Press Release

Pzena Investment Management, Inc. Reports Results for the Fourth Quarter and Full Year of 2018

Company Release - 2/5/2019 4:15 PM ET
  • Assets under management ends the fourth quarter at $33.4 billion.
      
  • 2018 full year revenue increases 9% to $153.6 million.
      
  • 2018 full year GAAP diluted earnings per share increases 93% reflecting the net expense from the Tax Cuts and Jobs Act in 2017.  Adjusting for the changes in the deferred tax asset and the impact of the Tax Cuts and Jobs Act, diluted earnings per share increased 22% for the full year.
      
  • Board declares a year-end dividend of $0.49 per share.

NEW YORK, Feb. 05, 2019 (GLOBE NEWSWIRE) -- Pzena Investment Management, Inc. (NYSE: PZN) reported the following U.S. Generally Accepted Accounting Principles (GAAP) and non-GAAP basic and diluted net income and earnings per share for the three and twelve months ended December 31, 2018 and 2017 (in thousands, except per-share amounts):

  GAAP Basis  Non-GAAP Basis1 
  For the Three Months Ended
December 31,
  For the Three Months Ended
December 31,
 
  2018  2017  2018  2017 
             
  (unaudited) 
Basic Net Income $2,537  $(1,046) $2,783  $3,597 
Basic Earnings Per Share $0.15  $(0.06) $0.16  $0.21 
                 
Diluted Net Income2 $2,537  $(1,046) $11,560  $13,633 
Diluted Earnings Per Share2 $0.15  $(0.06) $0.16  $0.19 
                 
  GAAP Basis  Non-GAAP Basis1 
  For the Twelve Months Ended
December 31,
  For the Twelve Months Ended
December 31,
 
  2018  2017  2018  2017 
             
  (unaudited) 
Basic Net Income $13,794  $6,908  $14,040  $11,551 
Basic Earnings Per Share $0.78  $0.40  $0.79  $0.67 
                 
Diluted Net Income2 $55,347  $6,908  $55,593  $44,706 
Diluted Earnings Per Share2 $0.77  $0.40  $0.77  $0.63 

1  Please refer to the GAAP to Non-GAAP Reconciliations on Page 12 of this release for a reconciliation to the GAAP financial measures.
2  During the three months ended December 31, 2018 and the three and twelve months ended December 31, 2017, the calculation of GAAP diluted earnings per share resulted in an increase in earnings per share. Therefore, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share.

  

GAAP diluted net income and GAAP diluted earnings per share were $2.5 million and $0.15 respectively, for the three months ended December 31, 2018, and $(1.0) million and $(0.06), respectively, for the three months ended December 31, 2017. GAAP diluted net income and GAAP diluted earnings per share were $55.3 million and $0.77, respectively, for the twelve months ended December 31, 2018, and $6.9 million and $0.40, respectively, for the twelve months ended December 31, 2017.

In evaluating the results of operations, management also reviews non-GAAP measures of earnings, which are adjusted to exclude accounting items that add a measure of non-operational complexity which obscures the underlying performance of the business.  For the three and twelve months ended December 31, 2018 and 2017, earnings were adjusted to exclude changes to the deferred tax asset and corresponding liability to the Company's selling and converting shareholders during the fourth quarters of 2018 and 2017, and the impact of the Tax Cuts and Jobs Act enacted in the fourth quarter of 2017.  As adjusted, non-GAAP diluted net income and non-GAAP diluted earnings per share were $11.6 million and $0.16, respectively, for the three months ended December 31, 2018, and $55.6 million and $0.77, respectively, for the twelve months ended December 31, 2018. As adjusted, non-GAAP diluted net income and non-GAAP diluted earnings per share were $13.6 million and $0.19, respectively, for the three months ended December 31, 2017, and $44.7 million and $0.63, respectively, for the twelve months ended December 31, 2017. Management uses the non-GAAP measures to assess the strength of the underlying operations of the business.  It believes the non-GAAP measures provide information to further analyze the Company's operations between periods and over time.  Investors should consider the non-GAAP measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.  

Net income for diluted earnings per share generally assume all operating company membership units are converted into Company stock at the beginning of the reporting period, and the resulting change to Company net income associated with its increased interest in the operating company is taxed at the Company's effective tax rate, exclusive of the adjustments noted above and other adjustments.  When this conversion results in an increase in earnings per share or a decrease in loss per share, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share for the reporting period.

Assets Under Management (unaudited)                    
($ billions)                    
  For the Three Months Ended  For the Twelve Months Ended 
  December 31,  September 30,  December 31,  December 31,  December 31, 
  20181  2018  2017  20181  2017 
Separately Managed Accounts                    
Assets                    
Beginning of Period $14.6  $13.8  $14.3  $15.0  $12.5 
Inflows  0.1   0.8   0.3   1.6   1.4 
Outflows  (0.2)  (0.3)  (0.5)  (1.8)  (1.6)
Net Flows  (0.1)  0.5   (0.2)  (0.2)  (0.2)
Market Appreciation/(Depreciation)  (1.9)  0.3   0.9   (2.2)  2.7 
End of Period $12.6  $14.6  $15.0  $12.6  $15.0 
                     
Sub-Advised Accounts                    
Assets                    
Beginning of Period Assets $22.2  $21.2  $19.7  $21.8  $16.3 
Inflows  0.6   1.0   1.3   3.0   3.5 
Outflows  (0.6)  (0.5)  (0.7)  (2.4)  (1.8)
Net Flows     0.5   0.6   0.6   1.7 
Market Appreciation/(Depreciation)  (3.4)  0.5   1.5   (3.6)  3.8 
End of Period $18.8  $22.2  $21.8  $18.8  $21.8 
                     
Pzena Funds                    
Assets                    
Beginning of Period Assets $2.1  $1.9  $1.4  $1.7  $1.2 
Inflows  0.3   0.2   0.3   0.9   0.5 
Outflows  (0.1)  (0.1)     (0.3)  (0.3)
Net Flows  0.2   0.1   0.3   0.6   0.2 
Market Appreciation/(Depreciation)  (0.3)  0.1      (0.3)  0.3 
End of Period $2.0  $2.1  $1.7  $2.0  $1.7 
                     
Total                    
Assets                    
Beginning of Period $38.9  $36.9  $35.4  $38.5  $30.0 
Inflows  1.0   2.0   1.9   5.5   5.4 
Outflows  (0.9)  (0.9)  (1.2)  (4.5)  (3.7)
Net Flows  0.1   1.1   0.7   1.0   1.7 
Market Appreciation/(Depreciation)  (5.6)  0.9   2.4   (6.1)  6.8 
End of Period $33.4  $38.9  $38.5  $33.4  $38.5 

1  Approximately $0.2 billion in assets under management have been reclassified from Separately Managed Accounts to Sub-Advised Accounts from amounts reported in the Company’s 8-K and press release filed on January 7, 2019.
  

Financial Discussion

Revenue (unaudited)            
($ thousands)            
  For the Three Months Ended 
  December 31,  September 30,  December 31, 
  2018  2018  2017 
Separately Managed Accounts $18,324  $19,578  $20,416 
Sub-Advised Accounts  14,832   16,616   15,565 
Pzena Funds  3,243   3,386   2,928 
Total $36,399  $39,580  $38,909 
             
      For the Twelve Months Ended 
      December 31,  December 31, 
      2018  2017 
Separately Managed Accounts     $77,144  $76,419 
Sub-Advised Accounts      64,155   55,003 
Pzena Funds      12,280   9,873 
Total     $153,579  $141,295 

Revenue was $36.4 million for the fourth quarter of 2018, a decrease of 8.0% from $39.6 million for the third quarter of 2018 and a decrease of 6.5% from $38.9 million for the fourth quarter of 2017. 

Included in these amounts for the fourth quarter of 2018 were performance fees recognized of $0.3 million, compared to $0.8 million for the third quarter of 2018 and $1.5 million for the fourth quarter of 2017. 

Average assets under management for the fourth quarter of 2018 were $36.1 billion, decreasing 5.7% from $38.3 billion for the third quarter of 2018, and 1.9% from $36.8 billion for the fourth quarter of 2017.  The decrease from the third quarter of 2018 and the fourth quarter of 2017 primarily reflects market depreciation.  The decrease from the fourth quarter of 2017 was partially offset by net inflows.

The weighted average fee rate was 0.404% for the fourth quarter of 2018, decreasing from 0.413% for the third quarter of 2018, and decreasing from 0.423% for the fourth quarter of 2017. 

The weighted average fee rate for separately managed accounts was 0.541% for the fourth quarter of 2018, decreasing from 0.547% for the third quarter of 2018, and decreasing from 0.560% for the fourth quarter of 2017.  The decrease from third quarter of 2018 and fourth quarter of 2017 reflects an increase in large client relationships that generally carry lower fee rates. The decrease from the fourth quarter of 2017 also reflects a decrease in performance fees recognized during the fourth quarter of 2018.

The weighted average fee rate for sub-advised accounts was 0.289% for the fourth quarter of 2018, decreasing from 0.302% for the third quarter of 2018, and from 0.302% for the fourth quarter of 2017. The decrease from third quarter of 2018 and fourth quarter of 2017 reflects a decrease in performance fees recognized during the fourth quarter of 2018. In addition, certain accounts related to one retail client relationship have fulcrum fee arrangements.  These fee arrangements require a reduction in the base fee or allow for a performance fee if the relevant investment strategy underperforms or outperforms, respectively, the agreed-upon benchmark over the contract's measurement period, which extends to three years.  During the fourth quarter of 2018 a reduction in base fees related to these fee arrangements was recognized.  A reduction in base fees was not recognized during the third quarter of 2018 or fourth quarter of 2017.  To the extent the three-year performance records of these accounts fluctuate relative to their relevant benchmarks, the amount of base fees recognized may vary.

The weighted average fee rate for Pzena funds was 0.644% for the fourth quarter of 2018, decreasing from 0.668% for the third quarter of 2018, and from 0.737% for the fourth quarter of 2017. The decrease from the fourth quarter of 2017 reflects the adoption of the new revenue recognition standard, which requires fund expense cap reimbursements to be presented net against revenue. The Company adopted the new revenue recognition standard as of January 1, 2018 using a modified retrospective approach, and thus prior periods have not been restated. Excluding the impact of the revenue recognition presentation change, the weighted average fee rate for Pzena funds was 0.692% for the fourth quarter of 2018, decreasing from 0.703% for the third quarter of 2018 and from 0.737% for the fourth quarter of 2017. The decrease from the fourth quarter of 2017 reflects a decrease in performance fees recognized during the fourth quarter of 2018. The decrease from the third quarter of 2018 reflects an increase in assets in products that generally carry higher fee rates.

Total operating expenses were $17.4 million for the fourth quarter of 2018, decreasing from $19.4 million for the third quarter of 2018 and from $18.0 million for the fourth quarter of 2017.  The decrease in operating expenses from the third quarter of 2018 reflects a decrease in compensation expense, partially offset by an increase in general and administrative costs. Compensation expense in the fourth quarter of 2018 reflects a decrease in compensation rates. The increase in general and administrative expenses from the third quarter of 2018 reflects an increase in professional fees. The decrease in operating expenses from the fourth quarter of 2017 reflects a decrease in compensation expense, as well as a decrease in general and administrative expenses. The decrease in general and administrative expenses reflects a decrease in professional fees.

Operating Expenses (unaudited)            
($ thousands)            
  For the Three Months Ended 
  December 31,  September 30,  December 31, 
  2018  2018  2017 
Compensation and Benefits Expense $13,899  $16,122  $14,223 
General and Administrative Expense  3,549   3,322   3,752 
Operating Expenses $17,448  $19,444  $17,975 
             
      For the Twelve Months Ended 
      December 31,  December 31, 
      2018  2017 
Compensation and Benefits Expense     $61,419  $58,904 
General and Administrative Expense      13,405   13,337 
Operating Expenses     $74,824  $72,241 

As of December 31, 2018, employee headcount was 106, down from 109 at September 30, 2018 and, up from 105 at December 31, 2017. 

The operating margin was 52.1% for the fourth quarter of 2018, compared to 50.9% for the third quarter of 2018, and 53.8% for the fourth quarter of 2017.

Other (expense)/ income was an expense of approximately $3.0 million for the fourth quarter of 2018, income of $0.6 million for the third quarter of 2018, and income of $22.2 million for the fourth quarter of 2017. 

Other (expense)/ income primarily reflects the fluctuations in the gains/ (losses) and other investment income recognized by the Company on its direct equity investments, the majority of which are held to satisfy obligations under its deferred compensation plan.  Other (expense)/ income also includes a portion of gains/ (losses) and other investment income recognized by external investors on their investments in investment partnerships that the Company consolidates, which are offset in net income attributable to non-controlling interests.  During the fourth quarter of 2017, other (expense)/ income included $20.8 million of income associated with the enactment of the Tax Cuts and Jobs Act.  Excluding the outside interests of the Company's investment partnerships and the impact of the Tax Cuts and Jobs Act, other (expense)/ income was an expense of approximately $2.9 million for the fourth quarter of 2018, income of $0.6 million for third quarter of 2018, and income of $1.1 million for the fourth quarter of 2017.  Details of other (expense)/ income, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:

Other (Expense)/ Income (unaudited)            
($ thousands)            
  For the Three Months Ended 
  December 31,  September 30,  December 31, 
  2018  2018  2017 
Net Interest and Dividend Income $332  $286  $122 
(Losses)/ Gains and Other Investment Income  (3,386)  346   1,315 
Change in Liability to Selling and Converting Shareholders1  87       
Impact of the Tax Cuts and Jobs Act on the Liability to Selling and Converting Shareholders2        20,819 
Other Income/ (Expense)  (34)  (27)  (52)
GAAP Other (Expense)/ Income  (3,001)  605   22,204 
Change in Liability to Selling and Converting Shareholders1  (87)      
Impact of the Tax Cuts and Jobs Act on the Liability to Selling and Converting Shareholders2        (20,819)
Outside Interests of Investment Partnerships3  221   (16)  (271)
Non-GAAP Other (Expense)/ Income, Net of Outside Interests $(2,867) $589  $1,114 
             
      For the Twelve Months Ended 
      December 31,  December 31, 
      2018  2017 
Net Interest and Dividend Income     $841  $523 
(Losses)/ Gains and Other Investment Income      (3,530)  4,117 
Change in Liability to Selling and Converting Shareholders1      87    
Impact of the Tax Cuts and Jobs Act on the Liability to Selling and Converting Shareholders2         20,819 
Other Income      (56)  149 
GAAP Other (Expense)/ Income      (2,658)  25,608 
Change in Liability to Selling and Converting Shareholders1      (87)   
Impact of the Tax Cuts and Jobs Act on the Liability to Selling and Converting Shareholders2         (20,819)
Outside Interests of Investment Partnerships3      208   (863)
Non-GAAP Other (Expense)/ Income, Net of Outside Interests     $(2,537) $3,926 

1  Reflects the change in the liability to the Company’s selling and converting shareholders associated with the deferred tax asset generated by the Company’s initial public offering and subsequent unit conversions.
2  Reflects the change in the liability to the Company's selling and converting shareholders associated with the re-measurement of the deferred tax asset upon enactment of the Tax Cuts and Jobs Act in the fourth quarter of 2017.
3  Represents the non-controlling interest allocation of the income of the Company's consolidated investment partnerships to its external investors.
  

The Company recognized income tax expenses of $2.1 million for the fourth quarter of 2018, $1.3 million for the third quarter of 2018, and $28.1 million for the fourth quarter of 2017.  Third quarter 2018 income tax expense reflects a $0.5 million benefit associated with the reversal of uncertain tax position liabilities and interest related to unincorporated and other business tax expenses due to the expiration of the statute of limitations.  Income taxes for the fourth quarter of 2017 included $26.5 million in income tax expense resulting from the re-measurement of the deferred tax asset related to the Tax Cuts and Jobs Act enacted in the United States.

Details of the income tax expense, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below: 

Income Tax Expense (unaudited)            
($ thousands)            
  For the Three Months Ended 
  December 31,  September 30,  December 31, 
  2018  2018  2017 
GAAP Income Tax Expense $2,101  $1,294  $28,052 
             
Non-GAAP Corporate Income Tax Expense $993  $867  $1,775 
Non-GAAP Unincorporated and Other Business Tax Expense  775   427   815 
Non-GAAP Income Tax Expense  1,768   1,294   2,590 
Impact of Tax Cuts and Jobs Act1        26,468 
Change due to Prior Period Adjustments2  333      (1,006)
GAAP Income Tax Expense $2,101  $1,294  $28,052 
             
      For the Twelve Months Ended 
      December 31,  December 31, 
      2018  2017 
GAAP Income Tax Expense     $7,778  $34,512 
             
Non-GAAP Corporate Income Tax Expense     $4,667  $6,188 
Non-GAAP Unincorporated and Other Business Tax Expense      2,778   2,862 
Non-GAAP Income Tax Expense      7,445   9,050 
Impact of Tax Cuts and Jobs Act1         26,468 
Change due to Prior Period Adjustments2      333   (1,006)
GAAP Income Tax Expense     $7,778  $34,512 

1  Reflects income tax expense resulting from the re-measurement of the deferred tax asset related to the Tax Cuts and Jobs Act enacted in the United States during the fourth quarter of 2017.
2   Reflects the impact of a prior period adjustment to the deferred tax asset established as part of the Company’s initial public offering and subsequent unit conversions recognized during the fourth quarter of 2018, and the net impact of a prior period adjustment to the deferred tax asset and corresponding liability to selling and converting shareholders recognized during the fourth quarter of 2017.
  

Details of the net income attributable to non-controlling interests of the Company's operating company and consolidated subsidiaries are shown below:

GAAP Non-Controlling Interests (unaudited)            
($ thousands)            
  For the Three Months Ended 
  December 31,  September 30,  December 31, 
  2018  2018  2017 
Operating Company Allocation $11,533  $15,169  $15,861 
Outside Interests of Investment Partnerships1  (221)  16   271 
GAAP Net Income Attributable to Non-Controlling Interests $11,312  $15,185  $16,132 
             
      For the Twelve Months Ended 
      December 31,  December 31, 
      2018  2017 
Operating Company Allocation     $54,733  $52,379 
Outside Interests of Investment Partnerships1      (208)  863 
GAAP Net Income Attributable to Non-Controlling Interests     $54,525  $53,242 

1  Represents the non-controlling interest allocation of the income of the Company's consolidated investment partnerships to its external investors.
  

On January 29, 2019, the Company's Board of Directors approved a year-end dividend of $0.49 per share of its Class A common stock.  The following dates apply to the dividend:

          Record Date:    February 15, 2019

          Payment Date:    March 1, 2019

During the last twelve months, inclusive of the dividend noted above, the Company declared total dividends of $0.58 per share of its Class A common stock.

Fourth Quarter and Full Year 2018 Earnings Call Information

Pzena Investment Management, Inc. (NYSE: PZN) will hold a conference call to discuss the Company's financial results and outlook at 10:00 a.m. ET, Wednesday, February 6, 2019.  The call will be open to the public.

Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to the Events page in the Investor Relations area of the Company's website, www.pzena.com

Teleconference Instructions: To gain access to the conference call via telephone, U.S. callers should dial 844-378-6482; Canada callers should dial 855-669-9657; international callers should dial 412-317-5106.  Please reference the Pzena Investment Management call.

Replay: The conference call will be available for replay through February 20, 2019, on the web using the information given above.

About Pzena Investment Management

Pzena Investment Management, LLC, the firm's operating company, is a value-oriented investment management firm.  Founded in 1995, Pzena Investment Management has built a diverse, global client base.  More firm and stock information is posted at www.pzena.com

Forward-Looking Statements

This press release may contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements provide the Company’s current views, expectations, or forecasts of future events and performance, and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Among the factors that could cause actual results to differ from those expressed or implied by a forward-looking statement are those described in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's Annual Report on Form 10-K, as filed with the SEC on March 9, 2018 and in the Company's Quarterly Reports on Form 10-Q as filed with the SEC.  In light of these risks, uncertainties, assumptions, and factors, actual results could differ materially from those expressed or implied in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this release.

The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward-looking statements to reflect circumstances existing after the date of this release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Contact: Gary Bachman, 212-583-0225 or bachman@pzena.com.

PZENA INVESTMENT MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)

  As of 
  December 31,  December 31, 
  2018  2017 
  (unaudited)     
ASSETS        
Cash and Cash Equivalents $38,099  $63,414 
Restricted Cash  1,028   1,017 
Due from Broker  64   1,875 
Advisory Fees Receivable  32,590   32,531 
Investments  50,470   21,737 
Prepaid Expenses and Other Assets  6,099   2,575 
Deferred Tax Asset  38,317   39,639 
Property and Equipment, Net of Accumulated        
Depreciation of $3,724 and $3,063, respectively  5,394   6,259 
TOTAL ASSETS $172,061  $169,047 
         
LIABILITIES AND EQUITY        
Liabilities:        
Accounts Payable and Accrued Expenses $37,266  $31,983 
Due to Broker  360   144 
Liability to Selling and Converting Shareholders  32,389   36,441 
Deferred Compensation Liability  1,845   918 
Other Liabilities  108   272 
TOTAL LIABILITIES  71,968   69,758 
         
Equity:        
Total Pzena Investment Management, Inc.'s Equity  34,087   32,304 
Non-Controlling Interests  66,006   66,985 
TOTAL EQUITY  100,093   99,289 
TOTAL LIABILITIES AND EQUITY $172,061  $169,047 
 

PZENA INVESTMENT MANAGEMENT, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per-share amounts)

  For the Three Months Ended  For the Twelve Months Ended 
  December 31,  December 31, 
  2018  2017  2018  2017 
REVENUE $36,399  $38,909  $153,579  $141,295 
                 
EXPENSES                
Compensation and Benefits Expense  13,899   14,223   61,419   58,904 
General and Administrative Expense  3,549   3,752   13,405   13,337 
TOTAL OPERATING EXPENSES  17,448   17,975   74,824   72,241 
Operating Income  18,951   20,934   78,755   69,054 
                 
Other Income  (3,001)  22,204   (2,658)  25,608 
                 
Income Before Taxes  15,950   43,138   76,097   94,662 
                 
Income Tax Expense  2,101   28,052   7,778   34,512 
Consolidated Net Income  13,849   15,086   68,319   60,150 
                 
Less: Net Income Attributable to Non-Controlling Interests  11,312   16,132   54,525   53,242 
                 
Net Income Attributable to Pzena Investment Management, Inc. $2,537  $(1,046) $13,794  $6,908 
                 
Earnings per Share - Basic and Diluted Attributable to Pzena Investment Management, Inc. Common Stockholders:                
                 
Net Income for Basic Earnings per Share1 $2,537  $(1,046) $13,794  $6,908 
Basic Earnings per Share1 $0.15  $(0.06) $0.78  $0.40 
Basic Weighted Average Shares Outstanding  17,460,942   17,392,946   17,678,874   17,338,348 
                 
Net Income for Diluted Earnings per Share1 $2,537  $(1,046) $55,347  $6,908 
Diluted Earnings per Share1 $0.15  $(0.06) $0.77  $0.40 
Diluted Weighted Average Shares Outstanding  71,945,413   71,252,063   71,934,144   70,934,362 

1  During the three months ended December 31, 2018 and the three and twelve months ended December 31, 2017, the calculation of GAAP diluted earnings per share resulted in an increase in earnings per share. Therefore, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share.
  

PZENA INVESTMENT MANAGEMENT, INC.

GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except share and per-share amounts)

  For the Three Months Ended  For the Twelve Months Ended 
  December 31,  December 31, 
  2018  2017  2018  2017 
GAAP Net Income/ (Loss) $2,537  $(1,046) $13,794  $6,908 
Net Expense as a result of Tax Cuts and Jobs Act     5,649      5,649 
Change due to Prior Period Adjustments  246   (1,006)  246   (1,006)
Non-GAAP Net Income $2,783  $3,597  $14,040  $11,551 
                 
Basic Weighted Average Shares Outstanding  17,460,942   17,392,946   17,678,874   17,338,348 
GAAP Basic Earnings per Share $0.15  $(0.06) $0.78  $0.40 
Net Expense as a result of Tax Cuts and Jobs Act     0.32      0.33 
Change due to Prior Period Adjustments  0.01   (0.05)  0.01   (0.06)
Non-GAAP Basic Earnings per Share $0.16  $0.21  $0.79  $0.67 
                 
GAAP Net Income for Diluted Earnings per Share $11,314  $8,990  $55,347  $40,063 
Net Expense as a result of Tax Cuts and Jobs Act     5,649      5,649 
Change due to Prior Period Adjustments  246   (1,006)  246   (1,006)
Non-GAAP Net Income for Diluted Earnings per Share $11,560  $13,633  $55,593  $44,706 
                 
Diluted Weighted Average Shares Outstanding  71,945,413   71,252,063   71,934,144   70,934,362 
GAAP Diluted Earnings per Share $0.16  $0.13  $0.77  $0.56 
Net Expense as a result of Tax Cuts and Jobs Act     0.08      0.08 
Change due to Prior Period Adjustments     (0.02)     (0.01)
Non-GAAP Diluted Earnings per Share $0.16  $0.19  $0.77  $0.63 

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Source: Pzena Investment Management Inc