Janus Henderson Group plc Ordinary Shares

Good morning, my name is Adam and I will be your conference facilitator today. Thank you for standing by and welcome to the Janice Henderson Group third quarter 2025 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 sections of the company's most recent Form 10-K 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 Mr Ali Dabash, Chief Executive Officer of Janice Henderson. Mr. DeBosch, you may begin your conference.

Welcome, everyone, and thank you for joining us today on Janus Henderson's third quarter 2025 earnings call. I'm Ali DeBosch, and I'm joined by our CFO, Roger Thompson. Before discussing the quarterly results, I wanted to comment briefly on the non-binding proposal submitted by Tryon, a 20.6% shareholder of Janus Henderson, and General Catalyst, a growth venture capital firm, earlier this week to acquire all outstanding ordinary shares of Janus Henderson that Tryon does not already own or control. The Board of Directors has appointed a special committee which will carefully consider the proposal. The company appreciates the history of constructive engagement with Tryon since they first disclosed their investment in Janus Henderson in October 2020. We also appreciate the proposal's desire for continuity for Janus Henderson's clients and other stakeholders. The offer will be evaluated by the special committee and there's no assurance that any definitive agreement will result from the proposal or that any transaction will be consummated. Dennis Henderson does not intend to comment further about the proposal unless and until it deems further disclosure is appropriate. In the interim, and as always, our focus continues to be helping clients define and achieve superior financial outcomes and deliver desired results for clients, shareholders, employees, and all our stakeholders. As you can understand, our remarks on this call must be focused on the quarterly results and progress across the business. We ask that during Q&A, questions be limited to the business results. Now turning to the quarterly results, I'll start with some thoughts on the quarter before handing it over to Roger to run through the results in more detail. After Roger's comments, I'll provide an update on our progress in private markets and how we're meeting the evolving needs of our clients and their clients. We'll then take your questions on the quarterly results following our prepared remarks. Turning to slide two. Janice Anderson delivered another good set of quarterly results, building upon tangible momentum in the business. Results reflect the sixth consecutive quarter of positive net flows delivered by dedicated client groups, market gains, solid investment performance produced by world-class investment professionals, and the efforts and productivity from all operating and support areas. Longer-term investment performance is consistently solid, with over 60% of assets beating respective benchmarks on a 3-, 5-, and 10-year basis. Against peers, long-term investment performance is even stronger, with over 70% of AUM in the top two Morningstar quartiles across the 3-, 5-, 10-year time periods. Assets under management of $483.8 billion increased 6% over the prior quarter, and compared to a year ago, AUM has increased 27%, September AUM is our highest quarterly figure ever at nearly half a trillion dollars in AUM. Switching to flows, the third quarter marked our sixth consecutive quarter of positive net flows and represented a 7% organic growth rate. Positive net flow results demonstrates our truly global distribution footprint and the broad range of strategies and vehicles we offer. Moving to our financial results, which remain solid, adjusted diluted EPS of $1.09 is 20% higher 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. On slide three, I want to provide an update on progress being made in the business. We continue to be in the execution phase of our strategic vision, which consists of three pillars. Protect and grow our core businesses, amplify our strengths not fully leveraged, and diversify where clients give us the right to win. In Protect and Grow, we are actively upskilling and utilizing data, people, and process best practices across the organization to drive market share improvement and diversification of organic growth across regions and strategies. For example, in the third quarter, there were 21 strategies that each had at least $100 million of net inflows. This compares to 11 strategies just a year ago. These 21 strategies reflect a broad range of capabilities and vehicles across Protect and Grow and Amplify strategic efforts, including six ETS, six equity strategies, the fully tokenized Janus Henderson Animoid AAA CLO Fund, regional fixed income strategies, Absolute Return, Victory Park Capitals, Asset-backed Opportunistic Credit Fund, and Privacor within our alternative businesses, and the adaptive capital preservation strategy within multi-asset. Under Amplify itself, We also announced a partnership with CNO Financial Group for providing long-term capital, which we believe will further accelerate the growth of Victory Park Capital and expand and scale its investment capabilities for the benefits of our clients. With CNO and Guardian, we now have almost $50 billion in very long-term capital, or roughly 10% of our overall AUM. We also continue to leverage our investment expertise through the launches of active ETFs that allow us to cater to client demands globally. During the third quarter in the U.S., we launched our asset-backed securities ETF, JABS, or JABS, and a global artificial intelligence ETF, JHAI. In Europe, we launched our transformational growth equity EU CITS ETF, JTXX, complementing our U.S. launch of transformational growth equity, JXX. Within the diversify pillar, we announced the successful first closing of a non-U.S. direct lending vehicle by our emerging markets private investment team. I'll talk more about the VPC partnership with CNO and our emerging markets private investment team later in the presentation. Along with executing our strategic vision, we are making progress in other areas of the business. As I mentioned, we delivered several consecutive quarters of positive net flows and delivered market share gains in key regions, which demonstrates that we are on the path to delivering consistent growth over the long term. In addition to the net flows this quarter, Importantly, Janice Henderson also generated positive organic net new revenue growth in the third quarter. Fee pressures are persistent in this industry, and not all AUMs created equally, so we're pleased with that result. Elsewhere in the business, we've made the strategic decision to transition our investment management system to Aladdin. This multi-year transition is expected to deliver a more scalable operating model through consistent and integrated technology infrastructure and investment management platforms. Transitions of this nature are not uncommon in our industry, and we expect this transition will deliver enhanced services to our funds and our clients and enable strategic growth. Our focus is on making this transition seamless for our clients, maintaining the consistent level of service they expect from us. While we anticipate an approximately 1% increase in adjusted operating costs for 2026 and 2027 from this transition all else equal, In 2028 and beyond, we expect this transition to deliver ongoing operational improvements and efficiencies and attractive ROI. We'll provide an update on 2026 expense expectations, including the net impact of this shift in ongoing costs on the next quarter's earnings call. Shifting to capital stewardship, our solid financial results and cash flow generation, along with a strong and stable balance sheet, has enabled us to return nearly $130 million this quarter through dividends and share buybacks. Our cumulative share count reduction is 23% since we started the accretive buyback program in the third quarter of 2018. Janice Henderson's strong liquidity profile continues to provide us the flexibility to invest in the business both organically and inorganically, as well as return cash to shareholders. I'll now turn the call over to Roger to run you through more of the financial results.

Thanks, Ali, and thank you for joining us on today's call. Starting on slide four, an investment performance. As Ali mentioned, Longer-term investment performance versus benchmark remains solid, with at least 60% of AUM beating their respective benchmarks over the 3, 5, and 10-year time periods. Looking in further detail, at least half of each capability's AUM is ahead of benchmarks over medium and long-term periods, reflecting consistent longer-term investment performance across capabilities. Overall investment performance compared to peers continues to be very competitive. with over 70% of AUM in the top two Morningstar quartiles over the three, five, and 10-year time periods. Slide five shows total company flows by quarter. Net inflows for the quarter was $7.8 billion, which improved significantly over the net inflows of $400 million a year ago. Excluding the one-time impact from the Guardian general account funding last quarter, our gross sales increased for the fourth consecutive quarter and improved by 86% compared to the third quarter of last year. All three channels and regions experienced an increase in gross sales compared to the prior year across a broad range of capabilities, including ETFs, U.S. buy and maintain credit, Australian fixed income, U.S. research, our tokenized AAA CLO fund, and asset-backed opportunity credit from VPC. Turning to slide six and flows by client type. Third quarter net flows for the intermediary channel were positive $5.1 billion, equating to a 9% organic growth rate. In the third quarter, net flows were positive in the US and Asia Pacific, with net outflows in EMEA. To set expectations, we do not expect to repeat this level of net flow in Q4. In the US, net flows were positive for the ninth consecutive quarter, with inflows in several strategies, including most of the active ETFs, U.S. research, multi-sector income, U.S. mid-cap growth, and Privacor. U.S. intermediary is a key initiative under our Protect and Grow strategic pillar, and we're pleased that we gain market share on a year-over-year basis. Additionally, whilst negative, the third quarter net flows for U.S. mutual funds within the intermediary channel was the best result in several years. 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 to our clients. In addition to active ETFs, flows into CITs and hedge funds in this channel were positive in the third quarter. In EMEA, continental Europe and the Middle East delivered net inflows, while the UK had net outflows primarily driven by a single outflow in investment trusts. Institutional net inflows were $3.1 billion, marking the fourth consecutive quarter of positive flows. Gross sales were the best result in over two years and reflect fundings across all capabilities, covering corporates, pensions, insurance, and private credit clients. Net outflows for the self-directed channel, which includes direct and supermarket investors, were $400 billion. The third quarter includes approximately $600 million of ETF net inflows from our supermarket clients. Excluding ETFs, self-directed net outflows were roughly flat the prior year. Slide seven shows our flows in the quarter by capability. Equity flows were negative $3.3 billion compared to $2.6 billion of net outflows in the prior quarter. The current quarter was impacted by the merger of the Henderson European Trust into another third party trust which resulted in $900 million of net outflows. The environment remains challenging for active equities across all regions. Whilst net flows for equities were negative in aggregate, CITs, active equity ETFs, and Horizon CCAP funds all delivered positive net flows in the quarter. Elsewhere, while still negative, the US equity mutual funds had their best flow result in over two years. Third quarter net inflows for fixed income were $9.7 billion, compared to $49.7 billion of net inflows in the Guardian-boosted prior quarter. Several strategies contributed to positive fixed income flows. Active fixed income ETFs delivered over $5 billion in the quarter and included five active ETFs with at least $100 million of net inflows, including JAAA, JMBS, JSI, JBB, and VNLA, or vanilla. Other strategies contributing to positive flows were Australian fixed income, US buy and maintain credit, the tokenized JAAA fund, and multi-sector credit. Net flows for the multi-asset capability will break even, primarily due to net outflows in the balance strategy, which were offset by an institutional win in our adaptive capital preservation strategy. And finally, net inflows in the alternative capability were $1.4 billion, driven primarily by absolute return, biotech hedge fund, VPC's asset-backed opportunity credit strategy, and Privacor. Moving on to the financials. Slide eight is our US GAAP statement of income. Before moving on to the adjusted financial results, GAAP results this quarter include an approximately $28 million charge related to the strategic decision to transition our investment management platform to Aladdin. Discharge is removed from our adjusted results and the majority is non-cash. Continuing to slide nine and our adjusted financial results. Adjusted financial results improved compared to the prior quarter and the prior year. The improvement was primarily due to higher average AUM and good investment performance generating higher performance fees. Adjusted operating income improved 22% and EPS improved 21% quarter over quarter. Improvements over prior year were similar with operating income and EPS, both up 20%. Looking at the detail, adjusted revenue increased 11% compared to the prior quarter and 14% compared to the prior year, primarily due to higher management fees on higher average AUM and improved performance fees. Net management fee margin was 42.7 basis points in the third quarter. The expected and communicated decline from the prior quarter was primarily a result of the successful integration of lower fee Guardian AUM. We are also very pleased with positive firm-wide organic net new revenue generation in the third quarter, which demonstrates our success across a broad range of strategies and regions. Third quarter performance fees were positive $16 million, primarily reflecting the CCAV absolute return strategy and US mutual funds. The US mutual fund performance fees were positive this quarter at over $3 million, which is the best result in over 10 years. This result compares favorably to negative $9 million of US mutual fund performance fees over the same period a year ago. We currently expect Q4 2025 performance fees to be at or above the Q4 24 total, reflecting very strong performance of our hedge funds. But final amounts will be dependent on performance over the remainder of the year. Continuing to expenses. Adjusted operating expenses in the third quarter increased 6% to $350 million, primarily reflecting higher profit based compensation, LTI expense and investment supporting strategic initiatives. Adjusted LTI increased 20% compared to the prior quarter, largely due to mark to market or mutual fund share awards. In the appendix, we provided the usual table on the expected future amortization of existing grants for you to use in your models. The third quarter adjusted comp to revenue ratio was 43.3%, which is flat to the prior year and in line with our guidance. Our 2025 expectation and adjusted compensation range of 43% to 44% remains unchanged. Adjusted non-comp operating expenses decreased 5% compared to the prior quarter, primarily from seasonally lower marketing and G&A expenses. For non compensation guidance, our expectation of high single digit percentage growth in full year non-comp expenses compared to 2024 remains unchanged, reflecting investments supporting our ongoing strategic initiatives and operational efficiencies, inflation, the full year impact of the consolidation of VPC, NBK, Tabula and Guardian, and the FX impact of a weaker US dollar year to date in 2025. Our expectation of high single-digit percentage growth in non-comp expenses implies growth in the fourth quarter. We do expect to invest a little bit further in high ROI investments, supporting areas of momentum in our business, examples being marketing and advertising, as well as client-related expenses such as T&E. 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. Our expectation of the firm's tax rate on adjusted net income attributable to GHG remains unchanged in the range of 23% to 25%. And finally, we'll give 2026 guidance on a three-year call. But as Ali's mentioned, our transition to Aladdin will result in higher costs in 2026 and 2027 before we deliver the improvements and efficiencies for the future in 2028 and beyond. Our third quarter adjusted operating margin was 36.9%, an increase of 200 basis points from a year ago. And finally, adjusted diluted EPS was $1.09, up 20% from the comparable third quarter 2024 period. The increase in adjusted diluted EPS primarily reflects higher operating income and operating leverage. Skipping over slide 10, and moving to slide 11 and a look at our liquidity profile. Our balance sheet remains strong and stable. Cash and cash equivalents were a billion dollars as at the 30th of September compared to $395 million of outstanding debt. During the quarter, we funded our quarterly dividends and repurchased 1.5 million shares as part of our corporate buyback program for approximately $67 million. The board has also declared a 40 cent per share dividend to be paid on the 26th of November to shareholders of record as at the 10th of November. Slide 12 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 almost 23% since 2018. During the first nine months of 2025, we've returned $331 million including $143 million for share repurchases. The buyback program and dividends do not alter our ability to invest in the business organically and organically, 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. We'll 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 in private markets.