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Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2025
Accounting Policies [Abstract] |
Significant Accounting Policies | 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. Reclassification Certain prior period amounts and disclosures may have been reclassified to conform to the current period’s financial presentation. Principles of Consolidation The accompanying 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. Accounts Receivable The Company records accounts receivable when they are due and presents them on the balance sheet net of any allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical losses, existing conditions in the industry, and the financial stability of the individual or entity that owes the receivable. No allowance for doubtful accounts was deemed necessary at 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.

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