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What changed in DIAMOND HILL INVESTMENT GROUP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DIAMOND HILL INVESTMENT GROUP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+255 added−252 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-29)

Top changes in DIAMOND HILL INVESTMENT GROUP INC's 2024 10-K

255 paragraphs added · 252 removed · 200 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeEquity 21,885 20,835 26,748 19,906 17,479 Alternatives Long-Short 1,725 1,752 1,998 2,056 3,605 Total Alternatives 1,725 1,752 1,998 2,056 3,605 Global/International Equity International 109 52 56 17 13 Global (a) — — — 16 22 Total Global/International Equity 109 52 56 33 35 Fixed Income Short Duration Securitized Bond 1,948 1,308 1,613 1,132 809 Core Fixed Income 1,735 792 622 541 300 Long Duration Treasury 26 33 51 62 52 Corporate Credit (b) — — — 2,020 1,147 High Yield (b) — — — 724 135 Total Fixed Income 3,709 2,133 2,286 4,479 2,443 Total-All Strategies 27,428 24,772 31,088 26,474 23,562 (Less: Investments in affiliated funds) (c) (10) (9) (60) (63) (163) Total AUM 27,418 24,763 31,028 26,411 23,399 Total AUA (d) 1,746 1,802 2,098 1,099 933 Total AUM and AUA $ 29,164 $ 26,565 $ 33,126 $ 27,510 $ 24,332 (a) The Diamond Hill Global Fund was liquidated on December 17, 2021.
Biggest changeEquity 21,963 21,885 20,835 Alternatives Long-Short 1,684 1,725 1,752 Total Alternatives 1,684 1,725 1,752 International Equity International 141 109 52 Total International Equity 141 109 52 Fixed Income Short Duration Securitized Bond 3,732 1,948 1,308 Core Fixed Income 2,416 1,735 792 Securitized Credit 52 — — Long Duration Treasury 24 26 33 Total Fixed Income 6,224 3,709 2,133 Total-All Strategies 30,012 27,428 24,772 (Less: Investments in affiliated funds) (a) — (10) (9) Total AUM 30,012 27,418 24,763 Total AUA (b) 1,913 1,746 1,802 Total AUM and AUA $ 31,925 $ 29,164 $ 26,565 (a) Certain of the Proprietary Funds own shares of the Diamond Hill Short Duration Securitized Bond Fund.
Growth Strategy The Company’s growth centers first and foremost on delivering an investment and client experience that enables investors to experience better outcomes over the long-term. The Company’s client alignment philosophy guides it to develop strategies and offer vehicles that meet clients’ objectives, capitalize on its investment team’s research capabilities, and align with its investment principles.
Growth and Distribution Strategy The Company’s growth centers first and foremost on delivering an investment and client experience that enables investors to experience better outcomes over the long-term. The Company’s client alignment philosophy guides it to develop strategies and offer vehicles that meet clients’ objectives, capitalize on its investment team’s research capabilities, and align with its investment principles.
DHCM also provides investment advisory and related services to the Diamond Hill Micro Cap Fund, LP (“DHMF”), a private fund, as well as, separately managed accounts, collective investment trusts (“CITs”), other pooled vehicles including sub-advised funds, and model delivery programs.
DHCM also provides investment advisory and related services to the Diamond Hill Micro Cap Fund, LP (“DHMF”), a private fund, as well as separately managed accounts (“SMAs”), collective investment trusts (“CITs”), other pooled vehicles including sub-advised funds, and model delivery programs.
Factors that may cause such actual results or experiences to differ materially from results discussed in the forward-looking statements include, but are not limited to: (i) any reduction in the Company's assets under management (“AUM”) or assets under advisement (“AUA”); (ii) withdrawal, renegotiation, or termination of investment advisory agreements; (iii) damage to the Company's reputation; (iv) failure to comply with investment guidelines or other contractual requirements; (v) challenges from the competition the Company faces in its business; (vi) challenges from industry trends towards lower fee strategies and model portfolio arrangements; (vii) adverse regulatory and legal developments; (viii) unfavorable changes in tax laws or limitations; (ix) interruptions in or failure to provide critical technological service by the Company or third parties; (x) adverse civil litigation and government investigations or proceedings; (xi) failure to adapt to or successfully incorporate technological changes, such as artificial intelligence, into the Company’s business; (xii) risk of loss on the Company's investments; (xiii) lack of sufficient capital on satisfactory terms; (xiv) losses or costs not covered by insurance; (xv) a decline in the performance of the Company's products; (xvi) changes in interest rates and inflation; (xvii) changes in national and local economic and political conditions; (xix) the continuing economic uncertainty in various parts of the world; (xviii) the after-effects of the COVID-19 pandemic and the actions taken in connection therewith; (xx) political uncertainty caused by, among other things, political parties, economic nationalist sentiments, tensions surrounding the current socioeconomic landscape; and (xix), other risks identified from time-to-time in our public documents on file with the U.S.
Factors that may cause such actual results or experiences to differ materially from results discussed in the forward-looking statements include, but are not limited to: (i) any reduction in the Company’s assets under management (“AUM”) or assets under advisement (“AUA”); (ii) withdrawal, renegotiation, or termination of investment advisory agreements; (iii) damage to the Company’s reputation; (iv) failure to comply with investment guidelines or other contractual requirements; (v) challenges from the competition the Company faces in its business; (vi) challenges from industry trends towards lower fee strategies and model portfolio arrangements; (vii) adverse regulatory and legal developments; (viii) unfavorable changes in tax laws or limitations; (ix) interruptions in or failure to provide critical technological service by the Company or third parties; (x) adverse civil litigation and government investigations or proceedings; (xi) failure to adapt to or successfully incorporate technological changes, such as artificial intelligence (“AI”), into the Company’s business; (xii) risk of loss on the Company’s investments; (xiii) lack of sufficient capital on satisfactory terms; (xiv) losses or costs not covered by insurance; (xv) a decline in the performance of the Company’s products; (xvi) changes in interest rates and inflation; (xvii) changes in national and local economic and political conditions; (xix) the continuing economic uncertainty in various parts of the world; (xviii) the effects of pandemics and the actions taken in connection therewith; (xx) political uncertainty caused by, among other things, political parties, economic nationalist sentiments, tensions surrounding the current socioeconomic landscape; and (xix), other risks identified from time-to-time in the Company’s public documents on file with the U.S.
Securities and Exchange Commission (“SEC”), including those discussed in Item 1A of this Form 10-K. Forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above, in Item 1A of this Form 10-K, and in our other public documents on file with the SEC.
Securities and Exchange Commission (“SEC”), including those discussed in Item 1A of this Form 10-K. Forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above, in Item 1A of this Form 10-K, and in the Company’s other public documents on file with the SEC.
The Company reduces the total AUM of each Fund that holds such shares by the AUM of the investments held in this affiliated Fund.
The Company reduces the total AUM of each Proprietary Fund that holds such shares by the AUM of the investments held in this affiliated fund.
ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended, impose certain duties on persons who are fiduciaries, prohibit certain transactions involving ERISA plan clients, and provide monetary penalties for violations of these prohibitions. The Department of Labor, which administers ERISA, has been increasingly active in proposing and adopting regulations affecting the asset management industry.
ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended, impose certain duties on persons who are fiduciaries, prohibit certain transactions involving ERISA plan clients, and provide monetary penalties for violations of these prohibitions. In recent years, the Department of Labor, which administers ERISA, has been active in proposing and adopting regulations affecting the asset management industry.
Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors.
Forward-looking statements are based on the Company’s expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors.
The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements, operational requirements, and disclosure obligations. All of the Funds are registered with the SEC under the Investment Company Act of 1940, as amended (“1940 Act”), and are required to make notice filings with all states where the Funds are offered for sale.
The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements, operational requirements, and disclosure obligations. All of the Proprietary Funds are registered with the SEC under the Investment Company Act of 1940, as amended (“Company Act”), and are required to make notice filings with all states where the Proprietary Funds are offered for sale.
Information contained on the Company’s website is not part of this Form 10-K or any other report or document that it files with, or furnishes to, the SEC. These reports are also available free of charge on the SEC’s website at http://www.sec.gov . 9 Table of Contents
Information contained on the Company’s website is not part of this Form 10-K or any other report or document that it files with, or furnishes to, the SEC. These reports are also available free of charge on the SEC’s website at http://www.sec.gov .
Business Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K (this “Form 10-K”), the documents incorporated herein by reference and statements, whether oral or written, made from time to time by representatives of Diamond Hill Investment Group, Inc., an Ohio corporation organized in 1990 (“DHIL”, and collectively with its subsidiaries, the “Company,” “we,” “our,” and “us”), may contain or incorporate “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended (the “PSLR Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Business Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K (this “Form 10-K”), the documents incorporated herein by reference and statements, whether oral or written, made from time to time by representatives of Diamond Hill Investment Group, Inc., an Ohio corporation organized in 1990 (“DHIL”, and collectively with its subsidiaries, the “Company”), may contain or incorporate “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended (the “PSLR Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Many of DHCM’s competitors are better known, offer a broader range of investment products, and have more dedicated resources for business development and marketing. 7 Table of Contents Regulation The Company is subject to various federal, state, and non-U.S. laws and regulations.
Many of DHCM’s competitors are better known, offer a broader range of investment products, and have more dedicated resources for business development and marketing. Regulation The Company is subject to various federal, state, and non-U.S. laws and regulations.
Fund Administration Activities DHCM provides fund administration services to the Funds. Fund administration services are broadly defined to include the following services: portfolio and regulatory compliance; treasury and financial oversight; oversight of back-office service providers, such as the custodian, fund accountant, and transfer agent; and general business management and governance of the Funds.
Fund administration services are broadly defined to include the following services: portfolio and regulatory compliance; treasury and financial oversight; oversight of back-office service providers, such as the custodian, fund accountant, and transfer agent; and general business management and governance of the Proprietary Funds.
Competition Competition in the investment management industry is intense, and DHCM’s competitors include investment management firms, broker-dealers, banks, and insurance companies, some of whom offer various investment alternatives, including passive index strategies.
Competition Competition in the investment management industry is intense, and DHCM’s competitors include investment management firms, broker-dealers, banks, and insurance companies, some of whom offer various investment alternatives, including passive index strategies, and strategies that invest in private equity and credit.
Workforce Data Attracting, developing, and retaining talented employees is integral to the Company’s human capital strategy and critical to its success. The Company depends on highly skilled personnel, with specialized expertise and extensive experience in the investment management industry. As of December 31, 2023 and December 31, 2022, the Company employed 129 full-time employees.
Workforce Data Attracting, developing, and retaining talented employees is integral to the Company’s human capital strategy and critical to its success. The Company depends on highly skilled personnel, with specialized expertise and extensive experience in the investment management industry.
The Company’s capacity as of December 31, 2023 was estimated to be $40 billion to $50 billion in domestic equities, $20 billion to $30 billion in international equities, and $50 billion to $65 billion in fixed income. The Company’s firm-level capacity increases with the development of new products or strategies.
The Company’s capacity as of December 31, 2024 was estimated to be $45 billion to $55 billion in domestic equities, $20 billion to $30 billion in international equities, and $50 billion to $70 billion in fixed income. The Company’s capacity increases with the development of new products or strategies.
If the Company determines the size of a strategy could impede its ability to meet investment return goals, the Company will close that strategy to new clients. The Company’s commitment to capacity discipline inherently impacts its ability to grow its AUM. Investment results will always be prioritized over asset accumulation.
If the Company determines the size of a strategy could impede its ability to meet its investment objectives, the Company, where possible, may close that strategy to new clients. The Company’s commitment to capacity discipline inherently impacts its ability to grow its AUM as investment results are prioritized over asset accumulation.
However, there is no assurance that the Funds will choose to continue their relationships with DHCM. Please see Item 1A for risk factors regarding this relationship. Human Capital The Company believes its people are its greatest asset, and each role within the firm contributes to its goals of generating excellent, long-term investment outcomes and building enduring client partnerships.
Please see Item 1A for risk factors regarding this relationship. Human Capital The Company believes its people are its greatest asset, and each role within the firm contributes to its goals of generating excellent, long-term investment outcomes and building enduring client partnerships.
Employees who embrace trust act with integrity, are authentic and honest in interactions with others, and put client interests ahead of all others. Employees who are motivated by giving and receiving respect communicate and provide feedback candidly, transparently, and with positive intent. They are humble in their assumptions and listen to better understand others.
Employees who are motivated by giving and receiving respect communicate and provide feedback candidly, transparently, and with positive intent. They are humble in their assumptions and listen to better understand others.
DHCM is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is the investment adviser and administrator for the Diamond Hill Funds, a series of open-end mutual funds (each a “Fund,” and collectively, the “Funds”).
DHCM is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is the investment adviser and administrator for the Diamond Hill Funds, a series of open-end mutual funds (each, a “Diamond Hill Fund”, and collectively, the “Diamond Hill Funds”) and the Diamond Hill Securitized Credit Fund, a closed-end registered investment company (“DHSC”, and collectively with the Diamond Hill Funds, the “Proprietary Funds”).
(d) AUA is primarily comprised of model portfolio assets related to the Large Cap and Select strategies. 5 Table of Contents Change in Assets Under Management For the Year Ended December 31, (in millions) 2023 2022 2021 2020 2019 AUM at beginning of the year $ 24,763 $ 31,028 $ 26,411 $ 23,399 $ 19,108 Net cash inflows (outflows) Diamond Hill Funds (599) (2,433) 1,994 879 (499) Separately managed accounts (416) (73) 168 (63) (394) Collective investment trusts 153 486 182 236 26 Other pooled vehicles 368 (221) (221) 477 190 (494) (2,241) 2,123 1,529 (677) Sale of High Yield-Focused Advisory Contracts — — (3,456) — — Net market appreciation/(depreciation) and income 3,149 (4,024) 5,950 1,483 4,968 Increase (decrease) during the year 2,655 (6,265) 4,617 3,012 4,291 AUM at end of the year 27,418 24,763 31,028 26,411 23,399 AUA at end of year 1,746 1,802 2,098 1,099 933 Total AUM and AUA at end of year $ 29,164 $ 26,565 $ 33,126 $ 27,510 $ 24,332 Capacity The Company’s ability to retain and grow its AUM has been, and will continue to be, primarily driven by delivering attractive long-term investment results, which requires adherence to capacity discipline.
(b) AUA is primarily comprised of model portfolio assets related to the Large Cap and Select strategies. 5 Table of Contents Change in Assets Under Management For the Year Ended December 31, (in millions) 2024 2023 2022 AUM at beginning of the year $ 27,418 $ 24,763 $ 31,028 Net cash inflows (outflows) Proprietary Funds 726 (599) (2,433) Separately managed accounts (1,269) (416) (73) Collective investment trusts 403 153 486 Other pooled vehicles (149) 368 (221) (289) (494) (2,241) Net market appreciation/(depreciation) and income 2,883 3,149 (4,024) Increase (decrease) during the year 2,594 2,655 (6,265) AUM at end of the year 30,012 27,418 24,763 AUA at end of year 1,913 1,746 1,802 Total AUM and AUA at end of year $ 31,925 $ 29,164 $ 26,565 Capacity The Company’s ability to retain and grow its AUM has been, and will continue to be, primarily driven by delivering attractive long-term investment results.
The following is a summary of the Company’s AUM by product and investment strategy, a roll-forward of the change in AUM, and a summary of AUA for each of the past five years ended December 31, 2023: Assets Under Management and Assets Under Advisement As of December 31, (in millions) 2023 2022 2021 2020 2019 Diamond Hill Funds $ 15,879 $ 14,745 $ 19,786 $ 17,615 $ 16,148 Separately managed accounts 6,617 6,220 7,232 5,611 5,222 Collective investment trusts 1,359 1,040 603 318 30 Other pooled vehicles 3,563 2,758 3,407 2,867 1,999 Total AUM 27,418 24,763 31,028 26,411 23,399 Total AUA 1,746 1,802 2,098 1,099 933 Total AUM and AUA $ 29,164 $ 26,565 $ 33,126 $ 27,510 $ 24,332 4 Table of Contents Assets Under Management by Investment Strategy As of December 31, (in millions) 2023 2022 2021 2020 2019 U.S.
The following is a summary of the Company’s AUM by product and investment strategy, a roll-forward of the change in AUM, and a summary of AUA for each of the past three years ended December 31, 2024: Assets Under Management and Assets Under Advisement As of December 31, (in millions) 2024 2023 2022 Proprietary Funds $ 18,097 $ 15,879 $ 14,745 Separately managed accounts 6,108 6,617 6,220 Collective investment trusts 1,947 1,359 1,040 Other pooled vehicles 3,860 3,563 2,758 Total AUM 30,012 27,418 24,763 Total AUA 1,913 1,746 1,802 Total AUM and AUA $ 31,925 $ 29,164 $ 26,565 4 Table of Contents Assets Under Management by Investment Strategy As of December 31, (in millions) 2024 2023 2022 U.S.
The preceding descriptions of the regulatory and statutory provisions applicable to DHCM are not exhaustive or complete and are qualified in their entirety by reference to the respective statutory or regulatory provisions. Failure to comply with these requirements could have a material adverse effect on DHCM’s business.
The preceding descriptions of the regulatory and statutory provisions applicable to DHCM are not exhaustive or complete and are qualified in their entirety by reference to the respective statutory or regulatory provisions.
The Company focuses its efforts primarily on asset allocators with centralized research teams, allowing efficient delivery of services to a larger and more diverse client base. These highly sophisticated buyers conduct deep research and pair the Company’s strategies with complementary strategies to meet holistic client objectives.
The Company’s distribution team focuses primarily on asset allocators with centralized research teams, allowing it to efficiently deliver services to a large and diversified client base. These asset allocators tend to be highly sophisticated buyers, who conduct deep research and pair the Company’s strategies with complementary strategies to meet holistic client objectives.
Contractual Relationships with the Funds DHCM is highly dependent on its contractual relationships with the Funds. If any of DHCM’s advisory or administration agreements with the Funds were terminated or not renewed, or were amended or modified to reduce fees, DHCM would be materially and adversely affected.
If any of DHCM’s advisory or administration agreements with the Diamond Hill Funds were terminated or not renewed, or were amended or modified to reduce fees, DHCM would be materially and adversely affected. DHCM generated approximately 66%, 68%, and 71% of its 2024, 2023, and 2022 revenues, respectively, from its advisory and administration agreements with the Diamond Hill Funds.
DHCM generated approximately 68%, 71%, and 69% of its 2023, 2022, and 2021 revenues, respectively, from its advisory and administration agreements with the Funds. DHCM believes that it has strong relationships with the Funds and their board of trustees, and DHCM has no reason to believe that these advisory or administration contracts will not be renewed in the future.
DHCM believes that it has strong relationships with the Diamond Hill Funds and their board of trustees, and DHCM has no reason to believe that these advisory or administration contracts will not be renewed in the future. However, there is no assurance that the Diamond Hill Funds will choose to continue their relationships with DHCM.
They embrace, value, and celebrate diversity, inclusion, and differences in all forms. The Company’s culture revolves around the fact that DHCM is a fiduciary first and foremost. The primary focus is serving its clients. The Company’s long-term, valuation-disciplined investment principles are foundational to its culture and have been consistently implemented since the firm’s inception.
They embrace, value, and celebrate diversity, inclusion, and differences in all forms, and recognize that transparency and accountability are critical to driving real change within the firm, in the industry, and within their community. The Company’s culture revolves around the fact that DHCM is a fiduciary first and foremost. The primary focus is serving its clients.
DHCM is paid for its services by the program sponsors at a pre-determined rate based on AUA in the model delivery programs. DHCM does not have discretionary investment authority over individual client accounts in the model delivery programs, and therefore, the AUA is not included in the Company’s AUM.
DHCM does not have discretionary investment authority over individual client accounts in the model delivery programs, and therefore, the AUA is not included in the Company’s AUM. The Company’s revenues are highly dependent on both the value and composition of AUM and AUA.
Equity Large Cap $ 17,307 $ 16,478 $ 21,285 $ 15,075 $ 12,316 Small-Mid Cap 2,588 2,646 3,183 2,810 3,243 Mid Cap 1,023 899 1,165 992 569 Select 593 392 438 446 528 Small Cap 255 306 597 556 795 Large Cap Concentrated 98 99 64 27 28 Micro Cap 21 15 16 — — Total U.S.
Equity Large Cap $ 17,702 $ 17,307 $ 16,478 Small-Mid Cap 2,009 2,588 2,646 Mid Cap 1,082 1,023 899 Select 755 593 392 Small Cap 253 255 306 Large Cap Concentrated 129 98 99 Micro Cap 33 21 15 Total U.S.
As of December 31, 2023, females represented 50% of DHIL’s board of directors (“Board”), 66% of the Company’s management team, and approximately 32% of its employees. As of December 31, 2023, racial or ethnic minorities represented approximately 14% of the Company’s workforce and 17% of the Board. Please see additional demographic details on the Company’s website.
As of December 31, 2024, racial or ethnic minorities represented approximately 14% of the Company’s workforce and 14% of the Board. Please see additional demographic details on the Company’s website. Competitive Pay and Benefits The Company’s competitive compensation and benefits are designed to help attract, retain, and motivate employees who embody its values.
Culture The Company’s culture emphasizes four key values: curiosity, ownership, trust and respect. The way its employees embody these core values creates the Company’s culture. The culture allows the Company to attract and retain employees who share its commitment to client alignment, are motivated by investment excellence, and are committed to delivering excellent outcomes.
The Company aligns its employees’ compensation with client outcomes, individual and team results, and company performance. Culture The Company’s culture emphasizes four key values: curiosity, ownership, trust and respect. The way its employees embody these core values creates the Company’s culture.
Employees who are curious focus on continuous self-improvement and have a passion for learning. They are open-minded, seek differing perspectives, and go beyond surface-level assumptions. Employees who think and act like business owners naturally embrace a long-term mindset. They lead by example and accept accountability for ensuring strong client outcomes.
Employees who think and act like business owners naturally embrace a long-term mindset. They lead by example and accept accountability for ensuring strong client outcomes. Employees who embrace trust act with integrity, are authentic and honest in interactions with others, and put client interests ahead of all others.
The average employee tenure is approximately eight years, and nearly one-third of its employees have been with the Company more than 10 years. The Company’s five-year average employee turnover rate is approximately 7%.
The Company’s overall headcount has remained relatively consistent over the last five years, and was 127 as of December 31, 2024, two employees fewer than as of December 31, 2023. The average employee tenure is 8.3 years, and more than one-third of its employees have been with the Company more than 10 years.
These asset allocators include centralized research teams at institutional consulting firms, wirehouses, banks, independent broker dealers, and independent registered investment advisory firms.
These asset allocators include centralized research teams at institutional consulting firms, wirehouses, banks, independent broker dealers (“IBD”), and independent registered investment advisory firms (“RIAs”). The Company also believes having a focus on plan sponsors with their own investment research teams is important. The Company’s distribution team members possess a deep understanding of the Company’s clients’ business models and needs.
All members of the investment team believe in, and adhere to, the same investment principles. The Company’s employees invest alongside its clients, and portfolio managers have significant personal investments in the strategy or strategies they manage. Diversity, Equity, and Inclusion The Company views diversity, equity, and inclusion (“DEI”) as essential parts of its business and operating model.
The Company’s employees invest alongside its clients, and portfolio managers have significant personal investments in the strategy or strategies they manage. 8 Table of Contents SEC Filings The Company maintains a website at www.diamond-hill.com .
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DHCM also has certain agreements that allow it to earn performance-based fees if investment returns exceed targeted amounts over a specified measurement period. Model Delivery Programs - Assets Under Advisement DHCM provides strategy-specific model portfolios to sponsors of model delivery programs.
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Model Delivery Programs - Assets Under Advisement DHCM provides strategy-specific model portfolios to sponsors of model delivery programs. DHCM is paid for its services by the program sponsors at a pre-determined rate based on AUA in the model delivery programs.
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The Company’s revenues are highly dependent on both the value and composition of AUM and AUA.
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As an active investment boutique, the Company brings long-term oriented investment strategies to clients. Each strategy is designed to deliver excellent, long-term investment outcomes. It is imperative that the Company attracts and retains a diversified client base that philosophically aligns with the Company’s investment principles, long-term orientation, and understands the outcomes the Company can provide.
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(b) The Diamond Hill Corporate Credit and the Diamond Hill High Yield investment advisory contracts (the “High Yield-Focused Advisory Contracts”) were sold to Brandywine Global Investment Management, LLC (“Brandywine Global”) effective July 30, 2021. (c) Certain of the Funds own shares of the Diamond Hill Short Duration Securitized Bond Fund.
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The team takes a consultative, customized approach to developing and maintaining relationships. Creating a customized approach requires integrating marketing throughout the sales process and client lifecycle.
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The Company aims to partner with investors who maintain a long-term orientation and align with its investment principles. 6 Table of Contents Distribution Channels The Company offers a variety of investment strategies designed for long-term strategic allocations from institutionally-oriented investors in key asset classes, aligning its investment team’s competitive advantages with its clients’ needs.
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A proactive, investment content-led marketing effort with a compelling digital ecosystem allows the Company to deliver the right content to the right clients/prospects in the right format at all stages of the client lifecycle. 6 Table of Contents Distribution technology and business intelligence, including the use of third-party data sets and advanced analytics, provide a solid and scalable foundation for all client interactions.
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The following table is a summary of AUM by distribution channel for each of the five years ended December 31, 2023: AUM and AUA by Distribution Channel As of December 31, (in millions) 2023 2022 2021 2020 2019 Diamond Hill Funds: Registered investment adviser $ 4,329 $ 3,787 $ 4,633 $ 4,315 $ 3,603 Independent broker-dealer 4,597 4,135 5,304 4,274 3,563 Wirehouse 2,902 2,843 4,195 3,529 3,026 Bank trust 1,777 1,718 2,256 2,546 2,907 Defined contribution 2,090 2,085 3,249 2,716 2,723 Other 184 177 149 235 326 Total Diamond Hill Funds 15,879 14,745 19,786 17,615 16,148 Separately managed accounts: Institutional consultant 2,782 2,432 2,960 2,504 2,397 Financial intermediary 2,986 3,067 3,594 2,371 1,777 Direct 849 721 678 736 1,048 Total separately managed accounts 6,617 6,220 7,232 5,611 5,222 Collective investment trusts 1,359 1,040 603 318 30 Other pooled vehicles 3,563 2,758 3,407 2,867 1,999 Total AUM 27,418 24,763 31,028 26,411 23,399 Total AUA (a) 1,746 1,802 2,098 1,099 933 Total AUM and AUA $ 29,164 $ 26,565 $ 33,126 $ 27,510 $ 24,332 (a) 100% of AUA is from financial intermediaries.
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Compiling, centralizing, and analyzing data regarding trends, prospects, purchasing patterns, and engagement informs resource allocation and segmentation of clients, enhancing the effectiveness of the Company’s distribution efforts. The Company’s intention is to deliver investment strategies to clients in the investment vehicle that best meets their unique needs. Fund Administration Activities DHCM provides fund administration services to the Proprietary Funds.
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The Company’s employees are based in 12 states, and approximately 80% of its employees reside in Ohio. 8 Table of Contents Competitive Pay and Benefits The Company’s competitive compensation and benefits are designed to help attract, retain, and motivate employees who embody its values. The Company aligns its employees’ compensation with client outcomes, individual and team results, and company performance.
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Failure to comply with these requirements could have a material adverse effect on DHCM’s business. 7 Table of Contents Contractual Relationships with the Diamond Hill Funds DHCM is highly dependent on its contractual relationships with the Diamond Hill Funds.
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DEI is embedded in the policies, practices, and strategic initiatives of the Company, and is linked to its core values. The Company believes clients are best served by decision making that engages and encourages varied perspectives.
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The Company’s five-year average employee turnover rate is 7.4%. The Company’s employees are based in 12 states, and approximately 80% of its employees reside in Ohio. As of December 31, 2024, females represented 43% of DHIL’s board of directors (“Board”), 67% of the Company’s management team, and approximately 33% of its employees.
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DEI is a continuous journey, and the Company recognizes that transparency and accountability are critical to driving real change within the firm, in the industry, and within its community. Learn more about the Company’s DEI philosophy, commitments and annual progress on the Company’s website.
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The culture allows the Company to attract and retain employees who share its commitment to client alignment, are motivated by investment excellence, and are committed to delivering excellent outcomes. Diversity, equity, and inclusion is embedded in the policies, practices, and strategic initiatives of the Company, ensuring we have teams that encourage varied points of view.
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The information on our website, including our DEI annual reports, is not incorporated by reference in or otherwise considered a part of this Form 10-K or any other report or document we file with, or furnish to, the SEC.
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The Company believes clients are best served by decision making that engages diverse perspectives. Our culture manifests itself in a variety of ways. Employees who are curious focus on continuous self-improvement and have a passion for learning. They are open-minded, seek differing perspectives, and go beyond surface-level assumptions.
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The Company’s DEI initiatives are driven by employees across functional teams who are enthusiastic about leading sustainable efforts under four areas of focus: workforce diversity, inclusive culture, vendor and policy, and philanthropy and community. SEC Filings The Company maintains a website at www.diamond-hill.com .
Added
The Company’s long-term, valuation-disciplined investment principles are foundational to its culture and have been consistently implemented since the firm’s inception. All members of the investment team believe in, and adhere to, the same investment principles.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSimilarly, in recent years, there has been a trend in clients shifting their assets from higher fee mutual funds and separately managed accounts to lower fee model portfolio arrangements. As a result, a shift in the Company’s client assets from AUM to AUA could result in a decrease in Company revenues.
Biggest changeAs a result, a shift in the Company’s AUM from higher to lower fee generating clients and strategies could result in a decrease in revenues even if its AUM increases or remains unchanged. Similarly, in recent years, there has been a trend in clients shifting their assets from higher fee mutual funds and SMAs to lower fee model portfolio arrangements.
Investors should carefully consider these risks before making an investment decision regarding the Company’s securities. There may be additional risks of which the Company is currently unaware, or which the Company currently considers to be immaterial.
Investors should carefully consider these risks before making an investment decision regarding the Company’s securities. There may be additional risks of which the Company is currently unaware, or of which the Company currently considers to be immaterial.
The Company competes with other providers of investment services primarily based upon its philosophy, performance, and client service. Some institutions have a broader array of products and distribution channels, which makes it more difficult for the Company to compete.
The Company competes with other providers of investment services primarily based upon its philosophy, performance, and quality of client service. Some institutions have a broader array of products and distribution channels, which makes it more difficult for the Company to compete.
Whether information is corrupted, stolen, or inadvertently disclosed, and regardless of the type and nature of the information ( e.g. , proprietary information about the Company’s business or personal information about clients or employees), it could have various adverse impacts on, and be materially harmful to, the Company, including the following: • The Company’s reputation could be harmed, resulting in the loss of clients, vendors, and employees or making payments or concessions to such persons to maintain its relationships with them; • The Company’s inability to operate its business fully, even if temporarily, and thus, fulfill contracts with clients or vendors, could result in termination of contracts and loss of revenue; • Harm suffered by clients or vendors whose contracts have been breached, or by clients, vendors, or employees whose information is compromised, could result in costly litigation against us; • The Company’s need to focus attention on remediation of a cybersecurity issue could take its attention away from the operation of its business, resulting in lost revenue; • The Company could incur costs to repair systems made inoperable by a cyberattack and to make changes to its systems to reduce future cyber threats.
Whether information is corrupted, stolen, or inadvertently disclosed, and regardless of the type and nature of the information ( e.g. , proprietary information about the Company’s business or personal information about clients or employees), it could have various adverse impacts on, and be materially harmful to, the Company, including the following: • The Company’s reputation could be harmed, resulting in the loss of clients, vendors, and employees or making payments or concessions to such persons to maintain its relationships with them; • The Company’s inability to operate its business fully, even if temporarily, and thus, fulfill contracts with clients or vendors, could result in termination of contracts and loss of revenue; • Harm suffered by clients or vendors whose contracts have been breached, or by clients, vendors, or employees whose information is compromised, could result in costly litigation against the Company; • The Company’s need to focus attention on remediation of a cybersecurity issue could take its attention away from the operation of its business, resulting in lost revenue; 11 Table of Contents • The Company could incur costs to repair systems made inoperable by a cyberattack and to make changes to its systems to reduce future cyber threats.
Investor interest in the valuation of the Company’s fixed income strategies are affected by changes in interest rates and the overall credit environment. In addition, the majority of the Company’s existing AUM is managed in primarily long-only, equity investment strategies, which exposes it to greater risk than certain of its competitors who may manage assets in more diverse strategies.
Investor interest in the Company’s fixed income strategies is affected by changes in interest rates and the overall credit environment. In addition, the majority of the Company’s existing AUM is managed in primarily long-only, equity investment strategies, which exposes it to greater risk than certain of its competitors who may manage assets in more diverse strategies.
The Company’s business is subject to a variety of federal securities laws, including the Advisers Act, the 1940 Act, the Securities Act, the Exchange Act, the Sarbanes-Oxley Act of 2002, the U.S. PATRIOT Act of 2001, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, each as amended.
The Company’s business is subject to a variety of federal securities laws, including the Advisers Act, the Company Act, the Securities Act, the Exchange Act, the Sarbanes-Oxley Act of 2002, the U.S. PATRIOT Act of 2001, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, each as amended.
Natural disasters, outbreaks of epidemics or pandemics, terrorist attacks, extreme weather events or other unpredictable events could adversely affect the Company’s revenues, expenses, and net income by: • Decreasing investment valuations in, and returns on, the investment portfolios that the Company manages and its corporate investments, thus, causing reductions in revenue; • Causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive; • Reducing the availability of key personnel necessary to conduct the Company’s business activities; • Interrupting the Company’s business operations or those of critical service providers; • Triggering technology delays or failures; and/or 14 Table of Contents • Requiring substantial capital expenditures and operating expenses to restore the Company’s operations.
Natural disasters, outbreaks of epidemics or pandemics, terrorist attacks, extreme weather events or other unpredictable events could adversely affect the Company’s revenues, expenses, and net income by: • Decreasing investment valuations in, and returns on, the investment portfolios that the Company manages and its corporate investments, thus, causing reductions in AUM, AUA, and revenue; • Causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive; • Reducing the availability of key personnel necessary to conduct the Company’s business activities; • Interrupting the Company’s business operations or those of critical service providers; • Triggering technology delays or failures; and/or • Requiring substantial capital expenditures and operating expenses to restore the Company’s operations.
The Company and its directors, officers, and employees could be subject to lawsuits or regulatory proceedings for violations of such laws and regulations, which could result in the payment of fines or penalties and cause reputational harm to the Company, which could negatively affect its financial condition and results of operations, as well as divert management’s attention from its operations.
The Company and its directors, officers, and employees could be subject to lawsuits or regulatory proceedings for violations of such laws and 13 Table of Contents regulations, which could result in the payment of fines or penalties and cause reputational harm to the Company, which could negatively affect its financial condition and results of operations, as well as divert management’s attention from its operations.
If current or potential clients decide to use one of the Company’s competitors, it could face a significant decline in market share, AUM, AUA, revenues, and net income.
If current or potential clients decide to use one of the Company’s competitors, it could face a significant decline in AUM, AUA, revenues, and net income.
If the Company fails to deliver acceptable investment results for its clients, both in the short and long-term, the Company could experience diminished investor interest and a decreased level of AUM. Investment strategies are assessed and rated by independent third parties, including rating agencies, industry analysts, and publications. Investors can be influenced by such ratings.
If the Company fails to deliver acceptable investment results for its clients, both in the short and long-term, the Company could experience diminished investor interest and a decrease in its AUM. Investment strategies are assessed and rated by independent third parties, including rating agencies, industry analysts, and publications. Investors can be influenced by such ratings.
If a strategy receives an adverse report, it could negatively impact the Company’s AUM and revenue. The Company’s success depends on its key personnel, and its financial performance could be negatively affected by the loss of their services.
If a Company strategy receives an adverse report, it could negatively impact the Company’s AUM and revenues. The Company’s success depends on its key personnel, and its financial performance could be negatively affected by the loss of their services.
It may not be as successful as its competitors incorporating artificial intelligence (“AI”) into its business or adapting to a rapidly changing marketplace. The Company’s competitors may be larger, more diversified, better funded, and have access to more advanced technology, including AI.
It may not be as successful as its competitors incorporating AI into its business or adapting to a rapidly changing marketplace. The Company’s competitors may be larger, more diversified, better funded, and have access to more advanced technology, including generative AI.
The Funds’ agreements are subject to annual approval by either: (i) their board of trustees, or (ii) a vote of the majority of the outstanding voting securities of each Fund. These agreements automatically terminate in the event of their assignment by either DHCM or the Funds.
The Diamond Hill Funds’ agreements are subject to annual approval by either: (i) their board of trustees, or (ii) a vote of the majority of the outstanding voting securities of each Diamond Hill Fund. 10 Table of Contents These agreements automatically terminate in the event of their assignment by either DHCM or the Diamond Hill Funds.
The loss of any of the Diamond Hill Large Cap Fund, the Diamond Hill Long-Short Fund, or the Diamond Hill Small-Mid Cap Fund contracts would have a material adverse effect on DHCM.
The loss of either the Diamond Hill Large Cap Fund or Diamond Hill Long-Short Fund contracts would have a material adverse effect on DHCM.
If DHCM’s advisory or administration agreements with the Funds were terminated or not renewed, or were amended or modified to reduce fees, DHCM would be materially and adversely affected. Generally, these agreements are terminable by either party upon 60 days’ prior written notice without penalty.
DHCM is highly dependent on its contractual relationships with the Diamond Hill Funds. If DHCM’s advisory or administration agreements with the Diamond Hill Funds were terminated or not renewed, or were amended or modified to reduce fees, DHCM would be materially and adversely affected. Generally, these agreements are terminable by either party upon 60 days’ prior written notice without penalty.
DHCM believes that it has strong relationships with the Funds and their board of trustees, and it has no reason to believe that these advisory or administration contracts will not be renewed in the future.
DHCM believes that it has strong relationships with the Diamond Hill Funds and their board of trustees, and it has no reason to believe that these advisory or administration contracts will not be renewed in the future. However, there can be no assurance that the Diamond Hill Funds will choose to continue their relationships with DHCM.
The Company is subject to federal, state, and local income taxes in the United States. Tax authorities may disagree with certain positions that the Company has taken or may implement changes in tax policy, which may result in the assessment of additional taxes on the Company. The Company regularly assesses the appropriateness of its tax positions and reporting.
Tax authorities may disagree with certain positions that the Company has taken or may implement changes in tax policy, which may result in the assessment of additional taxes on the Company. The Company regularly assesses the appropriateness of its tax positions and reporting.
The Company’s investment products compete against investment products and services from: • Asset management firms; 10 Table of Contents • Mutual fund companies; • Commercial banks and thrift institutions; • Insurance companies; • Exchange-traded funds; • Private funds, including hedge funds and private equity funds; and • Brokerage and investment banking firms.
The Company’s investment products compete against investment products and services from: • Asset management firms; • Mutual fund companies; • Commercial banks and thrift institutions; • Insurance companies; • Interval and other closed-end funds; • Exchange-traded funds; • Private funds, including hedge funds and private equity and credit funds; and • Brokerage and investment banking firms.
If the Company misjudged the point at which it would be optimal to close an investment strategy, the investment results of the strategy could be negatively impacted. The Company has closed investment strategies in the past and may do so again in the future. As of December 31, 2023, the Company does not have any closed investment strategies.
If the Company misjudged the point at which it would be 9 Table of Contents optimal to close an investment strategy, the investment results of the strategy could be negatively impacted. The Company has closed investment strategies in the past and may do so again in the future.
DHCM generated approximately 68%, 71%, and 69% of its 2023, 2022, and 2021 revenues, respectively, from its advisory and administration agreements with the Funds, including 30%, 12%, and 10% from the advisory contracts with the Diamond Hill Large Cap Fund, the Diamond Hill Long-Short Fund, and the Diamond Hill Small-Mid Cap Fund, respectively, during 2023.
DHCM generated approximately 66%, 68%, and 71% of its 2024, 2023, and 2022 revenues, respectively, from its advisory and administration agreements with the Diamond Hill Funds, including 29% and 11% from the advisory contracts with the Diamond Hill Large Cap Fund and the Diamond Hill Long-Short Fund during 2024.
There is a risk that these vendors will not be able to perform in an adequate and timely manner. If the Company loses the availability of employees, or if it is unable to respond adequately to such an event in a timely manner, revenues, expenses, and net income could be negatively impacted.
There is a risk that these vendors will not be able to perform in an adequate and timely manner. If the Company’s operations or its employees’ ability to perform their duties is temporarily disrupted, or if the Company is unable to respond adequately to such an event in a timely manner, revenues, expenses, and net income could be negatively impacted.
Those changes could include, among other things, obtaining additional technologies as well as employing additional personnel and training employees; • The interruption of the Company’s business or theft of proprietary information could harm its ability to compete; and • Any losses that the Company may be responsible to bear may not be covered by insurance. 12 Table of Contents Any of the above potential impacts of a cybersecurity incident could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Those changes could include, among other things, obtaining additional technologies as well as employing additional personnel and training employees; • The interruption of the Company’s business or theft of proprietary information could harm its ability to compete; and • Any losses that the Company may be responsible to bear may not be covered by insurance.
The Company’s future success depends, in part, upon its ability to address client needs by using technology to provide products and services that will satisfy client demands, as well as to create additional efficiencies in its operations.
The effective use of technology increases efficiency and enables financial institutions to better serve clients while reducing costs. The Company’s future success depends, in part, upon its ability to address client needs by using technology to provide products and services that will satisfy client demands, as well as to create additional efficiencies in its operations.
The Company’s investment approach may underperform other investment approaches during certain market conditions. The Company’s investment strategies are best suited for investors with long-term investment time horizons. The Company’s investment strategies may not perform well during certain periods of time. Additionally, the Company could have common positions and industry concentrations across its strategies at the same time.
The Company’s investment approach may underperform other investment approaches during certain market conditions. The Company’s investment strategies are best suited for investors with long-term investment time horizons. The Company’s investment strategies may not perform well during certain periods of time.
The sale of a large number of shares by any such individual could temporarily depress the market price of its shares. Regulatory Risks Changes in tax laws and unanticipated tax obligations could have an adverse impact on the Company’s financial condition, results of operations, and cash flow.
As a result, shareholders may not be able to sell their shares on short notice, and the sale of a large number of shares at one time could temporarily depress the market price. Regulatory Risks Changes in tax laws and unanticipated tax obligations could have an adverse impact on the Company’s financial condition, results of operations, and cash flow.
The Company compensates some of these intermediaries for access to investors and for various marketing services provided. These distribution sources and client bases may not continue to be accessible to the Company for reasonable terms, or at all. If such access is restricted or eliminated, it could have an adverse effect on the Company’s results of operations.
The Company’s ability to attract additional AUM is dependent on its relationship with third-party financial intermediaries. The Company compensates some of these intermediaries for access to investors and for various marketing services provided. These distribution sources and client bases may not continue to be accessible to the Company under reasonable terms, or at all.
The loss of access to, or increased fees required by, third - party distribution sources to market the Company’s portfolios and access its client base could adversely affect the Company’s results of operations. The Company’s ability to attract additional AUM is dependent on its relationship with third-party financial intermediaries.
As a result, a shift in the Company’s client assets from AUM to AUA could result in a decrease in Company revenues. The loss of access to, or increased fees required by, third - party distribution sources to market the Company’s portfolios and access its client base could adversely affect the Company’s results of operations.
A decline in securities prices or in the sale of investment products, or an increase in fund redemptions, generally will reduce revenue and net income. Financial market declines will generally negatively impact the level of the Company’s AUM, and consequently, its revenue and net income.
Financial market declines will generally negatively impact the level of the Company’s AUM, and consequently, its revenue and net income.
Although the Company’s common shares are listed on the The Nasdaq Global Select Market, the shares are held by a relatively small number of shareholders, and trading in its common shares is relatively inactive. The spread between the bid and the ask prices is often wide.
Trading in DHIL common shares is limited, which may adversely affect the time and the price at which shareholders can sell their shares. Although DHIL common shares are listed on The Nasdaq Global Select Market, the shares are held by a relatively small number of shareholders, and trading in its common shares is relatively inactive.
All of these investments are subject to market risk and the Company’s non-operating investment income could be adversely affected by market performance.
The Company currently has a substantial portion of its assets invested in investment strategies that it manages. All of these investments are subject to market risk and the Company’s non-operating investment income could be adversely affected by market performance. Fluctuations in investment income are expected to occur in the future.
As such, factors leading to underperformance may impact multiple strategies simultaneously. The Company’s investment income and asset levels may be negatively impacted by fluctuations in its investment portfolio. The Company currently has a substantial portion of its assets invested in investment strategies that it manages.
Additionally, the Company has, and is expected to continue to have, common positions and industry concentrations across its strategies at the same time. As such, factors leading to underperformance may impact multiple strategies simultaneously. The Company’s investment income and asset levels may be negatively impacted by fluctuations in its investment portfolio.
The Company is subject to substantial competition in all aspects of its business.
As of December 31, 2024, the Company does not have any closed investment strategies. The Company is subject to substantial competition in all aspects of its business.
However, there can be no assurance that the Funds will choose to continue their relationships with DHCM. 11 Table of Contents Negative public opinion of the Company could cause it to lose clients and adversely affect its share price.
Negative public opinion of the Company could cause it to lose clients and adversely affect its share price.
A significant portion of DHCM's revenues are based on advisory and administration agreements with the Funds that are subject to termination without cause and on short notice. DHCM is highly dependent on its contractual relationships with the Funds.
If such fee increases continue, refusal to pay them could restrict the Company’s access to those client bases while paying them could adversely affect its profitability. A significant portion of DHCM's revenues are based on advisory and administration agreements with the Diamond Hill Funds that are subject to termination without cause and on short notice.
Industry, Market, and Economic Risks The Company’s AUM, which impacts revenue, is subject to significant fluctuations. The majority of the Company’s revenue is calculated as a percentage of AUM or is related to the general performance of the equity securities markets.
The majority of the Company’s revenue is calculated as a percentage of AUM or is related to the general performance of the equity securities markets. A decline in securities prices or in the sale of investment products, or an increase in client redemptions, generally will reduce revenue and net income.
The Company may not be able to adapt to technological change. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve clients while reducing costs.
Any of the above potential impacts of a cybersecurity incident, individually or collectively, could have a material adverse effect on the Company’s business, financial condition, and results of operations. The Company may not be able to adapt to technological change. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
Fees paid to financial intermediaries for investor access and marketing services have generally increased in recent years. If such fee increases continue, refusal to pay them could restrict the Company’s access to those client bases while paying them could adversely affect its profitability.
If such investor access is restricted or eliminated, it could have an adverse effect on the Company’s results of operations. Fees paid to financial intermediaries for investor access and marketing services have generally increased in recent years.
Removed
Specifically, Charles Bath, a co-portfolio manager on our Large Cap strategy, which is our largest strategy by AUM and revenues, announced his retirement from the Company effective December 31, 2024. It is possible his departure could lead to increased redemptions resulting in a material decline in AUM and revenue.
Added
Employee misconduct could harm the Company by impairing its ability to attract and retain clients and subjecting the Company to significant legal liability, regulatory scrutiny and reputational harm. The Company’s controls and procedures may fail or be circumvented, its risk management policies and procedures may be inadequate,and operational risks could adversely affect its reputation and financial condition.
Removed
The Company has had a well-defined succession plan in place since 2018, when Austin Hawley was named co-portfolio manager on the Large Cap strategy. Mr. Hawley has worked closely with Mr. Bath for over 15 years, including the last six years as a co-portfolio manager.
Added
The Company has developed and continues to update strategies and procedures specific to its business for managing risks, which include market risk, liquidity risk, operational risk and reputational risk. Management of these risks can be very complex.
Removed
As a result, a shift in in the Company’s AUM from higher to lower fee generating clients and strategies could result in a decrease in profitability even if its AUM increases or remains unchanged.
Added
These strategies and procedures may fail under some circumstances, particularly if the Company is confronted with risks that it has underestimated or not identified. Some of the Company’s risk evaluation methods depend upon information provided by others and public information regarding markets, clients, or other matters that are otherwise accessible by the Company.
Removed
Fluctuations in investment income are expected to occur in the future. 13 Table of Contents Trading in the Company’s common shares is limited, which may adversely affect the time and the price at which shareholders can sell their shares.
Added
If the Company’s policies and procedures are not fully effective or it is not successful in capturing all risks to which it is or may be exposed,the Company may suffer harm to its reputation or be subject to litigation or regulatory actions that could have a material adverse effect on its business, results of operations,or financial condition. 12 Table of Contents Industry, Market, and Economic Risks The Company’s AUM, which impacts revenue, is subject to significant fluctuations.
Removed
As a result, shareholders may not be able to sell their shares on short notice, and the sale of a large number of shares at one time could temporarily depress the market price. In addition, certain shareholders, including certain of the Company’s directors and officers, own a significant number of shares.
Added
Certain shareholders, including certain of the Company’s directors and officers, own a significant number of shares. The spread between the bid and the ask prices is often wide.
Removed
Specifically, the effects of the outbreak of the novel coronavirus (COVID-19) in early 2020 negatively affected the global economy, the U.S. economy, and the global financial markets, and demonstrated that pandemics may disrupt the Company’s operations, which could have an adverse effect on the Company’s business, financial condition, and results of operations.
Added
The Company is subject to federal, state, and local income taxes in the United States. We cannot predict future changes in the tax regulations to which we are subject, and any such changes could have a material impact on our tax liability or result in increased costs of our tax compliance efforts.
Removed
Although the long-term effects of the pandemic cannot be predicted, previous occurrences of other pandemic and epidemic diseases had an adverse effect on the economies of those countries in which they were most prevalent.
Removed
A recurrence of an outbreak of any kind of epidemic, communicable disease or virus or major public health issue could cause a slowdown in the levels of economic activity generally, which would adversely affect the Company’s business, financial condition and operations. ITEM 1B. Unresolved Staff Comments None.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis information is then augmented through participation by certain Committee members in industry threat intelligence groups designed to share best practices and emerging threats related to cybersecurity. The Committee also completes a full cybersecurity risk assessment annually, which drives the implementation of policies and procedures as well as the scope of third-party testing.
Biggest changeThe Committee identifies and assesses risks by understanding and evaluating the Company’s systems, processes, data, and controls. This information is then augmented through participation by certain 14 Table of Contents Committee members in industry threat intelligence groups designed to share best practices and emerging threats related to cybersecurity.
From its review of these reports and discussions with the Committee and management, the Board ensures it has sufficient awareness of the material cybersecurity risks to which the Company is exposed, enabling a dialogue about how management manages and mitigates those risks. The Board currently has three members who have obtained certifications in cybersecurity oversight. 15 Table of Contents
The Board receives quarterly reports and meets periodically with the Committee chair. From its review of these reports and discussions with management and the Committee chair, the Board ensures it has sufficient awareness of the material cybersecurity risks to which the Company is exposed, enabling a dialogue about how management manages and mitigates those risks.
The Company’s cybersecurity policies and procedures have been independently certified by a third-party as compliant with the ISO 27001 standard. The Committee engages multiple third-party experts to perform penetration tests on a periodic basis, and to assess whether these policies and procedures are designed appropriately and operating effectively. Cybersecurity oversight forms part of the Board’s risk oversight of the Company.
The Committee engages third-party experts to perform penetration tests on a periodic basis and to assess whether these policies and procedures are designed appropriately and operating effectively. Cybersecurity oversight forms part of the Board’s risk oversight of the Company. The Board oversees efforts by management to manage the cybersecurity risks to which the Company may be exposed.
The Committee is comprised of members having expertise in information technology infrastructure, data security, risk management, compliance, and business continuity and recovery efforts. The Committee identifies and assesses risks by understanding and evaluating the Company’s systems, processes, data, and controls.
The Technology Risk & Information Security Officer serves as the Committee chair and the day-to-day manager of the Company’s information security management systems. The Committee is comprised of members having expertise in information technology infrastructure, data security, risk management, compliance, legal, and business continuity and recovery efforts.
The Company has an Information Security Committee (the “Committee”) to identify, assess, and manage cybersecurity risks and to implement necessary policies and procedures to mitigate those risks. The Committee also coordinates employee education efforts throughout the year. The Managing Director of Information Technology serves as the Committee chair and the day-to-day manager of the Company’s information security management systems.
For more information about these risks, please see Item 1A. The Company has an Information Security Committee (the “Committee”) to identify, assess, and manage cybersecurity risks and to implement necessary policies and procedures to mitigate those risks. The Committee also coordinates employee education efforts throughout the year.
The Committee has implemented a comprehensive set of cybersecurity policies and procedures that follows standards established by the International Organization for Standardization (“ISO 27001”). Included are policies and procedures to oversee, identify, and mitigate the Company’s cybersecurity risks as well as cybersecurity risks to the Company associated with its significant service providers and vendors.
The policies and procedures within the program, among other things, are to oversee, identify, and mitigate the Company’s cybersecurity risks as well as cybersecurity risks to the Company associated with its significant service providers and vendors. The Company’s cybersecurity policies and procedures have been independently certified by a third party as compliant with the ISO 27001 standard.
Removed
The Board oversees efforts by management to manage the cybersecurity risks to which the Company may be exposed. The Board receives at least annual reports and meets periodically with the Chief Compliance Officer and the Managing Director of Information Technology, both of whom serve on the Committee.
Added
In 2024, the Company did not identify any cybersecurity risks that have materially affected or are reasonably likely to materially affect its business strategy, results of operations, or financial condition. However, despite its efforts, the Company cannot eliminate all risks from cybersecurity threats or incidents, or provide assurances that it has not experienced an undetected cybersecurity incident.
Added
The Committee also completes a full cybersecurity risk assessment annually, which drives the implementation of policies and procedures as well as the scope of third-party testing. The Committee has implemented an information security program that includes a comprehensive set of cybersecurity policies and procedures that follows standards established by the International Organization for Standardization (“ISO 27001”).
Added
The Board currently has four members who have obtained certifications in cybersecurity oversight.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

15 edited+7 added−1 removed1 unchanged
Biggest changeThe approximate number of beneficial holders of DHIL common shares held by brokers, banks, and other intermediaries was greater than 8,000 as of February 28, 2024. 18 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information regarding repurchases of DHIL common shares during the quarter ended December 31, 2023: Period Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as part of Publicly Announced Programs (b) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (b) October 1, 2023 through October 31, 2023 40,329 $ 155.20 39,419 $ 35,235,719 November 1, 2023 through November 30, 2023 47,130 160.36 47,130 27,677,936 December 1, 2023 through December 31, 2023 7,657 $ 161.61 7,657 26,440,462 Total 95,116 94,206 $ 26,440,462 (a) The Company regularly withholds common shares for tax payments due upon the vesting of employee restricted shares.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information regarding repurchases of DHIL common shares during the quarter ended December 31, 2024: Period Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as part of Publicly Announced Programs (b) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (b) October 1, 2024 through October 31, 2024 10,475 161.61 — $ 4,739,260 November 1, 2024 through November 30, 2024 22,556 $ 168.33 22,556 46,203,126 December 1, 2024 through December 31, 2024 30,243 $ 156.95 30,243 41,456,564 Total 63,274 52,799 $ 41,456,564 (a) The Company regularly withholds common shares for tax payments due upon the vesting of employee restricted shares.
The graph assumes that the value of the investment in DHIL common shares and each index was $100 on December 31, 2018. Total return includes reinvestment of all dividends. The Russell 2000 Index measures the performance of approximately 2,000 small-cap U.S. equities, and was selected as a broad equity market index comprised of companies with comparable market capitalization to DHIL.
The graph assumes that the value of the investment in DHIL common shares and each index was $100 on December 31, 2019. Total return includes reinvestment of all dividends. The Russell 2000 Index measures the performance of approximately 2,000 small-cap U.S. equities, and was selected as a broad equity market index comprised of companies with comparable market capitalization to DHIL.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The following performance graph compares the cumulative total shareholder return of an investment in DHIL common shares to that of the Russell 2000 Index and the Russell 2000 Asset Managers & Custodians Index (the “R2000 A&C Index”) for the five-year period ended December 31, 2023.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The following performance graph compares the cumulative total shareholder return of an investment in DHIL common shares to that of the Russell 2000 Index and the Russell 2000 Asset Managers & Custodians Index (the “R2000 A&C Index”) for the five-year period ended December 31, 2024.
A Rule 10b5-1 trading arrangement allows a company to purchase its shares at times when it would not ordinarily be in the market because of its trading policies or the possession of material nonpublic information.
A Rule 10b5-1 trading arrangement allows a company to purchase its stock at times when it would not ordinarily be in the market because of its trading policies or the possession of material nonpublic information.
Because repurchases under a Rule 10b5-1 trading arrangement are subject to specified parameters and certain price, timing, and volume restraints specified in the arrangement, there is no guarantee as to the exact number of common shares that will be repurchased or that there will be any repurchases at all pursuant to the arrangement.
Because repurchases under DHIL’s Rule 10b5-1 trading 18 Table of Contents arrangement are subject to specified parameters and certain price, timing, and volume restraints specified in the plan, there is no guarantee as to the exact number of common shares that will be repurchased or that there will be any repurchases at all pursuant to the plan.
The 2023 Repurchase Program will expire on May 10, 2025, or upon the earlier completion of all authorized purchases under the program. In connection with the 2023 Repurchase Program, DHIL entered into a Rule 10b5-1 trading arrangement. The Rule 10b5-1 trading arrangement is intended to qualify for the safe harbor under Rule 10b5-1 of the Exchange Act.
The 2024 Repurchase Program will expire on November 4, 2026, or upon the earlier completion of all authorized purchases under the program. In connection with the 2024 Repurchase Program, DHIL entered into a Rule 10b5-1 trading arrangement. The Rule 10b5-1 trading arrangement is intended to qualify for the safe harbor under Rule 10b5-1 of the Exchange Act.
During 2023 and 2022, approximately 3,143,990 and 2,472,866, of DHIL’s common shares were traded, respectively. Each fiscal quarter, the Board determines whether to approve and pay a regular quarterly dividend. In addition to the regular quarterly dividends, in the fourth quarter of each fiscal year, the Board decides whether to approve and pay a special dividend.
During 2024 and 2023, approximately 4,335,746 and 3,143,990, of DHIL’s common shares were traded, respectively. Each fiscal quarter, the Board determines whether to approve and pay a regular quarterly dividend. In addition to the regular quarterly dividends, in the fourth quarter of each fiscal year, the Board decides whether to approve and pay a special dividend.
The following table sets forth the high and low daily close prices during each quarter of 2023 and 2022: 2023 2022 High Price Low Price Quarterly Dividend Per Share Special Dividend Per Share High Price Low Price Quarterly Dividend Per Share Special Dividend Per Share Quarter ended: March 31 $ 191.47 $ 158.38 $ 1.50 — $ 206.90 $ 174.42 $ 1.50 — June 30 $ 178.18 $ 156.32 $ 1.50 — $ 192.73 $ 166.54 $ 1.50 — September 30 $ 187.24 $ 161.40 $ 1.50 — $ 196.00 $ 163.40 $ 1.50 — December 31 $ 171.99 $ 147.81 $ 1.50 — $ 195.99 $ 161.51 $ 1.50 $ 4.00 Due to the relatively low trading volume of DHIL’s common shares, bid/ask spreads can be wide at times, and therefore, quoted prices may not be indicative of the price a shareholder may receive in an actual transaction.
The following table sets forth the high and low daily close prices during each quarter of 2024 and 2023: 2024 2023 High Price Low Price Quarterly Dividend Per Share High Price Low Price Quarterly Dividend Per Share Quarter ended: March 31 $ 166.53 $ 144.68 $ 1.50 $ 191.47 $ 158.38 $ 1.50 June 30 $ 159.18 $ 138.79 $ 1.50 $ 178.18 $ 156.32 $ 1.50 September 30 $ 163.24 $ 139.35 $ 1.50 $ 187.24 $ 161.40 $ 1.50 December 31 $ 171.89 $ 150.15 $ 1.50 $ 171.99 $ 147.81 $ 1.50 Due to the relatively low trading volume of DHIL’s common shares, bid/ask spreads can be wide at times, and therefore, quoted prices may not be indicative of the price a shareholder may receive in an actual transaction.
Although DHIL currently expects to pay regular quarterly dividends, depending on the circumstances and the Board’s judgment, DHIL may not pay quarterly or special dividends. The approximate number of record holders of DHIL common shares as of February 28, 2024 was 71.
Although DHIL currently expects to pay regular quarterly dividends, depending on the circumstances and the Board’s judgment, DHIL may not pay quarterly or special dividends. DHIL has not paid a special dividend since 2022. The approximate number of record holders of DHIL common shares as of February 26, 2025 was 70.
Purchases in the open market are intended to comply with Rule 10b-18 under the Exchange Act. As of December 31, 2023, $26.4 million remained available for repurchases under the 2023 Repurchase Program. Sale of Unregistered Securities During the quarter ended December 31, 2023, DHIL did not sell any common shares that were not registered under the Securities Act.
Purchases under the 2024 Repurchase Program may be made in the open market or through privately negotiated transactions. Purchases in the open market are intended to comply with Rule 10b-18 under the Exchange Act. Sale of Unregistered Securities During the quarter ended December 31, 2024, DHIL did not sell any common shares that were not registered under the Securities Act.
The Company does not make or endorse any predictions as to future share performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Cumulative 5 Year Total Return Diamond Hill Investment Group, Inc. $100 $100 $115 $167 $168 $156 56 % Russell 2000 Index $100 $126 $151 $173 $138 $161 61 % Russell 2000 Asset Managers & Custodians Index (a) $100 $129 $173 $220 $171 $235 135 % 17 Table of Contents (a) The R2000 A&C Index used to calculate the returns includes the following companies: AlTi Global, Inc.
The Company does not make or endorse any predictions as to future share performance. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Cumulative 5 Year Total Return Diamond Hill Investment Group, Inc. $100 $115 $167 $168 $156 $151 51 % Russell 2000 Index $100 $120 $138 $110 $128 $143 43 % Russell 2000 Asset Managers & Custodians Index (a) $100 $134 $170 $132 $182 $239 139 % 16 Table of Contents (a) The R2000 A&C Index used to calculate the returns includes the following companies by year: 2020 2021 2022 2023 2024 Arlington Asset Investment Corp.
(b) On May 10, 2023, the Board approved a repurchase plan, authorizing management to repurchase up to $50.0 million DHIL common shares in the open market and in private transactions in accordance with applicable securities laws (“2023 Repurchase Program”).
On November 4, 2024, the Board terminated the 2023 Repurchase Program and authorized management to repurchase up to $50.0 million DHIL common shares in the open market and in private transactions in accordance with applicable securities laws (“2024 Repurchase Program”).
During the quarter ended December 31, 2023, the Company withheld 910 DHIL common shares for employee tax withholding obligations at an average price paid per share of $168.57.
During the quarter ended December 31, 2024, the Company withheld 10,475 DHIL common shares for employee tax withholding obligations at an average price paid per share of $161.61. (b) On May 10, 2023, the Board approved a repurchase plan, authorizing management to repurchase up to $50.0 million DHIL common shares (“2023 Repurchase Program”).
Silvercrest Asset Management Group Inc. AssetMark Financial Holdings, Inc. Greenhill & Co., Inc. StepStone Group, Inc. Associated Capital Group, Inc. Hamilton Lane Incorporated Victory Capital Holdings, Inc. Avantax, Inc. Manning & Napier, Inc. Virtus Investment Partners, Inc. B. Riley Financial, Inc. MMA Capital Holdings, Inc. Waddell & Reed Financial, Inc. BrightSphere Investment Group, Inc. Morgan Group Holding Co.
Hamilton Lane Incorporated Perella Weinberg Partners Hamilton Lane Incorporated Greenhill & Co., Inc. Hamilton Lane Incorporated Oppenheimer Holdings Inc. P10, Inc. Morgan Group Holding Co. Hamilton Lane Incorporated Manning & Napier, Inc. Patria Investments Ltd. Silvercrest Asset Management Group Inc. Oppenheimer Holdings Inc. MMA Capital Holdings, Inc. Oppenheimer Holdings Inc. PJT Partners, Inc. StepStone Group, Inc. PJT Partners, Inc.
Westwood Holdings Group, Inc. Brookfield Business Corp. Oppenheimer Holdings Inc. WisdomTree, Inc. Cohen & Steers, Inc. P10, Inc. (1) (1) Added to the R2000 A&C Index in 2023. Financial Engines, Inc. and Medley Management, Inc. were removed from the R2000 A&C Index in 2023. DHIL’s common shares trade on The Nasdaq Global Select Market under the ticker symbol DHIL.
Waddell & Reed Financial, Inc. Virtus Investment Partners, Inc. WisdomTree, Inc. WisdomTree Investments, Inc. Westwood Holdings Group, Inc. WisdomTree, Inc. WisdomTree Investments, Inc. 17 Table of Contents DHIL’s common shares trade on The Nasdaq Global Select Market under the ticker symbol DHIL.
Removed
(1) Cowen Inc. Patria Investments Ltd. (1) Altisource Portfolio Solutions S.A. Diamond Hill Investment Group, Inc. Perella Weinberg Partners Ares Management Corporation Federated Hermes, Inc. PJT Partners, Inc. Arlington Asset Investment Corp. Focus Financial Partners, Inc. Pzena Investment Management, Inc. Artisan Partners Asset Management, Inc. GAMCO Investors, Inc. Sculptor Capital Management, Inc. Ashford Inc. GCM Grosvenor, Inc.
Added
Arlington Asset Investment Corp. Associated Capital Group, Inc. Associated Capital Group, Inc. AlTi Global, Inc. Associated Capital Group, Inc. Associated Capital Group, Inc. AssetMark Financial Holdings, Inc. AlTi Global, Inc. AssetMark Financial Holdings, Inc. AssetMark Financial Holdings, Inc. AssetMark Financial Holdings, Inc. Artisan Partners Asset Management, Inc. AssetMark Financial Holdings, Inc. Artisan Partners Asset Management, Inc.
Added
Artisan Partners Asset Management, Inc. Artisan Partners Asset Management, Inc. Blucora, Inc. Artisan Partners Asset Management, Inc. BrightSphere Investment Group Inc Ares Management Corporation Blucora, Inc. Brookfield Business Corp. Avantax, Inc. Brookfield Business Corp. BrightSphere Investment Group, Inc. BrightSphere Investment Group, Inc. BrightSphere Investment Group, Inc. Brookfield Business Corp. Burford Capital Limited Cohen & Steers, Inc. Cohen & Steers, Inc.
Added
Cohen & Steers, Inc. BrightSphere Investment Group, Inc. Cohen & Steers, Inc. Cowen Inc Cowen Inc Diamond Hill Investment Group, Inc. Cohen & Steers, Inc. Diamond Hill Investment Group, Inc. Diamond Hill Investment Group, Inc. Diamond Hill Investment Group, Inc. Federated Hermes, Inc. Diamond Hill Investment Group, Inc. GCM Grosvenor, Inc. Federated Hermes, Inc. Federated Hermes, Inc.
Added
Focus Financial Partners, Inc. Federated Hermes, Inc. Hamilton Lane Incorporated Focus Financial Partners, Inc. Focus Financial Partners, Inc. GAMCO Investors, Inc. Focus Financial Partners, Inc. Patria Investments Ltd. GAMCO Investors, Inc. GAMCO Investors, Inc. GCM Grosvenor, Inc. GCM Grosvenor, Inc. PJT Partners, Inc. Greenhill & Co., Inc. GCM Grosvenor, Inc. Greenhill & Co., Inc.
Added
Oppenheimer Holdings Inc. PJT Partners, Inc. Perella Weinberg Partners Victory Capital Holdings, Inc. Pzena Investment Management, Inc. PJT Partners, Inc. Perella Weinberg Partners P10, Inc. Virtus Investment Partners, Inc. Silvercrest Asset Management Group Inc. Pzena Investment Management, Inc. Pzena Investment Management, Inc. Silvercrest Asset Management Group Inc. WisdomTree, Inc. Sculptor Capital Management, Inc. Silvercrest Asset Management Group Inc.
Added
Silvercrest Asset Management Group Inc. Sculptor Capital Management, Inc. StepStone Group, Inc. Sculptor Capital Management, Inc. Sculptor Capital Management, Inc. StepStone Group, Inc. Virtus Investment Partners, Inc. StepStone Group, Inc. StepStone Group, Inc. Victory Capital Holdings, Inc. Waddell & Reed Financial, Inc. Virtus Investment Partners, Inc. Victory Capital Holdings, Inc. Virtus Investment Partners, Inc. Westwood Holdings Group, Inc.
Added
The approximate number of beneficial holders of DHIL common shares held by brokers, banks, and other intermediaries was greater than 8,000 as of February 26, 2025.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8. Financial Statements and Supplementary Data 39 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 59 Item 9A. Controls and Procedures 59 Item 9B.
Biggest changeItem 6. [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 58 Item 9A. Controls and Procedures 58 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

104 edited+28 added−31 removed37 unchanged
Biggest changeYear Ended December 31, 2023 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating income Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 101,212 $ 35,504 $ 23,071 $ 15,490 $ 42,226 $ 14.32 26 % Non-GAAP Adjustments: Deferred compensation liability (1) (5,600) 5,600 (5,600) — — — 4 % Consolidated Funds (2) — 330 (4,148) (793) (2,166) (0.73) — Other investment income (4) — — $ (13,323) (3,571) (9,752) (3.31) — Adjusted Non-GAAP Basis $ 95,612 $ 41,434 — $ 11,126 $ 30,308 $ 10.28 30 % Year Ended December 31, 2022 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating loss Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 90,165 $ 64,331 $ (13,373) $ 14,088 $ 40,434 $ 13.01 42 % Non-GAAP Adjustments: Deferred compensation liability (1) 4,402 (4,402) 4,402 — — — (3) % Consolidated Funds (2) — 423 11,317 2,113 6,063 1.95 — Gain on sale of High Yield-Focused Advisory Contracts (3) — — (6,814) (1,761) (5,053) (1.63) — Other investment income (4) — — $ 4,468 1,155 3,313 1.07 — Adjusted Non-GAAP Basis $ 94,567 $ 60,352 — $ 15,595 $ 44,757 $ 14.40 39 % 36 Table of Contents Year Ended December 31, 2021 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating income Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 105,936 $ 76,258 $ 25,381 $ 26,050 $ 74,201 $ 23.34 42 % Non-GAAP Adjustments: Deferred compensation liability (1) (7,082) 7,082 (7,082) — — — 4 % Consolidated Funds (2) — 340 (6,192) (1,160) (3,304) (1.04) — % Gain on sale of High Yield-Focused Advisory Contracts (3) — — (9,000) (2,339) (6,661) (2.10) — % Other investment income (4) — — $ (3,107) (808) (2,299) (0.72) — % Adjusted Non-GAAP Basis $ 98,854 $ 83,680 — $ 21,743 $ 61,937 $ 19.48 46 % (1) This non-GAAP adjustment removes the compensation expense resulting from market valuation changes in the Deferred Compensation Plans’ liability and the related net gains/losses on investments designated as an economic hedge against the related liability.
Biggest changeInvestors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, as well as the Company’s condensed consolidated financial statements and related notes included elsewhere in this report. 34 Table of Contents Year Ended December 31, 2024 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating income Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 107,203 $ 43,892 $ 15,119 $ 15,833 $ 43,178 $ 15.66 29 % Non-GAAP Adjustments: Deferred compensation liability (1) (4,776) 4,776 (4,776) — — — 3 % Consolidated Funds (2) — 28 199 61 165 0.06 — Other investment income (4) — — $ (10,542) (2,825) (7,717) (2.80) — Adjusted Non-GAAP Basis $ 102,427 $ 48,696 — $ 13,069 $ 35,626 $ 12.92 32 % Year Ended December 31, 2023 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating loss Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 101,212 $ 35,504 $ 23,071 $ 15,490 $ 42,226 $ 14.32 26 % Non-GAAP Adjustments: Deferred compensation liability (1) (5,600) 5,600 (5,600) — — — 4 % Consolidated Funds (2) — 330 (4,148) (793) (2,166) (0.73) — Other investment income (4) — — $ (13,323) (3,571) (9,752) (3.31) — Adjusted Non-GAAP Basis $ 95,612 $ 41,434 — $ 11,126 $ 30,308 $ 10.28 30 % Year Ended December 31, 2022 (in thousands, except percentages and per share data) Total operating expenses Net operating income Total non-operating income Income tax expense (5) Net income attributable to common shareholders Earnings per share attributable to common shareholders - diluted Net operating profit margin GAAP Basis $ 90,165 $ 64,331 $ (13,373) $ 14,088 $ 40,434 $ 13.01 42 % Non-GAAP Adjustments: Deferred compensation liability (1) 4,402 (4,402) 4,402 — — — (3) % Consolidated Funds (2) — 423 11,317 2,113 6,063 1.95 — Gain on sale of High Yield-Focused Advisory Contracts (3) — — (6,814) (1,761) (5,053) (1.63) — Other investment income (4) — — $ 4,468 1,155 3,313 1.07 — Adjusted Non-GAAP Basis $ 94,567 $ 60,352 — $ 15,595 $ 44,757 $ 14.40 39 % (1) This non-GAAP adjustment removes the compensation expense resulting from market valuation changes in the Deferred Compensation Plans’ liability and the related net gains/losses on investments designated as an economic hedge against the related liability.
The Company evaluates such estimates, judgments, and assumptions on an ongoing basis, and bases its estimates, judgements, and assumptions on historical experiences, current trends, and various other factors that it believes to be reasonable under the circumstances. By their nature, these estimates, judgments, and assumptions are subject to uncertainty, and actual results may differ materially from these estimates. Consolidation.
The Company evaluates such estimates, judgments, and assumptions on an ongoing basis, and bases its estimates, judgments, and assumptions on historical experiences, current trends, and various other factors that it believes to be reasonable under the circumstances. By their nature, these estimates, judgments, and assumptions are subject to uncertainty, and actual results may differ materially from these estimates. Consolidation.
Cash flow attributable to Consolidated Funds Eliminations As reported on the Consolidated Statement of Cash Flows Cash flows from operating activities: Net income (loss) $ 42,226,422 $ 3,818,572 $ (2,959,446) $ 43,085,548 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 1,289,315 — — 1,289,315 Share-based compensation 11,691,890 — — 11,691,890 Net (gains) losses on investments (15,677,551) (3,818,572) 2,959,446 (16,536,677) Net change in securities held by Consolidated Funds — (10,930,911) — (10,930,911) Other changes in assets and liabilities 4,959,742 1,110,217 — 6,069,959 Net cash provided by (used in) operating activities 44,489,818 (9,820,694) — 34,669,124 Net cash used in investing activities (3,675,461) — (530,163) (4,205,624) Net cash provided by (used in) financing activities (57,017,780) $ 9,820,694 $ 530,163 (46,666,923) Net change during the year (16,203,423) — — (16,203,423) Cash and cash equivalents at beginning of year 63,195,302 — — 63,195,302 Cash and cash equivalents at end of year $ 46,991,879 — — $ 46,991,879 34 Table of Contents Year Ended December 31, 2022 Cash flow attributable to Diamond Hill Investment Group, Inc.
Cash flow attributable to Consolidated Funds Eliminations As reported on the Consolidated Statement of Cash Flows Cash flows from operating activities: Net income $ 42,226,422 $ 3,818,572 $ (2,959,446) $ 43,085,548 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,289,315 — — 1,289,315 Share-based compensation 11,691,890 — — 11,691,890 Net gains on investments (15,677,551) (3,818,572) 2,959,446 (16,536,677) Net change in securities held by Consolidated Funds — (10,930,911) — (10,930,911) Other changes in assets and liabilities 4,959,742 1,110,217 — 6,069,959 Net cash provided by operating activities 44,489,818 (9,820,694) — 34,669,124 Net cash used in investing activities (3,675,461) — (530,163) (4,205,624) Net cash used in financing activities (57,017,780) $ 9,820,694 $ 530,163 (46,666,923) Net change during the year (16,203,423) — — (16,203,423) Cash and cash equivalents at beginning of year 63,195,302 — — 63,195,302 Cash and cash equivalents at end of year $ 46,991,879 — — $ 46,991,879 33 Table of Contents Year Ended December 31, 2022 Cash flow attributable to Diamond Hill Investment Group, Inc.
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 fund shareholder mailings, registration services, and legal and audit services.
The Proprietary Funds have selected and contractually engaged certain vendors to fulfill various services to benefit the Proprietary Funds’ shareholders or to satisfy regulatory requirements of the Proprietary Funds. These services include, among others, required fund shareholder mailings, registration services, and legal and audit services.
The Company believes that these sources of liquidity, as well as its continuing cash flows from operating activities, will be sufficient to meet its current and future operating needs for the next 12 months.
The Company believes that these sources of liquidity, as well as its continuing cash flows from operating activities, will be sufficient to meet its current and future operating needs for the next 12 months and beyond.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Item 7, the Company discusses and analyzes its consolidated results of operations for the past three fiscal years and other factors that may affect its future financial performance.
ITEM 7. In this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), the Company discusses and analyzes its consolidated results of operations for the past three fiscal years and other factors that may affect its future financial performance.
Revenue has been recorded net of these Fund expenses, as appropriate for this agency relationship.
Revenue has been recorded net of these Proprietary Fund expenses, as appropriate for this agency relationship.
The decrease was due to a reduction in variable expenses as a result of the decrease in the Funds’ average AUM period-over-period. 30 Table of Contents Liquidity and Capital Resources Sources of Liquidity The Company’s current financial condition is liquid, with a significant amount of its assets comprised of cash and cash equivalents, investments, accounts receivable, and other current assets.
The decrease was due to a reduction in variable expenses as a result of the decrease in the Proprietary Funds’ average AUM period over period. 29 Table of Contents Liquidity and Capital Resources Sources of Liquidity The Company’s current financial condition is liquid, with a significant amount of its assets comprised of cash and cash equivalents, investments, accounts receivable, and other current assets.
These cash inflows were partially offset by the net change in securities held by the Consolidated Funds of $14.0 million, the cash impact of timing differences in the settlement of other assets and liabilities of $13.2 million, and the adjustment to net income of $6.8 million for the gain on sale of the High Yield- 32 Table of Contents Focused Advisory Contracts.
These cash inflows were partially offset by the net change in securities held by the Consolidated Funds of $14.0 million, the cash impact of timing differences in the settlement of other assets and liabilities of $13.2 million, and the adjustment to net income of $6.8 million for the gain on sale of the High Yield- Focused Advisory Contracts.
The Company believes adjusting for these non-operating income or loss items helps readers understand the Company’s core operating results and improves comparability from period to period. (5) The income tax expense impacts were calculated and resulted in an overall non-GAAP effective tax rate of 26.8% for 2023, 25.8% for 2022 and 26.0% for 2021.
The Company believes adjusting for these non-operating income or loss items helps readers understand the Company’s core operating results and improves comparability from period to period. (5) The income tax expense impacts were calculated and resulted in an overall non-GAAP effective tax rate of 26.8% for 2024, 26.8% for 2023 and 25.8% for 2022.
This discussion should be read in conjunction with the Company’s consolidated financial statements and notes to consolidated financial statements contained in this Form 10-K. Certain statements the Company makes under this Item 7 constitute “forward-looking statements” under the PSLR Act. See “Cautionary Note Regarding Forward-Looking Statements” in Part I, Item 1.
This discussion should be read in conjunction with the Company’s consolidated financial statements and notes to consolidated financial statements contained in this Form 10-K. Certain statements the Company makes under this MD&A constitute “forward-looking statements” under the PSLR Act. See “Cautionary Note Regarding Forward-Looking Statements” in Part I, Item 1.
The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
The decrease in the total average advisory fee rate was due to the growth in fixed income assets, which increased from 8% of total average AUM and AUA in 2022, to 11% in 2023. The average advisory fee rate is calculated by dividing investment advisory revenues by total average AUM and AUA during the period.
The decrease in the total average advisory fee rate was due to the growth in fixed income assets, which increased from 8% of total average AUM and AUA in 2022, to 11% in 2023. The average advisory fee rate is calculated by dividing investment advisory revenues by total average AUM and AUA during the period. Fund Administration Fees.
Some of these contractual amounts may be cancellable under certain conditions and may involve termination fees. The Company expects to fund these cash commitments with future cash flow from operations and its Deferred Compensation Plans’ investments in the Funds.
Some of these contractual amounts may be cancelable under certain conditions and may involve termination fees. The Company expects to fund these cash commitments with future cash flow from operations and its Deferred Compensation Plans’ investments in the Proprietary Funds.
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 fees and terms with the management and board of trustees of the Funds.
DHCM, in fulfilling a portion of its role under the administration agreements with the Proprietary Funds, acts as agent to pay these obligations of the Proprietary Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates fees and terms with the management and board of trustees of each Proprietary Fund.
Subject to Board approval and compliance with applicable law, the Company expects to pay a regular quarterly dividend of $1.50 per share in 2024. 31 Table of Contents In addition to the regular quarterly dividends, the Board will decide whether to approve and pay an additional special dividend in the fourth quarter of each fiscal year.
Subject to Board approval and compliance with applicable law, the Company expects to pay a regular quarterly dividend of $1.50 per share in 2025. 30 Table of Contents In addition to the regular quarterly dividends, the Board will decide whether to approve and pay an additional special dividend in the fourth quarter of each fiscal year.
A VIE is an 37 Table of Contents entity that lacks sufficient equity to finance its activities, or any entity whose equity holders do not have defined power to direct the activities of the entity normally associated with an equity investment.
A VIE is an entity that lacks sufficient equity to finance its activities, or any entity whose equity holders do not have defined power to direct the activities of the entity normally associated with an equity investment.
These cash inflows were partially offset by the net change in securities held by the Consolidated Funds of $10.9 million and the cash impact of timing differences in the settlement of other assets and liabilities of $10.5 million.
These cash inflows were partially offset by the net change in securities held by the Consolidated Funds of $10.9 million and the cash impact of timing differences in the settlement of other 31 Table of Contents assets and liabilities of $10.5 million.
The fee that the Funds pay to DHCM is reviewed annually by the Funds’ board of trustees and specifically considers the contractual expenses that DHCM pays on behalf of the Funds. As a result, DHCM is not involved in the delivery or pricing of these services and bears no risk related to these services.
The fee that the Proprietary Funds pay to DHCM is reviewed annually by the Proprietary Funds’ respective boards of trustees and specifically considers the contractual expenses that DHCM pays on behalf of the Proprietary Funds. As a result, DHCM is not involved in the delivery or pricing of these services and bears no risk related to these services.
The Company reduces the total AUM of each Fund that holds such shares by the AUM of the investments held in this affiliated Fund.
The Company reduces the total AUM of each Diamond Hill Fund that holds such shares by the AUM of the investments held in this affiliated fund.
On average, the Company had 129 employees in 2023 and 2022. 29 Table of Contents Incentive compensation expense can fluctuate significantly period over period as the Company evaluates investment performance, individual performance, its own performance, and other factors. Deferred Compensation Expense (Benefit).
On average, the Company had 129 employees in 2023 and 2022. Incentive compensation expense can fluctuate significantly period over period as the Company evaluates investment performance, individual performance, its own performance, and other factors. Deferred Compensation Expense (Benefit).
Year Ended December 31, 2023 Cash flow attributable to Diamond Hill Investment Group, Inc.
Year Ended December 31, 2024 Cash flow attributable to Diamond Hill Investment Group, Inc.
The Board and management regularly review various factors to determine whether the Company has capital in excess of that required for its business and what are the appropriate uses of any such excess capital, including share repurchases and/or the payment of dividends. Share Repurchases On May 10, 2023, the Board approved the 2023 Repurchase Program.
The Board and management regularly review various factors to determine whether the Company has capital in excess of that required for its business and what the appropriate uses of any such excess capital are, including share repurchases and/or the payment of dividends. Share Repurchases On November 4, 2024, the Board approved the 2024 Repurchase Program.
This decrease was primarily due to the impact of a 13% decrease in the Funds’ average AUM from 2022 compared to 2023, and an increase in administration fees paid on behalf of the Funds as a percentage of average Fund AUM. Revenue - 2022 Compared to 2021 Investment Advisory Fees.
This decrease was primarily due to the impact of a 13% decrease in the Proprietary Funds’ average AUM from 2022 compared to 2023, and an increase in administration fees paid on behalf of the Proprietary Funds as a percentage of average fund AUM.
Summary Discussion of Consolidated Results of Operations - 2023 Compared to 2022 Revenue for 2023 decreased $17.8 million compared to 2022, primarily due to a 7.5% decrease in total average AUM and AUA, as well as a decrease in the average advisory fee rate (excluding performance-based fees) from 0.48% in 2022 to 0.47% in 2023.
Summary Discussion of Consolidated Results of Operations - 2023 Compared to 2022 Revenue for 2023 decreased $17.8 million compared to 2022, primarily due to a 7.5% decrease in total average AUM and AUA, as well as a decrease in the average advisory fee rate from 0.49% in 2022 to 0.47% in 2023.
The 2023 Repurchase Program authorizes management to repurchase up to $50.0 million of DHIL’s common shares in the open market and in private transactions in accordance with applicable securities laws. The 2023 Repurchase Program will expire on May 10, 2025, or upon the earlier completion of all authorized purchases under the program.
The 2024 Repurchase Program authorizes management to repurchase up to $50.0 million of DHIL’s common shares in the open market and in private transactions in accordance with applicable securities laws. The 2024 Repurchase Program will expire on May 4, 2026, or upon the earlier completion of all authorized purchases under the program.
The Company’s main source of liquidity is cash flows from operating activities, which are generated from investment advisory and mutual fund administration fees. Cash and cash equivalents, investments held directly by DHCM, accounts receivable, and other current assets represented $181.8 million and $182.9 million of total assets as of December 31, 2023, and 2022, respectively.
The Company’s main source of liquidity is cash flows from operating activities, which are generated from investment advisory and fund administration fees. Cash and cash equivalents, investments held directly by DHCM, accounts receivable, and other current assets represented $187.4 million and $181.8 million of total assets as of December 31, 2024, and 2023, respectively.
This dividend is expected to reduce shareholders’ equity by approximately $4.3 million.
This dividend is expected to reduce shareholders’ equity by approximately $4.2 million.
As of December 31, 2023, $26.4 million remained available for repurchases under the 2023 Repurchase Program. Prior to the approval of the 2023 Repurchase Program, the Company repurchased shares under similar prior repurchase programs. The authority to repurchase shares may be exercised from time to time as market conditions warrant and is subject to regulatory constraints.
As of December 31, 2024, $41.5 million remained available for repurchases under the 2024 Repurchase Program. Prior to the approval of the 2024 Repurchase Program, the Company repurchased shares under similar prior repurchase programs. The authority to repurchase shares may be exercised from time to time as market conditions warrant and is subject to regulatory constraints.
Although the Company currently expects to continue to pay regular quarterly dividends, depending on the circumstances and the Board’s judgment, the Company may not pay quarterly or special dividends as described. Working Capital As of December 31, 2023, the Company had working capital of approximately $146.1 million, compared to $144.9 million as of December 31, 2022.
Although the Company currently expects to continue to pay regular quarterly dividends, depending on the circumstances and the Board’s judgment, the Company may not pay quarterly or special dividends as described. Working Capital As of December 31, 2024, the Company had working capital of approximately $150.4 million, compared to $146.1 million as of December 31, 2023.
These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable non-controlling interest holders of $10.3 million and proceeds received under the ESPP of $0.6 million. 33 Table of Contents Supplemental Consolidated Cash Flow Statement The following table summarizes the condensed cash flows for 2023, 2022, and 2021 that are attributable to the Company and to the Consolidated Funds, and the related eliminations required in preparing the consolidated financial statements.
These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable non-controlling interest holders of $9.5 million and proceeds received under the ESPP of $0.5 million. 32 Table of Contents Supplemental Consolidated Cash Flow Statement The following table summarizes the condensed cash flows for 2024, 2023, and 2022 that are attributable to the Company and to the Consolidated Funds, and the related eliminations required in preparing the consolidated financial statements.
The average advisory fee rate (excluding performance-based fees) for equity assets decreased from 0.50% in 2022 to 0.49% in 2023, and the average advisory fee rate for fixed income assets decreased from 0.31% in 2022 to 0.30% in 2023.
The average advisory fee rate for equity assets decreased from 0.50% in 2022 to 0.49% in 2023, and the average advisory fee rate for fixed income assets decreased from 0.31% in 2022 to 0.30% in 2023.
The decrease was primarily due to a reduction in payments made to third party intermediaries as a result of the decrease in the Funds’ average AUM period over period. Mutual Fund Administration . Mutual fund administration expenses decreased by less than $0.1 million, or 1%, from 2022 compared to 2023.
The decrease was primarily due to a reduction in payments made to third-party intermediaries as a result of the decrease in the Proprietary Funds’ average AUM period over period. Fund Administration. Fund administration expenses decreased by less than $0.1 million, or 1%, from 2022 compared to 2023. Fund administration expenses consist of both variable and fixed expenses.
The following is a summary of the investment returns for each of the Company’s strategies as of December 31, 2023, relative to their respective core and value indices, as applicable. As of December 31, 2023 U.S.
The following is a summary of the investment returns for each of the Company’s strategies as of December 31, 2024, relative to their respective core and value indices, as applicable. 21 Table of Contents As of December 31, 2024 U.S.
The decrease in investment advisory fees was primarily due to a decrease in total average AUM and AUA of 7.5% and a decrease in the average advisory fee rate (excluding performance-based fees) from 0.48% to 0.47% period over period.
The decrease in investment advisory fees was primarily due to a decrease in total average AUM and AUA of 7.5% and a decrease in the average advisory fee rate from 0.49% to 0.47% period over period.
The sale of the High Yield-Focused Advisory Contracts was a discrete transaction, thus, the Company believes that removing the impact of the gain helps readers understand the Company’s core operating results and improves comparability period to period.
(3) This non-GAAP adjustment removes the impact of the gain on the sale of the High Yield-Focused Advisory Contracts. The sale of the High Yield-Focused Advisory Contracts was a discrete transaction, thus, the Company believes that removing the impact of the gain helps readers understand the Company’s core operating results and improves comparability period to period.
Refer to Note 2 to the consolidated financial statements for a detailed description of the funds that are consolidated in each year. Refer to the “Non-GAAP Financial Measures and Reconciliation” section below in Part II, Item 7 of this Form 10-K for further details on adjusted net operating profit margin.
Refer to Note 2 to the consolidated financial statements for a detailed description of the funds that are consolidated in each year. Refer to the “Non-GAAP Financial Measures and Reconciliation” section below in this MD&A for further details on adjusted net operating profit margin.
Treasury Bills 1-3 Month Index as of December 31, 2023. The percentage of composite assets that outperform is based on total Company composite assets as of December 31, 2023, excluding wrap fee accounts and restricted accounts. Composite net returns are calculated using the highest applicable standard separate account fee schedule.
The percentage of composite assets that outperform is based on total Company composite assets as of December 31, 2024, excluding wrap fee accounts and restricted accounts. Composite net returns are calculated using the highest applicable standard separate account fee schedule.
Cash flow attributable to Consolidated Funds Eliminations As reported on the Consolidated Statement of Cash Flows Cash flows from Operating Activities: Net income (loss) $ 40,434,107 $ (11,739,448) $ 8,176,103 $ 36,870,762 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 1,377,610 — — 1,377,610 Share-based compensation 10,660,673 — — 10,660,673 Gain on sale of High Yield-Focused Advisory Contracts (6,813,579) — — (6,813,579) Net (gains) losses on investments 21,552,322 11,739,448 (8,819,876) 24,471,894 Net change in securities held by Consolidated Funds — (14,039,687) — (14,039,687) Other changes in assets and liabilities (17,563,539) 4,518,501 — (13,045,038) Net cash provided by (used in) operating activities 49,647,594 (9,521,186) (643,773) 39,482,635 Net cash provided by investing activities 5,330,622 — 703,249 6,033,871 Net cash provided by (used in) financing activities (72,333,307) $ 9,521,186 $ (59,476) (62,871,597) Net change during the year (17,355,091) — — (17,355,091) Cash and cash equivalents at beginning of year 80,550,393 — — 80,550,393 Cash and cash equivalents at end of year $ 63,195,302 — — $ 63,195,302 Year Ended December 31, 2021 Cash flow attributable to Diamond Hill Investment Group, Inc.
Cash flow attributable to Consolidated Funds Eliminations As reported on the Consolidated Statement of Cash Flows Cash flows from operating activities: Net income $ 40,434,107 $ (11,739,448) $ 8,176,103 $ 36,870,762 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,377,610 — — 1,377,610 Share-based compensation 10,660,673 — — 10,660,673 Gain on sale of High Yield-Focused Advisory Contracts (6,813,579) — — (6,813,579) Net losses on investments 21,552,322 11,739,448 (8,819,876) 24,471,894 Net change in securities held by Consolidated Funds — (14,039,687) — (14,039,687) Other changes in assets and liabilities (17,563,539) 4,518,501 — (13,045,038) Net cash provided by operating activities 49,647,594 (9,521,186) (643,773) 39,482,635 Net cash provided by investing activities 5,330,622 — 703,249 6,033,871 Net cash used in financing activities (72,333,307) $ 9,521,186 $ (59,476) (62,871,597) Net change during the year (17,355,091) — — (17,355,091) Cash and cash equivalents at beginning of year 80,550,393 — — 80,550,393 Cash and cash equivalents at end of year $ 63,195,302 — — $ 63,195,302 Material Cash Commitments The Company’s material cash commitments consist of its obligations under its Deferred Compensation Plans, lease obligations, and other contractual amounts that will be due for the purchase of goods and services to be used in its operations.
After assessing the current market environment, the level of share repurchases during the year, as well as the regular dividend paid during 2023, the Company decided not to issue a special dividend in 2023.
After assessing the market environment, the level of share repurchases during the year, as well as the regular quarterly dividend paid during 2024, the Board decided not to issue a special dividend in 2024.
These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable non-controlling interest holders of $9.5 million and proceeds received under the ESPP of $0.5 million.
These cash outflows we re partially offset by proceeds received under the ESPP of $0.3 million and net subscriptions received in the Consolidated Funds from redeemable non-controlling interest holders of $0.2 million.
The Company expects that cash flows provided by operating activities will continue to serve as its primary source of working capital in the near future. In 2023, net cash provided by operating activities totaled $34.7 million.
The Company expects that cash flows provided by operating activities will continue to serve as its primary source of working capital. In 2024, net cash provided by operating activities totaled $16.6 million.
The following table presents the results of certain key performance indicators over the past three fiscal years: For the Years Ended December 31, 2023 2022 2021 Ending AUM and AUA (in millions) $ 29,164 $ 26,565 $ 33,126 Average AUM and AUA (in millions) 27,321 29,551 32,045 Net cash inflows (outflows) (in millions) (494) (2,241) 2,123 Total revenue (in thousands) 136,716 154,496 182,194 Net operating income 35,504 64,331 76,258 Adjusted net operating income (a) $ 41,434 $ 60,352 $ 83,680 Average advisory fee rate 0.47 % 0.49 % 0.53 % Average advisory fee rate, excluding performance fees 0.47 % 0.48 % 0.49 % Net operating profit margin 26 % 42 % 42 % Adjusted net operating profit margin (a) 30 % 39 % 46 % (a) Adjusted net operating income and adjusted net operating profit margin are non-GAAP financial measures.
The following table presents the results of certain key performance indicators over the past three fiscal years: For the Years Ended December 31, 2024 2023 2022 Ending AUM and AUA (in millions) $ 31,925 $ 29,164 $ 26,565 Average AUM and AUA (in millions) 31,610 27,321 29,551 Net cash outflows (in millions) (289) (494) (2,241) Total revenue (in thousands) 151,095 136,716 154,496 Net operating income 43,892 35,504 64,331 Adjusted net operating income (a) $ 48,696 $ 41,434 $ 60,352 Average advisory fee rate 0.45 % 0.47 % 0.49 % Net operating profit margin 29 % 26 % 42 % Adjusted net operating profit margin (a) 32 % 30 % 39 % (a) Adjusted net operating income and adjusted net operating profit margin are non-GAAP financial measures.
(in thousands, except per share amounts and percentages) 2023 2022 % Change 2022 2021 % Change Total revenue $ 136,716 $ 154,496 (12)% $ 154,496 $ 182,194 (15)% Net operating income 35,504 64,331 (45)% 64,331 76,258 (16)% Adjusted net operating income (a) 41,434 60,352 (31)% 60,352 83,680 (28)% Investment income (loss), net 23,071 (20,187) NM (20,187) 16,381 NM Gain on sale of High Yield-Focused Advisory Contracts — 6,814 (100)% 6,814 9,000 (24)% Income tax expense 15,490 14,088 10% 14,088 26,050 (46)% Net income attributable to common shareholders 42,226 40,434 4% 40,434 74,201 (46)% Earnings per share attributable to common shareholders (diluted) $ 14.32 $ 13.01 10% $ 13.01 $ 23.34 (44)% Adjusted earnings per share attributable to common shareholders (diluted) (a) $ 10.28 $ 14.40 (29)% $ 14.40 $ 19.48 (26)% Net operating profit margin 26 % 42 % NM 42 % 42 % NM Adjusted net operating profit margin (a) 30 % 39 % NM 39 % 46 % NM (a) Adjusted net operating income, adjusted earnings per share attributable to common shareholders (diluted), and adjusted net operating profit margin are non-GAAP financial measures.
(in thousands, except per share amounts and percentages) 2024 2023 % Change 2023 2022 % Change Total revenue $ 151,095 $ 136,716 11% $ 136,716 $ 154,496 (12)% Net operating income 43,892 35,504 24% 35,504 64,331 (45)% Adjusted net operating income (a) 48,696 41,434 18% 41,434 60,352 (31)% Investment income (loss), net 15,119 23,071 (34)% 23,071 (20,187) NM Gain on sale of High Yield-Focused Advisory Contracts (b) — — NM — 6,814 (100)% Income tax expense 15,833 15,490 2% 15,490 14,088 10% Net income attributable to common shareholders 43,178 42,226 2% 42,226 40,434 4% Earnings per share attributable to common shareholders (diluted) $ 15.66 $ 14.32 9% $ 14.32 $ 13.01 10% Adjusted earnings per share attributable to common shareholders (diluted) (a) $ 12.92 $ 10.28 26% $ 10.28 $ 14.40 (29)% Net operating profit margin 29 % 26 % NM 26 % 42 % NM Adjusted net operating profit margin (a) 32 % 30 % NM 30 % 39 % NM (a) Adjusted net operating income, adjusted earnings per share attributable to common shareholders (diluted), and adjusted net operating profit margin are non-GAAP financial measures.
The increase in income tax expense was primarily due to an increase in the Company’s income before taxes, which was partially offset by a decrease in its effective tax rate from 27.6% to 26.4% year-over-year. The decrease in the Company’s effective tax rate in 2023 was primarily due to the benefit attributable to redeemable noncontrolling interests.
Income tax expense increased $1.4 million for 2023, compared to 2022. The increase in income tax expense was primarily due to an increase in the Company’s income before taxes, which was partially offset by a decrease in its effective tax rate from 27.6% to 26.4% year-over-year.
Net cash provided by operating activities of $26.3 million was inclusive of $50.3 million of cash used in operations by the Consolidated Funds. Cash Flows from Investing Activities The Company’s cash flows from investing activities consist primarily of capital expenditures and purchases and redemptions in its investment portfolio. Cash flows used in investing activities totaled $4.2 million in 2023.
Net cash provided by operating activities of $39.5 million was inclusive of $9.5 million of cash used in operations by the Consolidated Funds. Cash Flows from Investing Activities The Company’s cash flows from investing activities consist primarily of capital expenditures and purchases and redemptions in its investment portfolio. Cash flows provided by investing activities totaled $30.5 million in 2024.
Also, the Company recognized $1.2 million of performance-based fees during 2023, compared to $1.5 million of performance-based fees during 2022. Mutual Fund Administration Fees. Mutual fund administration fees decreased $2.6 million, or 26%, from 2022 compared to 2023. Mutual fund administration fees include administration fees received from the Funds, which are calculated as a percentage of the Funds’ average AUM.
Fund administration fees decreased $2.6 million, or 26%, from 2022 compared to 2023. Fund administration fees include administration fees received from the Proprietary Funds, which are calculated as a percentage of the Proprietary Funds’ average AUM.
Equity 21,885 20,835 26,748 Alternatives Long-Short 1,725 1,752 1,998 Total Alternatives 1,725 1,752 1,998 International Equity International 109 52 56 Total International Equity 109 52 56 Fixed Income Short Duration Securitized Bond 1,948 1,308 1,613 Core Fixed Income 1,735 792 622 Long Duration Treasury 26 33 51 Total Fixed Income 3,709 2,133 2,286 Total-All Strategies 27,428 24,772 31,088 (Less: Investments in affiliated funds) (a) (10) (9) (60) Total AUM 27,418 24,763 31,028 Total AUA (b) 1,746 1,802 2,098 Total AUM and AUA $ 29,164 $ 26,565 $ 33,126 (a) Certain of the Funds own shares of the Diamond Hill Short Duration Securitized Bond Fund.
Equity 21,963 21,885 20,835 Alternatives Long-Short 1,684 1,725 1,752 Total Alternatives 1,684 1,725 1,752 International Equity International 141 109 52 Total International Equity 141 109 52 Fixed Income Short Duration Securitized Bond 3,732 1,948 1,308 Core Fixed Income 2,416 1,735 792 Securitized Credit 52 — — Long Duration Treasury 24 26 33 Total Fixed Income 6,224 3,709 2,133 Total-All Strategies 30,012 27,428 24,772 (Less: Investments in affiliated funds) (a) — (10) (9) Total AUM 30,012 27,418 24,763 Total AUA (b) 1,913 1,746 1,802 Total AUM and AUA $ 31,925 $ 29,164 $ 26,565 (a) Certain of the Diamond Hill Funds own shares of the Diamond Hill Short Duration Securitized Bond Fund.
The following is a summary of the Company’s AUM by product and investment objective, a roll-forward of the change in AUM, and a summary of AUA for the years ended December 31, 2023, 2022, and 2021: Assets Under Management and Assets Under Advisement As of December 31, (in millions) 2023 2022 2021 Diamond Hill Funds $ 15,879 $ 14,745 $ 19,786 Separately managed accounts 6,617 6,220 7,232 Collective investment trusts 1,359 1,040 603 Other pooled vehicles 3,563 2,758 3,407 Total AUM 27,418 24,763 31,028 Total AUA 1,746 1,802 2,098 Total AUM and AUA $ 29,164 $ 26,565 $ 33,126 24 Table of Contents Assets Under Management by Investment Strategy As of December 31, (in millions) 2023 2022 2021 U.S.
The following is a summary of the Company’s AUM by product and investment objective, a roll-forward of the change in AUM, and a summary of AUA for 2024, 2023, and 2022: Assets Under Management and Assets Under Advisement As of December 31, (in millions) 2024 2023 2022 Proprietary Funds $ 18,097 $ 15,879 $ 14,745 Separately managed accounts 6,108 6,617 6,220 Collective investment trusts 1,947 1,359 1,040 Other pooled vehicles 3,860 3,563 2,758 Total AUM 30,012 27,418 24,763 Total AUA 1,913 1,746 1,802 Total AUM and AUA $ 31,925 $ 29,164 $ 26,565 23 Table of Contents Assets Under Management by Investment Strategy As of December 31, (in millions) 2024 2023 2022 U.S.
Expenses (in thousands, except percentages) 2023 2022 % Change 2022 2021 % Change Compensation and related costs, excluding deferred compensation expense (benefit) $ 70,731 $ 70,505 —% $ 70,505 $ 73,591 (4)% Deferred compensation expense (benefit) 5,600 (4,402) NM (4,402) 7,082 NM General and administrative 14,935 13,607 10% 13,607 14,021 (3)% Sales and marketing 6,684 7,160 (7)% 7,160 7,659 (7)% Mutual fund administration 3,262 3,295 (1)% 3,295 3,582 (8)% Total $ 101,212 $ 90,165 12% $ 90,165 $ 105,935 (15)% Expenses - 2023 Compared to 2022 Compensation and Related Costs, Excluding Deferred Compensation Expense (Benefit) .
Expenses (in thousands, except percentages) 2024 2023 % Change 2023 2022 % Change Compensation and related costs, excluding deferred compensation expense (benefit) $ 74,589 $ 70,731 5% $ 70,731 $ 70,505 —% Deferred compensation expense (benefit) 4,776 5,600 (15)% 5,600 (4,402) NM General and administrative 16,785 14,935 12% 14,935 13,607 10% Sales and marketing 7,510 6,684 12% 6,684 7,160 (7)% Fund administration 3,543 3,262 9% 3,262 3,295 (1)% Total $ 107,203 $ 101,212 6% $ 101,212 $ 90,165 12% Expenses - 2024 Compared to 2023 Compensation and Related Costs, Excluding Deferred Compensation Expense .
Total number of funds included in the 1-, 3-, 5-, 10-, and 15-year periods are 10, 9, 9, 6, and 5, respectively . Percentage of Fund assets that outperform is based on the Fund assets as of December 31, 2023.
Past performance is not a guarantee of future results. The total number of funds included in the 1-, 3-, 5-, and 10-year periods are 10, 10, 9, and 6, respectively . The percentage of Diamond Hill Fund assets that outperform is based on the Diamond Hill Fund assets as of December 31, 2024.
The Company believes it is useful to offset the non-operating investment income or loss realized on the hedges against the related compensation expense and remove the net impact to help readers understand the Company’s core operating results and to improve comparability from period to period.
The Company believes it is useful to offset the non-operating investment income or loss realized on the hedges against the related compensation expense and remove the net impact to help readers understand the Company’s core operating results and to improve comparability from period to period. 35 Table of Contents (2) This non-GAAP adjustment removes the impact that the Consolidated Fund(s) have on the Company’s GAAP consolidated statements of income.
(b) AUA is primarily comprised of Large Cap and Select strategies. 25 Table of Contents Change in Assets Under Management For the Year Ended December 31, (in millions) 2023 2022 2021 AUM at beginning of the year $ 24,763 $ 31,028 $ 26,411 Net cash inflows (outflows) Diamond Hill Funds (599) (2,433) 1,994 Separately managed accounts (416) (73) 168 Collective investment trusts 153 486 182 Other pooled vehicles 368 (221) (221) (494) (2,241) 2,123 Sale of High Yield-Focused Advisory Contracts — — (3,456) Net market appreciation (depreciation) and income 3,149 (4,024) 5,950 Increase (decrease) during the year 2,655 (6,265) 4,617 AUM at end of the year 27,418 24,763 31,028 AUA at end of the year 1,746 1,802 2,098 Total AUM and AUA at end of year $ 29,164 $ 26,565 $ 33,126 Average AUM during the year $ 25,552 $ 27,599 $ 30,297 Average AUA during the year 1,769 1,952 1,748 Total Average AUM and AUA during the year $ 27,321 $ 29,551 $ 32,045 Net Cash Inflows (Outflows) Further Breakdown For the Year Ended December 31, (in millions) 2023 2022 2021 Net cash inflows (outflows) Equity $ (1,865) $ (2,247) $ 958 Fixed Income 1,371 6 1,165 $ (494) $ (2,241) $ 2,123 2023 Discussion of Net Cash Outflows Flows out of the Company’s equity strategies were largely driven by flows out of its Large Cap strategy, which experienced net outflows of $1.4 billion.
(b) AUA is primarily comprised of Large Cap and Select strategies. 24 Table of Contents Change in Assets Under Management For the Year Ended December 31, (in millions) 2024 2023 2022 AUM at beginning of the year $ 27,418 $ 24,763 $ 31,028 Net cash inflows (outflows) Proprietary Funds 726 (599) (2,433) Separately managed accounts (1,269) (416) (73) Collective investment trusts 403 153 486 Other pooled vehicles (149) 368 (221) (289) (494) (2,241) Net market appreciation (depreciation) and income 2,883 3,149 (4,024) Increase (decrease) during the year 2,594 2,655 (6,265) AUM at end of the year 30,012 27,418 24,763 AUA at end of the year 1,913 1,746 1,802 Total AUM and AUA at end of year $ 31,925 $ 29,164 $ 26,565 Average AUM during the year $ 29,718 $ 25,552 $ 27,599 Average AUA during the year 1,892 1,769 1,952 Total Average AUM and AUA during the year $ 31,610 $ 27,321 $ 29,551 Net Cash Outflows Further Breakdown For the Year Ended December 31, (in millions) 2024 2023 2022 Net cash inflows (outflows) Equity $ (2,544) $ (1,865) $ (2,247) Fixed Income 2,255 1,371 6 $ (289) $ (494) $ (2,241) 2024 Discussion of Net Cash Outflows Flows out of the Company’s equity strategies were largely driven by flows out of its Large Cap and Small-Mid Cap strategies, which experienced net outflows of $1.6 billion and $0.8 billion, respectively.
Aggregate Index 5.53 % (3.31) % 1.10 % N/A 0.78 % _______________________ - Composite returns are net of fees. - Index returns do not reflect any fees. 23 Table of Contents Key Financial Performance Indicators There are a variety of key performance indicators that the Company monitors to evaluate its business results.
Aggregate Index 1.25 % (2.41) % (0.33) % N/A 0.84 % Diamond Hill Securitized Credit Composite 10/31/2024 N/A N/A N/A N/A 2.33 % _______________________ - Composite returns are net of fees. - Index returns do not reflect any fees. 22 Table of Contents Key Financial Performance Indicators There are a variety of key performance indicators that the Company monitors to evaluate its business results.
Equity Large Cap $ 17,307 $ 16,478 $ 21,285 Small-Mid Cap 2,588 2,646 3,183 Mid Cap 1,023 899 1,165 Select 593 392 438 Small Cap 255 306 597 Large Cap Concentrated 98 99 64 Micro Cap 21 15 16 Total U.S.
Equity Large Cap $ 17,702 $ 17,307 $ 16,478 Small-Mid Cap 2,009 2,588 2,646 Mid Cap 1,082 1,023 899 Select 755 593 392 Small Cap 253 255 306 Large Cap Concentrated 129 98 99 Micro Cap 33 21 15 Total U.S.
Equity Composites Inception 1 Year 3 Year 5 Year 10 Year Since Inception Diamond Hill Large Cap 6/30/2001 13.68 % 7.39 % 12.35 % 9.42 % 9.01 % Russell 1000 Index 26.53 % 8.97 % 15.52 % 11.80 % 8.44 % Russell 1000 Value Index 11.46 % 8.86 % 10.91 % 8.40 % 7.31 % Diamond Hill Large Cap Concentrated 12/31/2011 16.62 % 8.67 % 13.02 % 9.97 % 12.00 % Russell 1000 Index 26.53 % 8.97 % 15.52 % 11.80 % 13.83 % Russell 1000 Value Index 11.46 % 8.86 % 10.91 % 8.40 % 10.97 % Diamond Hill Mid Cap 12/31/2013 9.88 % 7.86 % 9.20 % 7.12 % 7.12 % Russell Midcap Index 17.23 % 5.92 % 12.68 % 9.42 % 9.42 % Russell Midcap Value Index 12.71 % 8.36 % 11.16 % 8.26 % 8.26 % Diamond Hill Small-Mid Cap 12/31/2005 11.50 % 8.15 % 10.39 % 7.20 % 8.32 % Russell 2500 Index 17.42 % 4.24 % 11.67 % 8.36 % 8.64 % Russell 2500 Value Index 15.98 % 8.81 % 10.79 % 7.42 % 7.69 % Diamond Hill Small Cap 12/31/2000 23.35 % 11.86 % 11.23 % 6.43 % 9.90 % Russell 2000 Index 16.93 % 2.22 % 9.97 % 7.16 % 7.87 % Russell 2000 Value Index 14.65 % 7.94 % 10.00 % 6.76 % 8.46 % Diamond Hill Select 6/30/2000 30.60 % 13.02 % 16.73 % 10.76 % 10.51 % Russell 3000 Index 25.96 % 8.54 % 15.16 % 11.48 % 7.34 % Russell 3000 Value Index 11.66 % 8.81 % 10.84 % 8.28 % 7.54 % Alternative Composites Diamond Hill Long-Short 6/30/2000 13.25 % 7.92 % 9.39 % 6.50 % 7.32 % 60% Russell 1000 Index / 40% BofA ML U.S.
Equity Composites Inception 1 Year 3 Year 5 Year 10 Year Since Inception Diamond Hill Large Cap 6/30/2001 12.06 % 3.35 % 8.70 % 9.54 % 9.13 % Russell 1000 Index 24.51 % 8.41 % 14.28 % 12.87 % 9.08 % Russell 1000 Value Index 14.37 % 5.63 % 8.68 % 8.49 % 7.60 % Diamond Hill Large Cap Concentrated 12/31/2011 14.28 % 5.01 % 10.00 % 10.40 % 12.17 % Russell 1000 Index 24.51 % 8.41 % 14.28 % 12.87 % 14.61 % Russell 1000 Value Index 14.37 % 5.63 % 8.68 % 8.49 % 11.23 % Diamond Hill Mid Cap 12/31/2013 10.61 % 1.83 % 6.42 % 7.38 % 7.43 % Russell Midcap Index 15.34 % 3.79 % 9.92 % 9.63 % 9.95 % Russell Midcap Value Index 13.07 % 3.88 % 8.59 % 8.10 % 8.69 % Diamond Hill Small-Mid Cap 12/31/2005 8.31 % 1.45 % 6.80 % 7.30 % 8.32 % Russell 2500 Index 12.00 % 2.39 % 8.77 % 8.85 % 8.82 % Russell 2500 Value Index 10.98 % 3.81 % 8.44 % 7.81 % 7.86 % Diamond Hill Small Cap 12/31/2000 13.29 % 6.04 % 9.63 % 7.25 % 10.04 % Russell 2000 Index 11.54 % 1.24 % 7.40 % 7.82 % 8.02 % Russell 2000 Value Index 8.05 % 1.94 % 7.29 % 7.14 % 8.44 % Diamond Hill Select 6/30/2000 13.14 % 6.98 % 13.38 % 10.91 % 10.62 % Russell 3000 Index 23.81 % 8.01 % 13.86 % 12.55 % 7.97 % Russell 3000 Value Index 13.98 % 5.41 % 8.60 % 8.40 % 7.80 % Diamond Hill Micro Cap 9/30/2021 23.63 % 12.14 % N/A N/A 14.75 % Russell Micro Cap Index 13.70 % (1.00) % N/A N/A (1.74) % Alternative Composites Diamond Hill Long-Short 6/30/2000 10.97 % 4.98 % 6.90 % 6.66 % 7.36 % 60% Russell 1000 Index / 40% BofA ML U.S.
Revenue (in thousands, except percentages) 2023 2022 % Change 2022 2021 % Change Investment advisory $ 129,180 $ 144,326 (10)% $ 144,326 $ 170,138 (15)% Mutual fund administration, net 7,536 10,170 (26)% 10,170 12,056 (16)% Total $ 136,716 $ 154,496 (12)% $ 154,496 $ 182,194 (15)% 28 Table of Contents Revenue - 2023 Compared to 2022 Investment Advisory Fees.
Revenue (in thousands, except percentages) 2024 2023 % Change 2023 2022 % Change Investment advisory $ 143,342 $ 129,180 11% $ 129,180 $ 144,326 (10)% Fund administration, net 7,753 7,536 3% 7,536 10,170 (26)% Total $ 151,095 $ 136,716 11% $ 136,716 $ 154,496 (12)% 27 Table of Contents Revenue - 2024 Compared to 2023 Investment Advisory Fees.
The Company generated net income attributable to common shareholders of $42.2 million ($14.32 per diluted share) for 2023, compared to $40.4 million ($13.01 per diluted share) for 2022. The year-over-year increase in net income attributable to common shareholders was primarily due to investment income in 2023 compared to investment loss in 2022 due to the market environment.
The decrease in the Company’s effective tax rate in 2023 was primarily due to the benefit attributable to redeemable noncontrolling interests. The Company generated net income attributable to common shareholders of $42.2 million ($14.32 per diluted share) for 2023, compared to $40.4 million ($13.01 per diluted share) for 2022.
Assets Under Management The Company derives revenue primarily from DHCM’s investment advisory and administration fees. Investment advisory and administration fees paid to DHCM are generally based on the value of the investment portfolios it manages and fluctuate with changes in the total value of its AUM.
Investment advisory and administration fees paid to DHCM are generally based on the value of the investment portfolios it manages and fluctuate with changes in the total value of its AUM. The Company, through DHCM, recognizes revenue when DHCM satisfies its performance obligations under the terms of a contract with a client.
Net cash provided by operating activities of $39.5 million was inclusive of $9.5 million of cash used in operations by the Consolidated Funds. In 2021, net cash provided by operating activities totaled $26.3 million.
Net cash provided by operating activities of $16.6 million was inclusive of $35.9 million of cash used in operations by the Consolidated Funds. In 2023, net cash provided by operating activities totaled $34.7 million.
In 2021, net cash used in financing activities totaled $71.5 million, consisting of the payment of dividends of $73.0 million, repurchases of DHIL’s common shares of $7.8 million, and $1.6 million of shares withheld related to employee tax withholding obligations.
In 2024, net cash used in financing activities totaled $52.5 million, consisting of repurchases of DHIL’s common shares of $30.2 million, the payment of dividends of $16.5 million, and the value of shares withheld to cover employee tax withholding obligations of $6.3 million.
The gain (loss) on the Deferred Compensation Plans’ investments increases (decreases) deferred compensation expense (benefit) and is included in operating income. Deferred compensation expense (benefit) is offset by an equal amount in investment income (loss) below net operating income on the consolidated statements of income, and thus, has no impact on net income attributable to the Company.
Deferred compensation expense (benefit) is offset by an equal amount in investment income (loss) below net operating income on the consolidated statements of income, and thus, has no impact on net income attributable to the Company. General and Administrative . General and administrative expenses increased by $1.8 million, or 12%, from 2023 compared to 2024.
T-Bill 0-3 Month Index 17.82 % 6.60 % 10.34 % 7.77 % 5.33 % International Composites Diamond Hill International 12/31/2016 18.29 % 4.95 % 8.90 % N/A 8.78 % MSCI ACWI ex USA Index 15.62 % 1.55 % 7.08 % N/A 6.33 % Fixed Income Composites Diamond Hill Short Duration Securitized Bond 7/31/2016 8.98 % 2.70 % 3.23 % N/A 3.31 % Bloomberg Barclays U.S. 1-3 Yr.
T-Bill 0-3 Month Index 16.63 % 7.00 % 9.87 % 8.61 % 5.77 % International Composites Diamond Hill International 12/31/2016 4.03 % 2.14 % 5.14 % N/A 8.18 % MSCI ACWI ex USA Index 5.53 % 0.82 % 4.10 % N/A 6.23 % Fixed Income Composites Diamond Hill Short Duration Securitized Bond 7/31/2016 9.40 % 4.85 % 4.11 % N/A 4.01 % Bloomberg Barclays U.S. 1-3 Yr.
A summary of cash dividends paid during the years ended December 31, 2023, 2022, and 2021 is presented below: Year Regular Dividend Per Share Regular Dividend Total Special Dividend Per Share Special Dividend Total Total Dividend Per Share Total Dividends 2023 $ 6.00 $ 17,676,364 $ — $ — $ 6.00 $ 17,676,364 2022 $ 6.00 18,637,238 $ 4.00 12,059,669 $ 10.00 30,696,907 2021 $ 4.00 12,700,876 $ 19.00 60,260,100 $ 23.00 72,960,976 Total $ 49,014,478 $ 72,319,769 $ 121,334,247 On February 28, 2024, the Board approved a regular quarterly dividend for the first quarter of 2024 of $1.50 per share to be paid on March 22, 2024, to shareholders of record as of March 11, 2024.
A summary of cash dividends paid during the years ended December 31, 2024, 2023, and 2022 is presented below: Year Regular Dividend Per Share Regular Dividend Total Special Dividend Per Share Special Dividend Total Total Dividend Per Share Total Dividends 2024 $ 6.00 $ 16,530,676 $ — $ — $ 6.00 $ 16,530,676 2023 $ 6.00 17,676,364 $ — — $ 6.00 17,676,364 2022 $ 6.00 18,637,238 $ 4.00 12,059,669 $ 10.00 30,696,907 Total $ 52,844,278 $ 12,059,669 $ 64,903,947 On February 26, 2025, the Board approved a regular quarterly dividend for the first quarter of 2025 of $1.50 per share to be paid on March 21, 2025, to shareholders of record at the close of business on March 10, 2025.
The following table summarizes the Company’s annual share repurchase transactions: Year Total Number of Shares Purchased Average Price Paid Per Share Purchased Purchase Price of Shares Purchased 2023 212,638 $ 162.81 $ 34,619,944 2022 217,009 178.45 38,726,007 2021 45,727 171.02 7,820,315 Total 475,374 $ 157.65 $ 81,166,266 Dividends Fiscal 2023 was the 16th consecutive year that the Company paid a dividend.
The following table summarizes the Company’s annual share repurchase transactions: Year Total Number of Shares Purchased Average Price Paid Per Share Purchased Purchase Price of Shares Purchased 2024 195,224 $ 154.92 $ 30,244,638 2023 212,638 162.81 34,619,944 2022 217,009 178.45 38,726,007 Total 624,871 $ 165.78 $ 103,590,589 Dividends Fiscal 2024 was the 17th consecutive year that the Company paid a dividend.
You should also consider the Company’s forward-looking statements in light of the risks discussed Part I, Item 1A, as well as our consolidated financial statements, related notes and other financial information appearing elsewhere in this Form 10-K and our other filings with the SEC. 19 Table of Contents Business Environment 1 The performance of the U.S. and international equity markets, as well as the U.S. fixed income market, have a direct impact on the Company’s operations and financial position.
You should also consider the Company’s forward-looking statements in light of the risks discussed Part I, Item 1A, as well as the Company’s consolidated financial statements, related notes and other financial information appearing elsewhere in this Form 10-K and its other filings with the SEC.
Below is a summary of investments as of December 31, 2023 and 2022: As of December 31, 2023 2022 Corporate Investments: Diamond Hill International Fund $ 52,763,714 $ 36,084,204 Diamond Hill Core Bond Fund 34,003,006 41,315,982 Diamond Hill Micro Cap Fund, LP 12,482,396 9,690,916 Diamond Hill Large Cap Concentrated Fund 12,402,576 10,571,463 Total Corporate Investments 111,651,692 97,662,565 Deferred Compensation Plan Investments in the Funds 36,087,170 30,744,990 Total investments held by DHCM 147,738,862 128,407,555 Redeemable noncontrolling interest in the Consolidated Fund — 17,268,156 Total investments $ 147,738,862 $ 145,675,711 Cash Flow Analysis Cash Flows from Operating Activities The Company’s cash flows from operating activities are calculated by adjusting net income to reflect other significant operating sources and uses of cash, certain significant non-cash items (such as share-based compensation), and timing differences in the cash settlement of operating assets and liabilities.
Below is a summary of investments as of December 31, 2024 and 2023: As of December 31, 2024 2023 Corporate Investments: Diamond Hill International Fund $ 54,887,433 $ 52,763,714 Diamond Hill Core Plus Bond Fund 35,294,858 — Diamond Hill Micro Cap Fund, LP 15,978,910 12,482,396 Diamond Hill Large Cap Concentrated Fund 14,180,828 12,402,576 Diamond Hill Securitized Credit Fund 117,266 — Diamond Hill Core Bond Fund — 34,003,006 Total Corporate Investments 120,459,295 111,651,692 Deferred Compensation Plan Investments in the Funds 39,129,093 36,087,170 Total investments held by DHCM 159,588,388 147,738,862 Redeemable noncontrolling interest in the Consolidated Fund 164,593 — Total investments $ 159,752,981 $ 147,738,862 Cash Flow Analysis Cash Flows from Operating Activities The Company’s cash flows from operating activities are calculated by adjusting net income to reflect other significant operating sources and uses of cash, certain significant non-cash items (such as share-based compensation), and timing differences in the cash settlement of operating assets and liabilities.
On average, the Company had 129 employees in 2022 and 126 in 2021. Incentive compensation expense can fluctuate significantly period over period as the Company evaluates investment performance, individual performance, its own performance, and other factors. Deferred Compensation Expense (Benefit). Deferred compensation benefit was $4.4 million for 2022 compared to an expense of $7.1 million for 2021.
On average, the Company had 128 employees in 2024 28 Table of Contents and 129 employees in 2023. Incentive compensation expense can fluctuate significantly period over period as the Company evaluates investment performance, individual performance, its own performance, and other factors. Deferred Compensation Expense.
Total composite assets for the 1-, 3-, 5-, 10-, and 15-year periods are $24.0B, $23.8B, $23.8B, $20.5B, and $19.4B, respectively, which represents between 70% and 88% of total Company assets for each period.
Total fund assets for the 1-, 3-, 5-, and 10-year periods are $18.0B, $18.0B, $18.0B, and $12.4B, respectively, which represents between 41% and 60% of total Company assets for each period.
The Company recorded a gain of $6.8 million from the final payment on the sale of its High Yield-Focused Advisory Contracts during 2022. 27 Table of Contents Income tax expense increased $1.4 million for 2023, compared to 2022.
The Company had $23.1 million in investment income due to market appreciation in 2023, compared to $20.2 million in investment loss due to market declines in 2022. The Company recorded a gain of $6.8 million from the final payment on the sale of its High Yield-Focused Advisory Contracts during 2022.
See the “Non-GAAP Financial Measures and Reconciliation” section in Part II, Item 7 in this Form 10-K for the definitions of “GAAP” and “non-GAAP” as well as a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
See the “Non-GAAP Financial Measures and Reconciliation” section in this MD&A for the definitions of “GAAP” and “non-GAAP” as well as a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Assets Under Management The Company derives revenue primarily from DHCM’s investment advisory and administration fees.
Adjusted net operating profit margin excludes the impact of market movements on the deferred compensation liability and related economic hedges, and the impact of the Diamond Hill International Fund and the Diamond Hill Large Cap Concentrated Fund (the “Consolidated Fund(s)”).
Adjusted net operating profit margin excludes the impact of market movements on the deferred compensation liability and related economic hedges, and the impact of the consolidated Diamond Hill Core Plus Bond Fund in 2024, and the Diamond Hill International Fund in 2023. Any Proprietary Fund(s) consolidated during the applicable period are referred to as the “Consolidated Fund(s)”.
Investment advisory fees decreased by $25.8 million, or 15%, from 2021 to 2022. Investment advisory fees are calculated as a percentage of the market value of client accounts at contractual fee rates, which vary by investment product. The Company recognized $1.5 million of performance-based fees in 2022 compared to $11.9 million of performance-based fees recognized in 2021.
Investment advisory fees increased by $14.2 million, or 11%, from 2023 to 2024. Investment advisory fees are calculated as a percentage of the market value of client accounts at contractual fee rates, which vary by investment product.
Mutual fund administration fees include administration fees received from the Funds, which are calculated as a percentage of the Funds’ average AUM. This decrease was primarily due to the impact of a 14% decrease in the Funds’ average AUM from 2021 compared to 2022.
Fund administration fees include administration fees received from the Proprietary Funds, which are calculated as a percentage of the funds’ average AUM.
The Company had $23.1 million in investment income due to market appreciation in 2023, compared to $20.2 million in investment loss due to market declines in 2022.
The Company had $15.1 million in investment income due to market appreciation in 2024, compared to $23.1 million in investment income due to market appreciation in 2023. Income tax expense increased $0.3 million in 2024, compared to 2023.
Mutual fund administration expenses consist of both variable and fixed expenses. The variable expenses are based on Fund AUM levels and the number of shareholder accounts. The decrease was due to a reduction in variable expenses as a result of the decrease in the Funds’ average AUM period over period.
The variable expenses are based on Proprietary Fund AUM levels and the number of shareholder accounts. The increase was due to an increase in variable expenses as a result of the increase in the Proprietary Funds’ average AUM period over period. Expenses - 2023 Compared to 2022 Compensation and Related Costs, Excluding Deferred Compensation Expense (Benefit).
Refer to the “Revenue” section below in Part II, Item 7 of this Form 10-K for further details on the decrease in the average advisory fee rate. The Company recognized $1.2 million of performance-based fees during 2023 compared to $1.5 million of performance-based fees during 2022. Net operating profit margin was 26% for 2023 and 42% for 2022.
Refer to the “Revenue” section below in this MD&A for further details on the decrease in the average advisory fee rate. Operating profit margin was 26% for 2023 and 42% for 2022.
DHCM is paid for its services by the program sponsor at a pre-determined rate based on AUA in the model delivery programs. DHCM does not have discretionary investment authority over individual client accounts in model delivery programs, and therefore, the AUA is not included in the Company’s AUM.
DHCM does not have discretionary investment authority over individual client accounts in model delivery programs, and therefore, the AUA is not included in the Company’s AUM. The Company’s revenues are highly dependent on both the value and composition of AUM and AUA.
Total fund assets for the 1-, 3-, 5-, 10-, and 15-year periods are $15.9B, $15.9B, $15.9B, $12.6B, and $12.5B, respectively, which represents between 45% and 60% of total Company assets for each period. 21 Table of Contents The percentage of the Company’s composites that outperform their benchmark includes all our composites (excluding Long-Duration Treasury) vs. the primary benchmark for each composite, except for the Long-Short Composite which uses a blended index that is a 60%/40% weighted blend of the Russell 1000 Index and the Bloomberg U.S.
The percentage of the Company’s composites that outperform their benchmark includes all its composites (excluding Long-Duration Treasury) versus the performance benchmark for each composite, except for the Long-Short Composite which uses a blended index that is a 60%/40% weighted blend of the Russell 1000 Index and the Bloomberg U.S. Treasury Bills 1-3 Month Index as of December 31,2024.
Gov./Credit Index 4.61 % 0.09 % 1.51 % N/A 1.30 % Diamond Hill Core Bond 7/31/2016 6.75 % (2.24) % 1.79 % N/A 1.67 % Bloomberg Barclays U.S.
Gov./Credit Index 4.36 % 1.69 % 1.58 % N/A 1.65 % Diamond Hill Core Bond 7/31/2016 3.58 % (0.81) % 0.89 % N/A 1.89 % Bloomberg Barclays U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−1 removed1 unchanged
Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk The Company’s revenues and net income are based primarily on the value of its AUM. Accordingly, declines in financial market values directly and negatively impact its investment advisory revenues and net income. The Company invests in its investment strategies, which are market risk sensitive financial instruments.
Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Table of Contents The Company’s revenues and net income are based primarily on the value of its AUM. Accordingly, declines in financial market values directly and negatively impact its investment advisory revenues and net income. The Company invests in its investment strategies, which are market risk sensitive financial instruments.
The table below summarizes the Company’s market risks as of December 31, 2023, and shows the effects of a hypothetical 10% increase and decrease in investments.
The table below summarizes the Company’s market risks as of December 31, 2024, and shows the effects of a hypothetical 10% increase and decrease in investments.
Removed
Fair Value as of December 31, 2023 Fair Value Assuming a Hypothetical 10% Increase Fair Value Assuming a Hypothetical 10% Decrease Equity investments $ 110,296,156 $ 121,325,772 $ 99,266,540 Fixed Income investments 37,442,706 41,186,977 33,698,435 Total $ 147,738,862 $ 162,512,749 $ 132,964,975 38
Added
Fair Value as of December 31, 2024 Fair Value Assuming a Hypothetical 10% Increase Fair Value Assuming a Hypothetical 10% Decrease Equity investments $ 79,207,519 $ 87,128,271 $ 71,286,767 Fixed Income investments 80,545,462 88,600,008 72,490,916 Total $ 159,752,981 $ 175,728,279 $ 143,777,683 37

Other DHIL 10-K year-over-year comparisons