compensation liability. Deferred compensation liability was $22.9 million and $30.3 million as of March 31, 2020 and December 31, 2019 , respectively. |
Operating Lease
Operating Lease | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Operating Lease | Operating Lease The Company currently leases office space of approximately 37,829 square feet at one location. As of March 31, 2020 , the carrying value of this right-of use asset, which is included in property and equipment, net of deferred rent on the consolidated balance sheets, was approximately $2.4 million . As of March 31, 2020 , the carrying value of the lease liability, which is included in accounts payable and accrued expenses on the consolidated balance sheets, was approximately $3.0 million . The following table summarizes the total lease and operating expenses for the three months ended March 31, 2020 and 2019 : March 31, March 31, Three Months Ended $ 225,858 $ 252,073 The approximate future minimum lease payments under the operating lease are as follows: Future Minimum Lease Payments Nine Months 2020 2021 2022 2023 2024 Thereafter Total $ 468,134 $ 624,179 $ 624,179 $ 624,179 $ 624,179 $ 156,045 $ 3,120,895 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company has determined its interim tax provision projecting an estimated annual effective tax rate. A reconciliation of the statutory federal tax rate to the Company’s effective income tax rate is as follows: Three Months Ended 2020 2019 Statutory U.S. federal income tax rate 21.0 % 21.0 % State and local income taxes, net of federal benefit 4.5 % 4.1 % Internal revenue code section 162 limitations 2.3 % 0.5 % Other 0.2 % 0.1 % Unconsolidated effective income tax rate 28.0 % 25.7 % Impact attributable to redeemable noncontrolling interests (a) (58.8 )% (2.6 )% Effective income tax rate (30.8 )% 23.1 % (a) The provision for income taxes includes the impact of the operations of the Consolidated Funds which are not subject to federal income taxes. Accordingly, a portion of the Company’s earnings are not subject to corporate tax levels. Absent the impact attributable to redeemable noncontrolling interests, the estimated unconsolidated effective income tax rate would have been 28.0% . Our actual effective tax rate for fiscal 2020 could be materially different from the projected rate as of March 31, 2020 . The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2020 and December 31, 2019 , no valuation allowance was deemed necessary. FASB ASC 740, Income Taxes , prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are "more-likely-than-not" sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company did not record an accrual for tax related uncertainties or unrecognized tax positions as of March 31, 2020 or December 31, 2019 . The Company did not recognize any interest and penalties during the three months ended March 31, 2020 , related to uncertain tax positions. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The Company’s common shares outstanding consist of all shares issued and outstanding, including unvested restricted shares. Basic and diluted EPS are calculated under the two-class method. Restricted stock units are considered dilutive,although were no restricted stock units outstanding as of March 31, 2020 . The following table sets forth the computation for basic and diluted EPS and reconciliation between basic and diluted shares outstanding: Three Months Ended 2020 2019 Net Income (Loss) $ (2,528,368 ) $ 19,555,847 Less: Net loss (income) attributable to redeemable noncontrolling interest 4,058,476 (2,623,205 ) Net income attributable to common shareholders $ 1,530,108 $ 16,932,642 Weighted average number of outstanding shares - Basic 3,272,761 3,493,843 Dilutive impact of restricted stock units — 2,691 Weighted average number of outstanding shares - Diluted 3,272,761 3,496,534 Earnings per share attributable to common shareholders Basic $ 0.47 $ 4.85 Diluted $ 0.47 $ 4.84 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company indemnifies directors, officers and certain of its employees for certain liabilities that might arise from performance of their duties to the Company. From time to time, the Company is involved in legal matters relating to claims arising in the ordinary course of business. There are currently no such matters pending that the Company believes could have a material adverse effect on its consolidated financial statements. Additionally, in the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and that provide general indemnification obligations. Certain agreements do not contain any limits on the Company’s liability and could involve future claims that may be made against the Company that have not yet occurred. Therefore, it is not possible to estimate the Company’s potential liability under these indemnities. Further, the Company maintains insurance policies that may provide coverage against certain of these liabilities. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 , and for the three- month periods ended March 31, 2020 and 2019 , for Diamond Hill Investment Group, Inc. and its subsidiaries (referred to in these notes to the condensed consolidated financial statements as "the Company," "management," "we," "us," and "our") have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (the "SEC") Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair statement of the financial condition and results of operations at the dates and for the interim periods presented have been included. These unaudited condensed consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the " 2019 Form 10-K") as filed with the SEC. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions related to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. |
Reclassification | Reclassification Certain prior period amounts and disclosures may have been reclassified to conform to the current period's financial presentation. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the operations of the Company and its controlled subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. The Company holds certain investments in the Funds for general corporate investment purposes, to provide seed capital for newly formed strategies or to add capital to existing strategies. The Funds are organized in a series fund structure in which there are multiple mutual funds within one Trust. The Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the"1940 Act"). The Company performs its analysis at the individual mutual fund level and has concluded the mutual funds are voting rights entities ("VREs") because the structure of the investment product is such that the shareholders are deemed to have the power through voting rights to direct the activities that most significantly impact the entity's economic performance. To the extent material, these investment products are consolidated if Company ownership, directly or indirectly, represents a majority interest (greater than 50%). The Company records redeemable noncontrolling interests in consolidated investments for which the Company's ownership is less than 100%. The Company has consolidated the Diamond Hill International Fund and the Diamond Hill Global Fund (collectively the "Consolidated Funds") as of March 31, 2020 . |
Redeemable Noncontrolling Interest | Redeemable Noncontrolling Interest Redeemable noncontrolling interest represents third-party interests in the Consolidated Funds. This interest is redeemable at the option of the investors and therefore is not treated as permanent equity. Redeemable noncontrolling interest is recorded at redemption value, which approximates the fair value each reporting period. |
Segment Information | Segment Information Management has determined that the Company operates in one business segment, which is providing investment management and administration services to mutual funds, separately managed accounts, and a private investment fund. Therefore, the Company does not present disclosures relating to operating segments in annual or interim financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Accounts Receivable | Accounts Receivable |
Investments | Investments Management determines the appropriate classification of its investments at the time of purchase and re-evaluates its determination at each reporting period. Investments in the Funds we advise where the Company has neither control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds, are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income (loss) in the Company's consolidated statements of income. Investments classified as equity method investments represent investments in which the Company owns between 20-50% of the outstanding voting interests in the entity or when it is determined that the Company is able to exercise significant influence but not control over the investments. When using the equity method, the Company recognizes its respective share of the investee's net income or loss for the period, which is recorded as investment income in the Company's consolidated statements of income. |
Property and Equipment | Property and Equipment Property and equipment, consisting of leasehold improvements, right-of use lease assets, computer equipment, furniture, and fixtures, are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated lives of the assets. |
Revenue Recognition | Revenue Recognition – Mutual Fund Administration DHCM has an administrative and transfer agency services agreement with the Funds under which DHCM performs certain services for each Fund. These services include performance obligations such as mutual fund administration, fund accounting, transfer agency, and other related functions. These services are performed concurrently under our agreement with the Funds, all performance obligations to provide these administrative services are satisfied over time, and the Company recognizes the related revenue as time passes. Each Fund pays DHCM a fee for performing these services , which is calculated using an annual rate times the average daily net assets of each respective share class. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which we bill the Funds is no longer subject to market fluctuations. The Funds have selected and contractually engaged certain vendors to fulfill various services to benefit the Funds’ shareholders or to satisfy regulatory requirements of the Funds. These services include, among others, required shareholder mailings, federal and state registrations, and legal and audit services. DHCM, in fulfilling a portion of its role under the administration agreement with the Funds, acts as agent to pay these obligations of the Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates its fees and terms directly with the management and board of trustees of the Funds. Each year the Funds' board of Trustees reviews the fee that each Fund pays to DHCM and specifically takes into account the contractual expenses that DHCM pays on behalf of the Funds. As a result, DHCM is not involved in the delivery or pricing of these services, and bears no risk related to these services. Revenue has been recorded net of these Fund related expenses. In addition, DHCM advances the upfront commissions that are paid to brokers who sell Class C shares of the Funds. These advances are capitalized and amortized over 12 months to correspond with the repayments DHCM receives from the principal underwriter to recoup this commission advancement. Revenue Recognition – General Revenue Recognition – Investment Advisory Fees The Company's investment advisory contracts have a single performance obligation (the investment advisory services provided to the client) as the promised services are not separately identifiable from other promises in the contracts and, therefore, are not distinct. All performance obligations to provide advisory services are satisfied over time and the Company recognizes revenue as time passes. The fees we receive for our services under our investment advisory contracts are based on AUM, which changes based on the value of securities held under each advisory contract. These fees are thereby constrained and represent variable consideration, and are excluded from revenue until the AUM on which our client is billed is no longer subject to market fluctuations. The Company also provides services to Unified Managed Account ("UMA") programs in which an investment manager provides its strategy model portfolio to the sponsor of the UMA. The Company is paid a portion of the UMA fee for our services by the program sponsor at a pre-determined rate based on assets in the program. UMA program revenue was $0.7 million and $0.4 million for the three months ended March 31, 2020 and 2019 , respectively, and are included in investment advisory fees in the consolidated statements of income. Revenue Recognition – Variable Rate Fees The Company manages certain client accounts that provide for variable rate fees. These fees are calculated based on client investment results over rolling five |
Income Taxes | Income Taxes The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ from actual payments or assessments. The Company regularly assesses positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, Income Taxes |
Earnings Per Share | Earnings Per Share Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, which includes unvested restricted shares. Diluted EPS reflects the dilutive effect of any outstanding and unvested restricted stock units. See Note 9 . |
Recently Adopted Accounting Guidance | Recently Adopted Accounting Guidance In August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-13, “Fair Value Measurements.” This update makes certain revisions to existing disclosure requirements for fair value measurement. ASU 2018-13 does not change fair value measurements already required or permitted by existing standards. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020 without any impact on the Company’s consolidated financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Disaggregation of Revenue | Revenue earned during the three months ended March 31, 2020 and 2019 under contracts with clients include: Three Months Ended March 31, 2020 Investment advisory Mutual fund administration, net Total revenue Proprietary funds $ 23,454,563 $ 1,768,065 $ 25,222,628 Sub-advised funds and separately managed accounts 6,703,117 — 6,703,117 $ 30,157,680 $ 1,768,065 $ 31,925,745 Three Months Ended March 31, 2019 Investment advisory Mutual fund Total revenue Proprietary funds $ 23,579,877 $ 2,066,655 $ 25,646,532 Sub-advised funds and separately managed accounts 6,932,841 — 6,932,841 $ 30,512,718 $ 2,066,655 $ 32,579,373 |
Assets under Management (AUM) Subject to Incentive Fees and Incentive Fees | The table below shows AUM subject to variable rate fees and the amount of variable rate fees that would be recognized based upon investment results as of March 31, 2020 : As of March 31, 2020 AUM subject to variable rate fees Unearned variable rate fees Contractual Period Ending: Quarter Ending December 31, 2020 $ 48,120,435 $ 357,648 Quarter Ending September 30, 2021 227,221,875 7,465,020 Total $ 275,342,310 $ 7,822,668 |
Mutual Fund Administration Gross and Net Revenue | Mutual fund administration gross and net revenue are summarized below: Three Months Ended 2020 2019 Mutual fund administration: Administration revenue, gross $ 5,592,658 $ 5,402,728 Fund related expense (3,827,249 ) (3,349,541 ) Revenue, net of related expenses 1,765,409 2,053,187 C-Share financing: Broker commission advance repayments 63,542 65,212 Broker commission amortization (60,886 ) (51,744 ) Financing activity, net 2,656 13,468 Mutual fund administration revenue, net $ 1,768,065 $ 2,066,655 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Market Value of Investments | The following table summarizes the carrying value of these investments as of March 31, 2020 and December 31, 2019 : As of March 31, 2020 December 31, 2019 Fair value investments: Securities held in Consolidated Funds (a) $ 26,043,249 $ 36,248,360 Company sponsored investments 21,579,691 42,039,044 Company sponsored equity method investments 56,896,124 61,149,774 Total Investments $ 104,519,064 $ 139,437,178 (a) Of the securities held in the Consolidated Funds as of March 31, 2020 , the Company directly held $16.3 million and noncontrolling shareholders held $9.7 million . Of the securities held in the Consolidated Funds as of December 31, 2019 , the Company directly held $21.1 million and noncontrolling shareholders held $15.1 million . |
Schedule of Investment Income | The components of net investment income (loss) are as follows: Three Months Ended 2020 2019 Realized gains (losses) $ (817,539 ) $ 2,907,366 Unrealized gains (losses) (22,467,598 ) 9,777,692 Dividends 894,413 1,496,439 Other investment income (loss) (7,368 ) 103,380 Investment income (loss), net $ (22,398,092 ) $ 14,284,877 |
Equity Method Investments | The following table includes the condensed summary financial information from the Company's equity method investments as of and for the period ended March 31, 2020 : As of March 31, 2020 Total assets $ 213,264,977 Total liabilities 23,227,019 Net assets 190,037,958 DHCM's portion of net assets 56,896,124 For the Three Months Ended March 31, 2020 Investment income $ 1,199,720 Expenses 340,399 Net realized gains (2,258,700 ) Net unrealized depreciation (14,319,744 ) Net loss (15,719,123 ) DHCM's portion of net loss (3,675,555 ) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets Measured on Recurring Basis | The following table summarizes investments that are recognized in our consolidated balance sheet using fair value measurements (excluding investments classified as equity method investments) determined based upon the differing levels as of March 31, 2020 : Level 1 Level 2 Level 3 Total Cash equivalents (money market mutual funds) $ 94,884,074 $ — $ — $ 94,884,074 Fair value investments Securities held in Consolidated Funds (a) 13,103,369 12,939,880 — $ 26,043,249 Company sponsored investments 21,579,691 — — $ 21,579,691 (a) Of the securities held in the Consolidated Funds as of March 31, 2020 , the Company directly held $16.3 million and noncontrolling shareholders held $9.7 million . |
Compensation Plans (Tables)
Compensation Plans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Roll-Forward of Outstanding Restricted Stock Grants Issued | The following table represents a roll-forward of outstanding restricted stock and related activity during the three months ended March 31, 2020 : Shares Weighted-Average Grant Date Price per Share Outstanding restricted stock as of December 31, 2019 227,844 $ 175.49 Grants issued 3,850 90.24 Grants vested (4,100 ) 138.04 Grants forfeited (1,225 ) 168.45 Total outstanding restricted stock as of March 31, 2020 226,369 $ 174.76 |
Expense Recognition of Deferred Compensation | The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows: Nine Months 2020 2021 2022 2023 2024 Thereafter Total $ 4,676,431 $ 5,257,317 $ 4,277,823 $ 2,226,661 $ 1,112,714 $ 1,135,804 $ 18,686,750 |
Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value | The following table represents common shares issued as part of our incentive compensation program during the three months ended March 31, 2020 and 2019 : Shares Issued Grant Date Value March 31, 2020 23,640 $ 3,396,359 March 31, 2019 24,048 $ 3,655,296 |
Operating Lease (Tables)
Operating Lease (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Summary of Total Lease and Operating Expenses | The following table summarizes the total lease and operating expenses for the three months ended March 31, 2020 and 2019 : March 31, March 31, Three Months Ended $ 225,858 $ 252,073 |
Future Minimum Lease Payments under Operating Leases | The approximate future minimum lease payments under the operating lease are as follows: Future Minimum Lease Payments Nine Months 2020 2021 2022 2023 2024 Thereafter Total $ 468,134 $ 624,179 $ 624,179 $ 624,179 $ 624,179 $ 156,045 $ 3,120,895 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of the statutory federal tax rate to effective income tax rate | A reconciliation of the statutory federal tax rate to the Company’s effective income tax rate is as follows: Three Months Ended 2020 2019 Statutory U.S. federal income tax rate 21.0 % 21.0 % State and local income taxes, net of federal benefit 4.5 % 4.1 % Internal revenue code section 162 limitations 2.3 % 0.5 % Other 0.2 % 0.1 % Unconsolidated effective income tax rate 28.0 % 25.7 % Impact attributable to redeemable noncontrolling interests (a) (58.8 )% (2.6 )% Effective income tax rate (30.8 )% 23.1 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Computation for Earnings Per Share | The following table sets forth the computation for basic and diluted EPS and reconciliation between basic and diluted shares outstanding: Three Months Ended 2020 2019 Net Income (Loss) $ (2,528,368 ) $ 19,555,847 Less: Net loss (income) attributable to redeemable noncontrolling interest 4,058,476 (2,623,205 ) Net income attributable to common shareholders $ 1,530,108 $ 16,932,642 Weighted average number of outstanding shares - Basic 3,272,761 3,493,843 Dilutive impact of restricted stock units — 2,691 Weighted average number of outstanding shares - Diluted 3,272,761 3,496,534 Earnings per share attributable to common shareholders Basic $ 0.47 $ 4.85 Diluted $ 0.47 $ 4.84 |
Significant Accounting Polici_4
Significant Accounting Policies - Narrative (Detail) | 3 Months Ended | ||
Mar. 31, 2020USD ($)Segment | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Business Organization And Significant Accounting Policies [Line Items] | |||
Number of business segment | Segment | 1 | ||
Accounts receivable, related parties | $ 8,400,000 | $ 10,700,000 | |
Client performance period | 5 years | ||
Revenue | $ 31,925,745 | $ 32,579,373 | |
Advance commissions amortization period | 12 months | ||
Variable Rate Fees | |||
Business Organization And Significant Accounting Policies [Line Items] | |||
Revenue | $ 700,000 | $ 400,000 |
Significant Accounting Polici_5
Significant Accounting Policies - Revenues From Contracts with Customers (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 31,925,745 | $ 32,579,373 |
Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 30,157,680 | 30,512,718 |
Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,768,065 | 2,066,655 |
Proprietary funds | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 25,222,628 | 25,646,532 |
Proprietary funds | Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 23,454,563 | 23,579,877 |
Proprietary funds | Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 1,768,065 | 2,066,655 |
Sub-advised funds and separately managed accounts | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 6,703,117 | 6,932,841 |
Sub-advised funds and separately managed accounts | Investment advisory | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 6,703,117 | 6,932,841 |
Sub-advised funds and separately managed accounts | Mutual fund administration revenue, net | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 0 | $ 0 |
Significant Accounting Polici_6
Significant Accounting Policies - Assets under Management (AUM) Subject to Incentive Fees and Incentive Fees (Detail) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Quarter Ending December 31, 2019 | |
Principal Transaction Revenue [Line Items] | |
AUM subject to variable rate fees | $ 48,120,435 |
Unearned variable rate fees | 357,648 |
Quarter Ending September 30, 2021 | |
Principal Transaction Revenue [Line Items] | |
AUM subject to variable rate fees | 227,221,875 |
Unearned variable rate fees | 7,465,020 |
Total | |
Principal Transaction Revenue [Line Items] | |
AUM subject to variable rate fees | 275,342,310 |
Unearned variable rate fees | $ 7,822,668 |
Significant Accounting Polici_7
Significant Accounting Policies - Mutual Fund Administration Gross and Net Revenue (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue from External Customer [Line Items] | ||
Revenue | $ 31,925,745 | $ 32,579,373 |
Administration revenue, gross | ||
Revenue from External Customer [Line Items] | ||
Revenue | 5,592,658 | 5,402,728 |
Fund related expense | ||
Revenue from External Customer [Line Items] | ||
Expenses | 3,827,249 | 3,349,541 |
Revenue, net of related expenses | ||
Revenue from External Customer [Line Items] | ||
Revenue | 1,765,409 | 2,053,187 |
Broker Commission | ||
Revenue from External Customer [Line Items] | ||
Revenue | 63,542 | 65,212 |
Expenses | 60,886 | 51,744 |
Financing activity, net | ||
Revenue from External Customer [Line Items] | ||
Revenue | 2,656 | 13,468 |
Mutual fund administration revenue, net | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,768,065 | $ 2,066,655 |
Investments - Summary of Market
Investments - Summary of Market Value of Investments (Detail) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Investment Holdings [Line Items] | ||
Company sponsored equity method investments | $ 56,896,124 | $ 61,149,774 |
Total Investments | 104,519,064 | 139,437,178 |
Securities held in Consolidated Funds | ||
Investment Holdings [Line Items] | ||
Fair value investments | 26,043,249 | 36,248,360 |
Securities held in Consolidated Funds | Parent | ||
Investment Holdings [Line Items] | ||
Fair value investments | 16,300,000 | 21,100,000 |
Securities held in Consolidated Funds | Redeemable Noncontrolling Interest | ||
Investment Holdings [Line Items] | ||
Fair value investments | 9,700,000 | 15,100,000 |
Company sponsored investments | ||
Investment Holdings [Line Items] | ||
Fair value investments | $ 21,579,691 | $ 42,039,044 |
Investments - Investment Income
Investments - Investment Income (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | ||
Realized gains (losses) | $ (817,539) | $ 2,907,366 |
Unrealized gains (losses) | (22,467,598) | 9,777,692 |
Dividends | 894,413 | 1,496,439 |
Other investment income (loss) | (7,368) | 103,380 |
Investment income (loss), net | $ (22,398,092) | $ 14,284,877 |
Investments Schedule of Equity
Investments Schedule of Equity Method Investment Ownership (Details) | Mar. 31, 2020 |
Research Opportunities Fund | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage | 29.00% |
Core Bond Fund | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage | 30.00% |
Investments - Equity Method Inv
Investments - Equity Method Investments (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Investments, Debt and Equity Securities [Abstract] | |
Total assets | $ 213,264,977 |
Total liabilities | 23,227,019 |
Net assets | 190,037,958 |
DHCM's portion of net assets | 56,896,124 |
Investment income | 1,199,720 |
Expenses | 340,399 |
Net realized gains | (2,258,700) |
Net unrealized depreciation | (14,319,744) |
Net loss | (15,719,123) |
DHCM's portion of net loss | $ (3,675,555) |
Fair Value Measurements Summary
Fair Value Measurements Summary of Investment Values Based Upon Fair Value Hierarchy (Detail) | Mar. 31, 2020USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | $ 94,884,074 |
Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 94,884,074 |
Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Securities held in Consolidated Funds | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 26,043,249 |
Securities held in Consolidated Funds | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 13,103,369 |
Securities held in Consolidated Funds | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 12,939,880 |
Securities held in Consolidated Funds | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 0 |
Company sponsored investments | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 21,579,691 |
Company sponsored investments | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 21,579,691 |
Company sponsored investments | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | 0 |
Company sponsored investments | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value investments | $ 0 |
Fair Value Measurements Textual
Fair Value Measurements Textual (Details) - Securities held in Consolidated Funds - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | $ 26,043,249 | $ 36,248,360 |
Parent | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | 16,300,000 | 21,100,000 |
Redeemable Noncontrolling Interest | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value investments | $ 9,700,000 | $ 15,100,000 |
Line of Credit (Details)
Line of Credit (Details) - The Credit Agreement - Line of Credit | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Line of Credit Facility [Line Items] | |
Maximum borrowing amount | $ 25,000,000 |
Commitment fee rate on unused borrowings | 0.10% |
Borrowing under line of credit facility | $ 0 |
London Interbank Offered Rate (LIBOR) | |
Line of Credit Facility [Line Items] | |
Line of credit facility, interest rate description | 1.00% |
Compensation Plans - Roll-Forwa
Compensation Plans - Roll-Forward of Outstanding Restricted Stock Grants Issued (Detail) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Shares | |
Outstanding shares, Beginning Balance (shares) | 211,575 |
Outstanding shares, Ending Balance (shares) | 226,369 |
Restricted stock | |
Shares | |
Outstanding shares, Beginning Balance (shares) | 227,844 |
Shares issued (shares) | 3,850 |
Grants vested (shares) | (4,100) |
Grants forfeited (shares) | (1,225) |
Outstanding shares, Ending Balance (shares) | 226,369 |
Weighted-Average Grant Date Price per Share | |
Outstanding, Beginning of Period (usd per share) | $ / shares | $ 175.49 |
Grants issued (usd per share) | $ / shares | 90.24 |
Grants vested (usd per share) | $ / shares | 138.04 |
Grants forfeited (usd per share) | $ / shares | 168.45 |
Outstanding, End of Period (usd per share) | $ / shares | $ 174.76 |
Compensation Plans - Expense Re
Compensation Plans - Expense Recognition of Deferred Compensation (Detail) - Restricted stock | Mar. 31, 2020USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2019 (Remaining Period) | $ 4,676,431 |
2020 | 5,257,317 |
2021 | 4,277,823 |
2022 | 2,226,661 |
2023 | 1,112,714 |
Thereafter | 1,135,804 |
Total | $ 18,686,750 |
Compensation Plans - Schedule o
Compensation Plans - Schedule of Grants Issued and Grant Date Fair Value (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Issuance of stock grants | $ 3,396,359 | $ 3,655,296 |
Shares Issued | ||
Shares issued (shares) | 23,640 | 24,048 |
Grant Date Value | ||
Shares issued (shares) | 23,640 | 24,048 |
Issuance of stock grants | $ 3,396,359 | $ 3,655,296 |
Compensation Plans - Narrative
Compensation Plans - Narrative (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Deferred compensation equity | $ (18,686,750) | $ (20,331,890) |
Fully vested employee elected deferral period | 5 years | |
Deferred compensation liability | $ 22,867,172 | $ 30,342,204 |
2014 Equity and Cash Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common shares available for issuance (in shares) | 209,118 |
Operating Lease - Narrative (De
Operating Lease - Narrative (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($)ft²location | |
Leases [Abstract] | |
Area of operating lease | ft² | 37,829 |
Number of office space locations | location | 1 |
Operating lease, right-of-use asset | $ 2.4 |
Operating lease, liability | $ 3 |
Operating Lease - Summary of To
Operating Lease - Summary of Total Lease and Operating Expenses (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Lease and operating expenses | $ 225,858 | |
Lease and operating expenses | $ 252,073 |
Operating Lease - Future Minimu
Operating Lease - Future Minimum Lease Payments under Operating Leases (Detail) | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
Remainder of 2019 | $ 468,134 |
2020 | 624,179 |
2021 | 624,179 |
2022 | 624,179 |
2023 | 624,179 |
Thereafter | 156,045 |
Total future lease payments due | $ 3,120,895 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Detail) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Unconsolidated effective income tax rate | 28.00% | 25.70% |
Income Taxes - Effective Tax Ra
Income Taxes - Effective Tax Rate Reconciliation (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. federal income tax rate | 21.00% | 21.00% |
State and local income taxes, net of federal benefit | 4.50% | 4.10% |
Internal revenue code section 162 limitations | 2.30% | 0.50% |
Other | 0.20% | 0.10% |
Unconsolidated effective income tax rate | 28.00% | 25.70% |
Impact attributable to redeemable noncontrolling interests(a) | (58.80%) | (2.60%) |
Effective income tax rate | (30.80%) | 23.10% |
Earnings Per Share - Computatio
Earnings Per Share - Computation for Earnings Per Share (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net Income (Loss) | $ (2,528,368) | $ 19,555,847 |
Less: Net loss (income) attributable to redeemable noncontrolling interest | 4,058,476 | (2,623,205) |
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 1,530,108 | $ 16,932,642 |
Weighted average shares outstanding | ||
Weighted average number of outstanding shares - Basic (in shares) | 3,272,761 | 3,493,843 |
Dilutive impact of restricted stock units (in shares) | 0 | 2,691 |
Weighted average number of outstanding shares - Diluted (in shares) | 3,272,761 | 3,496,534 |
Earnings per share | ||
Basic (USD per share) | $ 0.47 | $ 4.85 |
Diluted (USD per share) | $ 0.47 | $ 4.84 |