United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP, INC. (Exact name of registrant as specified in its charter) | --- | --- | |----------------- ...

[Part I: Financial Information](index=3&type=section&id=Part%20I%3A%20FINANCIAL%20INFORMATION) This section presents the company's consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls for the reporting period [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements for Q1 2022 show decreased assets and equity, with revenue growth offset by investment losses leading to a significant decline in net income and negative operating cash flow [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$261.4 million** by March 31, 2022, primarily due to reduced cash and accrued incentive compensation liability after annual payments Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | March 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $58,779 | $80,550 | | Investments | $161,930 | $166,656 | | Total assets | $261,366 | $286,153 | | **Liabilities & Equity** | | | | Accrued incentive compensation | $9,401 | $37,235 | | Total liabilities | $58,018 | $83,974 | | Total permanent shareholders' equity | $182,610 | $184,423 | | Book value per share | $57.22 | $58.15 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2022 revenue grew **8%** to **$42.3 million**, but a **$7.6 million** net investment loss led to a **33%** decline in net income to **$9.1 million** and reduced diluted EPS Q1 2022 vs Q1 2021 Income Statement (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenue | $42,256 | $39,014 | | Net Operating Income | $19,073 | $13,532 | | Investment Income (Loss), Net | $(7,592) | $5,663 | | Net Income Attributable to Common Shareholders | $9,130 | $13,709 | | Diluted EPS | $2.87 | $4.34 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 saw **$13.7 million** net cash used in operations due to incentive payouts, while financing activities used **$9.9 million** for share repurchases and dividends Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,678) | $(15,661) | | Net cash provided by investing activities | $1,834 | $1,588 | | Net cash used in financing activities | $(9,927) | $(4,218) | | Net change in cash | $(21,771) | $(18,291) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's investment advisory business, accounting policies, revenue recognition, investment composition, compensation, income taxes, and recent corporate actions - The company's revenue is **primarily derived from investment advisory and fund administration services** provided by its wholly-owned subsidiary, Diamond Hill Capital Management, Inc. (DHCM)[16](index=16&type=chunk) Revenue by Source (Q1 2022 vs Q1 2021, in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Proprietary funds | $30,232 | $28,956 | | Separately managed accounts | $7,192 | $6,473 | | Sub-Advised funds | $3,115 | $2,678 | | Model delivery | $1,717 | $907 | - As of March 31, 2022, the company had **$505.9 million in AUM** subject to performance-based fees, with **$1.1 million in unearned fees** based on investment results to date[46](index=46&type=chunk) - On April 26, 2022, the Board of Directors approved a quarterly cash dividend of **$1.50 per share**, payable in June 2022[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 revenue growth driven by higher AUM, net income decline due to investment losses, AUM decrease from market depreciation, and continued capital return through repurchases and dividends [Assets Under Management (AUM)](index=20&type=section&id=Assets%20Under%20Management%20%28AUM%29) Q1 2022 AUM decreased by **$0.7 billion** to **$30.3 billion** due to market depreciation, despite net cash inflows, while average AUM increased **8%** year-over-year AUM Roll-Forward (in millions) | Period | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Beginning AUM | $31,028 | $26,411 | | Net cash inflows | $237 | $1,744 | | Net market appreciation (depreciation) | $(943) | $2,427 | | **Ending AUM** | **$30,322** | **$30,582** | - Model delivery Assets Under Advisement (AUA), which are not included in AUM, were **$2.1 billion** as of March 31, 2022, up from **$1.4 billion** as of March 31, 2021[109](index=109&type=chunk) [Consolidated Results of Operations](index=23&type=section&id=Consolidated%20Results%20of%20Operations) Q1 2022 revenue rose **8%** to **$42.3 million**, and net operating income increased **41%**, but a **$7.6 million** investment loss led to a **33%** drop in net income to **$9.1 million** - The increase in revenue was primarily due to an **8% increase in average AUM**, partially offset by a decrease in the average advisory fee rate from **0.53% to 0.52%** year-over-year[113](index=113&type=chunk)[118](index=118&type=chunk) - The decrease in net income was primarily due to the impact of **investment losses** in the current period versus investment income in the prior period[116](index=116&type=chunk) GAAP to Non-GAAP Reconciliation (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net operating income, GAAP basis | $19,073 | $13,532 | | Gains (losses) on deferred comp plan | $(1,179) | $3,103 | | **Net operating income, as adjusted (Non-GAAP)** | **$17,894** | **$16,635** | | Operating profit margin, GAAP basis | 45% | 35% | | **Operating profit margin, as adjusted (Non-GAAP)** | **42%** | **43%** | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains **$166.2 million** in working capital, utilized **$9.3 million** for share repurchases and **$4.8 million** for dividends in Q1 2022, and plans to continue its **$1.50 per share** quarterly dividend - The company repurchased **50,104 common shares** for a total of **$9.3 million** during Q1 2022[129](index=129&type=chunk) - A quarterly dividend of **$1.50 per share** was paid in March 2022, totaling **$4.8 million**; the company expects to continue this regular quarterly dividend[130](index=130&type=chunk)[131](index=131&type=chunk) - Working capital was approximately **$166.2 million** as of March 31, 2022, compared to **$168.5 million** at year-end 2021[132](index=132&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes in market risk exposures have occurred since December 31, 2021, with further details available in the 2021 Form 10-K - There have been **no significant changes** in the Company's market risk exposures since the December 31, 2021 year end[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls during the quarter - The CEO and CFO concluded that as of the evaluation date, the Company's disclosure controls and procedures are **effective**[158](index=158&type=chunk) - **No changes in internal controls** over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[159](index=159&type=chunk) [Part II: Other Information](index=29&type=section&id=Part%20II%3A%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its consolidated financial statements - There are currently **no pending legal matters** that the Company believes could have a material adverse effect on its consolidated financial statements[160](index=160&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since those disclosed in the 2021 Form 10-K - **No material changes** to the Company's risk factors have occurred since the information disclosed in the 2021 Form 10-K[161](index=161&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2022, the company repurchased **50,104 shares** for **$9.3 million**, with **$44.8 million** remaining under a new **$50.0 million** repurchase program Share Repurchases in Q1 2022 | Period | Total Shares Purchased | Average Price Paid Per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Jan 2022 | 9,020 | $180.97 | $1.6 | | Feb 2022 | 13,777 | $179.23 | $2.5 | | Mar 2022 | 27,307 | $191.01 | $5.2 | | **Total** | **50,104** | **$185.94** | **$9.3** | - On February 25, 2022, the Board approved a new repurchase program authorizing up to **$50.0 million** of common share repurchases, which will expire in February 2024[163](index=163&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of exhibits filed with the Form 10-Q, including governance documents and certifications

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Diamond Hill Investment Group (DHIL) offers investment advisory and fund administration services, emphasizing valuation-disciplined active management and AUM-based revenue - Diamond Hill Investment Group, Inc. (DHIL) generates revenue from investment advisory and fund administration services through its wholly-owned subsidiary, Diamond Hill Capital Management, Inc. (DHCM)[13](index=13&type=chunk)[284](index=284&type=chunk) - DHCM's core values include curiosity, ownership, trust, and respect, fostering an environment focused on client success and long-term investment outcomes[14](index=14&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) Assets Under Management (AUM) by Product (2017-2021) | (in millions) | 2021 | 2020 | 2019 | 2018 | 2017 | |:---|:---|:---|:---|:---|:---| | Proprietary funds | $19,802 | $17,615 | $16,148 | $13,440 | $15,974 | | Sub-advised funds | 3,994 | 3,185 | 2,029 | 1,358 | 1,518 | | Separately managed accounts | 7,232 | 5,611 | 5,222 | 4,310 | 4,825 | | **Total AUM** | **$31,028** | **$26,411** | **$23,399** | **$19,108** | **$22,317** | Assets Under Advisement (AUA) from Model Delivery Programs (2017-2021) | (in millions) | 2021 | 2020 | 2019 | 2018 | 2017 | |:---|:---|:---|:---|:---|:---| | Model delivery program AUA | $2,098 | $1,099 | $933 | $476 | $445 | - The company maintains capacity discipline, closing strategies to new clients if size impedes investment return goals. As of December 31, 2021, Large Cap and Small-Mid Cap strategies were closed to most new investors[28](index=28&type=chunk) - In 2021, DHIL expanded its domestic equity line-up and vehicle availability, including a new Large Cap Concentrated mutual fund and collective investment trusts for several strategies. It also launched a private fund focused on micro-cap companies[31](index=31&type=chunk) - DHIL is subject to extensive federal, state, and non-U.S. laws and regulations, including the Advisers Act and the Investment Company Act of 1940, with potential for significant penalties for non-compliance[38](index=38&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The company is highly dependent on contractual relationships with the Funds, which generated approximately **69%**, **75%**, and **77%** of revenues in 2021, 2020, and 2019, respectively[44](index=44&type=chunk)[78](index=78&type=chunk) Workforce Data (as of December 31, 2021) | Metric | Value | |:---|:---| | Full-time equivalent employees | 128 | | Average employee tenure | ~7 years | | Employees with >10 years service | >20% | | 5-year average employee turnover | <9% | | Females on Board of Directors | 42% | | Females in management team | 66% | | Females among employees | 30% | | Racial/ethnic minorities among workforce | ~14% | [ITEM 1A. Risk Factors](index=11&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces significant business, operational, market, economic, and regulatory risks that could materially impact its financial condition and operations - Poor investment results or adverse ratings of products could diminish investor interest and reduce AUM, negatively impacting revenue and net income[63](index=63&type=chunk)[64](index=64&type=chunk) - The loss of highly skilled key personnel, including portfolio managers and research analysts, could damage reputation, hinder client attraction/retention, and decrease net income due to increased compensation costs or asset loss[65](index=65&type=chunk)[66](index=66&type=chunk) - Intense competition from various financial institutions, including those offering passive index strategies, could lead to market share decline, reduced AUM, and pressure to lower fees, impacting profitability[37](index=37&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - Cybersecurity attacks pose a significant operational risk, potentially leading to unauthorized disclosure of sensitive information, disruption of business operations, financial losses, reputational harm, and costly litigation[81](index=81&type=chunk)[82](index=82&type=chunk)[85](index=85&type=chunk) - Revenues are highly dependent on AUM and equity market performance; declines in securities prices, sales, or increased redemptions, or economic/political events, can significantly reduce revenue and net income[99](index=99&type=chunk)[100](index=100&type=chunk) - The company's business is subject to substantial governmental regulation, with frequent changes potentially increasing compliance costs, reducing revenue, and resulting in fines or lawsuits for noncompliance[105](index=105&type=chunk)[106](index=106&type=chunk) [Item 1B. Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[110](index=110&type=chunk) [Item 2. Properties](index=17&type=section&id=Item%202.%20Properties) The company leases a single office space in Columbus, Ohio, for operations and owns no real estate - The company leases its office space at 325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215[111](index=111&type=chunk) - The company does not own any real estate or interests in real estate[112](index=112&type=chunk) [Item 3. Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) No pending legal matters are expected to materially affect the consolidated financial statements - No legal matters are currently pending that are believed to have a material adverse effect on the consolidated financial statements[113](index=113&type=chunk) [Item 4. Mine Safety Disclosures](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable[114](index=114&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) DHIL common shares trade on NASDAQ, with a 29% 5-year total return, and the Board approved a dividend increase and a new $50.0 million share repurchase program Cumulative 5-Year Total Return (as of December 31, 2021) | Entity | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | Cumulative 5 Year Total Return | |:---|:---|:---|:---|:---|:---|:---|:---| | Diamond Hill Investment Group, Inc. | $100 | $102 | $77 | $77 | $89 | $129 | 29 % | | Russell Microcap® Index | $100 | $113 | $98 | $120 | $146 | $174 | 74 % | | Peer Group* | $100 | $119 | $86 | $109 | $127 | $159 | 59 % | Quarterly Stock Prices and Dividends (2020-2021) | Quarter ended: | 2021 High Price | 2021 Low Price | 2021 Quarterly Dividend Per Share | 2021 Special Dividend Per Share | 2020 High Price | 2020 Low Price | 2020 Quarterly Dividend Per Share | 2020 Special Dividend Per Share | |:---|:---|:---|:---|:---|:---|:---|:---|:---| | March 31 | $175.00 | $141.51 | $1.00 | — | $144.40 | $81.70 | — | — | | June 30 | $178.79 | $158.59 | $1.00 | — | $122.13 | $86.00 | — | — | | September 30 | $184.60 | $161.00 | $1.00 | — | $128.08 | $111.80 | — | — | | December 31 | $231.22 | $178.75 | $1.00 | $19.00 | $160.00 | $128.01 | — | $12.00 | - The Board approved an increase in the regular quarterly dividend from **$1.00** to **$1.50** per share, effective Q1 2022[122](index=122&type=chunk) Common Share Repurchase Program Activity (Q4 2021) | Period | Total Number of Shares Purchased for Employee Tax Withholdings (a) | Average Price Paid Per Share Purchased Under the Program | Purchase Price of Shares Purchased Under the Program | Aggregate Purchase Price Yet To Be Purchased Under the Program | |:---|:---|:---|:---|:---| | October 1, 2021 through October 31, 2021 | 608 | — | — | $27,831,775 | | November 1, 2021 through November 30, 2021 | — | — | — | $27,831,775 | | December 1, 2021 through December 31, 2021 | — | $184.28 | $276,414 | $27,555,361 | | **Total** | **608** | | **$276,414** | **$27,555,361** | - The 2020 Repurchase Program expired in February 2022, and a new 2022 Repurchase Program was approved, authorizing up to **$50.0 million** in common share repurchases until February 2024[126](index=126&type=chunk)[127](index=127&type=chunk)[201](index=201&type=chunk) [Item 6. Selected Financial Data](index=20&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable, as selected financial data is integrated within other report sections - Selected Financial Data is not applicable[129](index=129&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and operations for the past three years, detailing AUM, revenue, expenses, liquidity, and cash flow, noting significant 2021 growth - The performance of U.S. and international equity markets and the U.S. fixed income market directly impacts the company's operations and financial position[131](index=131&type=chunk) - The company aims to deliver market-beating returns over a full market cycle through active management and strict capacity discipline[134](index=134&type=chunk) Key Financial Performance Indicators (2019-2021) | Indicator | 2021 | 2020 | 2019 | |:---|:---|:---|:---| | Ending AUM (in millions) | $31,028 | $26,411 | $23,399 | | Average AUM (in millions) | 30,297 | 21,907 | 21,653 | | Net cash inflows (outflows) (in millions) | 2,123 | 1,529 | (677) | | Total revenue (in thousands) | 182,194 | 126,388 | 136,624 | | Net operating income | 76,258 | 45,538 | 47,935 | | Net operating income, as adjusted (non-GAAP) | $83,340 | $47,757 | $53,912 | | Average advisory fee rate | 0.56 % | 0.54 % | 0.59 % | | Average advisory fee rate, excluding performance fees | 0.52 % | 0.54 % | 0.59 % | | Operating profit margin | 42 % | 36 % | 35 % | | Operating profit margin, as adjusted (non-GAAP) | 46 % | 38 % | 39 % | Consolidated Results of Operations (2019-2021) | (in thousands, except per share amounts and percentages) | 2021 | 2020 | % Change (2021 vs 2020) | 2019 | % Change (2020 vs 2019) | |:---|:---|:---|:---|:---|:---| | Total revenue | $182,194 | $126,388 | 44% | $136,624 | (7)% | | Net operating income | 76,258 | 45,538 | 67% | 47,935 | (5)% | | Investment income, net | 16,381 | 6,585 | 149% | 30,507 | (78)% | | Gain on sale of high yield-focused advisory contracts | 9,000 | — | NM | — | NM | | Income tax expense | 26,050 | 13,958 | 87% | 18,688 | (25)% | | Net income attributable to common shareholders | 74,201 | 38,661 | 92% | 54,959 | (30)% | | Earnings per share attributable to common shareholders (diluted) | $23.34 | $12.03 | 94% | $15.99 | (25)% | | Operating profit margin | 42 % | 36 % | NM | 35 % | NM | - Revenue increased by **$55.8 million** (**44%**) in 2021 compared to 2020, primarily due to a **38%** increase in average AUM and **$11.9 million** in performance-based fees, partially offset by a decrease in the average advisory fee rate[160](index=160&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - Net income attributable to common shareholders increased by **92%** to **$74.2 million** (**$23.34** diluted EPS) in 2021, driven by increased revenues, higher investment income, and a **$9.0 million** gain from the sale of High Yield-Focused Advisory Contracts[164](index=164&type=chunk)[167](index=167&type=chunk) - The company's liquidity is strong, with cash flows from operating activities as the main source. Primary uses of cash include operating expenses and seed capital for new investment strategies[198](index=198&type=chunk)[199](index=199&type=chunk) Cash Dividends Paid (2019-2021) | Year | Total Dividends Per Share | |:---|:---| | 2021 | $23.00 | | 2020 | $12.00 | | 2019 | $9.00 | Contractual Obligations (as of December 31, 2021) | | Total | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | |:---|:---|:---|:---|:---|:---|:---|:---| | Operating lease obligations | $2,028,581 | $624,179 | $624,179 | $624,179 | $156,044 | $— | $— | | Purchase obligations | 7,099,679 | 3,960,575 | 1,670,814 | 709,138 | 706,027 | 53,125 | — | | Deferred compensation obligations | 37,348,294 | 3,474,351 | 3,911,526 | 4,288,132 | 4,942,954 | 2,262,332 | 18,468,999 | | **Total** | **$46,476,554** | **$8,059,105** | **$6,206,519** | **$5,621,449** | **$5,805,025** | **$2,315,457** | **$18,468,999** | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Revenues and net income are highly sensitive to AUM and market values, with investments subject to price risk, where a 10% change significantly impacts fair value - The majority of the company's revenue and net income are directly impacted by the value of its AUM and financial market values[244](index=244&type=chunk) - Investments in company funds are sensitive to market risk, specifically price risk, which can lead to potential future loss of value[245](index=245&type=chunk) Market Risk Sensitivity (as of December 31, 2021) | | Fair Value as of December 31, 2021 | Fair Value Assuming a Hypothetical 10% Increase | Fair Value Assuming a Hypothetical 10% Decrease | |:---|:---|:---|:---| | Equity investments | $115,079,799 | $126,587,779 | $103,571,819 | | Fixed Income investments | 51,576,202 | 56,733,822 | 46,418,582 | | **Total** | **$166,656,001** | **$183,321,601** | **$149,990,401** | [Item 8. Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements and the independent auditor's unqualified opinion on financial statements and internal controls, with detailed notes - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the three-year period ended December 31, 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2021[253](index=253&type=chunk)[254](index=254&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) Consolidated Balance Sheets (as of December 31, 2021 and 2020) | ASSETS | 2021 | 2020 | |:---|:---|:---| | Cash and cash equivalents | $80,550,393 | $98,478,202 | | Investments | 166,656,001 | 128,401,136 | | Accounts receivable | 20,443,562 | 17,805,864 | | Prepaid expenses | 2,555,296 | 2,977,759 | | Income taxes receivable | — | 256,538 | | Property and equipment, net of depreciation | 6,100,599 | 6,740,396 | | Deferred taxes | 9,847,552 | 8,437,446 | | **Total assets** | **$286,153,403** | **$263,097,341** | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Liabilities | | | | Accounts payable and accrued expenses | $8,588,713 | $8,002,303 | | Accrued incentive compensation | 37,235,418 | 28,400,000 | | Deferred compensation | 37,348,294 | 33,241,952 | | Income taxes payable | 801,740 | — | | **Total liabilities** | **83,974,165** | **69,644,255** | | Redeemable noncontrolling interest | 17,756,336 | 9,372,333 | | Permanent Shareholders' Equity | | | | Common stock, no par value | 80,434,049 | 80,810,946 | | Deferred equity compensation | (15,268,705) | (14,748,118) | | Retained Earnings | 119,257,558 | 118,017,925 | | **Total permanent shareholders' equity** | **184,422,902** | **184,080,753** | | **Total liabilities and shareholders' equity** | **$286,153,403** | **$263,097,341** | | Book value per share | $58.15 | $58.09 | Consolidated Statements of Income (Years Ended December 31, 2021, 2020, and 2019) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---| | REVENUES: | | | | | Investment advisory | $170,137,609 | $119,125,230 | $128,009,409 | | Mutual fund administration, net | 12,056,228 | 7,262,488 | 8,614,971 | | **Total revenue** | **182,193,837** | **126,387,718** | **136,624,380** | | OPERATING EXPENSES: | | | | | Compensation and related costs, excluding deferred compensation expense | 73,591,327 | 58,291,670 | 60,264,117 | | Deferred compensation expense | 7,082,153 | 2,218,898 | 5,976,938 | | General and administrative | 14,020,836 | 11,002,572 | 13,277,843 | | Sales and marketing | 7,659,423 | 5,999,846 | 5,867,297 | | Mutual fund administration | 3,581,960 | 3,336,575 | 3,302,767 | | **Total operating expenses** | **105,935,699** | **80,849,561** | **88,688,962** | | **NET OPERATING INCOME** | **76,258,138** | **45,538,157** | **47,935,418** | | Investment income, net | 16,381,216 | 6,584,849 | 30,507,375 | | Gain on sale of high yield-focused advisory contracts | 9,000,000 | — | — | | **NET INCOME BEFORE TAXES** | **101,639,354** | **52,123,006** | **78,442,793** | | Income tax expense | (26,049,815) | (13,957,868) | (18,688,474) | | **NET INCOME** | **75,589,539** | **38,165,138** | **59,754,319** | | Net loss (income) attributable to redeemable noncontrolling interest | (1,388,930) | 495,407 | (4,795,295) | | **NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS** | **$74,200,609** | **$38,660,545** | **$54,959,024** | | Earnings per share attributable to common shareholders | | | | | Basic | $23.34 | $12.03 | $15.99 | | Diluted | $23.34 | $12.03 | $15.99 | | Weighted average shares outstanding | | | | | Basic | 3,179,497 | 3,214,564 | 3,436,574 | | Diluted | 3,179,497 | 3,214,564 | 3,436,641 | Consolidated Statements of Cash Flows (Years Ended December 31, 2021, 2020, and 2019) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---| | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | Net Income | $75,589,539 | $38,165,138 | $59,754,319 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation | 1,281,420 | 992,836 | 1,164,207 | | Share-based compensation | 7,415,170 | 7,739,320 | 9,081,421 | | Increase in accounts receivable | (2,666,551) | (582,502) | (5,021,516) | | Change in current income taxes | 1,058,278 | 3,592,561 | (6,617,780) | | Change in deferred income taxes | (1,410,106) | 1,949,407 | 1,079,247 | | Gain on sale of high yield-focused advisory contracts | (9,000,000) | — | — | | Net gain on investments | (10,878,658) | (3,005,441) | (21,058,463) | | Net change in securities held by Consolidated Funds | (50,430,607) | 3,179,362 | 6,286,645 | | Increase in accrued incentive compensation | 9,365,224 | 5,180,849 | 3,516,639 | | Increase in deferred compensation | 4,106,342 | 2,899,748 | 7,954,330 | | Other changes in assets and liabilities | 1,882,186 | (338,793) | 827,194 | | **Net cash provided by operating activities** | **26,312,237** | **59,772,485** | **56,966,243** | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | Purchase of property and equipment | (1,104,981) | (2,450,421) | (707,790) | | Purchase of Company sponsored investments | (21,395,411) | (14,852,892) | (14,351,062) | | Proceeds from sale of Company sponsored investments | 40,764,891 | 25,715,013 | 48,637,779 | | Net cash on deconsolidation of Company sponsored investments | — | — | (22,723,853) | | Proceeds from sale of high yield-focused advisory contracts | 9,000,000 | — | — | | **Net cash provided by investing activities** | **27,264,499** | **8,411,700** | **10,855,074** | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | Value of shares withheld related to employee tax withholding | (1,625,413) | (1,947,456) | (1,390,482) | | Payment of dividends | (72,960,976) | (37,976,714) | (30,275,867) | | Net subscriptions (redemptions) received from redeemable noncontrolling interest holders | 10,298,891 | (4,311,084) | 11,340,880 | | Repurchase of common stock | (7,820,315) | (18,646,982) | (38,749,654) | | Proceeds received under employee stock purchase plan | 603,268 | — | — | | **Net cash used in financing activities** | **(71,504,545)** | **(62,882,236)** | **(59,075,123)** | | CASH AND CASH EQUIVALENTS | | | | | Net change during the year | (17,927,809) | 5,301,949 | 8,746,194 | | At beginning of year | 98,478,202 | 93,176,253 | 84,430,059 | | At end of year | $80,550,393 | $98,478,202 | $93,176,253 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=56&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) No changes in or disagreements with accountants on accounting and financial disclosures were reported - There are no changes in or disagreements with accountants on accounting and financial disclosures[379](index=379&type=chunk) [Item 9A. Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[380](index=380&type=chunk) - No material changes in internal control over financial reporting occurred during the year ended December 31, 2021[381](index=381&type=chunk) - Management assessed and concluded that the company's internal control over financial reporting was effective as of December 31, 2021[384](index=384&type=chunk)[385](index=385&type=chunk) [Item 9B. Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) No other information required by this item was reported - No other information is reported under this item[387](index=387&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=57&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[388](index=388&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement[390](index=390&type=chunk) [Item 11. Executive Compensation](index=58&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the 2022 Proxy Statement - Information on executive compensation is incorporated by reference from the 2022 Proxy Statement[391](index=391&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the 2022 Proxy Statement - Information on security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement[392](index=392&type=chunk)[394](index=394&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement[394](index=394&type=chunk) [Item 14. Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2022 Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement[395](index=395&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits, with schedules omitted as information is in the financial statements or notes - Financial statements are referenced from Part II, Item 8[397](index=397&type=chunk) - All financial statement schedules are omitted as the required information is included in the accompanying financial statements or notes[397](index=397&type=chunk) - A comprehensive list of exhibits, including organizational documents, agreements, and certifications, is provided[397](index=397&type=chunk)[398](index=398&type=chunk) [Item 16. Form 10-K Summary](index=60&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company does not provide a separate Form 10-K summary - No Form 10-K Summary is provided[400](index=400&type=chunk) [Signatures](index=61&type=section&id=Signatures) The report is signed by the CEO, CFO, Controller, and Directors, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Heather E. Brilliant (CEO and President), Thomas E. Line (CFO and Treasurer), Jeffrey J. Cook (Controller), and several Directors, dated February 25, 2022[402](index=402&type=chunk)[403](index=403&type=chunk)

Part I: Financial Information [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements, highlighting significant revenue and net income growth from AUM and performance fees [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Summary (Unaudited) | Account | 9/30/2021 ($) | 12/31/2020 ($) | | :--- | :--- | :--- | | **Total Assets** | **316,744,019** | **263,097,341** | | Cash and cash equivalents | 98,580,247 | 98,478,202 | | Investments | 167,692,971 | 128,401,136 | | **Total Liabilities** | **75,319,635** | **69,644,255** | | **Total Shareholders' Equity** | **228,056,910** | **184,080,753** | | Book value per share | 71.89 | 58.09 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (Unaudited) | Metric | Three Months Ended 9/30/2021 ($) | Three Months Ended 9/30/2020 ($) | Nine Months Ended 9/30/2021 ($) | Nine Months Ended 9/30/2020 ($) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **55,054,554** | **31,175,755** | **139,138,640** | **91,350,429** | | Net Operating Income | 28,320,989 | 9,969,599 | 59,619,985 | 37,462,427 | | Gain on sale of advisory contracts | 9,000,000 | 0 | 9,000,000 | 0 | | **Net Income** | **24,875,795** | **11,140,583** | **56,764,946** | **22,250,694** | | **Diluted EPS** | **8.03** | **3.30** | **17.66** | **7.52** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended 9/30/2021 ($) | Nine Months Ended 9/30/2020 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | 15,319,993 | 38,202,042 | | Net cash provided by (used in) investing activities | (543,374) | 10,693,754 | | Net cash used in financing activities | (14,674,574) | (24,318,377) | | **Net change in Cash and Cash Equivalents** | **102,045** | **24,577,419** | | Cash and cash equivalents at end of period | 98,580,247 | 117,753,672 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial results, including significant performance fees, advisory contract sale, and post-quarter dividend declarations - In Q3 2021, the company recognized **$11.9 million** in performance-based fees as a significant agreement reached its first five-year measurement term. No such fees were recorded in the comparable 2020 period[57](index=57&type=chunk)[52](index=52&type=chunk) - On July 30, 2021, the company sold its high yield-focused advisory contracts to Brandywine Global for an initial cash payment of **$9.0 million**, which was recognized as a gain. An additional **$13.0 million** in payments is contingent on future net revenue[98](index=98&type=chunk)[99](index=99&type=chunk)[101](index=101&type=chunk) - Subsequent to the quarter end, on October 26, 2021, the Board approved a special cash dividend of **$19.00 per share** and a regular Q4 dividend of **$1.00 per share**. The company also expects to increase its regular quarterly dividend to **$1.50 per share** starting in Q1 2022[103](index=103&type=chunk)[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant financial performance growth in Q3 and YTD 2021, driven by AUM increase, performance fees, and strong liquidity [Assets Under Management](index=21&type=section&id=Assets%20Under%20Management) Assets Under Management (AUM) as of September 30 | Metric | 2021 (million $) | 2020 (million $) | % Change | | :--- | :--- | :--- | :--- | | **Total AUM** | **29,186** | **22,283** | **31%** | | Proprietary funds | 18,750 | 14,761 | 27% | | Sub-advised funds | 3,665 | 2,750 | 33% | | Separately managed accounts | 6,771 | 4,772 | 42% | - For the nine months ended September 30, 2021, AUM increased by **$2.8 billion**, primarily due to market appreciation and net inflows of **$2.4 billion**, partially offset by the sale of high yield-focused advisory contracts which reduced AUM by **$3.5 billion**[121](index=121&type=chunk)[118](index=118&type=chunk) - Net cash inflows for the nine months ended September 30, 2021, were **$2.36 billion**, a significant improvement from **$580 million** in the same period of 2020. Equity strategies saw inflows of **$1.18 billion**, reversing outflows of **$540 million** from the prior year[120](index=120&type=chunk)[118](index=118&type=chunk) [Consolidated Results of Operations](index=25&type=section&id=Consolidated%20Results%20of%20Operations) Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 ($M) | Q3 2020 ($M) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | 55.1 | 31.2 | 77% | | Net Operating Income | 28.3 | 10.0 | 184% | | Net Income Attributable to Common Shareholders | 25.6 | 10.6 | 143% | | Diluted EPS | 8.03 | 3.30 | 143% | - Q3 2021 revenue growth was driven by a **39% increase** in average AUM and **$11.9 million** in performance-based fees, which were not present in Q3 2020[127](index=127&type=chunk) - For the nine months ended September 30, 2021, net income attributable to common shareholders rose **131%** to **$56.2 million**, driven by higher revenue, a **$9.0 million** gain on the sale of advisory contracts, and improved investment income[147](index=147&type=chunk)[126](index=126&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's working capital increased to **$213.5 million** as of September 30, 2021, from **$168.9 million** at year-end 2020, reflecting strong operating cash flows[165](index=165&type=chunk) - During the first nine months of 2021, the company repurchased **$7.5 million** of its common stock. As of September 30, 2021, **$27.8 million** remained available for repurchase under the current program[160](index=160&type=chunk) - The company paid **$9.5 million** in regular quarterly dividends during the first nine months of 2021. A significant special dividend of **$19.00 per share** and a regular Q4 dividend of **$1.00 per share** were approved post-quarter end, totaling approximately **$63.4 million**[161](index=161&type=chunk)[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no significant changes in its market risk exposures since the end of the fiscal year 2020 - There have been no significant changes in the Company's market risk exposures since the December 31, 2020 year-end report[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls - Management concluded that as of September 30, 2021, the Company's disclosure controls and procedures are effective[193](index=193&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[194](index=194&type=chunk) Part II: Other Information [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently party to any material legal proceedings - There are currently no pending legal matters that the Company believes could have a material adverse effect on its consolidated financial statements[195](index=195&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company states there have been no material changes to its risk factors from those disclosed in its 2020 Form 10-K - There have been no material changes to the Company's risk factors from the information disclosed in the 2020 Form 10-K[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchase of 31,468 common shares for approximately $5.6 million during Q3 2021 Share Repurchases for Q3 2021 | Period | Total Shares Purchased (Public Program) | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | August 2021 | 17,096 | 177.99 | | September 2021 | 14,372 | 178.99 | | **Total Q3** | **31,468** | **178.44** | - Through September 30, 2021, the Company has repurchased a total of **173,616 shares** for **$22.2 million** under the 2020 Repurchase Program[201](index=201&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) The company entered a new employment agreement with CEO Heather E. Brilliant, modifying her compensation structure - On October 26, 2021, the Company entered into a new employment agreement with CEO Heather E. Brilliant, which supersedes her 2019 agreement[204](index=204&type=chunk) - Key terms of the new agreement include: - Annual base salary of **$400,000** - Eligibility for an annual incentive award with a target of **$1,750,000** - Eligibility for an annual equity bonus with a target of **$600,000** through October 2024, and **$1,200,000** thereafter[205](index=205&type=chunk)[208](index=208&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, the new employment agreement for the CEO, required certifications by the CEO and CFO, and XBRL data files - Key exhibits filed with this report include the Employment Agreement for CEO Heather E. Brilliant (Exhibit 10.1), and CEO and CFO certifications required by Rule 13a-14(a) (Exhibits 31.1 and 31.2)[214](index=214&type=chunk)

United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP, INC. (Exact name of registrant as specified in its charter) | --- | --- | |----------------- ...

[Part I: Financial Information](index=3&type=section&id=Part%20I:%20FINANCIAL%20INFORMATION) This section provides the company's unaudited consolidated financial statements and management's discussion for the first quarter of 2021 [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2021, including balance sheets, income statements, cash flows, and detailed notes [Financial Statements Overview](index=4&type=section&id=Financial%20Statements%20Overview) Q1 2021 saw net income of **$13.7 million**, total assets of **$259.7 million**, and **$(15.7) million** net cash used in operations Consolidated Balance Sheet Summary (Unaudited, in USD) | Account | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | **Total Assets** | **$259,665,393** | **$263,097,341** | | Total Liabilities | $54,559,169 | $69,644,255 | | Total Shareholders' Equity | $194,441,078 | $184,080,753 | | **Total Liabilities and Shareholders' Equity** | **$259,665,393** | **$263,097,341** | Consolidated Statement of Income Summary (Unaudited, in thousands USD) | Metric | Three Months Ended March 31, 2021 (in thousands USD) | Three Months Ended March 31, 2020 (in thousands USD) | | :--- | :--- | :--- | | Total Revenue | $39,014 | $31,926 | | Net Operating Income | $13,532 | $20,465 | | Investment Income (Loss), Net | $5,663 | $(22,398) | | **Net Income Attributable to Common Shareholders** | **$13,709** | **$1,530** | | **Diluted EPS** | **$4.34** | **$0.47** | Consolidated Statement of Cash Flows Summary (Unaudited, in USD) | Cash Flow Activity | Three Months Ended March 31, 2021 (USD) | Three Months Ended March 31, 2020 (USD) | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(15,660,505) | $1,990,996 | | Net Cash Provided by Investing Activities | $1,587,873 | $12,145,851 | | Net Cash Used in Financing Activities | $(4,217,885) | $(10,001,543) | | **Net Change in Cash and Cash Equivalents** | **$(18,290,517)** | **$4,135,304** | [Note 2: Significant Accounting Policies](index=8&type=section&id=Note%202%20Significant%20Accounting%20Policies) This note details the company's accounting policies, including U.S. GAAP basis, consolidation principles, and revenue recognition from advisory fees - The company consolidates funds where its ownership represents a majority interest (greater than **50%**), including the Diamond Hill Large Cap Concentrated, International, and Global Funds as of March 31, 2021[28](index=28&type=chunk) Revenue by Source (Three Months Ended March 31, in USD) | Revenue Source | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | | **Investment Advisory** | | | | Proprietary funds | $26,510,701 | $23,454,563 | | Sub-advised funds and separately managed accounts | $10,058,402 | $6,703,117 | | **Mutual fund administration, net** | $2,445,330 | $1,768,065 | | **Total Revenue** | **$39,014,433** | **$31,925,745** | - As of March 31, 2021, the company had **$443.4 million** in AUM subject to performance-based fees, with unearned potential fees of **$10.1 million** based on investment results to date, with no performance-based fees recorded in Q1 2021 or Q1 2020[44](index=44&type=chunk) [Note 3: Investments](index=13&type=section&id=Note%203%20Investments) Investments increased to **$142.7 million** by March 31, 2021, with Q1 2021 net investment income of **$5.7 million**, a recovery from prior year losses Carrying Value of Investments (in USD) | Investment Type | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | Securities held in Consolidated Funds | $47,164,927 | $33,233,307 | | Company sponsored investments | $95,530,265 | $95,167,829 | | **Total Investments** | **$142,695,192** | **$128,401,136** | Components of Net Investment Income (Loss) (in USD) | Component | Three Months Ended March 31, 2021 (USD) | Three Months Ended March 31, 2020 (USD) | | :--- | :--- | :--- | | Realized gains (losses) | $2,523,505 | $(817,539) | | Unrealized gains (losses) | $2,505,344 | $(22,467,598) | | Dividends | $665,009 | $894,413 | | **Investment income (loss), net** | **$5,663,454** | **$(22,398,092)** | [Note 11: Sale of Assets of Diamond Hill's High Yield-Focused Funds](index=18&type=section&id=Note%2011%20Sale%20of%20Assets%20of%20Diamond%20Hill's%20High%20Yield-Focused%20Funds) The company agreed to sell its high yield-focused funds for up to **$9.0 million** initial payment and **$13.0 million** in potential future payments - DHCM entered into an asset purchase agreement with Brandywine Global to sell its two high yield-focused mutual funds[87](index=87&type=chunk) - The deal consideration includes an initial payment of up to **$9.0 million** at closing and two potential additional payments totaling up to **$13.0 million** based on net revenue one year after closing[89](index=89&type=chunk) - The sale is subject to customary closing conditions, including shareholder approval of the acquired funds, and is expected to close on July 30, 2021[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 performance, highlighting **75% AUM growth**, **22% revenue increase**, and changes in liquidity and capital resources [Assets Under Management (AUM)](index=20&type=section&id=Assets%20Under%20Management) Total AUM grew **75%** to **$30.6 billion** by March 31, 2021, driven by market appreciation and **$1.7 billion** net inflows AUM by Product (in millions) | Product | March 31, 2021 (in millions) | March 31, 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Proprietary funds | $20,954 | $11,942 | 75% | | Sub-advised funds | $3,575 | $1,928 | 85% | | Separately managed accounts | $6,053 | $3,626 | 67% | | **Total AUM** | **$30,582** | **$17,496** | **75%** | AUM Roll-Forward for Q1 2021 (in millions) | Description | Amount (in millions) | | :--- | :--- | | AUM at beginning of period | $26,411 | | Net cash inflows | $1,744 | | Net market appreciation and income | $2,427 | | **AUM at end of period** | **$30,582** | - Effective March 31, 2021, the Company closed its Large Cap strategy to most new investors due to strong inflows[104](index=104&type=chunk) [Consolidated Results of Operations](index=23&type=section&id=Consolidated%20Results%20of%20Operations) Q1 2021 revenue increased **22%** to **$39.0 million**, with net income surging **796%** to **$13.7 million**, despite a **34%** decline in reported net operating income Q1 2021 vs. Q1 2020 Performance Summary (in thousands) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $39,014 | $31,926 | 22% | | Net operating income | $13,532 | $20,465 | (34)% | | Net operating income, as adjusted (Non-GAAP) | $16,635 | $12,309 | 35% | | Net income attributable to common shareholders | $13,709 | $1,530 | 796% | | Diluted EPS | $4.34 | $0.47 | 823% | - The **22%** increase in revenue was primarily due to a **35%** increase in average AUM, partially offset by a decrease in the average advisory fee rate from **0.58%** to **0.53%** due to a shift in asset mix to lower-fee strategies[109](index=109&type=chunk)[115](index=115&type=chunk) - Deferred compensation expense was **$3.1 million** in Q1 2021 compared to a benefit of **$(8.2) million** in Q1 2020, significantly impacting reported operating income due to market performance of plan investments[118](index=118&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, repurchased **$1.9 million** in shares, and initiated a **$1.00** per share quarterly dividend in Q1 2021 - The company's main source of liquidity is cash flow from operating activities, believed sufficient to meet operating needs for the next 12 months[124](index=124&type=chunk) - Under its **$50.0 million** share repurchase program, the company repurchased **$1.9 million** of common shares during Q1 2021, with **$33.5 million** remaining available[128](index=128&type=chunk) - The Board of Directors instituted a regular quarterly dividend of **$1.00** per share, with the first payment made in March 2021 and a second approved in April 2021[129](index=129&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes in market risk exposures have occurred since the December 31, 2020, Annual Report on Form 10-K - There have been no significant changes in the Company's market risk exposures since its December 31, 2020 year-end report[158](index=158&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures are effective, with no material changes to internal controls during Q1 2021 - Management concluded that as of the end of the period, the Company's disclosure controls and procedures are effective[159](index=159&type=chunk) - There were no changes in internal control over financial reporting during Q1 2021 that have materially affected, or are likely to materially affect, the company's internal controls[160](index=160&type=chunk) [Part II: Other Information](index=31&type=section&id=Part%20II:%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and exhibits for the reporting period [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal matters expected to materially impact its consolidated financial statements - There are currently no pending legal matters that the Company believes could have a material adverse effect on its consolidated financial statements[161](index=161&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since its 2020 Annual Report on Form 10-K - There have been no material changes to the Company's risk factors from the information disclosed in its 2020 Annual Report on Form 10-K[162](index=162&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **12,529** shares for approximately **$1.9 million** under its publicly announced program during Q1 2021 Share Repurchases in Q1 2021 (in USD) | Period | Total Shares Purchased (Publicly Announced Program) | Average Price Paid Per Share (USD) | Total Cost (Publicly Announced Program, USD) | | :--- | :--- | :--- | :--- | | Jan 2021 | 0 | N/A | $0 | | Feb 2021 | 0 | N/A | $0 | | Mar 2021 | 12,529 | $151.10 | $1,893,146 | | **Total Q1** | **12,529** | **$151.10** | **$1,893,146** | - Through March 31, 2021, the Company has repurchased a total of **141,918** shares under the 2020 Repurchase Program at a total cost of **$16.5 million**[166](index=166&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists key exhibits, including the Asset Purchase Agreement and required CEO/CFO certifications - Key exhibits filed with this report include: - 10.1: Asset Purchase Agreement with Brandywine Global Investment Management, LLC - 31.1 & 31.2: Certifications of the CEO and CFO - 32.1: Section 1350 Certifications[171](index=171&type=chunk)

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP, INC. (Exact name of registrant as specified in its charter) | --- | --- | |--- ...

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP INC. (Exact name of registrant as specified in its charter) | --- | -- ...

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP INC. (Exact name of registrant as specified in its charter) | --- | --- | | ...

Table of Contents United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-24498 DIAMOND HILL INVESTMENT GROUP INC. (Exact name of registrant as specified in its charter) Ohio 65-019040 ...