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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
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
65-0190407
(State of
incorporation)
(I.R.S. Employer
Identification No.)
325 John H. McConnell Blvd., Suite 200
,
Columbus
,
Ohio
43215
(Address of principal executive offices) (Zip Code)
(
614
)
255-3333
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, no par value
DHIL
The Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
:
x
No:
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
x
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes:
☐
No:
x
As of October 30, 2025, the registrant had
2,705,296
outstanding common shares.
Common shares, no par value:
7,000,000
shares authorized;
2,723,160
issued and outstanding at September 30, 2025 (inclusive of
275,933
unvested shares);
2,670,469
issued and outstanding at December 31, 2024 (inclusive of
173,120
unvested shares)
51,380,481
28,478,515
Preferred shares, undesignated:
1,000,000
shares authorized and unissued
—
—
Deferred equity compensation
(
32,762,540
)
(
15,833,657
)
Retained earnings
162,327,015
149,671,270
Total permanent shareholders’ equity
180,944,956
162,316,128
Total liabilities and shareholders’ equity
$
256,267,310
$
245,126,650
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements (unaudited)
Note 1
Business and Organization
Diamond Hill Investment Group, Inc., an Ohio corporation (“DHIL” and, collectively with its subsidiaries, the “Company”), derives its consolidated revenues and net income from investment advisory and fund administration services provided by its wholly-owned subsidiary, Diamond Hill Capital Management, Inc., an Ohio corporation (“DHCM”).
DHCM is a registered investment adviser. DHCM is the investment adviser and administrator for the Diamond Hill Funds, a series of funds (each a “Diamond Hill Fund”, and collectively, the “Diamond Hill Funds”), including open-end mutual funds and the Diamond Hill Large Cap Concentrated ETF, an exchange-traded fund (“ETF”), the Diamond Hill Securitized Credit Fund, a closed-end registered investment company (“DHSC,” and together with the Diamond Hill Funds, the “Proprietary Funds”). 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.
Note 2
Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed, and consolidated financial statements of the Company as of September 30, 2025 and December 31, 2024, and for the three- and nine months ended September 30, 2025 and 2024, have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), the instructions to Form 10-Q, and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, the accompanying financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management (“management”), all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the financial condition and results of operations as of the dates, and for the interim periods, presented, have been included. The accompanying unaudited, condensed, and consolidated financial statements and these footnotes should be read in conjunction with the audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”), as filed with the SEC.
Operating results for the three- and nine months ended September 30, 2025 and 2024 are not necessarily indicative of the results the Company may expect for any fiscal quarter, the full fiscal year ending December 31, 2025, or any subsequent period.
For further information regarding the risks to the Company’s business, refer to the consolidated financial statements and notes thereto in the 2024 Form 10-K, as well as “Part I – Item 1A. – Risk Factors” of the 2024
Form 10-K, the “Cautionary Note Regarding Forward-Looking Statements” in “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q (this “Form 10-Q”), “Part II – Item 1A. – Risk Factors” of this Form 10-Q, and in the Company’s public documents on file with the SEC.
Use of Estimates
The preparation of the accompanying unaudited, condensed, and consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the reporting period. Estimates have been prepared based on the most current and best available information, but actual results could differ materially from those estimates.
Certain prior period amounts and disclosures may have been reclassified to conform to the current period’s financial presentation.
Principles of Consolidation
The accompanying unaudited, condensed, and consolidated financial statements include the operations of DHIL and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
DHCM holds certain investments in the Proprietary Funds and DHMF for general corporate investment purposes, to provide seed capital for newly formed strategies, or to add capital to existing strategies. The Diamond Hill Funds are organized in a series fund structure in which there are multiple mutual funds and an ETF within one trust (the “Trust”). The Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (“Company Act”). Each individual Diamond Hill Fund represents a separate share class of a legal entity organized under the Trust. DHSC is organized as a Delaware statutory trust and is a closed-end investment company registered under the Company Act. DHMF is organized as a Delaware limited partnership and is exempt from registration under the Company Act.
DHIL consolidates those subsidiaries and investments over which it has a controlling interest. The Company is generally deemed to have a controlling interest when it owns the majority of the voting interest of a voting rights entity (“VRE”) or is deemed to be the primary beneficiary of a variable interest entity (“VIE”). 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. The Company’s analysis to determine whether an entity is a VIE or a VRE involves judgment and consideration of several factors, including an entity’s legal organization, equity structure, the rights of the investment holders, the Company’s ownership interest in the entity, and the Company’s contractual involvement with the entity. The Company continually reviews and reconsiders its controlling interest, VIE, and VRE conclusions upon the occurrence of certain events, such as changes to its ownership interest or amendments to contract documents.
The Company performs its consolidation analysis at the individual fund level and has concluded that the Proprietary Funds are VREs because the structure of the Proprietary Funds is such that the shareholders are deemed to have the power through voting rights to direct the activities that most significantly impact each Proprietary Fund’s economic performance. The Proprietary Funds are consolidated if DHIL ownership, directly or indirectly, represents a majority interest (greater than 50%). The Company records redeemable noncontrolling interests in consolidated investments for which the Company’s ownership is less than 100%. As of December 31, 2024 the Company consolidated the Diamond Hill Core Plus Bond Fund. As of September 30, 2025, as well as during the three-and nine-month periods ended September 30, 2025, the Company consolidated the Diamond Hill Securitized Total Return Fund. The Company consolidated the Diamond Hill Core Plus Bond Fund for the six-months ended June 30, 2025 and, effective July 1, 2025, deconsolidated the fund as the Company’s ownership dropped below 50%. As of and for the three-and nine-month periods ended September 30, 2024, the Company had not consolidated any of the Proprietary Funds. Any Proprietary Fund(s) consolidated during the applicable periods are referred to as the “Consolidated Fund(s)”.
DHCM is the investment adviser to DHMF and is the managing member of Diamond Hill Fund GP, LLC (the “General Partner”), which is the general partner of DHMF. DHCM is wholly owned by, and consolidated with, DHIL. Further, through its control of the General Partner, DHCM has the power to direct DHMF’s economic activities and the right to receive investment advisory fees from DHMF that may be significant. DHMF commenced operations on June 1, 2021, and its underlying assets consist primarily of marketable securities.
The Company concluded DHMF was a VIE given that: (i) DHCM has disproportionately less voting interest than economic interest, and (ii) DHMF’s limited partners have full power to remove the General Partner (which is controlled by DHCM, and DHCM is controlled by DHIL) due to the existence of substantive kick-out rights. In addition, substantially all of DHMF’s activities are conducted on behalf of the General Partner, which has disproportionately few voting rights. The Company concluded it is not the primary beneficiary of DHMF as it lacks the power to control DHMF, since DHMF’s limited partners have single-party kick-out rights and can unilaterally remove the General Partner without cause. DHCM’s investments in DHMF are reported as a component of the Company’s investment portfolio and valued at DHCM’s respective share of DHMF’s net income or loss.
Gains and losses attributable to changes in the value of DHCM’s interests in DHMF are included in the Company’s reported investment income. The Company’s exposure to loss as a result of its involvement with DHMF is limited to the amount of its investment. DHCM is not obligated to provide, and has not provided, financial or other support to DHMF, except for its investment in DHMF to date and its contractually provided investment advisory responsibilities. The Company has not provided liquidity arrangements, guarantees, or other commitments to support DHMF’s operations, and DHMF’s creditors and interest holders have no recourse to the general credit of the Company.
Redeemable Noncontrolling Interest
Redeemable noncontrolling interest represents third-party interests in the Consolidated Funds. This interest is redeemable at the option of the investors, and therefore, is not treated as permanent equity. Redeemable noncontrolling interest is recorded at redemption value, which approximates the fair value in each reporting period.
Segment Information
Management has determined that the Company operates in a
single
business segment, which is providing investment advisory and fund administration services. The Chief Operating Decision Maker (“CODM”) is the Company’s
Chief Executive Officer
who evaluates the performance of the business and allocates resources using a single, consolidated internal reporting structure.
The accounting policies of the segment are the same as those described in this
Note 2
.
The CODM assesses performance for the segment and decides how to allocate resources based on net operating income.
The CODM does not review Company assets in evaluating the results of the single business segment, therefore, no additional asset information is presented.
For information regarding how the Company generates revenue, and its revenues by source, refer to “Revenue Recognition - General” in this
Note 2
. Substantially all of the Company’s revenue is generated from clients in the U.S., and all long-lived assets are located in the U.S. No single client accounted for more than 10% of the Company’s total revenue during the periods presented.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and money market mutual funds held by DHCM. The Company considers all highly liquid temporary cash instruments with an original maturity of three months or less to be cash equivalents. The Company places its cash on deposit with U.S. financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
250,000
. The Company’s credit risk in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amount on deposit. Management monitors the financial institutions’ creditworthiness in conjunction with balances on deposit to minimize risk. The Company has amounts on deposit in excess of the insured limits. As of
September 30, 2025, the Company had
$
1.0
million
and
$
42.0
million
in demand deposits and money market mutual funds, respectively. As of December 31, 2024, the Company had
$
1.3
million
and
$
40.3
million
in demand deposits and money market mutual funds, respectively.
The Company records accounts receivable when they are due and presents them on the balance sheet net of any allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical losses, existing conditions in the industry, and the financial stability of the individual or entity that owes the receivable. No allowance for doubtful accounts was deemed necessary at either September 30, 2025 or December 31, 2024. Accounts receivable from the Proprietary Funds were
$
10.5
million
as of September 30, 2025 and
$
10.3
million
as of December 31, 2024
.
Investments
Management determines the appropriate classification of the Company’s investments at the time of purchase and re-evaluates its determination each reporting period.
Company sponsored investments, where the Company has neither the control nor the ability to exercise significant influence, as well as securities held in the Consolidated Funds are measured at fair value based on quoted market prices. Unrealized gains and losses are recorded as investment income in the Company’s consolidated statements of income.
Investments classified as equity method investments represent investments in which the Company owns 20% to 50% of the outstanding voting interests in the entity or where it is determined that the Company is able to exercise significant influence (but not control) over the investments. When using the equity method, the Company recognizes its respective share of the investee’s net income or loss for the period, which is recorded as investment income in the Company’s consolidated statements of income.
Property and Equipment
Property and equipment, consisting of leasehold improvements, right-of-use lease assets, computer equipment, capitalized software, furniture, and fixtures, are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated lives of the assets.
Implementation costs incurred to develop or obtain internal-use software, including hosting arrangements, are capitalized and expensed on a straight-line basis over either the estimated useful life of the respective software or the term of the hosting arrangement.
Property and equipment is tested for impairment when there is an indication that the carrying amount of an asset may not be recoverable. When an asset is determined to not be recoverable, the impairment loss is measured based on the excess (if any) of the carrying value of the asset over its fair value.
Revenue Recognition – General
The Company recognizes revenue when DHCM satisfies performance obligations under the terms of a contract with a client. The Company earns substantially all of its revenue from DHCM investment advisory and fund administration contracts. Investment advisory and fund administration fees, generally calculated as a percentage of assets under management (“AUM”), are recorded as revenue as services are performed.
Revenue from contracts with clients that was earned during the
three months ended September 30, 2025 and 2024, include:
Three Months Ended September 30, 2025
Investment advisory
Fund
administration, net
Total revenue
Proprietary Funds
$
24,861,364
$
1,779,831
$
26,641,195
SMAs
5,362,198
—
5,362,198
Other pooled vehicles
2,799,253
—
2,799,253
Model delivery
1,334,421
—
1,334,421
CITs
1,265,452
—
1,265,452
$
35,622,688
$
1,779,831
$
37,402,519
Three Months Ended September 30, 2024
Investment advisory
Fund
administration, net
Total revenue
Proprietary Funds
$
23,595,204
$
1,788,357
$
25,383,561
SMAs
7,585,790
—
7,585,790
Other pooled vehicles
2,878,015
—
2,878,015
CITs
1,839,850
—
1,839,850
Model delivery
1,331,016
—
1,331,016
$
37,229,875
$
1,788,357
$
39,018,232
Revenue from contracts with clients that was earned during the nine months ended September 30, 2025 and 2024, include:
Nine Months Ended September 30, 2025
Investment advisory
Fund
administration, net
Total revenue
Proprietary Funds
$
71,722,107
$
5,545,295
$
77,267,402
SMAs
16,689,926
—
16,689,926
Other pooled vehicles
8,240,390
—
8,240,390
CITs
4,267,032
—
4,267,032
Model delivery
4,079,910
—
4,079,910
$
104,999,365
$
5,545,295
$
110,544,660
Nine Months Ended September 30, 2024
Investment advisory
Fund
administration, net
Total revenue
Proprietary Funds
$
68,249,762
$
5,551,702
$
73,801,464
SMAs
20,970,918
—
20,970,918
Other pooled vehicles
8,522,431
—
8,522,431
CITs
4,805,245
—
4,805,245
Model delivery
3,874,437
—
3,874,437
$
106,422,793
$
5,551,702
$
111,974,495
Revenue Recognition – Investment Advisory Fees
DHCM’s investment advisory contracts with clients have a single performance obligation because the contracted services are not separately identifiable from other obligations in the contracts, and therefore, are not distinct. All obligations to provide investment advisory services are satisfied over time by DHCM.
The fees DHCM receives for its services under its investment advisory contracts are based on AUM, which changes based on the value of securities held under each investment advisory contract. These fees are thereby constrained and represent variable consideration, and they are excluded from revenue until the AUM on which DHCM’s client is billed are no longer subject to market fluctuations.
DHCM also provides its strategy-specific model portfolios and related services to sponsors of model delivery programs. For its services, DHCM is paid a model delivery fee by the program sponsor at a pre-determined rate based on the amount of assets under advisement (“AUA”) in the program.
Revenue Recognition – Fund Administration
DHCM has administrative and transfer agency services agreements with the Diamond Hill Funds and DHSC and an administrative services agreement with the Diamond Hill Large Cap Concentrated ETF under which DHCM performs certain services for each Proprietary Fund (collectively, the “Administration Agreements”). These services include performance obligations, such as fund administration, fund accounting, transfer agency (except for the Diamond Hill Large Cap Concentrated ETF), and other related functions. These services are performed concurrently under the Administration Agreements. DHCM satisfies all performance obligations to provide these administrative services over time, and the Company recognizes the related revenue as time progresses. Each Proprietary Fund pays DHCM a fee for performing these services, which is calculated using an annual rate multiplied by the average daily net assets of each respective fund share class. These fees are thereby constrained and represent variable consideration, and are excluded from revenue until the AUM on which DHCM bills the Proprietary Funds is no longer subject to market fluctuations.
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 shareholder mailings, federal and state registrations, and legal and audit services. In fulfilling a portion of its role under the Administration Agreements, DHCM acts as agent and pays for these services on behalf of the Proprietary Funds. Each vendor is independently responsible for fulfillment of the services it has been engaged to provide and negotiates its fees and terms directly with the Proprietary Funds’ officers and respective boards of trustees. Each year, the Proprietary Funds’ respective boards of trustees review the fee that each fund pays to DHCM, 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. Revenue has been recorded net of these fund-related expenses.
Fund administration gross and net revenue are summarized below:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Fund administration:
Administration revenue, gross
$
7,149,254
$
6,402,818
$
20,456,641
$
18,051,623
Fund related expense
(
5,369,423
)
(
4,614,461
)
(
14,911,346
)
(
12,499,921
)
Fund administration revenue, net
$
1,779,831
$
1,788,357
$
5,545,295
$
5,551,702
Income Taxes
The Company accounts for current and deferred income taxes through an asset and liability approach. Deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company is subject to examination by federal and applicable state and local jurisdictions for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws among those jurisdictions, and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities may differ materially from actual payments or assessments. The Company regularly assesses its positions with regard to tax exposures and records liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740,
Income Taxes
. The Company records interest and penalties within income tax expense on the income statement. See
Note 8
.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBB Act”), encompassing a wide array of tax reform measures, was enacted in the U.S. The Company is evaluating the impact of the OBBB Act and currently anticipates that it will not significantly affect the Company’s projected annual effective tax rate for 2025.
Earnings Per Share
Basic and diluted earnings per share (“EPS”) are computed by dividing net income attributable to common shareholders by the weighted average number of DHIL common shares outstanding for the period, which includes unvested restricted shares. See
Note 9
.
Recently Adopted Accounting Guidance
The Company did not adopt any new accounting guidance during the nine months ended September 30, 2025, that had a material effect on its financial position or results of operations.
Newly Issued But Not Yet Adopted Accounting Guidance
In November 2024, FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures.” The ASU requires entities to disaggregate any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other depletion expenses. ASU 2024-03 is effective for financial statements issued for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures. While the Company has not yet completed its assessment, the adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In December 2023, FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures.” This update requires certain revisions to income tax disclosures, primarily disclosures related to rate reconciliation and income taxes paid. ASU 2023-09 is effective for financial statements issued for annual periods beginning after December 15, 2024. The Company does not believe that adoption of ASU 2023-09 will have a material impact on the Company’s consolidated financial statements.
Note 3
Investments
The following table summarizes the carrying value of the Company’s investments as of
September 30, 2025 and December 31, 2024:
As of
September 30, 2025
December 31, 2024
Fair value investments:
Securities held in Consolidated Funds
(a)
$
30,909,036
$
35,583,162
Company-sponsored investments
30,709,147
30,146,571
Company-sponsored equity method investments
113,073,310
94,023,248
Total Investments
$
174,691,493
$
159,752,981
(a) Of the securities held in the Consolidated Funds as of September 30, 2025, DHCM held
$
30.9
million
and non-controlling shareholders held less than
$
0.1
million
. Of the securities held in the Consolidated Fund as of December 31, 2024, DHCM held
$
35.4
million
and non-controlling shareholders held
$
0.2
million
.
As of September 30, 2025 the Company consolidated the Diamond Hill Securitized Total Return Fund. As of December 31, 2024, the Company consolidated the Diamond Hill Core Plus Bond Fund.
The components of net investment income (loss), net are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Realized gains
$
4,018,635
$
70,138
$
8,056,139
$
1,080,393
Change in unrealized
3,079,834
8,620,510
12,686,379
14,579,579
Dividends
1,113,959
997,553
2,036,620
2,773,166
Interest income
296,646
—
1,427,991
—
Other
(
15,344
)
(
19,240
)
(
38,745
)
(
53,090
)
Investment income, net
$
8,493,730
$
9,668,961
$
24,168,384
$
18,380,048
Company-Sponsored Equity Method Investments
As of September 30, 2025, the Company’s equity method investments consisted of DHMF, the Diamond Hill International Fund, the Diamond Hill Core Plus Bond Fund, and the Diamond Hill Large Cap Concentrated ETF. The Company’s ownership percentage in these investments was
81
%
,
22
%
,
40
%
, and
45
%
, respectively. The Company’s ownership in DHMF, the Diamond Hill International Fund, the Diamond Hill Core Plus Bond Fund, and the Diamond Hill Large Cap Concentrated ETF includes
$
10.8
million
of investments held in the Deferred Compensation Plans (as defined in
Note 6
).
The following table includes the condensed summary financial information from the Company’s equity method investments as of, and for the
three-and nine-month periods ended September 30, 2025:
As of
September 30, 2025
Total assets
$
334,429,914
Total liabilities
13,074,549
Net assets
321,355,365
DHCM’s portion of net assets
$
113,073,310
For the Three Months Ended
For the Nine Months Ended
September 30, 2025
September 30, 2025
Investment income
$
1,560,446
$
4,924,683
Expenses
325,863
1,332,933
Net realized gains
5,962,596
14,978,089
Change in unrealized
8,433,250
26,453,698
Net income
15,630,429
45,023,537
DHCM’s portion of net income
$
6,272,816
$
17,756,125
The Company’s investments as of September 30, 2025 include its interest in DHMF, an unconsolidated VIE, as the Company is not deemed the primary beneficiary. The Company’s maximum risk of loss related to its involvement with DHMF is limited to the carrying value of its investment, which was
$
23.7
million
as of September 30, 2025
.
Note 4
Fair Value Measurements
The Company determines the fair value of its cash equivalents and certain investments using the following broad levels listed below:
Level 1 - Unadjusted quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations in which all significant inputs are observable.
Level 3 - Valuations derived from techniques in which significant inputs are unobservable. The Company does not value any investments using Level 3 inputs.
These levels are not necessarily indicative of the risk or liquidity associated with investments.
The following table summarizes investments that are recognized in the Company’s consolidated balance sheet using fair value measurements (excluding investments classified as equity method investments) determined based upon the differing levels as of
September 30, 2025:
Level 1
Level 2
Level 3
Total
Cash equivalents
$
42,044,852
—
—
$
42,044,852
Fair value investments:
Securities held in Consolidated Funds
(a)
$
167,125
$
30,741,911
—
$
30,909,036
Company-sponsored investments
$
30,709,147
—
—
$
30,709,147
(a) Of the securities held in the Consolidated Funds as of September 30, 2025, DHCM directly held
$
30.9
million
and non-controlling shareholders held less than
$
0.1
million
.
Changes to fair values of the investments are recorded in the Company’s consolidated statements of income as investment income, net.
Note 5
Line of Credit
The Company has a committed Line of Credit Agreement (“Credit Agreement”) with a commercial bank that matures on December 11, 2025, which permits the Company to borrow up to $
25.0
million. Borrowings under the Credit Agreement bear interest at a rate equal to the Secured Overnight Financing Rate plus
1.10
%. The Company pays a commitment fee on the unused portion of the facility, accruing at a rate per annum of
0.10
%.
The proceeds of the Credit Agreement may be used by the Company for ongoing working capital needs, to seed new and existing investment strategies, and for other general corporate purposes. The Credit Agreement contains customary representations, warranties, and covenants.
The Company did not borrow under the Credit Agreement during the nine months ended September 30, 2025, and no borrowings were outstanding as of September 30, 2025
.
Note 6
Compensation Plans
Share-Based Payment Transactions
The Company maintains the shareholder-approved Diamond Hill Investment Group, Inc. 2025 Equity and Cash Incentive Plan (the “2025 Plan”) which authorizes the issuance of
225,000
DHIL common shares in various forms of equity awards. As of September 30, 2025, there were
162,151
DHIL common shares available for grants under the 2025 Plan. Previously, the Company issued equity awards under the Diamond Hill Investment Group, Inc. 2022 Equity and Cash Incentive Plan (“2022 Plan”) and the Diamond Hill Investment Group, Inc. 2014 Equity and Cash Incentive Plan (“2014 Plan”). There are no longer any DHIL common shares available for issuance under the 2022 and 2014 Plans, although certain grants previously made under the 2022 and 2014 Plans remain issued and outstanding.
Restricted share grants represent DHIL common shares issued and outstanding upon grant that remain subject to restrictions until specified vesting conditions are satisfied. The Company issues to all new Company employees upon hire restricted shares, and may issue additional restricted shares to certain key employees from time to time, that cliff vest after
five years
. In the first quarter of each year, the Company also issues to certain key employees restricted shares that vest ratably on an annual basis over
three years
.
Restricted shares are valued based upon the fair market value of the common shares on the applicable grant date. The restricted shares are recorded as deferred compensation in the equity section of the balance sheet on the grant date and then recognized as compensation expense on a straight-line basis over the vesting period of the respective grant. The Company’s policy is to adjust compensation expense for forfeitures as they occur.
The following table represents a roll-forward of outstanding restricted shares and related activity for the
nine months ended September 30, 2025:
Shares
Weighted-Average
Grant Date Price
per Share
Outstanding Restricted Shares as of December 31, 2024
173,120
$
160.77
Grants issued
190,082
146.93
Grants vested
(
79,686
)
158.13
Grants forfeited
(
7,583
)
153.97
Outstanding Restricted Shares as of September 30, 2025
275,933
$
152.18
Total deferred equity compensation related to unvested restricted shares was
$
32.8
million
as of September 30, 2025
.
The recognition of compensation expense related to deferred compensation over the remaining vesting periods is as follows:
Three Months Remaining In
2025
2026
2027
2028
2029
Thereafter
Total
$
3,517,421
$
11,554,267
$
8,179,887
$
4,887,532
$
3,745,972
$
877,461
$
32,762,540
Employee Stock Purchase Plan
Under the Diamond Hill Investment Group, Inc. Employee Stock Purchase Plan (the “ESPP”), eligible employees may purchase DHIL common shares at
85
% of the fair market value on the last day of each offering period. Each offering period is approximately three months, which coincides with the Company’s fiscal quarters. During the
nine-month period ended September 30, 2025, ESPP participants purchased
1,877
DHIL common shares for
$
0.2
million
, and the Company recorded
$
0.1
million
of share-based payment expense related to the discount to fair market value for these purchases. During the nine-month period ended September 30, 2024
, ESPP participants purchased
2,408
DHIL common shares for
$
0.3
million
and the Company recorded $
0.1
million of share-based payment expense related to these purchases.
401(k) Plan
The Company sponsors a 401(k) plan in which all employees are eligible to participate. Company employees may contribute a portion of their compensation subject to certain limits based on federal tax laws. The Company matches employee contributions equal to
250.0
% of the first
6.0
% of an employee’s compensation contributed to the plan. The Company may settle the 401(k) plan matching contributions in cash or DHIL common shares. Employees vest ratably in the matching contributions over a
five-year
period.
Deferred Compensation Plans
The Company sponsors the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (together, the “Deferred Compensation Plans”). Under the Deferred Compensation Plans, participants may elect to voluntarily defer, for a minimum of
five years
(subject to an earlier distribution in the case of the participant’s death or disability or a change in control of DHIL), certain incentive compensation that the Company then contributes into the Deferred Compensation Plans. Participants are responsible for designating investment options for the assets they contribute, and the distribution paid to each participant reflects any gains or losses on the assets realized in connection with the Deferred Compensation Plans. Assets held in the Deferred Compensation Plans are included in the Company’s investment portfolio, and the associated obligation to participants is included in deferred compensation liability. Deferred compensation liability was
$
40.5
million
and
$
39.1
million
as of September 30, 2025 and December 31, 2024
, respectively.
On July 31, 2024, the Company entered into a
10-year
extension of its lease through March 31, 2035, for office space of approximately
40,158
square feet at a single location.
As of September 30, 2025, the carrying value of the right-of-use asset, which is included in property and equipment on the consolidated balance sheets, was approximately
$
3.5
million
. As of September 30, 2025, the carrying value of the lease liability was approximately
$
6.5
million
.
Lease liability is measured at the present value of the remaining lease payments, discounted using the discount rate determined at the lease commencement date.
As of September 30, 2025
, the weighted average discount rate applied to the Company’s lease liability was
6.5
%, reflective of the Company’s incremental borrowing rate. The determination of the incremental borrowing rate involves judgment, including assumptions about the Company’s credit risk, economic conditions, and the lease-specific circumstances such as lease term and asset class. Changes in these assumptions could have a material impact on the measurement of the Company’s lease liability.
The following table summarizes the total lease and operating expenses for the
three-and nine-month periods ended September 30, 2025 and 2024:
September 30,
2025
September 30,
2024
Three Months Ended
$
261,653
$
246,089
Nine Months Ended
$
743,489
$
682,755
The following table provides a maturity analysis of the Company’s operating lease liability, based on undiscounted cash flows, as of
September 30, 2025:
As of September 30, 2025
2025
$
200,790
2026
821,231
2027
845,928
2028
871,429
2029
897,430
2030 and Thereafter
5,169,841
Total undiscounted operating lease payments
8,806,649
Less: Imputed interest
(
2,310,924
)
Present value of operating lease liability
$
6,495,725
Note 8
Income Taxes
The Company has determined its interim tax provision projecting an estimated annual effective tax rate.
A reconciliation of the statutory federal tax rate to the Company’s effective income tax rate is as follows:
Nine Months Ended
September 30,
2025
2024
Statutory U.S. federal income tax rate
21.0
%
21.0
%
State and local income taxes, net of federal benefit
4.7
%
4.8
%
Internal revenue code section 162 limitations
1.3
%
1.2
%
Other
—
—
Unconsolidated effective income tax rate
27.0
%
27.0
%
Impact attributable to redeemable noncontrolling interest
(a)
(
0.3
%)
—
%
Effective income tax rate
26.7
%
27.0
%
(a) The provision for income taxes includes the impact of the operations of the Consolidated Funds, which is not subject to federal income taxes. Accordingly, a portion of the Company’s earnings are not subject to corporate tax levels.
The Company’s actual effective tax rate for the fiscal year ending December 31, 2025 could be materially different from the projected rate as of September 30, 2025.
The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2025 and December 31, 2024
,
no
valuation allowance was deemed necessary.
FASB ASC 740,
Income Taxes
, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are “more-likely-than-not” sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company did not record an accrual for tax-related uncertainties or unrecognized tax positions as of September 30, 2025 or December 31, 2024.
The Company did not recognize any interest and penalties during the nine months ended September 30, 2025
.
Note 9
Earnings Per Share
Basic and diluted EPS are calculated under the two-class method and are computed by dividing net income attributable to common shareholders by the weighted average number of DHIL common shares outstanding for the period, including unvested restricted shares. For the periods reported, DHIL did not have any dilutive common shares outstanding. DHIL has not issued any preferred shares.
The following table sets forth the computation for basic and diluted EPS:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2025
2024
2025
2024
Net income
$
13,565,433
$
14,644,593
$
40,096,711
$
35,786,366
Less: Net income attributable to redeemable noncontrolling interest
(
14,822
)
—
(
613,260
)
—
Net income attributable to common shareholders
$
13,550,611
$
14,644,593
$
39,483,451
$
35,786,366
Weighted average number of outstanding shares - Basic
2,718,171
2,738,588
2,728,671
2,774,819
Weighted average number of outstanding shares - Diluted
2,718,171
2,738,588
2,728,671
2,774,819
Earnings per share attributable to common shareholders
Basic
$
4.99
$
5.35
$
14.47
$
12.90
Diluted
$
4.99
$
5.35
$
14.47
$
12.90
Note 10
Commitments and Contingencies
The Company indemnifies its directors and executive and corporate officers for certain liabilities that may arise from the performance of their duties to the Company. The Company is not aware of any active claims under these indemnification arrangements. From time to time, the Company may be involved in legal matters incidental to its business. There are currently no such legal matters pending that the Company believes will have a material adverse effect on its consolidated financial statements. However, litigation involves an element of uncertainty, and future developments could cause legal actions or claims to have a material adverse effect on the Company’s financial condition, results of operations, and/or liquidity.
Additionally, in the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and that provide indemnification obligations. Certain agreements do not contain any limits on the Company’s liability and could involve future claims that may be made against the Company that have not yet occurred. Therefore, it is not possible to estimate the Company’s potential liability under these indemnities. Further, the Company maintains insurance policies that may provide full or partial coverage against certain of these liabilities.
Note 11
Subsequent Events
The Company’s board of directors approved the payment of a regular quarterly cash dividend of
$
1.50
per common share.
The board of directors also approved a special dividend of
$
4.00
per share. Both the fourth quarter regular dividend and the special dividend will be paid on
December 5, 2025
, to the Company’s shareholders of record as of the close of business on
November 21, 2025
. The Company expects
100
% of the distributions to be classified as qualified dividends. The dividends are expected to reduce shareholders' equity by approximately
$
14.9
million
.
This Form 10-Q, the documents incorporated herein by reference and statements, whether oral or written, made from time to time by representatives of 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”). Such statements are provided under the “safe harbor” protection of the PSLR Act. Forward-looking statements include, but are not limited to, statements regarding anticipated operating results, prospects and levels of AUM or AUA, technological developments, economic trends (including interest rates and market volatility), expected transactions and similar matters. The words “may,” “believe,” “expect,” “anticipate,” “target,” “goal,” “project,” “estimate,” “guidance,” “forecast,” “outlook,” “would,” “will,” “continue,” “likely,” “should,” “hope,” “seek,” “plan,” “intend,” and variations of such words and similar expressions identify forward-looking statements. Similarly, descriptions of the Company’s objectives, strategies, plans, goals, or targets are also forward-looking statements. 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. While the Company believes that the assumptions underlying its forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and, accordingly, the Company’s actual results and experiences may differ materially from the anticipated results or other expectations expressed in its forward-looking statements.
Factors that may cause the Company’s actual results or experiences to differ materially from results discussed in forward-looking statements include, but are not limited to: (i) any reduction in the Company’s AUM or 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; (xviii) the continuing economic uncertainty in various parts of the world; (xix) 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; (xxi) changes in trade policy, including new tariffs and retaliatory measures, by the U.S. and other countries; and (xxii), other risks identified from time to time in the Company’s public documents on file with the SEC.
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 “Part II – Item 1A. – Risk Factors” of this Form 10-Q, in “Part I – Item 1A. – Risk Factors” of the 2024 Form 10-K, and in the Company’s public documents on file with the SEC. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect it. The Company undertakes no obligation to update any forward-looking statements after the date they are made, whether as a result of new information, future events or developments or otherwise, except as required by law, although it may do so from time to time. Readers are advised to review this Form 10-Q in its entirety and consult any further disclosures the Company makes on related subjects in its public announcements and SEC filings. The Company does not endorse any projections regarding future performance that may be made by third parties.
The Company derives its consolidated revenue and net income from investment advisory and fund administration services provided by DHCM. DHCM is a registered investment adviser under the Company Act, and is the investment adviser and administrator for the Proprietary Funds. DHCM also provides investment advisory and related services to DHMF as well as SMAs, CITs, other pooled vehicles including sub-advised funds, and model delivery programs.
The Company believes focusing on generating excellent, long-term investment outcomes and building enduring client partnerships will enable it to grow its intrinsic value to achieve a compelling, long-term return for its shareholders.
The Company accomplishes this through its shared investment principles, including: (i) valuation-disciplined active portfolio management; (ii) fundamental bottom-up research; (iii) a long-term, business owner mindset; and (iv) a client alignment philosophy that ensures clients’ interests come first. Client alignment is emphasized through: (i) a strategic capacity discipline that protects portfolio managers’ abilities to generate excess returns; (ii) personal investment by the Company’s portfolio managers in the strategies they manage; (iii) portfolio manager compensation being driven by long-term investment results in client portfolios; and (iv) a fee philosophy focused on a fair sharing of the economics among clients, employees, and shareholders. The Company’s core cultural values of curiosity, ownership, trust, and respect create an environment where investment professionals focus on investment results and all teammates focus on the overall client experience.
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.
Assets Under Management
DHCM’s principal source of revenue is investment advisory fee income earned from managing client accounts under investment advisory and sub-advisory agreements. The fees earned depend on the type of investment strategy, account size, and servicing requirements. DHCM’s revenues depend largely on the total value and composition of its AUM. Accordingly, net cash flows from clients, market fluctuations, and the composition of AUM impact the Company’s revenues and results of operations.
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. DHCM does not have discretionary investment authority over individual client accounts in the model delivery programs, and therefore, 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. 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 the three-and nine-month periods ended September 30, 2025 and 2024:
Assets Under Management and Assets Under Advisement
(a) Certain of the Proprietary Funds own shares of the Diamond Hill Short Duration Securitized Bond 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.
(b) AUA is primarily comprised of model portfolio assets related to the Large Cap and Select strategies.
Net flows out of the Company’s equity strategies for the three months ended September 30, 2025 were largely driven by flows out of the Large Cap, Mid Cap, and Small-Mid Cap strategies, which experienced outflows of $0.7 billion, $0.2 billion, and $0.1
billion, respectively, partially offset by flows into the Long-Short strategy of $0.1 billion. Net flows into the Company’s fixed income strategies were largely driven by flows into the Core Bond and Short Duration strategies, which experienced net inflows of $0.5 billion and $0.4 billion, respectively.
Net flows out of the Company’s equity strategies for the nine months ended September 30, 2025 were largely driven by flows out of the Large Cap and Small-Mid Cap strategies, which experienced net outflows of $2.3 billion and $0.7 billion, respectively. Net flows into the Company’s fixed income strategies were largely driven by flows into the Core Bond and Short Duration strategies, which experienced net inflows of $0.9 billion and $1.0 billion, respectively.
Consolidated Results of Operations
The following is a table and discussion of the Company’s consolidated results of operations.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except per share amounts and percentages)
2025
2024
% Change
2025
2024
% Change
Total revenue
$
37,403
$
39,018
(4
)%
$
110,545
$
111,974
(1
)%
Net operating income
9,729
10,217
(5
)%
30,557
30,653
(0
)%
Adjusted net operating income
(a)
11,831
12,467
(5
)%
34,842
35,224
(1
)%
Investment income, net
8,494
9,669
(12
)%
24,168
18,380
31
%
Income tax expense
4,657
5,242
(11
)%
14,629
13,247
10
%
Net income attributable to common shareholders
13,551
14,645
(7
)%
39,483
35,786
10
%
Earnings per share attributable to common shareholders (diluted)
$
4.99
$
5.35
(7
)%
$
14.47
$
12.90
12
%
Adjusted earnings per share attributable to common shareholders (diluted)
(a)
$
3.24
$
3.35
(3
)%
$
9.32
$
9.26
1
%
Net operating profit margin
26
%
26
%
28
%
27
%
Adjusted net operating profit margin
(a)
32
%
32
%
32
%
31
%
(a) Adjusted net operating income, adjusted EPS attributable to common shareholders (diluted), and adjusted net operating profit margin are non-GAAP financial measures. Refer to the information under “Non-GAAP Financial Measures and Reconciliation” within this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the definition of “non-GAAP” and a reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Summary Discussion of Consolidated Results of Operations - Three Months Ended September 30, 2025, compared with Three Months Ended September 30, 2024
Revenue for the three months ended September 30, 2025 decreased $1.6 million or 4%, compared to revenue for the same period in 2024, primarily due to a decrease in the average advisory fee rate from 0.46% for the three months ended September 30, 2024 to 0.44% for the three months ended September 30, 2025. Average AUM and AUA remained relatively consistent period over period, with less than a 1% decrease. Refer to “Revenue” in this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details on the decrease in the average advisory fee rate.
Operating profit margin was 26% for both the three months ended September 30, 2025, and for the three months ended September 30, 2024.
Adjusted net operating profit margin was 32% for the three months ended September 30, 2025, and 32% for the three months ended September 30, 2024. Adjusted operating profit margin excludes the impact of market movements on the deferred compensation liability and related economic hedges, and the impact of the Consolidated Fund in 2025. Refer to “Non-GAAP Financial Measures and Reconciliation” within this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion.
The Company expects that its operating profit margin will fluctuate period over period based on various factors, including revenues, investment results in the strategies the Company manages, employee performance, staffing levels, and gains and losses on investments held in the Deferred Compensation Plans.
The Company had $8.5 million in investment income for the three months ended September 30, 2025, compared to investment income of $9.7 million for the three months ended September 30, 2024. The decrease was primarily due to lower market appreciation in 2025.
Income tax expense decreased $0.6 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease in income tax expense was primarily due to the decrease in the Company’s income before taxes period over period.
The Company generated net income attributable to common shareholders of $13.6 million ($4.99 per diluted share) for the three months ended September 30, 2025, compared with net income attributable to common shareholders of $14.6 million ($5.35 per diluted share) for the same period in 2024. The decrease in net income attributable to common shareholders period over period was primarily due to a decrease in revenues and investment income, partially offset by decreased operating expenses for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Revenue
Three Months Ended September 30,
(in thousands, except percentages)
2025
2024
% Change
Investment advisory
$
35,623
$
37,230
(4
)%
Fund administration, net
1,780
1,788
(0
)%
Total
$
37,403
$
39,018
(4
)%
Investment Advisory Fees.
Investment advisory fees for the three months ended September 30, 2025 decreased $1.6 million, or 4%, compared to the three months ended September 30, 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. The decrease in investment advisory fees was primarily due to a decrease in the average advisory fee rate from 0.46% to 0.44% period over period. Average AUM and AUA remained relatively consistent period over period, with less than a 1% decrease.
The average advisory fee rate for equity assets decreased from 0.49% during the three months ended September 30, 2024 to 0.47% during the three months ended September 30, 2025, and the average fee rate for fixed income assets increased from 0.31% during the three months ended September 30, 2024 to 0.33% during the three months ended September 30, 2025. The decrease in the total average advisory fee rate was due to growth in the lower fee fixed income assets, which increased from 16% of AUM and AUA during the three months ended September 30, 2024, to 25% during the three months ended September 30, 2025. The average advisory fee rate is calculated by dividing investment advisory revenues by total average AUM and AUA during the period (annualized for all periods less than one year). If the trend continues in the growth in fixed income assets as a percentage of total assets, the total average advisory fee rate could continue to decline.
Fund Administration Fees.
Fund administration fees for the three months ended September 30, 2025 were consistent with the three months ended September 30, 2024. Fund administration fees include administration fees received from the Proprietary Funds, which are calculated as a percentage of the Proprietary Funds’ average AUM.
Compensation and related costs, excluding deferred compensation expense
$
18,352
$
19,509
(6
)%
Deferred compensation expense
2,052
2,250
(9
)%
General and administrative
4,260
4,324
(1
)%
Sales and marketing
2,001
1,841
9
%
Fund administration
1,009
877
15
%
Total
$
27,674
$
28,801
(4
)%
Compensation and Related Costs, Excluding Deferred Compensation Expense.
Employee compensation and related costs (excluding deferred compensation expense) decreased by $1.2 million or 6% for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This decrease is due to a decrease in incentive compensation of $1.2 million. Employee compensation and related costs (excluding deferred compensation expense) as a percentage of total revenue was 49% for the three months ended September 30, 2025 and 50% for the three months ended September 30, 2024.
Deferred Compensation Expense.
Deferred compensation expense was $2.1 million for the three months ended September 30, 2025, compared to $2.3 million for the three months ended September 30, 2024.
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.
General and Administrative.
General and administrative expenses decreased by $0.1 million or 1% for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease was driven by a $0.3 million decrease in IT consulting expenses, partially offset by a $0.2 million increase in investment research-related costs.
Sales and Marketing.
Sales and marketing expenses increased by $0.2 million or 9% for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase was due to a $0.1 million increase in payments made to third-party intermediaries as a result of the increase in the Proprietary Funds’ average AUM period over period as well as a $0.1 million increase in sales and marketing software expenses.
Fund Administration.
Fund administration expenses increased by $0.1 million or 15% for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Fund administration expenses consist of both variable and fixed expenses. The increase was primarily due to legal fees related to new product launches.
Summary Discussion of Consolidated Results of Operations - Nine Months Ended September 30, 2025, compared with Nine Months Ended September 30, 2024
Revenue for the nine months ended September 30, 2025 decreased $1.4 million compared to revenue for the same period in 2024, primarily due to a decrease in the average advisory fee rate from 0.46% for the nine months ended September 30, 2024 to 0.44% for the nine months ended September 30, 2025. Refer to “Revenue” in this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details on the decrease in the average advisory fee rate.
Operating profit margin was 28% for the nine months ended September 30, 2025 and 27% for the nine months ended September 30, 2024, respectively.
Adjusted net operating profit margin was 32% for the nine months ended September 30, 2025, and 31% for the nine months ended September 30, 2024, respectively. 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 Fund(s) in 2025. Refer to “Non-GAAP Financial Measures and Reconciliation” within this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion.
The Company expects that its operating profit margin will fluctuate period over period based on various factors, including revenues, investment results in the strategies the Company manages, employee performance, staffing levels, and gains and losses on investments held in the Deferred Compensation Plans.
The Company had $24.2 million in investment income for the nine months ended September 30, 2025, compared to investment income of $18.4 million for the nine months ended September 30, 2024. The increase was primarily due to higher market appreciation in 2025.
Income tax expense increased $1.4 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in income tax expense was primarily due to the increase in the Company’s income before taxes period over period.
The Company generated net income attributable to common shareholders of $39.5 million ($14.47 per diluted share) for the nine months ended September 30, 2025, compared with net income attributable to common shareholders of $35.8 million ($12.90 per diluted share) for the same period in 2024. The increase in net income attributable to common shareholders period over period was primarily due to the increase in investment income.
Revenue
Nine Months Ended September 30,
(in thousands, except percentages)
2025
2024
% Change
Investment advisory
$
105,000
$
106,423
(1
)%
Fund administration, net
5,545
5,551
(0
)%
Total
$
110,545
$
111,974
(1
)%
Investment Advisory Fees.
Investment advisory fees for the nine months ended September 30, 2025 decreased $1.4 million compared to the nine months ended September 30, 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. The decrease in investment advisory fees was primarily due to a decrease in the average advisory fee rate from 0.46% to 0.44% period over period, partially offset by an increase in total average AUM and AUA of 2%.
The average advisory fee rate for equity assets decreased from 0.48% during the nine months ended September 30, 2024 to 0.47% during the nine months ended September 30, 2025, and the average fee rate for fixed income assets increased from 0.30% during the nine months ended September 30, 2024 to 0.33% during the nine months ended September 30, 2025. The decrease in the total average advisory fee rate was due to growth in the lower fee fixed income assets, which increased from 14% of AUM and AUA during the nine months ended September 30, 2024 to 23% during the nine months ended September 30, 2025. The average advisory fee rate is calculated by dividing investment advisory revenues by total average AUM and AUA during the period (annualized for all periods less than one year). If the trend continues in the growth in fixed income assets as a percentage of total assets, the total average advisory fee rate could continue to decline.
Fund Administration Fees.
Fund administration fees for the nine months ended September 30, 2025 were consistent with the nine months ended September 30, 2024. Fund administration fees include administration fees received from the Proprietary Funds, which are calculated as a percentage of the Proprietary Funds’ average AUM.
Compensation and related costs, excluding deferred compensation expense
$
54,245
$
55,987
(3
)%
Deferred compensation expense
4,128
4,571
(10
)%
General and administrative
12,682
12,755
(1
)%
Sales and marketing
6,018
5,422
11
%
Fund administration
2,914
2,587
13
%
Total
$
79,987
$
81,322
(2
)%
Compensation and Related Costs, Excluding Deferred Compensation Expense.
Employee compensation and related costs (excluding deferred compensation expense) for the nine months ended September 30, 2025 decreased by $1.7 million compared to the nine months ended September 30, 2024. This decrease was due to a decrease in incentive compensation of $2.2 million and a decrease in separation payments of $0.7 million, partially offset by an increase in restricted stock expense of $0.9 million and an increase in salary and related benefits of $0.3 million. Employee compensation and related costs (excluding deferred compensation expense) as a percentage of total revenue was 49% for the nine months ended September 30, 2025 and 50% for the nine months ended September 30, 2024.
Deferred Compensation Expense.
Deferred compensation expense was $4.1 million for the nine months ended September 30, 2025, compared to $4.6 million for the nine months ended September 30, 2024, primarily due to market returns on the Deferred Compensation Plans’ investments period over period.
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.
General and Administrative.
General and administrative expenses decreased by 1% for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.
Sales and Marketing.
Sales and marketing expenses for the nine months ended September 30, 2025 increased by $0.6 million or 11%, compared to the nine months ended September 30, 2024. The increase was due mainly to increased payments made to third-party intermediaries as a result of the increase in the Proprietary Funds’ average AUM period over period and an increase in marketing materials expense.
Fund Administration.
Fund administration expenses for the nine months ended September 30, 2025, increased by $0.3 million or 13%, compared to the nine months ended September 30, 2024. Fund administration expenses consist of both variable and fixed expenses. The increase was primarily due to the increase in the Proprietary Funds’ average AUM period over period.
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 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 $199.6 million and $187.4 million of total assets as of September 30, 2025 and December 31, 2024, respectively. 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.
The Company anticipates that its main uses of cash will be for operating expenses and seed capital to fund new and existing investment strategies. 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
DHIL repurchased 102,904 common shares during the nine months ended September 30, 2025 for a total of $14.5 million. For additional information on the Company’s repurchase plans, refer to “Part II - Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q.
Dividends
Subject to Board approval and compliance with applicable law, DHIL expects to pay a regular quarterly dividend of $1.50 per share. A summary of cash dividends paid during the nine months ended September 30, 2025, is presented below:
Dividend
Declaration Date
Date Paid
Dividend Amount
(in millions)
First quarter - $1.50 per share
February 26, 2025
March 21, 2025
$
4.2
Second quarter - $1.50 per share
April 29, 2025
June 13, 2025
4.1
Third quarter - $1.50 per share
July 29, 2025
September 12, 2025
4.1
Total
$
12.4
The Company's board of directors approved the payment of a regular quarterly dividend for the fourth quarter of 2025 of $1.50 per share.
The board of directors also approved a special dividend of $4.00 per share. Both the fourth quarter regular dividend and the special dividend will be paid on December 5, 2025, to the Company’s shareholders of record as of the close of business on November 21, 2025. The dividends are expected to reduce shareholders' equity by approximately $14.9 million.
Working Capital
As of September 30, 2025, the Company had working capital of approximately $171.6 million, compared to $150.4 million as of December 31, 2024. Working capital includes cash and cash equivalents, accounts receivable, investments, and other current assets of DHCM, net of accounts payable and accrued expenses, accrued incentive compensation, deferred compensation and other current liabilities of DHCM.
Below is a summary of investments as of September 30, 2025 and December 31, 2024.
As of
September 30, 2025
December 31, 2024
Corporate Investments:
Diamond Hill International Fund
$
34,098,721
$
54,887,433
Diamond Hill Core Plus Bond Fund
37,775,738
35,294,858
Diamond Hill Core Securitized Total Return Fund
30,870,466
—
Diamond Hill Large Cap Concentrated ETF (a)
15,253,842
—
Diamond Hill Large Cap Concentrated Fund (a)
—
14,180,828
Diamond Hill Micro Cap Fund, LP
15,133,430
15,978,910
Diamond Hill Securitized Credit Fund
976,673
117,266
Total Corporate Investments
134,108,870
120,459,295
Deferred Compensation Plan Investments in the Funds
40,544,053
39,129,093
Total investments held by DHCM
174,652,923
159,588,388
Redeemable noncontrolling interest in the Consolidated Fund(s)
38,570
164,593
Total Investments
$
174,691,493
$
159,752,981
(a) During the third quarter of 2025, the Company’s investment in the Diamond Hill Large Cap Concentrated Fund was reorganized into the Diamond Hill Large Cap Concentrated ETF through a tax-free, in-kind exchange pursuant to the fund’s Plan of Reorganization, resulting in the liquidation of the mutual fund and receipt of equivalent ETF shares.
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. The Company expects that cash flows provided by operating activities will continue to serve as its primary source of working capital.
For the nine months ended September 30, 2025, net cash used in operating activities totaled $23.4 million. Cash flows used in operating activities were primarily driven by a $11.0 million decrease in the incentive compensation accrual due to the annual incentive compensation payment made in the first quarter of 2025, net investment purchase activity by the Consolidated Funds of $53.1 million, and the cash impact of timing differences in the settlement of other assets and liabilities of $10.1 million. These outflows were partially offset by net income of $40.1 million, and non-cash adjustments added back to net income consisting of share-based compensation of $9.9 million, and depreciation of $0.8 million.
For the nine months ended September 30, 2024, net cash provided by operating activities totaled $25.4 million. Cash provided by operating activities was primarily driven by net income of $35.8 million, non-cash adjustments added back to net income consisting of share-based compensation of $9.0 million and depreciation of $0.9 million. These inflows were partially offset by a $6.8 million decrease in the incentive compensation accrual due to the annual incentive compensation payment made in the first quarter of 2024 and the cash impact of timing differences in the settlement of other assets and liabilities of $13.5 million.
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 $32.8 million for the nine months ended September 30, 2025. Cash flows provided by investing activities were driven by proceeds from the sale of Company sponsored investments totaling $41.1 million, partially offset by purchases of Company-sponsored investments of $6.4 million and the purchase of property and equipment of $1.9 million.
Cash flows used in investing activities totaled $0.3 million for the nine months ended September 30, 2024. Cash flows used in investing activities were driven by purchases of Deferred Compensation Plan investments of $10.5 million and the purchase of property and equipment of $0.4 million, partially offset by proceeds from the sale of Deferred Compensation Plan investments totaling $10.6 million.
Cash Flows from Financing Activities
The Company’s cash flows from financing activities consist primarily of the repurchase of DHIL common shares, dividends paid on DHIL common shares, DHIL common shares withheld related to employee tax withholding, proceeds received under the ESPP, and distributions to, or contributions from, redeemable noncontrolling interest holders.
For the nine months ended September 30, 2025, net cash used in financing activities totaled $8.0 million, consisting of cash outflows for repurchases of DHIL’s common shares of $14.5 million, the payment of quarterly dividends totaling $12.3 million, and the value of shares withheld to cover employee tax withholding obligations of $4.1 million. These cash outflows were partially offset by net subscriptions received in the Consolidated Funds from redeemable noncontrolling interest holders of $22.7 million and proceeds received under the ESPP of $0.2 million.
For the nine months ended September 30, 2024, net cash used in financing activities totaled $38.4 million, consisting of cash outflows for repurchases of DHIL’s common shares of $21.7 million, the payment of quarterly dividends totaling $12.5 million, and the value of shares withheld to cover employee tax withholding obligations of $4.5 million. These cash outflows were partially offset by proceeds received under the ESPP of $0.3 million.
Supplemental Consolidated Cash Flow Statement
The following table summarizes the condensed cash flows for the nine months ended September 30, 2025, that are attributable to the Company and to the Consolidated Funds, and the related eliminations required in preparing the consolidated statements.
Nine Months Ended September 30, 2025
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
$
39,483,451
$
3,066,615
$
(2,453,355
)
$
40,096,711
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation
822,908
—
—
822,908
Share-based compensation
9,871,786
—
—
9,871,786
Net gains on investments
(19,725,384
)
(3,066,615
)
1,296,425
(21,495,574
)
Net change in securities held by Consolidated Funds
—
(53,078,436
)
—
(53,078,436
)
Other changes in assets and liabilities
(163,597
)
554,277
—
390,680
Net cash provided by (used in) operating activities
30,289,164
(52,524,159
)
(1,156,930
)
(23,391,925
)
Net cash provided by investing activities
1,631,957
—
31,172,289
32,804,246
Net cash provided by (used in) financing activities
As supplemental information, the Company is providing certain financial measures that are based on methodologies other than GAAP (“non-GAAP”). Management believes the non-GAAP financial measures below are useful measures of the Company’s core business activities, are important metrics in estimating the value of an asset management business, and help facilitate comparisons to Company operating performance across periods. These non-GAAP financial measures are presented for supplemental informational purposes only, should not be used as a substitute for financial measures calculated in accordance with GAAP and may be calculated differently from similarly titled non-GAAP measures used by other companies. The following schedules reconcile the differences between financial measures calculated in accordance with GAAP and non-GAAP financial measures for the three-and nine-month periods ended September 30, 2025 and 2024, respectively. Investors 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.
Three Months Ended September 30, 2025
(in thousands, except percentages and per share data)
Total operating expenses
Net operating income
Total non-operating income (loss)
Income tax expense
(4)
Net income attributable to common shareholders
Earnings per share attributable to common shareholders - diluted
Net operating profit margin
GAAP Basis
$
27,674
$
9,729
$
8,494
$
4,657
$
13,551
$
4.99
26
%
Non-GAAP Adjustments:
Deferred compensation liability
(1)
(2,052
)
2,052
(2,052
)
—
—
—
6
%
Consolidated Funds
(2)
—
50
(936
)
(223
)
(647
)
(0.24
)
—
Other investment income
(3)
—
—
(5,506
)
(1,408
)
(4,098
)
(1.51
)
—
Adjusted Non-GAAP basis
$
25,622
$
11,831
$
—
$
3,026
$
8,806
$
3.24
32
%
Three Months Ended September 30, 2024
(in thousands, except percentages and per share data)
Total operating expenses
Net operating income
Total non-operating income (loss)
Income tax expense
(4)
Net income attributable to common shareholders
Earnings per share attributable to common shareholders - diluted
Net operating profit margin
GAAP Basis
$
28,801
$
10,217
$
9,669
$
5,242
$
14,645
$
5.35
26
%
Non-GAAP Adjustments:
Deferred compensation liability
(1)
(2,250
)
2,250
(2,250
)
—
—
—
6
%
Other investment income
(3)
—
—
(7,419
)
(1,956
)
(5,463
)
(2.00
)
—
Adjusted Non-GAAP basis
$
26,551
$
12,467
$
—
$
3,286
$
9,182
$
3.35
32
%
Nine Months Ended September 30, 2025
(in thousands, except percentages and per share data)
Total operating expenses
Net operating income
Total non-operating income (loss)
Income tax expense
(4)
Net income attributable to common shareholders
Earnings per share attributable to common shareholders - diluted
(in thousands, except percentages and per share data)
Total operating expenses
Net operating income
Total non-operating income (loss)
Income tax expense
(4)
Net income attributable to common shareholders
Earnings per share attributable to common shareholders - diluted
Net operating profit margin
GAAP Basis
$
81,322
$
30,653
$
18,380
$
13,247
$
35,786
$
12.90
27
%
Non-GAAP Adjustments:
Deferred compensation liability
(1)
(4,571
)
4,571
(4,571
)
—
—
—
4
%
Other investment income
(3)
—
—
(13,809
)
(3,731
)
(10,078
)
(3.64
)
—
Adjusted Non-GAAP basis
$
76,751
$
35,224
$
—
$
9,516
$
25,708
$
9.26
31
%
(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. Amounts deferred under the Deferred Compensation Plans are adjusted for appreciation/depreciation of investments chosen by participants. 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.
(2)
This non-GAAP adjustment removes the impact that the Consolidated Fund(s) had on the Company’s GAAP consolidated statements of income. Specifically, the Company adds back the operating expenses and subtracts the investment income of the Consolidated Fund(s). The adjustment to net operating income represents the operating expenses of the Consolidated Fund(s), net of the elimination of related management and administrative fees. The adjustment to net income attributable to common shareholders represents the net income of the Consolidated Fund(s), net of redeemable non-controlling interests. The Company believes removing the impact of the Consolidated Fund(s) helps readers understand its core operating results and improves comparability from period to period.
(3)
This non-GAAP adjustment represents the net gains or losses earned on the Company’s non-consolidated investment portfolio that are not designated as economic hedges of the Deferred Compensation Plans’ liability, non-consolidated seed investments, and other investments. 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.
(4)
The income tax expense impacts were calculated and resulted in the overall non-GAAP effective tax rates of 25.6% for the three months ended September 30, 2025, 26.4% for the three months ended September 30, 2024, 27.0% for the nine months ended September 30, 2025, and 27.0% for the nine months ended September 30, 2024.
Critical Accounting Estimates
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of financial statements and related disclosures in accordance with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities. 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 management believes to be reasonable under the circumstances at the time the estimate was made. By their nature, these estimates, judgments, and assumptions are subject to uncertainty, and actual results may differ materially from these estimates.
For a summary of the critical accounting policies important to understanding the condensed consolidated financial statements, refer to Note 2 “Significant Accounting Policies” in “Part I - Item 1 - Financial Statements” of this Form 10-Q, and Note 2 “Significant Accounting Policies” in “Part II - Item 8 - Financial Statements and Supplementary Data” in the 2024 Form 10-K.
There have been no material changes to the Company’s critical accounting estimates during the quarter ended September 30, 2025, as compared to the critical accounting estimates disclosed in “Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K.
ITEM 3: Qua
ntitative and Qualitative Disclosures About Market Risk
For information regarding the Company’s exposure to certain market risks, refer to “Part II - Item 7A - Quantitative and Qualitative Disclosures About Market Risk” in the 2024 Form 10-K. Except as described in “Part I - Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, there have been no significant changes in the Company’s market risk exposures since the Company’s December 31, 2024 year end.
ITEM 4: Co
ntrols and Procedures
Evaluation of Disclosure Controls and Procedures
Management, including the Chief Executive Officer and the Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q (the “Evaluation Date”). Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute, of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As a result, there can be no assurance that the Company’s controls and procedures will detect all errors or fraud.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
From time to time, the Company may be party to ordinary, routine litigation that is incidental to its business. The Company is not aware of any pending legal proceedings that the Company believes will have, individually or in the aggregate, a material adverse effect on its consolidated financial statements.
ITEM 1A: Ri
sk Factors
There have been no material changes to the Company’s risk factors from the information disclosed in “Part I - Item 1A - Risk Factors” of the 2024 Form 10-K, except as set forth below:
Changes in trade policy, including new tariffs and retaliatory measures, by the U.S. and other countries could adversely affect the U.S. economy and financial markets, which would have a material adverse impact on fund AUM and the Company’s revenues and earnings.
Changes to economic conditions and policies in the U.S. and other countries could negatively impact the Company’s business. Recently, the U.S. trade environment has become increasingly uncertain. In some instances, escalated tariff disputes with major trading partners and related uncertainty around future trade policy are contributing to higher import costs, strained export demand, and delayed investments by businesses. These dynamics can slow economic growth and disrupt financial markets in the U.S. and other countries, as evidenced by market volatility following intensified U.S.–China tariff actions. Deteriorating economic conditions or reduced corporate earnings resulting from tariffs and other protectionist policies may lead to broad market declines, lower asset values, and diminished investor confidence. Like other investment managers, DHCM earns fees largely based on the value of assets it manages, so any sustained market downturn or erosion of U.S. asset prices will directly impact DHCM’s fees, and thus, reduce the Company’s revenues and earnings. Furthermore, negative investor sentiment or risk aversion in response to trade tensions could trigger increased redemptions or shifts to other asset classes, compounding the pressure on the Company's AUM and revenues.
An unfavorable tariff environment amplifies macroeconomic headwinds – including the risk of a U.S. economic slowdown, market volatility, elevated inflation, and interest rate shifts – which could negatively impact the Company. If trade tensions continue or worsen, the resulting economic and market turbulence could materially and adversely affect fund AUM as well as the Company’s revenues, profitability and growth prospects. The Company cannot predict the future of U.S. or foreign trade policy or the full impact of recently imposed tariffs, but prolonged trade disputes or new tariff shocks increase the likelihood of further market declines and industry-wide outflows, which would have a material adverse effect on the Company’s business, revenues, earnings and financial conditions.
ITEM 2: Unr
egistered Sales of Equity Securities and Use of Proceeds
During the quarter ended September 30, 2025, DHIL did not sell any common shares that were not registered under the Securities Act. The following table sets forth information regarding repurchases of DHIL common shares during the quarter ended September 30, 2025:
Period
Total Number of Common Shares Purchased
(a)
Average Price Paid Per Common Share
Total Number
of Common Shares
Purchased
as part of Publicly
Announced Plans or Programs
(b)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(b)
July 1, 2025 through July 31, 2025
3,854
$
145.31
—
$
37,846,129
Aug 1, 2025 through Aug 31, 2025
8,932
$
137.49
8,932
36,618,066
Sept 1, 2025 through Sept 30, 2025
9,939
$
139.63
9,939
35,230,266
Total
22,725
$
139.75
18,871
$
35,230,266
(a) The Company regularly withholds common shares for tax payments due upon the vesting of employee restricted shares. Common shares withheld to cover tax withholding obligations in connection with the vesting of employee restricted shares are treated as common share repurchases for purposes of this table. The common shares withheld are not considered repurchases of DHIL common shares under any authorized common share repurchase plan or program. During the quarter ended September 30, 2025, the Company withheld 3,854 DHIL common shares for employee tax withholding obligations at an average price paid per share of $145.31.
(b) On November 4, 2024, the Board approved a repurchase plan, authorizing management to repurchase up to $50 million DHIL common shares in the open market and in private transactions in accordance with applicable securities laws (“2024 Repurchase Program”). 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. A Rule 10b5-1 trading arrangement allows a company to purchase its common shares 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 DHIL’s Rule 10b5-1 trading 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 trading arrangement.
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.
ITEM 3: Defa
ults Upon Senior Securities
None.
ITEM 4: M
ine Safety Disclosures
Not applicable.
ITEM 5: Ot
her Information
During the quarter ended September 30, 2025
, no director or officer (as defined under Rule 16a-1 of the Exchange Act)
adopted
or
terminated
any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
XBRL Taxonomy Extension Schema Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).
* Denotes management contract or compensatory plan or arrangement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DIAMOND HILL INVESTMENT GROUP, INC.
Date
Title
Signature
October 30, 2025
Chief Executive Officer and President (Principal Executive Officer)
/s/ Heather E. Brilliant
Heather E. Brilliant
October 30, 2025
Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
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