Janus Henderson Group plc Ordinary Shares

Good morning, my name is Breaker and I will be your conference facilitator today. Thank you for standing by and welcome to the Janice Henderson first quarter 2024 results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. In the interest of time, questions will be limited to one initial and one follow up question. in today's conference call certain matters discussed may constitute forward-looking statements actual results could differ materially from those projected in the forward-looking statements due to a number of factors including but not limited to those described in the forward-looking statements and risk factors section in the company's most recent form 10k and other more recent filings made with these sects Janice Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now, it is my pleasure to introduce Ali Dabaj, Chief Executive Officer of Janice Henderson. So, Mr. Dabaj, you may begin your conference.

Welcome, everyone, and thank you for joining us today on Janice Henderson's first quarter 2024 earnings call. I'm Ali Dabaj, and I'm joined by our CFO, Roger Thompson. Today's call, I'll start with some thoughts on the quarter before handing it over to Roger. After Roger's comments, I'll provide a progress update on our strategic initiatives, including two transactions we announced earlier today that we believe will allow us to deliver tremendous value for our clients and shareholders. And then we'll take your questions following those prepared remarks. Turning to slide two. Global equity market returns were strong in the first quarter, including in the U.S., where the S&P 500 touched record highs. Despite these strong returns, the market backdrop is uncertain, with increasing investor expectations for a higher-for-longer rate environment, stickier inflation, and geopolitical conflicts in Eastern Europe and the Middle East. The strong equity markets, alpha generation provided by a world-class investment team, the exceptional service provided by our client teams, and importantly and often overlooked, the productivity of our IT and operations teams as well as our regulatory, risk, legal, finance, and other teams, enabled us to deliver a good set of quarterly results. Indeed, investment performance is off to a very good start in 2024, resulting in at least 60% of assets beating respective benchmarks on a 1, 3, 5, and 10-year basis. Assets under management increased 5%, to $352.6 billion, which is the highest quarterly AUM figure in two years. First quarter flows were negative $3 billion, in line with expectations. The net flow results reflect improvement in our higher fee intermediary channel, particularly EMEA Intermediary in Q1, where if you recall, we said we would focus this year, while institutional net flows were impacted by a few larger redemptions in the first quarter. Our financial results remain solid. Positive markets coupled with outperformance delivered by our investment teams, plus expense management and increased productivity by all our teams at Janus Henderson, resulted in an adjusted diluted EPS of 71 cents, a 29% increase compared to the first quarter of 2023. Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business, both organically and inorganically, and return cash to shareholders. In summary, investment performance and financial results are strong. We have key areas of flow momentum in our business and still have much work to do to become consistent We have a strong and stable balance sheet, and we continue to execute our strategy, which I'll talk more about later in the presentation. I'll now turn the call over to Roger to run you through the detailed financial results.

Thank you, Ali, and thank you again to everyone for joining us on today's call. Starting on slide three, an investment performance. As Ali mentioned, investment performance versus benchmark remained solid with at least 60% of AUM beating their respective benchmarks over all time periods. Backing up the strong long-term numbers, we're pleased to report that the one-year number improved to 70% compared to 44% in the prior quarter, primarily driven by our equity and multi-asset capabilities. In equities, the improvement was driven primarily by the US concentrated growth, international alpha, and global alpha strategies. In the multi-asset capability, the balance strategy, which is the vast majority of assets in this bucket, moved back above its benchmark on a one-year basis, and is now ahead of its benchmark across all time periods. Performance is strong against peers, being in the top Morningstar quartile over 1, 3, 5 and 10 year time periods. We see the balanced strategy as a focal point for many of our clients who want to take on more risk, but also want the balance to fixed income, which now delivers higher yield. Elsewhere, fixed income performance versus benchmark remains strong. We believe our fixed income performance and differentiated breadth of products across different vehicles and regions positions us well for the anticipated movement into fixed income as interest rates potentially fall and bonds provide diversification benefits to clients. Overall investment performance compared to peers continues to be competitively strong, with at least 66% of AUM in the top two Morningstar quartiles over the 1, 3, 5 and 10 year time periods. Slide four shows total company flows by quarter, which were net outflows of $3 billion for the quarter. Slide five is flows by client type. Net flows for the higher fee intermediary channel were positive $1 billion for the first quarter, supported by a 25% increase in gross sales year over year. The US intermediary channel was positive for the third consecutive quarter, with net inflows into several strategies, including most of the active ETFs, multi-sector income, global life sciences, and the Biotech Innovation Hedge Fund. As we've spoken about previously, US Intermediary is a key initiative under our Protect and Grow strategic pillar. We're pleased by the results for the quarter and that we're gaining market share. During the quarter, we also expanded the sales reach of the Biotech Innovation Hedge Fund and announced a strategic partnership with the Forum Investment Group to market the Forum Real Estate Investment Fund a hybrid public and private real estate inflatable fund of which Janice Henderson has managed the commercial MBS leave since its inception in 2019. This distribution partnership will provide access to differentiated products to our clients in an investor friendly structure. Moving to the EMEA and Latin American intermediary segment, we are expanding our strategic efforts. Net outflows improved significantly compared to the prior quarter. Within the region, Both continental Europe and Latin America delivered positive flows for the quarter. Intermediary flows in Asia were also positive. Institutional net outflows were $3.1 billion, which were primarily driven by the EMEA region and include two large redemptions of $1.5 billion in the global high yield strategy and $1.2 billion in the global commodities enhanced index strategy. We talked publicly about the need to replenish a sustainable pipeline. We're pleased with the work our distribution team is doing, and the leading indicators suggest more and better client interactions and discussions. But the maturation of the pipeline is taking time. Net outflows for the self-directed channel, which includes direct and supermarket investors, were $900 million, compared to $1.1 billion in the prior quarter. Slide six is flows in the quarter by capability. Equity flows were negative $1.1 billion, improving from negative $3.2 billion in the fourth quarter. The improvement came primarily for the EMEA region in both the intermediary and institutional channels. Net inflows for fixed income were $100 million. Several strategies contributed to positive fixed income flows in the intermediary channel, including the fixed income ETFs, which had positive flows of $2.6 billion in the quarter. Other strategies contributing to the positive flows were multi-sector credit, core plus fixed income, and U.S. buy and maintain credit. And offsetting these inflows were net outflows in the lower fee institutional channel, including the global high yield redemption that I just mentioned. Total net outflows for the multi-asset capability were $800 million. And finally, net outflows in the alternatives capability were $1.2 billion, driven by the institutional redemption of the global commodities enhanced index strategy. Moving on to the financials. Slide seven is our US GAAP statement of income. Before moving on to adjusted financial results, GAAP results this quarter include a non-operating non-cash item related to the release of accumulated foreign currency translation gains due to the liquidation of several GHG entities. This amount is removed from adjusted results. As we continue to simplify our legal entity structure, there will be additional releases of accumulated foreign currency translation reserves in future quarters, which will also be non-operating, non-cash, but will likely be losses and similarly will be excluded from adjusted results. Continuing to slide eight and the adjusted financial results. Adjusted operating results are lower compared to the prior quarter, primarily due to the significant annual performance fees realised in the fourth quarter. More relevantly, compared to the first quarter a year ago, operating income and EPS are up 21% and 29% respectively, primarily due to higher average AUM, operating leverage and good investment performance. Looking at the detail, adjusted revenue decreased 6% compared to the prior quarter, primarily due to lower seasonal performance fees, which are partially offset by higher adjusted management fees. Adjusted revenue increased 11% over the prior year, primarily as a result of higher average assets and improving US mutual fund performance fees. Net management fee margin was stable at 48.7 basis points, level with or above each of the prior three quarters. This is a good result and a differentiating position compared to many competitors, considering the fee pressures experienced in the asset management industry. While we're not immune to those fee pressures, we do see that our competitively resilient fee rate is a differentiator versus many of our peers, given the mix of capabilities where we're seeing success, particularly in our higher fee intermediary business. Continuing on to expenses. Adjusted operating expenses in the first quarter were $299 million, a slight decrease compared to the prior quarter, reflecting continued expense discipline. Adjusted LTI was up 18% compared to the prior quarter, largely due to seasonal payroll taxes triggered by the annual vesting in the quarter. In the appendix, we provided the usual table on the expected future amortization of existing grants for you to use in your models. The first quarter adjusted comps for revenue ratio was seasonally higher at 48.2%, which is down from 50.1% in the first quarter of last year. The higher rate in the first quarter is primarily due to the payroll taxes on annual LTI vesting and the beginning of year reset on payroll taxes and retirement contributions. Our 2024 expectation of an adjusted compensation ratio range of 43 to 45% remains unchanged. Adjusted non-comp operating expenses decreased 11% compared to the prior quarter, primarily due to lower G&A expenses. Lower than anticipated non compensation costs in the quarter is due to the timing of our expenses. We still anticipate adjusted non compensation annual growth of mid to high single digits compared to the prior year, which suggests significant acceleration in our non compensation costs for the remaining three quarters of the year. Given we expect non compensation expenses to increase as a result of investment supporting areas of opportunity in our business. As I said earlier, While adjusted operating income decreased 18% compared to the prior quarter, it increased 21% over the same period a year ago to $128 million. Our first quarter adjusted operating margin was 30%, an increase of 250 basis points from a year ago, demonstrating the leverage in our business. Adjusted diluted EPS was 71 cents, down 13% from the prior quarter, but up 29% from the first quarter of 2023. First quarter adjusted diluted EPS primarily reflects higher operating income and benefits below the line from strong alpha generation on the JHG portion of our seed book, active management of our balance sheet, and a slightly lower tax rate. Skipping over slide 9 and moving to slide 10 to look at our liquidity profile. Our capital position remains strong. Cash and cash equivalents were $900 million as of the 31st of March, which is lower from the end of the year, primarily from the payment of annual variable compensation. The first quarter cash position is typically our lowest given seasonal cash needs. Compared to the same period a year ago, our cash and cash equivalents are 8% higher. During the quarter, we funded our quarterly dividend and repurchased 2.7 million shares for $81 million. As of the 31st of March, There was $7 million remaining under the existing buyback authorization, which was completed in April. This return of excess cash is consistent with our capital allocation framework. We'll look to return capital to shareholders where there isn't an immediately more compelling investment, either organically or inorganically in the business. The board has declared a $0.39 per share dividend to be paid on the 29th of May to shareholders of record as at the 13th of May. Finally, I'm pleased to say that our improving financial results and cash flow generation, along with a strong and stable balance sheet, has enabled the board to authorize a new share buyback program of up to $150 million to be completed by April 2025. The buyback program does not change our desire and pursuit to diversify our business through M&A where clients want us to do so. At this stage, our liquidity profile allows us to do both. as we've demonstrated by the acquisitions announced earlier today that Ali will discuss further about in a moment. Finally, slide 11 looks at our return of capital to shareholders. We've been disciplined in consistently returning excess capital to shareholders as the historical data reflects. We've maintained a healthy quarterly dividend and since 2018 have reduced shares outstanding by almost 20%. Our return of capital reflects our positive financial outlook our cash flow generation, and our strong and stable balance sheet. We believe that our buybacks and stable dividends do not impair our ability to execute M&A should further opportunities arise, and we'll continue to actively look to buy, build, or partner to diversify where clients give us the right to win. With that, I'd like to turn it back over to Ali to give us an update on our strategic progress.