Janus Henderson Group plc Ordinary Shares

Good morning. My name is Lucy and I will be your conference facilitator today. Thank you for standing by and welcome to the Janice Henderson Group second quarter 2025 results briefing. All lines have been placed on mute to prevent any background noise. After the speakers remarks there'll 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 sections of the company's most recent form 10k and other more recent filings made with the SEC. 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. Mr. Dabaj, you may begin your conference.

Welcome everyone and thank you for joining us today on Janice Henderson's second quarter 2025 earnings call. I'm Ali Dabaj. I'm joined by our CFO Roger Thompson. In today's call I'll start with some thoughts on the quarter before handing it over to Roger to run through the quarterly results in more detail. After Roger's comments I'll provide an update on our strategic progress and how our client approach has evolved leading to deeper collaborative relationships which has become the foundation of our new brand efforts. We'll then take your questions following our prepared remarks. Turning to slide two, despite its tumultuous few months and the incredible market volatility we saw through much of April business trends appear to have stabilized for now and strong alpha generation provided by world-class investment teams, the exceptional service provided by our client teams, and the productivity and execution of our operations, technology, and support teams enabled Janice Henderson to deliver a good set of quarterly results. In investment performance there was meaningful improvement in the one-year number. In investment performance is consistently solid with at least two-thirds of assets beating respective benchmarks on a one, three, five, and ten-year basis. Against peers investment performance is even stronger with over 70 percent of AUM in the top two Morningstar quartiles across all time periods. At the end of June we completed the previously announced transaction with Guardian. We are extremely excited for this multifaceted strategic partnership. This significant milestone further expands our insurance presence and institutional reach and we are pleased to bring to bear our strengths in fixed income, multi-asset solutions, and model portfolios to achieve mutually beneficial outcomes for clients, policyholders, and shareholders alike. Janice Henderson is now managing $46.5 billion of largely but not exclusively investment-grade public fixed income assets for Guardian's general account which is even more than the previously communicated $45 billion, demonstrating Guardian's growth trajectory and the potential of our partnership. This expands Janice Henderson fixed income AUM to $142 billion which is now over 30 percent of company-wide AUM. In addition, Guardian is committing up to $400 million of seed capital to help accelerate our continued innovation in secure types credit and high quality active fixed income products including ETFs. Pleasingly, a portion of this seed commitment has recently been utilized demonstrating quick progress from our partnership. Guardian has provided $100 million of seed to our asset-backed securities ETF, -B-S or JABS, which was launched last week. JABS is intended to provide investors access to short duration, high quality, predominantly fixed rate securitized assets and complements Janice Henderson's industry-leading CLO ETF, -A-A, which is predominantly a floating rate. JABS expands Janice Henderson's offerings to meet client demand including and especially insurance companies. Switching to AUM, where the addition of the Guardian AUM coupled with market gains and favorable currency adjustments due to weakening US dollar enabled assets under management to increase 23 percent to $457.3 billion, which is our highest quarterly AUM ever. Turning to flows, the second quarter marked our fifth consecutive quarter of positive net flows. While Guardian contributed to our strong quarterly net flow results, we're pleased that net flows excluding the Guardian general account were also positive, even the difficult flow environment created by April's drawdown. The positive net flow results demonstrate our truly global distribution footprint and the broad range of strategies and vehicles we offer. Said another way, all our businesses may not fire on all cylinders at the same time. However, our strategically developed broad breadth of businesses are capable of delivering more and more consistent growth for us over time, and this quarter was an instance of that. I want to quickly highlight a few examples of our diversified breadth of flows in the second quarter. There were 15 strategies, including 4ETS, that each had at least $100 million of net inflows. The fully tokenized Janice Henderson Anamoy Treasury Fund had over $400 million of net inflows. Net flows into our CIT and hedge fund strategies were positive. And finally, Privacor has advised on several hundred million dollars raised for CO2 CTECH funds in the wealth channel, which you might have read about in the media. Additionally, our institutional channel performed very well, offsetting retail net outflows, which were impacted by market volatility, especially during a few weeks in April. As we stated previously, delivering positive active flows is a key differentiator for Janice Henderson in an industry with well documented active flow headwinds, including during the second quarter for many of our peers. Moving to our financial results, which remains solid, adjusted diluted EPS of 90 cents is a 6% increase compared to the same period a year ago. 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, our investment performance is solid. Our net flows are positive. We continue to execute our strategy, including the Guardian Partnership. Financial results are good. We continue to be disciplined and ROI focused on expenses. We have strong and stable balance sheet and our truly global footprint and expanding breadth of product positions as well for the future. I'll now turn the call over to Roger to run you through the detail of the financial results.

Thanks, Ali, and thank you for joining us on today's call. Starting on slide three, an investment performance. As Ali mentioned, we saw a significant improvement in our short-term investment performance versus benchmark during the quarter and now have at least two-thirds of AUM meeting their respective benchmarks over the one, three, five and 10-year time periods. Looking in further detail, at least half of each of the capabilities AUM is ahead of benchmarks over all time periods, reflecting consistent investment performance across time periods and capabilities. Overall investment performance compared to peers continues to be competitively strong with at least 72% of AUM in the top two Morningstar quartiles over all time periods presented. Slide four shows total company flows by quarter. Net inflows for the quarter are $46.7 billion, which includes the $46.5 billion from Guardian's general account. While the Guardian mandate will quite rightly take the headlines, we're pleased with Positive Net Flows ex-Guardians general account from a quarter of extreme market volatility and it highlights our truly global footprint and the breadth of product solutions we bring to clients. Excluding the Guardian general account, our gross sales increased for the third consecutive quarter and improved by 40% compared to the second quarter of last year. All three channels saw an increase in gross sales compared to the prior year across a broad range of capabilities, including ETFs, US concentrated growth, our tokenized treasury fund, US mid-cap growth, US buy and maintain credit, and asset-backed opportunistic credit from VPC. Turning to slide five and flows by client type. As a reminder, beginning with the first quarter of 2025, ETF gross flow activity is reflected in the applicable client type that generated the activity. Access to improved data transparency enabled us to make this change. For periods prior to 2025, all ETF flow activity is shown in the intermediary channel. Intermediary channel net flows were negative $1.2 billion, reflecting the challenging flow environment during the first quarter of the April drawdown. In the second quarter, net flows were positive in the US with net outflows in EMEA, Latam, and Asia Pacific. In the US, the net flows were positive for the eighth consecutive quarter. Despite a challenging April for our active ETFs, once the extreme market dislocation abated and market stabilized, JAAA quickly returned to net inflows, resulting in positive net flows for our active ETFs in the quarter. In addition to our active ETFs, other areas contributing net flows in the second quarter included US mid-cap growth, international alpha equity, our biotech hedge fund, and the Privacore revised assets raised for CO2. US intermediary is a key initiative under our protect and growth strategic pillar, and we're pleased that we continue to gain market share against a volatile market backdrop. Under our amplify strategic pillar, we've talked about amplifying our investment and client service strengths using various means, including vehicles through which we deliver our products. In addition to active ETFs, flows into CITs, SMAs, and hedge funds in this channel were positive in the second quarter. In EMEA, continental Europe delivered net inflows, while the UK had net outflows, primarily driven by investment trusts and the global strategic total bond strategy. Institutional net inflows were $49 billion compared to net inflows of $800 million in the prior quarter, marking the third consecutive quarter of positive flows. During the quarter, we were pleased to see our broad distribution footprint demonstrated, as our institutional channel performed well, while retail was adversely impacted by the market uncertainty in the early part of the quarter. Excluding the Guardian general account, institutional growth sales were the best result in over two years, and reflect fundings in fixed income and equities across corporates, pensions, and insurance clients. We're continuing to work to create a sustainable pipeline, and we're encouraged by the second quarter results, leading indicators, and the increasing number of opportunities across our regions. Net outflows for the self-directed channel, which includes direct and quarter, includes approximately $100 million of ETF net outflows from our supermarket clients. Excluding ETFs, self-directed net outflows were roughly flat for the prior quarter and the prior year. Slide six shows our flows in the quarter by capability. Equity flows were negative $2.6 billion compared to $4.2 billion of net outflows in the prior quarter. The environment remains challenging for active equities across all regions. Whilst negative in net flows, our equity capability had its best gross sale quarter in two years, demonstrating increased client demand for equities. Second quarter net inflows for fixed income were $49.7 billion compared to $5.6 billion of net inflows in the prior quarter. Outside of the Guardian general account net flows, several strategies contributed to positive fixed income flows. Active fixed income ETFs delivered net inflows of a billion dollars in the quarter, and as Ali mentioned, included four active ETFs with at least $100 million of net inflows, including JAAA, JNBS, Vanilla, and JSI. Other strategies contributing to positive flows were US buy and maintain credit, our tokenized treasury fund, Core Plus, and Australian sustainable credit. Net outflows for the multi-asset capability were $1.1 billion, primarily due to net outflows in the balance strategy. And finally, net inflows in the alternatives capability were $700 million, driven primarily by the biotech hedge fund, VPC's asset-backed opportunistic credit strategy, and Privacore. Moving on to the financials. Slide seven is our US gap statement of income, and on slide eight we explain the adjusted financial results. Adjusted operating results improved compared to the prior quarter and the prior year. Compared to the prior quarter, the improvement is primarily from higher performance fees, versus the same period a year ago, the improvement was primarily from strong investment performance delivering higher performance fees and higher average AUM. These were partially offset by increased expenses from acquisitions, strategic investments in the business, and a weaker US dollar. Looking at the detail. Adjusted revenue increased 2% compared to the prior quarter, primarily due to higher seasonal performance fees, and increased 9% compared to the prior year, primarily due to higher management fees on higher average AUM, and the improved US mutual fund performance fees. Net management fee margin was 47.5 basis points in the second quarter. The decline in the prior quarter was primarily a result of mix shift caused by the April drawdown, as well as some one-time adjustments which will not repeat. With the 46.5 billion dollar predominantly investment grade fixed income portfolio we now manage for Guardian's general account, we expect that our aggregate net management fee rate will be approximately 4.5 basis points lower than the second quarter average net fee rate of 47.5 basis points, which compares to previous guidance of 5 to 6 basis points lower. Second quarter performance fees of positive 15 million dollars primarily consist of seasonal CCAV, UK OIC, and investment trust performance fees. Our US mutual fund performance fees were also positive this quarter at a million dollars, which is the first positive result in over 10 years. US mutual fund performance fees have continued to improve, reflected by the positive 1 million dollars this quarter compared to negative 11 million dollars a year ago. Continuing on to expenses. Adjusted operating expenses for the second quarter were 331 million dollars compared to 330 million dollars in the prior quarter. Adjusted LTI decreased 12 percent compared to the prior quarter, largely due to seasonal payroll taxes triggered by annual vestings in the prior quarter. In the appendix we've provided the usual table on the expected future amortization of existing grants for you to use in your models. The second quarter adjusted comp to revenue ratio declined to 43.2 percent for 45.8 percent in the seasonally higher first quarter. Adjusted non-compic operating expenses increased 8 percent compared to the first quarter, primarily from higher marketing and G&A expenses. With respect to full year 2025 expense expectations, our previously stated expected compensation ratio in 2025 remains unchanged at 43 to 44 percent, assuming 30 June AUM and a zero market assumption for the second half of the year. For non-compensation guidance, we expect high single digit percentage growth in non-comp expenses compared to 2024, reflecting investments supporting our ongoing strategic initiatives and operational efficiencies, inflation and the full year impact of the G&A. This update to the high end of our previous range is solely as a result of the FX impact from a further weakening US dollar in the first half of 2025. We remain committed to strong cost discipline, ensuring that we manage our cost base while continuing to support the long-term growth objectives of the business. Finally, our expectation of the firm's tax rate on adjusted net income attributable to GHG remains unchanged in the range of 23 to 25 percent. Our second quarter adjusted operating margin was 33.5 percent and finally adjusted diluted EPS was 90 cents, up six percent from the comparable second quarter 2024 period. Skipping over slide nine and moving to slide 10 on a look at our liquidity profile, our balance sheet remains strong and stable. Cash and cash equivalents were 900 million dollars as of the 30th of June, which is lower from the end of the first quarter primarily due to share buybacks related to our corporate and compensation repurchase schemes, as well as net investments made in seed capital. During the quarter, we funded our quarterly dividend and repurchased 1.3 million shares as part of our corporate buyback program for 50 million dollars. The board has also declared a 40 cent per share dividend to be paid on the 28th of August to shareholders of record as at the 11th of August. Slide 11 looks in more detail at our consistent return of capital to shareholders. We've maintained a healthy quarterly dividend and have reduced shares outstanding by over 22 percent since 2018. During the first half of 2025, we returned 202 million dollars including 76 million dollars via share repurchases. The buyback program and dividends do not alter our ability to invest in the business organically or inorganically as well as return cash to shareholders. Currently, our liquidity profile allows us to do both. Our return of excess cash is consistent with our capital allocation framework and will continue to look to return capital to shareholders where there isn't an immediately more compelling investment in the business. With that, I'd like to turn it back over to Ali to give an update on our strategic progress.