UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
for the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 2, 2022, there were
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
JANUS HENDERSON GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(U.S. Dollars in Millions, Except Share Data)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Investment securities |
| |
| | ||
Fees and other receivables |
| |
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OEIC and unit trust receivables |
| |
| | ||
Assets of consolidated VIEs: | ||||||
Cash and cash equivalents | | | ||||
Investment securities | | | ||||
Other current assets | | | ||||
Other current assets | | | ||||
Total current assets |
| |
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Non-current assets: | ||||||
Property, equipment and software, net |
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Intangible assets, net |
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Goodwill |
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Retirement benefit asset, net | | | ||||
Other non-current assets |
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Total assets | $ | | $ | | ||
LIABILITIES | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | | $ | | ||
Current portion of accrued compensation, benefits and staff costs |
| |
| | ||
OEIC and unit trust payables | | | ||||
Liabilities of consolidated VIEs: | ||||||
Accounts payable and accrued liabilities |
| |
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Total current liabilities |
| |
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Non-current liabilities: | ||||||
Accrued compensation, benefits and staff costs | | | ||||
Long-term debt |
| |
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Deferred tax liabilities, net |
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Retirement benefit obligations, net | | | ||||
Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (See Note 15) | ||||||
REDEEMABLE NONCONTROLLING INTERESTS |
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EQUITY | ||||||
Common stock, $ |
| |
| | ||
Additional paid-in-capital | | | ||||
Treasury shares, |
| ( |
| ( | ||
Accumulated other comprehensive loss, net of tax |
| ( |
| ( | ||
Retained earnings | | | ||||
Total shareholders’ equity |
| |
| | ||
Nonredeemable noncontrolling interests |
| |
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Total equity |
| |
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Total liabilities, redeemable noncontrolling interests and equity | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
JANUS HENDERSON GROUP PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(U.S. Dollars in Millions, Except per Share Data)
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Revenue: | ||||||
Management fees | $ | | $ | | ||
Performance fees |
| ( |
| | ||
Shareowner servicing fees |
| |
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Other revenue | | | ||||
Total revenue |
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Operating expenses: | ||||||
Employee compensation and benefits |
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Long-term incentive plans |
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Distribution expenses | | | ||||
Investment administration | | | ||||
Marketing |
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General, administrative and occupancy |
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Impairment of goodwill and intangible assets | | | ||||
Depreciation and amortization |
| |
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Total operating expenses |
| |
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Operating income |
| |
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Interest expense |
| ( |
| ( | ||
Investment gains (losses), net |
| ( |
| | ||
Other non-operating expenses, net | ( | ( | ||||
Income before taxes |
| |
| | ||
Income tax provision |
| ( |
| ( | ||
Net income |
| |
| | ||
Net loss attributable to noncontrolling interests |
| |
| | ||
Net income attributable to JHG | $ | | $ | | ||
Earnings per share attributable to JHG common shareholders: | ||||||
Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
Other comprehensive income (loss), net of tax: | ||||||
Foreign currency translation gains (losses) | $ | ( | $ | | ||
Actuarial gains |
| |
| | ||
Other comprehensive income (loss), net of tax |
| ( |
| | ||
Other comprehensive income attributable to noncontrolling interests |
| ( |
| ( | ||
Other comprehensive income (loss) attributable to JHG | $ | ( | $ | | ||
Total comprehensive income | $ | | $ | | ||
Total comprehensive loss attributable to noncontrolling interests |
| |
| | ||
Total comprehensive income attributable to JHG | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
JANUS HENDERSON GROUP PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(U.S. Dollars in Millions)
Three months ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
CASH FLOWS PROVIDED BY (USED FOR): | ||||||
Operating activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | | | ||||
Impairment of goodwill and intangible assets | | | ||||
Deferred income taxes | | | ||||
Stock-based compensation plan expense | | | ||||
Loss on sale of Intech | | - | ||||
Investment gains (losses), net | | ( | ||||
Contributions to pension plans in excess of costs recognized | ( | - | ||||
Other, net | | ( | ||||
Changes in operating assets and liabilities: | ||||||
OEIC and unit trust receivables and payables | ( | ( | ||||
Other assets | ( | | ||||
Other accruals and liabilities | ( | ( | ||||
Net operating activities | ( | | ||||
Investing activities: | ||||||
Sales (purchases) of: | ||||||
Investment securities, net | ( | | ||||
Property, equipment and software | ( | ( | ||||
Investment securities by consolidated seeded investment products, net | | ( | ||||
Cash received (paid) on settled seed capital hedges, net | | ( | ||||
Dividends received from equity-method investments | | | ||||
JHG long-term note with Intech | ( | - | ||||
Proceeds from sale of Intech | | - | ||||
Receipt of contingent consideration payments from sale of subsidiaries | - | | ||||
Net investing activities | ( | | ||||
Financing activities: | ||||||
Proceeds from stock-based compensation plans | | | ||||
Purchase of common stock for stock-based compensation plans | ( | ( | ||||
Purchase of common stock from Dai-ichi Life and share buyback program | ( | ( | ||||
Dividends paid to shareholders | ( | ( | ||||
Distributions to noncontrolling interests | ( | ( | ||||
Third-party sales (purchases) in consolidated seeded investment products, net | ( | | ||||
Principal payments under capital lease obligations | ( | - | ||||
Net financing activities | ( | ( | ||||
Cash and cash equivalents: | ||||||
Effect of foreign exchange rate changes | ( | | ||||
Net change | ( | ( | ||||
At beginning of period | | | ||||
At end of period | $ | | $ | | ||
Supplemental cash flow information: | ||||||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes, net of refunds | $ | | $ | | ||
Reconciliation of cash and cash equivalents: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Cash and cash equivalents held in consolidated VIEs | | | ||||
Total cash and cash equivalents | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
JANUS HENDERSON GROUP PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Amounts in Millions)
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| Accumulated |
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Additional | other | Nonredeemable | |||||||||||||||||||||
Number of | Common | paid-in | Treasury | comprehensive | Retained | noncontrolling | Total | ||||||||||||||||
Three months ended March 31, 2022 | shares | stock | capital | shares | loss | earnings | interests | equity | |||||||||||||||
Balance at January 1, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | ||||||||
Net income | — | — | — | — |
| — | | — |
| | |||||||||||||
Other comprehensive loss | — | — | — | — | ( |
| — | — |
| ( | |||||||||||||
Dividends paid to shareholders ($ | — | — | — | — |
| — | ( | — |
| ( | |||||||||||||
Purchase of common stock from share buyback program | ( | ( | — | — | — | ( | — | ( | |||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||
Sale of Intech | — | — | — | — | — | — | ( | ( | |||||||||||||||
Fair value adjustments to redeemable noncontrolling interests | — | — | — | — | — | | — | | |||||||||||||||
Purchase of common stock for stock-based compensation plans |
| — |
| — | ( | ( |
| — | — | — |
| ( | |||||||||||
Vesting of stock-based compensation plans | — | — | ( | |
| — | — | — |
| — | |||||||||||||
Stock-based compensation plan expense | — |
| — | | — |
| — | — | — |
| | ||||||||||||
Proceeds from stock-based compensation plans | — | — | | — | — | — | — | | |||||||||||||||
Balance at March 31, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | ||||||||
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| Accumulated |
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Additional | other | Nonredeemable | |||||||||||||||||||||
Number of | Common | paid-in | Treasury | comprehensive | Retained | noncontrolling | Total | ||||||||||||||||
Three months ended March 31, 2021 | shares | stock | capital | shares | loss | earnings | interests | equity | |||||||||||||||
Balance at January 1, 2021 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | ||||||||
Net income | — | — | — | — |
| — | | ( |
| | |||||||||||||
Other comprehensive income | — | — | — | — | |
| — | — |
| | |||||||||||||
Dividends paid to shareholders ($ | — | — | — | — |
| — | ( | — |
| ( | |||||||||||||
Purchase of common stock from Dai-ichi Life and share buyback program | ( | ( | — | — | — | ( | — | ( | |||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||
Fair value adjustments to redeemable noncontrolling interests | — | — | — | — | — | ( | — | ( | |||||||||||||||
Purchase of common stock for stock-based compensation plans |
| — |
| — | ( | ( |
| — | — | — |
| ( | |||||||||||
Vesting of stock-based compensation plans | — | — | ( | |
| — | — | — | — | ||||||||||||||
Stock-based compensation plan expense | — |
| — | | — |
| — | — | — | | |||||||||||||
Proceeds from stock-based compensation plans | — | — | | — | — | — | — | | |||||||||||||||
Balance at March 31, 2021 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
JANUS HENDERSON GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Basis of Presentation and Significant Accounting Policies
Basis of Presentation
In the opinion of management of Janus Henderson Group plc (“JHG,” “the Company,” “we,” “us,” “our” and similar terms), the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to fairly state our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP are not required for interim reporting purposes and have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the annual consolidated financial statements and notes presented in our Annual Report on Form 10-K for the year ended December 31, 2021. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date.
Note 2 — Dispositions
On February 3, 2022, we announced the strategic decision to sell our
On March 31, 2022, the Management Buyout closed and we recognized a $
The terms of the transaction also included a $
JHG and Intech entered into a transition services agreement that provides for continuation of support services to help ensure a seamless transition in operations and continuity in serving Intech’s clients.
Note 3 — Consolidation
Variable Interest Entities
Consolidated Variable Interest Entities
Our consolidated variable interest entities (“VIEs”) as of March 31, 2022, and December 31, 2021, include certain consolidated seeded investment products in which we have an investment and act as the investment manager. Third-party assets held in consolidated VIEs are not available to us or to our creditors. We may not, under any circumstances, access third-party assets held by consolidated VIEs to use in our operating activities or otherwise. In addition, the investors in these consolidated VIEs have no recourse to the credit of JHG.
5
Unconsolidated Variable Interest Entities
The following table presents the carrying value of investment securities included on our Condensed Consolidated Balance Sheets pertaining to unconsolidated VIEs (in millions):
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Unconsolidated VIEs | $ | | $ | | ||
Our total exposure to unconsolidated VIEs represents the value of our economic ownership interest in the investment securities.
Voting Rights Entities
Consolidated Voting Rights Entities
The following table presents the balances related to consolidated voting rights entities (“VREs”) that were recorded on our Condensed Consolidated Balance Sheets, including our net interest in these products (in millions):
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Investment securities | $ | | $ | | ||
Cash and cash equivalents | |
| | |||
Other current assets | | | ||||
Accounts payable and accrued liabilities | ( | ( | ||||
Total | $ | | $ | | ||
Redeemable noncontrolling interests in consolidated VREs | ( |
| ( | |||
JHG's net interest in consolidated VREs | $ | | $ | | ||
Third-party assets held in consolidated VREs are not available to us or to our creditors. We may not, under any circumstances, access third-party assets held by consolidated VREs to use in our operating activities or otherwise. In addition, the investors in these consolidated VREs have no recourse to the credit of JHG.
Our total exposure to consolidated VREs represents the value of our economic ownership interest in these seeded investment products.
Unconsolidated Voting Rights Entities
The following table presents the carrying value of investment securities included on our Condensed Consolidated Balance Sheets pertaining to unconsolidated VREs (in millions):
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Unconsolidated VREs | $ | | $ | | ||
Our total exposure to unconsolidated VREs represents the value of our economic ownership interest in the investment securities.
6
Note 4 — Investment Securities
Our investment securities as of March 31, 2022, and December 31, 2021, are summarized as follows (in millions):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Seeded investment products: | ||||||
Consolidated VIEs | $ | | $ | | ||
Consolidated VREs | | | ||||
Unconsolidated VIEs and VREs | | | ||||
Separate accounts | | | ||||
Pooled investment funds | | | ||||
Total seeded investment products |
| |
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Investments related to deferred compensation plans |
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Other investments | | | ||||
Total investment securities | $ | | $ | | ||
Trading Securities
Net unrealized gains (losses) on investment securities held as of the three months ended March 31, 2022 and 2021, are summarized as follows (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Unrealized gains (losses) on investment securities held at period end |
| $ | ( |
| $ | |
Investment Gains (Losses), Net
Investment gains (losses), net on our Condensed Consolidated Statements of Comprehensive Income included the following for the three months ended March 31, 2022 and 2021 (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Seeded investment products and hedges, net | $ | ( | $ | | ||
Third-party ownership interests in seeded investment products | ( | ( | ||||
Long Tail Alpha investment | | | ||||
Deferred equity plan | ( | | ||||
Other |
| ( |
| — | ||
Investment gains (losses), net | $ | ( | $ | | ||
7
Cash Flows
Cash flows related to investment securities for the three months ended March 31, 2022 and 2021, are summarized as follows (in millions):
Three months ended March 31, | ||||||||||||
2022 | 2021 | |||||||||||
|
| Sales, |
|
| Sales, | |||||||
Purchases | settlements | Purchases | settlements | |||||||||
and | and | and | and | |||||||||
settlements | maturities | settlements | maturities | |||||||||
Investment securities by consolidated seeded investment products | $ | ( | $ | | $ | ( | $ | | ||||
Investment securities | ( | | ( | | ||||||||
Note 5 — Derivative Instruments
Derivative Instruments Used to Hedge Seeded Investment Products
We maintain an economic hedge program that uses derivative instruments to mitigate against market volatility of certain seeded investments by using index and commodity futures (“futures”), index swaps, total return swaps and credit default swaps. Foreign currency exposures associated with our seeded investment products are also hedged by using foreign currency forward contracts and swaps.
We were party to the following derivative instruments as of March 31, 2022, and December 31, 2021 (in millions):
Notional value | ||||||
| March 31, 2022 |
| December 31, 2021 | |||
Futures | $ | | $ | | ||
Credit default swaps | | | ||||
Total return swaps | | | ||||
Foreign currency forward contracts and swaps | | | ||||
The derivative instruments are not designated as hedges for accounting purposes. Changes in fair value of the derivatives are recognized in investment gains (losses), net in our Condensed Consolidated Statements of Comprehensive Income.
Three months ended March 31, | ||||||
| 2022 |
| 2021 | |||
Futures | $ | | $ | ( | ||
Credit default swaps | | — | ||||
Total return swaps | | ( | ||||
Foreign currency forward contracts and swaps | ( | | ||||
Total gain from derivative instruments | $ | | $ | | ||
8
Derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or in accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. The derivative assets and liabilities as of March 31, 2022, and December 31, 2021, are summarized as follows (in millions):
Fair value | ||||||
March 31, 2022 | December 31, 2021 | |||||
Derivative assets |
| $ | |
| $ | |
Derivative liabilities |
| |
| | ||
In addition to using derivative instruments to mitigate against market volatility of certain seeded investments, we also engage in short sales of securities to hedge seed investments. As of March 31, 2022, and December 31, 2021, the fair value of securities sold but not yet purchased was $
Derivative Instruments in Consolidated Seeded Investment Products
Certain of our consolidated seeded investment products utilize derivative instruments to contribute to the achievement of defined investment objectives. These derivative instruments are classified within other current assets or in accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. Gains and losses on these derivative instruments are classified within investment gains (losses), net in our Condensed Consolidated Statements of Comprehensive Income.
Our consolidated seeded investment products were party to the following derivative instruments as of March 31, 2022, and December 31, 2021 (in millions):
Notional value | ||||||
| March 31, 2022 |
| December 31, 2021 | |||
Futures | $ | | $ | | ||
Credit default swaps | | | ||||
Total return swaps | | — | ||||
Options |
| |
| | ||
Foreign currency forward contracts and swaps |
| |
| | ||
The derivative assets and liabilities as of March 31, 2022, and December 31, 2021, are summarized as follows (in millions):
Fair value | ||||||
March 31, 2022 | December 31, 2021 | |||||
Derivative assets |
| $ | |
| $ | |
Derivative liabilities |
| |
| — | ||
Derivative Instruments — Used in Foreign Currency Hedging Program
We maintain a balance sheet foreign currency hedging program (the “Program”) to take reasonable measures to minimize the income statement effects of foreign currency remeasurement of monetary balance sheet accounts. The Program utilizes foreign currency forward contracts and swaps to achieve its objectives, and it is considered an economic hedge for accounting purposes.
9
The notional value of the foreign currency forward contracts and swaps as of March 31, 2022, and December 31, 2021, is summarized as follows (in millions):
Notional value | ||||||
| March 31, 2022 |
| December 31, 2021 | |||
Foreign currency forward contracts and swaps | $ | | $ | | ||
The derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or in accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. The derivative assets and liabilities as of March 31, 2022, and December 31, 2021, are summarized as follows (in millions):
Fair value | ||||||
| March 31, 2022 | December 31, 2021 | ||||
Derivative assets |
| $ | |
| $ | |
Derivative liabilities |
| |
| — | ||
Changes in fair value of the derivatives are recognized in other non-operating expenses, net on our Condensed Consolidated Statements of Comprehensive Income. We recognized a loss of $
10
Note 6 — Fair Value Measurements
The following table presents assets and liabilities reflected in the financial statements or disclosed in the notes to the financial statements at fair value on a recurring basis as of March 31, 2022 (in millions):
Fair value measurements using: | ||||||||||||
Quoted prices in | ||||||||||||
| active markets for |
|
|
| ||||||||
identical assets | Significant other | Significant | ||||||||||
and liabilities | observable inputs | unobservable inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||
Assets: | ||||||||||||
Cash equivalents | $ | | $ | — | $ | — | $ | | ||||
Investment securities: |
| |||||||||||
Consolidated VIEs | | | | | ||||||||
Other investment securities | | | — | | ||||||||
Total investment securities | | | | | ||||||||
Seed hedge derivatives | — |
| | — |
| | ||||||
Derivatives in consolidated seeded investment products | — | | — | | ||||||||
Derivatives used in foreign currency hedging program | — | | — | | ||||||||
Intech option agreement | — | — | | | ||||||||
Intech contingent consideration |
| — |
| — |
| |
| | ||||
Volantis contingent consideration | — | — | | | ||||||||
Total assets | $ | | $ | | $ | | $ | | ||||
Liabilities: | ||||||||||||
Derivatives in consolidated seeded investment products | $ | — | $ | | $ | — | $ | | ||||
Derivatives used in foreign currency hedging program | — | | — | | ||||||||
Securities sold, not yet purchased | | — | — | | ||||||||
Seed hedge derivatives | — | | — | | ||||||||
Long-term debt(1) | — | | — | | ||||||||
Deferred bonuses | — | — | | | ||||||||
Total liabilities | $ | | $ | | $ | | $ | | ||||
| (1) | Carried at amortized cost and disclosed at fair value. |
11
The following table presents assets and liabilities reflected in the financial statements or disclosed in the notes to the financial statements at fair value on a recurring basis as of December 31, 2021 (in millions):
Fair value measurements using: | ||||||||||||
Quoted prices in | ||||||||||||
| active markets for |
|
|
| ||||||||
identical assets | Significant other | Significant | ||||||||||
and liabilities | observable inputs | unobservable inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||
Assets: | ||||||||||||
Cash equivalents | $ | | $ | — | $ | — | $ | | ||||
Investment securities: | ||||||||||||
Consolidated VIEs | | | | | ||||||||
Other investment securities | | | — | | ||||||||
Total investment securities |
| | | | | |||||||
Seed hedge derivatives | — |
| | — |
| | ||||||
Derivatives in consolidated seeded investment products | — | | — | | ||||||||
Derivatives used in foreign currency hedging program | — | | — | | ||||||||
Volantis contingent consideration | — | — | | | ||||||||
Total assets | $ | | $ | | $ | | $ | | ||||
Liabilities: | ||||||||||||
Derivatives in consolidated seeded investment products | $ | — | $ | | $ | — | $ | | ||||
Securities sold, not yet purchased | | — | — | | ||||||||
Seed hedge derivatives | — | | — | | ||||||||
Long-term debt(1) | — | | — | | ||||||||
Deferred bonuses | — | — | | | ||||||||
Total liabilities | $ | | $ | | $ | | $ | | ||||
(1) | Carried at amortized cost and disclosed at fair value. |
Level 1 Fair Value Measurements
Our Level 1 fair value measurements consist mostly of investments held by seeded investment products, investments in advised mutual funds, cash equivalents, securities sold, not yet purchased and investments related to deferred compensation plans with quoted market prices in active markets. The fair value level of consolidated investments held by seeded investment products is determined by the underlying securities of the product. The fair value level of unconsolidated investments held in seeded investment products is determined by the net asset value (“NAV”), which is considered a quoted price in an active market.
Level 2 Fair Value Measurements
Our Level 2 fair value measurements consist mostly of consolidated seeded investment products, derivative instruments and our long-term debt. The fair value of consolidated seeded investment products is determined by the underlying securities of the product. The fair value of our long-term debt is determined using broker quotes and recent trading activity, which are considered Level 2 inputs.
12
Level 3 Fair Value Measurements
Investment Securities
As of March 31, 2022, and December 31, 2021, certain securities within consolidated VIEs were valued using significant unobservable inputs, resulting in Level 3 classification.
Intech Option Agreement and Contingent Consideration
On March 31, 2022, we completed the sale of Intech. Consideration received as part of the Management Buyout included contingent consideration of up to $
As of March 31, 2022, the fair value of the option agreement and of the Intech contingent consideration was $
Volantis Contingent Consideration
On April 1, 2017, we completed the sale of the Volantis UK Small Cap (“Volantis”) alternative team assets. Consideration for the sale was a
As of March 31, 2022, and December 31, 2021, the fair value of the Volantis contingent consideration was $
Deferred Bonuses
Deferred bonuses represent liabilities to employees over the vesting period that will be settled by investments in our products. The significant unobservable inputs used to value the liabilities are investment designations and vesting periods.
Changes in Fair Value
Changes in fair value of our Level 3 assets for the three months ended March 31, 2022 and 2021, were as follows (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Beginning of period fair value | $ | | $ | | ||
Intech option agreement | | — | ||||
Contingent consideration from sale of Intech | | — | ||||
Settlement of contingent consideration |
| — |
| ( | ||
Fair value adjustments |
| ( |
| ( | ||
Purchases of securities | ( | | ||||
Sales of securities | ( | ( | ||||
Foreign currency translation | ( | — | ||||
End of period fair value | $ | | $ | | ||
13
Changes in fair value of our individual Level 3 liabilities for the three months ended March 31, 2022 and 2021, were as follows (in millions):
Three months ended March 31, | ||||||
2022 | 2021 | |||||
Deferred | Deferred | |||||
bonuses | bonuses | |||||
Beginning of period fair value | $ | | $ | | ||
Fair value adjustments |
| ( |
| | ||
Vesting of deferred bonuses | ( | ( | ||||
Amortization of deferred bonuses |
| |
| | ||
Foreign currency translation |
| ( |
| | ||
End of period fair value | $ | | $ | | ||
Nonrecurring Fair Value Measurements
Nonrecurring Level 3 fair value measurements include goodwill and intangible assets. We measure the fair value of goodwill and intangible assets on initial recognition using discounted cash flow (“DCF”) analysis that requires assumptions regarding projected future earnings and discount rates. Because of the significance of the unobservable inputs in the fair value measurements of these assets, such measurements are classified as Level 3.
Note 7 — Goodwill and Intangible Assets
The following tables present movements in our intangible assets and goodwill during the three months ended March 31, 2022 and 2021 (in millions):
| December 31, |
|
| Foreign |
| March 31, | ||||||||||||
2021 | Amortization | Disposal | Impairment | translation | 2022 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||
Investment management agreements | $ | | $ | — | $ | — | $ | — | $ | ( | $ | | ||||||
Trademarks |
| |
| — | ( | — | — |
| | |||||||||
Definite-lived intangible assets: | ||||||||||||||||||
Client relationships |
| |
| — | ( | — | |
| | |||||||||
Accumulated amortization |
| ( |
| ( | | — | |
| ( | |||||||||
Net intangible assets | $ | | $ | ( | $ | ( | $ | — | $ | ( | $ | | ||||||
Goodwill | $ | | $ | — | $ | ( | $ | ( | $ | ( | $ | | ||||||
| December 31, |
|
| Foreign |
| March 31, | ||||||||||||
2020 | Amortization | Disposal | Impairment | translation | 2021 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||
Investment management agreements | $ | | $ | — | $ | — | $ | — | $ | | $ | | ||||||
Trademarks |
| |
| — | — | ( | — |
| | |||||||||
Definite-lived intangible assets: | ||||||||||||||||||
Client relationships |
| |
| — | — | — | ( |
| | |||||||||
Accumulated amortization |
| ( |
| ( | — | — | ( |
| ( | |||||||||
Net intangible assets | $ | | $ | ( | $ | — | $ | ( | $ | | $ | | ||||||
Goodwill | $ | | $ | — | $ | — | $ | — | $ | | $ | | ||||||
14
Management Buyout of Intech
As detailed in Note 2 – Dispositions, on March 31, 2022, the Management Buyout of Intech closed. As part of this disposition, we removed $
Out-of-Period Incremental Goodwill Impairment
In the first quarter 2020, due to the sudden decline of the global financial markets impacting our assets under management (“AUM”), we recognized a $
Perkins Trademark
During the first quarter of 2021, as part of our ongoing strategic initiatives and looking globally at delivering excellent service to our clients and positioning our business for success, we completed a review of Perkins Investment Management (“Perkins”). To right-size our product portfolio and better align with the changing needs of clients, certain strategies were closed and the funds were liquidated during the second quarter of 2021. The majority of the Perkins value equity strategies were unaffected by this reorganization and they have continued under the Janus Henderson brand. The Perkins brand was discontinued and the marketing efforts for value equity strategies were incorporated under the Janus Henderson brand. During the first quarter 2021, we impaired the entire balance of the intangible asset associated with the Perkins trademark. The impairment charge of $
Future Amortization
Expected future amortization expense related to client relationships is summarized below (in millions):
Future amortization |
| Amount | |
2022 (remainder of year) | $ | | |
2023 | | ||
2024 |
| | |
2025 |
| | |
2026 |
| | |
Thereafter |
| | |
Total | $ | | |
Note 8 — Debt
Our debt as of March 31, 2022, and December 31, 2021, consisted of the following (in millions):
March 31, 2022 | December 31, 2021 | |||||||||||
| Carrying |
| Fair |
| Carrying |
| Fair | |||||
value | value | value | value | |||||||||
$ | | $ | | $ | | $ | | |||||
15
The
Credit Facility
At March 31, 2022, we had a $
Note 9 — Income Taxes
Our effective tax rates for the three months ended March 31, 2022 and 2021, were as follows:
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Effective tax rate | | % | | % | ||
The effective tax rate for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was impacted by a decrease in pre-tax book income with an increase in the disallowed non-controlling interest loss. In addition, the effective tax rate was also impacted by excess tax benefit on equity-based vesting compensation.
As of March 31, 2022, we had $
16
Note 10 — Noncontrolling Interests
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests as of March 31, 2022, and December 31, 2021, consisted of the following (in millions):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Consolidated seeded investment products | $ | | $ | | ||
Intech: | ||||||
Employee appreciation rights | — | | ||||
Founding member ownership interests | — | | ||||
Total redeemable noncontrolling interests | $ | | $ | | ||
Consolidated Seeded Investment Products
Noncontrolling interests in consolidated seeded investment products are classified as redeemable noncontrolling interests when there is an obligation to repurchase units at the investor’s request.
Redeemable noncontrolling interests in consolidated seeded investment products may fluctuate from period to period and are impacted by changes in our relative ownership, changes in the amount of third-party investment in seeded products and volatility in the market value of the seeded products’ underlying securities. Third-party redemption of investments in any particular seeded product is redeemed from the respective product’s net assets and cannot be redeemed from the assets of our other seeded products or from our other assets.
The following table presents the movement in redeemable noncontrolling interests in consolidated seeded investment products for the three months ended March 31, 2022 and 2021 (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Opening balance | $ | | $ | | ||
Changes in market value |
| ( |
| ( | ||
Changes in ownership |
| |
| | ||
Foreign currency translation | | | ||||
Closing balance | $ | | $ | | ||
Nonredeemable Noncontrolling Interests
Nonredeemable noncontrolling interests as of March 31, 2022, and December 31, 2021, were as follows (in millions):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Nonredeemable noncontrolling interests in: | ||||||
Seed capital investments | $ | | $ | | ||
Intech |
| — |
| | ||
Total nonredeemable noncontrolling interests | $ | | $ | | ||
On March 31, 2022, we completed the sale of our
17
Note 11 — Long-Term Incentive and Employee Compensation
The following table presents restricted stock and mutual fund awards granted during the three months ended March 31, 2022 (in millions):
Three months ended | |||
March 31, | |||
| 2022 | ||
Restricted stock | $ | | |
Mutual fund awards | | ||
Total | $ | | |
Restricted stock and mutual fund awards generally vest and will be recognized using a graded vesting method over a - or
Note 12 — Retirement Benefit Plans
We operate defined contribution retirement benefit plans and defined benefit pension plans.
Our primary defined benefit pension plan is the defined benefit section of the Janus Henderson Group UK Pension Scheme (“JHGPS”).
Net Periodic Benefit Credit
The components of net periodic benefit credit in respect of defined benefit plans for the three months ended March 31, 2022 and 2021, include the following (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Service cost | $ | — | $ | ( | ||
Interest cost |
| ( |
| ( | ||
Amortization of prior service cost | ( | ( | ||||
Expected return on plan assets |
| |
| | ||
Net periodic benefit credit | $ | ( | $ | | ||
18
Note 13 — Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax for the three months ended March 31, 2022 and 2021, were as follows (in millions):
Three months ended March 31, | ||||||||||||||||||
2022 | 2021 | |||||||||||||||||
Foreign | Retirement benefit | Foreign | Retirement | |||||||||||||||
| currency |
| asset, net |
| Total |
| currency |
| asset, net |
| Total | |||||||
Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Other comprehensive loss | ( | — | ( | | — | | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | | | | ( | | ( | ||||||||||||
Total other comprehensive loss | ( | | ( | | | | ||||||||||||
Less: other comprehensive loss attributable to noncontrolling interests | ( | — | ( | ( | — | ( | ||||||||||||
Ending balance | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
The components of other comprehensive income (loss), net of tax for the three months ended March 31, 2022 and 2021, were as follows (in millions):
Three months ended March 31, | ||||||||||||||||||
2022 | 2021 | |||||||||||||||||
Pre-tax | Tax | Net | Pre-tax | Tax | Net | |||||||||||||
| amount |
| impact |
| amount |
| amount |
| impact |
| amount | |||||||
Foreign currency translation adjustments | $ | ( | $ | | $ | ( | $ | | $ | | $ | | ||||||
Reclassifications to net income | | — | | ( | — | ( | ||||||||||||
Total other comprehensive income (loss) | $ | ( | $ | | $ | ( | $ | | $ | | $ | | ||||||
19
Note 14 — Earnings and Dividends Per Share
Earnings Per Share
The following is a summary of the earnings per share calculation for the three months ended March 31, 2022 and 2021 (in millions, except per share data):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Net income attributable to JHG | $ | | $ | | ||
Allocation of earnings to participating stock-based awards | ( | ( | ||||
Net income attributable to JHG common shareholders | $ | | $ | | ||
Weighted-average common shares outstanding — basic |
| |
| | ||
Dilutive effect of nonparticipating stock-based awards | | | ||||
Weighted-average common shares outstanding — diluted |
| |
| | ||
Earnings (loss) per share: | ||||||
Basic (two class) | $ | | $ | | ||
Diluted (two class) | $ | | $ | | ||
Dividends Per Share
The payment of cash dividends is within the discretion of our Board of Directors and depends on many factors, including, but not limited to, our results of operations, financial condition, capital requirements, legal requirements and general business conditions.
The following is a summary of cash dividends declared and paid during the three months ended March 31, 2022:
Dividend | Date | Dividends paid | Date | |||||
per share |
| declared | (in US$ millions) |
| paid | |||
$ | | February 2, 2022 |
| $ | | February 28, 2022 | ||
On May 3, 2022, the Board approved a
Note 15 — Commitments and Contingencies
We are periodically involved in various legal proceedings and other regulatory matters. Although there can be no assurances, based on information currently available, we believe that it is probable that the ultimate outcome of matters that are pending or threatened will not have a material effect on our consolidated financial statements.
20
With respect to the unaudited financial statements of Janus Henderson Group plc as of and for the three-month period ended March 31, 2022, appearing herein, PricewaterhouseCoopers LLP (United States) reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 4, 2022, appearing herein, states that they did not audit and they do not express an opinion on the unaudited financial statements. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP (United States) is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial statements because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP (United States) within the meaning of Sections 7 and 11 of the Act.
21
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Janus Henderson Group plc
Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of Janus Henderson Group plc and its subsidiaries (the “Company”) as of March 31, 2022, and the related condensed consolidated statement of comprehensive income (loss), of changes in equity, and of cash flows for the three-month periods ended March 31, 2022 and March 31, 2021, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statement of comprehensive income, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 24, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
May 4, 2022
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q not based on historical facts are “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Such forward-looking statements involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those discussed. These include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects or future events. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.
Various risks, uncertainties, assumptions and factors that could cause our future results to differ materially from those expressed by the forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, risks, uncertainties, assumptions and factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, and this Quarterly Report on Form 10-Q under headings such as “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk,” and in other filings or furnishings made by the Company with the SEC from time to time.
Available Information
We make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments thereto as soon as reasonably practicable after such filings have been made with the SEC. These reports may be obtained through our Investor Relations website (ir.janushenderson.com) and are available in print at no charge upon request by any shareholder. The contents of our website are not incorporated herein for any purpose. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Charters for the Audit Committee, Compensation Committee, Risk Committee, and Nominating and Corporate Governance Committee of our Board of Directors, as well as our Corporate Governance Guidelines, Code of Business Conduct and Code of Ethics for Senior Financial Officers (our “Senior Officer Code”) are posted on our Investor Relations website (ir.janushenderson.com) and are available in print at no charge upon request by any shareholder. Within the time period prescribed by SEC and New York Stock Exchange (“NYSE”) regulations, we will post on our website any amendment to our Senior Officer Code or our Code of Business Conduct and any waivers thereof for directors or executive officers. The information on our website is not incorporated by reference into this report.
Business Overview
We are an independent global asset manager, specializing in active investment across all major asset classes. We actively manage a broad range of investment products for institutional and retail investors across four capabilities: Equities, Fixed Income, Multi-Asset and Alternatives.
On March 23, 2022, we announced our Board’s appointment of Ali Dibadj as our Chief Executive Officer (“CEO”), effective on a mutually agreed date but no later than June 27, 2022. In connection with Mr. Dibadj’s appointment and the retirement of our former CEO, Richard Weil, the Board appointed Roger Thompson to serve as the interim CEO, effective April 1, 2022.
23
Segment Considerations
We are a global asset manager and manage a range of investment products, operating across various product lines, distribution channels and geographic regions. However, information is reported to the chief operating decision-maker, the current interim CEO, on an aggregated basis. Strategic and financial management decisions are determined centrally by the interim CEO and, on this basis, we operate as a single-segment investment management business.
Revenue
Revenue primarily consists of management fees and performance fees. Management fees are generally based on a percentage of the market value of our AUM and are calculated using either the daily, month-end or quarter-end average asset balance in accordance with contractual agreements. Accordingly, fluctuations in the financial markets have a direct effect on our operating results. Additionally, our AUM may outperform or underperform the financial markets and, therefore, may fluctuate in varying degrees from that of the general market.
Performance fees are specified in certain fund and client contracts, and are based on investment performance either on an absolute basis or compared to an established index over a specified period of time. These fees are often subject to a hurdle rate. Performance fees are recognized at the end of the contractual period (typically monthly, quarterly or annually) if the stated performance criteria are achieved. Certain fund and client contracts allow for negative performance fees where there is underperformance against the relevant index.
FIRST QUARTER 2022 SUMMARY
First Quarter 2022 Highlights
| ● | Solid long-term investment performance, with 50%, 62%, 74% and 83% of our AUM outperforming relevant benchmarks on a one-, three-, five- and 10-year basis, respectively, as of March 31, 2022. |
| ● | First quarter 2022 operating income was $124.6 million, or $178.8 million on an adjusted basis. Refer to the Non-GAAP Financial Measures section below for information on adjusted non-GAAP figures. |
| ● | First quarter 2022 diluted earnings per share was $0.47, or $0.75 on an adjusted basis. Refer to the Non-GAAP Financial Measures section below for information on adjusted non-GAAP figures. |
| ● | On May 3, 2022, the Board approved a 2.6% increase in the quarterly cash dividends and declared a $0.39 per share dividend for the first quarter 2022. |
| ● | During the first quarter 2022, we acquired 1.2 million shares of our common stock for $43.3 million as part of the share buyback program. On May 3, 2022, the Board also approved authorization of $200 million of share buybacks through April 2023. |
| ● | On March 23, 2022, we announced our Board’s appointment of Ali Dibadj as our next CEO, effective on a mutually agreed date but no later than June 27, 2022. |
| ● | As of March 31, 2022, we completed the previously announced sale of our Quantitative Equities subsidiary, Intech. |
Financial Summary
Results are reported on a U.S. GAAP basis. Adjusted non-GAAP figures are presented in the Non-GAAP Financial Measures section below.
Revenue for the first quarter 2022 was $620.0 million, a decrease of $24.0 million, or (4%), compared to the first quarter 2021. Key drivers of the decrease include the following:
24
| ● | A decline of $25.4 million in performance fees primarily due to a reduction in performance fee crystallizations and an increase in negative mutual fund performance fees. |
Total operating expenses for the first quarter 2022 were $495.4 million, an increase of $43.9 million, or 10%, compared to operating expenses in the first quarter 2021. Key drivers of the variance include the following:
| ● | An increase of $29.2 million in intangible asset and goodwill impairment charges due to the out-of-period incremental goodwill impairment in the first quarter 2022. |
| ● | An increase of $14.4 million in distribution expenses driven by the timing of adjustments to distribution expenses. |
| ● | An increase of $10.1 million in general, administrative and occupancy expenses primarily due to higher consultancy fees. |
| ● | A decrease of $10.0 million in employee compensation and benefits primarily due to lower variable compensation charges. |
Operating income for the first quarter 2022 was $124.6 million, a decrease of $67.9 million, or (35%), compared to the first quarter 2021. Our operating margin was 20.1% in the first quarter 2022 compared to 29.9% in the first quarter 2021.
Net income attributable to JHG in the first quarter 2022 was $78.7 million, a decrease of $76.8 million, or (49%), compared to the first quarter 2021. In addition to the aforementioned factors affecting revenue and operating expenses, key drivers of the variance include the following:
| ● | An unfavorable movement of $33.8 million in investment gains, net in the first quarter 2022 compared to the first quarter 2021, partially offset by an improvement of $12.3 million in net loss attributable to noncontrolling interests. Movements in investment gains, net and net loss attributable to noncontrolling interests are primarily due to fair value adjustments in relation to our seeded investment products and derivative instruments and the consolidation of third-party ownership interests in seeded investment products. |
| ● | A decrease of $20.3 million in our provision for income taxes primarily due to a decrease in pre-tax income. |
Investment Performance of Assets Under Management
The following table is a summary of investment performance as of March 31, 2022:
Percentage of AUM outperforming benchmark |
| 1 year |
| 3 years |
| 5 years |
| 10 years |
|
Equities |
| 32 | % | 44 | % | 61 | % | 76 | % |
Fixed Income |
| 68 | % | 97 | % | 96 | % | 99 | % |
Multi-Asset |
| 95 | % | 96 | % | 96 | % | 99 | % |
Alternatives |
| 92 | % | 100 | % | 100 | % | 100 | % |
Total |
| 50 | % | 62 | % | 74 | % | 83 | % |
Assets Under Management
Our AUM as of March 31, 2022, was $361.0 billion, a decrease of $71.3 billion, or (16.5%), from December 31, 2021, driven primarily by a $29.6 billion disposition of the Intech Quantitative Equities capability and negative market movements of $29.1 billion. Net redemptions of $11.9 billion, or $6.2 billion when excluding the Intech Quantitative Equities capability, also contributed to the decline in AUM.
Our non-USD AUM is primarily denominated in GBP, EUR and AUD. During the three months ended March 31, 2022, the USD strengthened against GBP and EUR, and weakened against AUD, resulting in a $2.0 billion decrease in our AUM. As of March 31, 2022, approximately 33.5% of our AUM was non-USD denominated.
25
VelocityShares exchange-traded notes (“ETNs”) and certain index products are not included within our AUM because we are not the named adviser or subadviser to ETNs or index products. VelocityShares ETN assets totaled $0.3 billion and $0.2 billion as of March 31, 2022, and December 31, 2021, respectively. VelocityShares index product assets, not included within our AUM, totaled $1.7 billion and $1.9 billion as of March 31, 2022, and December 31, 2021, respectively.
Our AUM and flows by capability for the three months ended March 31, 2022 and 2021, were as follows (in billions):
| Closing AUM |
|
|
|
|
|
| Closing AUM | ||||||||||||||||
December 31, | Net sales |
| Reclassifications | March 31, | ||||||||||||||||||||
2021 | Sales | Redemptions(1) | (redemptions) | Markets | FX(2) | and disposals(3) | 2022 | |||||||||||||||||
By capability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Equities | $ | 244.3 | $ | 8.5 | $ | (12.3) | $ | (3.8) | $ | (19.2) | $ | (1.3) | $ | 1.3 | $ | 221.3 | ||||||||
Fixed Income |
| 79.6 |
| 6.0 |
| (6.0) |
| — |
| (3.8) |
| (0.3) |
| — |
| 75.5 | ||||||||
Multi-Asset |
| 59.7 |
| 2.3 |
| (4.5) |
| (2.2) | (3.5) |
| (0.1) |
| — |
| 53.9 | |||||||||
Quantitative Equities |
| 38.0 |
| 0.2 |
| (5.9) |
| (5.7) |
| (2.6) | (0.1) |
| (29.6) |
| — | |||||||||
Alternatives |
| 10.7 |
| 0.9 |
| (1.1) |
| (0.2) |
| — |
| (0.2) |
| — |
| 10.3 | ||||||||
Total | $ | 432.3 | $ | 17.9 | $ | (29.8) | $ | (11.9) | $ | (29.1) | $ | (2.0) | $ | (28.3) | $ | 361.0 | ||||||||
| Closing AUM |
|
|
|
|
|
| Closing AUM | ||||||||||||||||
December 31, | Net sales | Reclassifications | March 31, | |||||||||||||||||||||
| 2020 |
| Sales |
| Redemptions(1) | (redemptions) |
| Markets |
| FX(2) |
| and disposals(3) |
| 2021 | ||||||||||
By capability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Equities | $ | 219.4 | $ | 10.5 | $ | (12.0) | $ | (1.5) | $ | 7.3 | $ | (0.3) | $ | — | $ | 224.9 | ||||||||
Fixed Income |
| 81.5 |
| 5.9 |
| (5.5) |
| 0.4 |
| (2.1) |
| (0.3) |
| — |
| 79.5 | ||||||||
Multi-Asset |
| 48.0 |
| 3.0 |
| (2.2) |
| 0.8 |
| 0.7 |
| — |
| — |
| 49.5 | ||||||||
Quantitative Equities |
| 42.0 |
| 0.2 |
| (2.3) |
| (2.1) |
| 1.5 | (0.1) |
| — |
| 41.3 | |||||||||
Alternatives |
| 10.7 |
| 1.1 |
| (2.0) |
| (0.9) |
| 0.2 |
| (0.1) |
| — |
| 9.9 | ||||||||
Total | $ | 401.6 | $ | 20.7 | $ | (24.0) | $ | (3.3) | $ | 7.6 | $ | (0.8) | $ | — | $ | 405.1 | ||||||||
| (1) | Redemptions include the impact of client transfers, which could result in a positive balance on occasion. |
| (2) | FX reflects movements in AUM resulting from changes in foreign currency rates as non-USD-denominated AUM is translated into USD. |
| (3) | Disposals relate to the sale of Intech and reclassifications relate to a reclassification of existing funds from Quantitative Equities to Equities. |
26
Our AUM and flows by client type for the three months ended March 31, 2022 and 2021, were as follows (in billions):
| Closing AUM |
|
|
|
|
|
| Closing AUM | ||||||||||||||||
December 31, | Net sales |
| Reclassifications | March 31, | ||||||||||||||||||||
2021 | Sales | Redemptions | (redemptions) | Markets | FX | and disposals | 2022 | |||||||||||||||||
By client type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Intermediary | $ | 215.0 | $ | 14.0 | $ | (15.8) | $ | (1.8) | $ | (13.8) | $ | (1.3) | $ | (0.9) | $ | 197.2 | ||||||||
Institutional |
| 127.2 |
| 3.3 |
| (12.4) |
| (9.1) | (7.8) |
| (0.6) |
| (27.4) |
| 82.3 | |||||||||
Self-directed |
| 90.1 |
| 0.6 |
| (1.6) |
| (1.0) |
| (7.5) |
| (0.1) |
| — |
| 81.5 | ||||||||
Total | $ | 432.3 | $ | 17.9 | $ | (29.8) | $ | (11.9) | $ | (29.1) | $ | (2.0) | $ | (28.3) | $ | 361.0 | ||||||||
| Closing AUM |
|
|
|
|
|
| Closing AUM | ||||||||||||||||
December 31, | Net sales |
| Reclassifications | March 31, | ||||||||||||||||||||
2020 | Sales | Redemptions | (redemptions) | Markets | FX | and disposals | 2021 | |||||||||||||||||
By client type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Intermediary | $ | 192.9 | $ | 16.5 | $ | (15.4) | $ | 1.1 | $ | 4.4 | $ | (0.4) | $ | (1.8) | $ | 196.2 | ||||||||
Institutional |
| 127.6 |
| 3.3 |
| (6.8) |
| (3.5) | 1.7 |
| (0.4) |
| 1.8 |
| 127.2 | |||||||||
Self-directed |
| 81.1 |
| 0.9 |
| (1.8) |
| (0.9) |
| 1.5 |
| — |
| — |
| 81.7 | ||||||||
Total | $ | 401.6 | $ | 20.7 | $ | (24.0) | $ | (3.3) | $ | 7.6 | $ | (0.8) | $ | — | $ | 405.1 | ||||||||
Average Assets Under Management
The following table presents our average AUM by capability for the three months ended March 31, 2022 and 2021 (in billions):
Three months ended | Three months ended | |||||||||
March 31, | March 31, | |||||||||
By capability |
| 2022 |
| 2021 | 2022 vs. 2021 | |||||
Equities |
| $ | 222.9 |
| $ | 223.6 | (0) | % | ||
Fixed Income |
| 77.5 |
| 80.9 | (4) | % | ||||
Multi-Asset |
| 54.5 |
| 48.7 | 12 | % | ||||
Quantitative Equities |
| 31.2 |
| 41.5 | (25) | % | ||||
Alternatives |
| 10.6 |
| 10.6 | 0 | % | ||||
Total |
| $ | 396.7 |
| $ | 405.3 | (2) | % | ||
Closing Assets Under Management
The following table presents the closing AUM by client location as of March 31, 2022 (in billions):
| Closing AUM | ||
By client location | December 31, 2021 | ||
North America | $ | 207.6 | |
EMEA and LatAm |
| 116.4 | |
Asia Pacific |
| 37.0 | |
Total | $ | 361.0 | |
Valuation of Assets Under Management
The fair value of our AUM is based on the value of the underlying cash and investment securities of our funds, trusts and segregated mandates. A significant proportion of these securities is listed or quoted on a recognized securities exchange or market and is regularly traded thereon; these investments are valued based on unadjusted quoted market prices. However, for non-U.S. equity securities held by U.S. mutual funds, excluding exchange-traded funds (“ETFs”), the
27
quoted market prices may be adjusted to capture market movement between the time the local market closes and the NYSE closes. Other investments, including over-the-counter (“OTC”) derivative contracts (which are dealt in or through a clearing firm, exchanges or financial institutions), are valued by reference to the most recent official settlement price quoted by the appointed market vendor, and in the event no price is available from this source, a broker quotation may be used. Physical property held is valued monthly by a specialist independent appraiser.
When a readily ascertainable market value does not exist for an investment, the fair value is calculated using a variety of methodologies, including the expected cash flows of its underlying net asset base, taking into account applicable discount rates and other factors; comparable securities or relevant indices; recent financing rounds; revenue multiples; or a combination thereof. Judgment is used to ascertain if a formerly active market has become inactive and to determine fair values when markets have become inactive. Our Fair Value Pricing Committee is responsible for determining or approving these unquoted prices, which are reported to those charged with governance of the funds and trusts. For funds that invest in markets that are closed at their valuation point, an assessment is made daily to determine whether a fair value pricing adjustment is required to the fund’s valuation. This may be due to significant market movements in other correlated open markets, scheduled market closures or unscheduled market closures as a result of natural disaster or government intervention.
Third-party administrators hold a key role in the collection and validation of prices used in the valuation of the securities. Daily price validation is completed using techniques such as day-on-day tolerance movements, invariant prices, excessive movement checks and intra-vendor tolerance checks. Our data management team performs oversight of this process and completes annual due diligence on the processes of third parties.
In other cases, we and the sub-administrators perform a number of procedures to validate the pricing received from third-party providers. For actively traded equity and fixed income securities, prices are received daily from both a primary and secondary vendor. Prices from the primary and secondary vendors are compared to identify any discrepancies. In the event of a discrepancy, a price challenge may be issued to both vendors. Securities with significant day-to-day price changes require additional research, which may include a review of all news pertaining to the issue and issuer, and any corporate actions. All fixed income prices are reviewed by our fixed income trading desk to incorporate market activity information available to our traders. In the event the traders have received price indications from market makers for a particular issue, this information is transmitted to the pricing vendors.
We leverage the expertise of our fund management teams across the business to cross-invest assets and create value for our clients. Where cross investment occurs, assets and flows are identified, and the duplication is removed.
Results of Operations
Foreign Currency Translation
Foreign currency translation impacts our Results of Operations. The translation of GBP to USD is the primary driver of foreign currency translation in expenses. The GBP weakened against the USD during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. Meaningful foreign currency translation impacts to our operating expenses are discussed in the Operating Expenses section below. Revenue is also impacted by foreign currency translation, but the impact is generally determined by the primary currency of the individual funds.
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Revenue
Three months |
| ||||||||
Three months ended | ended | ||||||||
March 31, | March 31, | ||||||||
| 2022 |
| 2021 |
| 2022 vs. 2021 |
| |||
Revenue (in millions): |
|
|
|
|
|
| |||
Management fees | $ | 514.0 | $ | 514.9 | (0) | % | |||
Performance fees |
| (8.4) |
| 17.0 | n/m | * | |||
Shareowner servicing fees |
| 62.4 |
| 60.8 | 3 | % | |||
Other revenue |
| 52.0 |
| 51.3 | 1 | % | |||
Total revenue | $ | 620.0 | $ | 644.0 | (4) | % | |||
* n/m - Not meaningful. | |||||||||
Total revenue
Total revenue decreased $24.0 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to a decline in performance fee crystallizations within Société d’Investissement À Capital Variable (“SICAV”) and UK Open Ended Investment Companies (“OEICs”), and an increase in negative performance fees associated with U.S. mutual funds. Fluctuations in management fees, shareowner servicing fees and other revenue were insignificant.
Performance fees are derived across a number of product ranges. U.S. mutual fund performance fees are recognized on a monthly basis, while all other product range performance fees are recognized on a quarterly or annual basis. The investment management fees paid by each U.S. mutual fund subject to a performance fee is the base management fee plus or minus a performance fee adjustment, as determined by the relative investment performance of the fund compared to a specified benchmark index. Performance fees by product type consisted of the following for the three months ended March 31, 2022 and 2021 (in millions):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Performance fees (in millions): |
|
|
|
| ||
SICAVs | $ | — | $ | 12.4 | ||
UK OEICs and unit trusts |
| — |
| 4.0 | ||
Offshore absolute return funds and other funds |
| 5.7 |
| 2.2 | ||
Segregated mandates |
| (0.1) |
| 2.3 | ||
U.S. mutual funds |
| (14.0) |
| (3.9) | ||
Total performance fees | $ | (8.4) | $ | 17.0 | ||
29
Operating Expenses
Three months |
| ||||||||
Three months ended | ended | ||||||||
March 31, | March 31, | ||||||||
| 2022 |
| 2021 |
| 2022 vs. 2021 |
| |||
Operating expenses (in millions): |
|
|
|
|
|
| |||
Employee compensation and benefits | $ | 164.6 | $ | 174.6 | (6) | % | |||
Long-term incentive plans |
| 51.4 |
| 53.5 | (4) | % | |||
Distribution expenses |
| 141.8 |
| 127.4 | 11 | % | |||
Investment administration |
| 14.8 |
| 12.6 | 17 | % | |||
Marketing |
| 7.4 |
| 6.2 | 19 | % | |||
General, administrative and occupancy |
| 73.1 |
| 63.0 | 16 | % | |||
Impairment of goodwill and intangible assets | 32.8 | 3.6 | n/m | * | |||||
Depreciation and amortization |
| 9.5 |
| 10.6 | (10) | % | |||
Total operating expenses | $ | 495.4 | $ | 451.5 | 10 | % | |||
* n/m - Not meaningful. | |||||||||
Employee compensation and benefits
Employee compensation and benefits decreased by $10.0 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily driven by a decrease of $18.1 million in variable compensation, mainly due to a lower annual bonus pool and other variable compensation, favorable foreign currency translation of $2.7 million and a $2.3 million decrease in project charges driven by less internal labor costs capitalized during the three months ended March 31, 2022. These decreases were partially offset by a $6.8 million increase in salary and benefits, due to higher headcount driven by the conversion of temporary staff to full-time employees and annual base-pay increases, which increased expenses during the three months ended March 31, 2022, by $6.2 million.
Long-term incentive plans
Long-term incentive plan expenses decreased by $2.1 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily driven by a $17.1 million decrease in mark-to-market adjustments related to mutual fund share awards and certain long-term incentive awards, partially offset by $12.5 million for accelerated vesting of awards due to the retirement of our CEO and Chief Information Officer (“CIO”), and $3.1 million due to the roll-on of new awards exceeding the roll-off of vested awards.
Distribution expenses
Distribution expenses are paid to financial intermediaries for the distribution and servicing of our retail investment products and are typically calculated based on the amount of the intermediary-sourced AUM. Distribution expenses increased by $14.4 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to the timing of adjustments to distribution expenses.
Investment administration
Investment administration expenses, which represent back-office operations (including fund administration and fund accounting), increased by $2.2 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to a $1.9 million increase in fund accounting and ad valorem expenses.
30
Marketing
Marketing expenses increased by $1.2 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to an increase in marketing events, sponsorships, and advertising campaigns during the three months ended March 31, 2022.
General, administrative and occupancy
General, administrative and occupancy expenses increased by $10.1 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to increases of $6.4 million in consultancy fees related to certain project costs, $2.8 million in information technology costs, driven by an increased investment in non-capitalizable hardware and software, and $2.5 million in higher market data expenses.
Impairment of goodwill and intangible assets
Goodwill and intangible asset impairment charges increased by $29.2 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase is primarily due to a $32.8 million out-of-period incremental impairment of our goodwill recognized during the three months ended March 31, 2022, partially offset by a $3.6 million impairment of the Perkins brand name recognized during the three months ended March 31, 2021.
Depreciation and amortization
Depreciation and amortization expenses decreased $1.1 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to a decrease in the amortization of internally developed software, as assets became fully amortized during the current year.
Non-Operating Income and Expenses
Three months |
| ||||||||
Three months ended | ended | ||||||||
March 31, | March 31, | ||||||||
| 2022 |
| 2021 |
| 2022 vs. 2021 |
| |||
Non-operating income and expenses (in millions): |
|
|
|
|
|
| |||
Interest expense | $ | (3.2) | $ | (3.2) | — | % | |||
Investment gains (losses), net |
| (32.2) |
| 1.6 | n/m | * | |||
Other non-operating expenses, net |
| (7.8) |
| (0.1) | n/m | * | |||
Income tax provision |
| (22.8) |
| (43.1) | 47 | % | |||
* n/m - Not meaningful. | |||||||||
31
Investment gains (losses), net
The components of investment gains (losses), net for the three months ended March 31, 2022 and 2021, were as follows (in millions):
March 31, | ||||||
| 2022 |
| 2021 | |||
Investment gains (losses), net (in millions): |
|
|
|
| ||
Seeded investment products and hedges, net | $ | (11.5) | $ | 5.6 | ||
Third-party ownership interests in seeded investment products | (20.1) | (8.0) | ||||
Long Tail Alpha investment |
| 1.5 | 2.1 | |||
Deferred equity plan | (1.5) | 1.9 | ||||
Other |
| (0.6) |
| — | ||
Investment gains (losses), net | $ | (32.2) | $ | 1.6 | ||
Investment gains (losses), net moved unfavorably by $33.8 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. Movements in investment gains (losses), net are primarily due to fair value adjustments in relation to our seeded investment products, deferred equity plan and consolidation of third-party ownership interests in seeded investment products.
Other non-operating expenses, net
Other non-operating expenses, net declined $7.7 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The decrease was primarily due to a loss of $9.1 million related to the sale of Intech during the three months ended March 31, 2022. This loss was partially offset by $1.9 million of favorable foreign currency translation when comparing the three months ended March 31, 2022, to the three months ended March 31, 2021.
Income tax provision
Our effective tax rates for the three months ended March 31, 2022 and 2021, were as follows:
The effective tax rate for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was impacted by a decrease in pre-tax book income with an increase in the disallowed non-controlling interest loss. In addition, the effective tax rate was also impacted by excess tax benefit on equity-based vesting compensation.
32
Net loss attributable to noncontrolling interests
The components of net loss attributable to noncontrolling interests for the three months ended March 31, 2022 and 2021, were as follows (in millions):
Three months ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
Net loss attributable to noncontrolling interests (in millions): | ||||||
Consolidated seeded investment products | $ | 20.1 | $ | 8.0 | ||
Majority-owned subsidiaries |
| — |
| (0.2) | ||
Total net loss attributable to noncontrolling interests | $ | 20.1 | $ | 7.8 | ||
Net loss attributable to noncontrolling interests improved by $12.3 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. Movements in net loss attributable to noncontrolling interests primarily relate to third-party ownership interests in consolidated seeded investment products and fair value adjustments in relation to our seeded investment products.
2022 Outlook
Our philosophy of maintaining strong financial discipline while reinvesting in the business to deliver on our strategic priorities continues in 2022. Current areas of focus for reinvestment include distribution, technology and investment themes, such as environmental, social and governance factors (“ESG”). We also expect an increase in spending on travel and entertainment as pandemic-related restrictions continue to ease. Non-compensation operating expenses are expected to increase in the low teens, on a percentage basis, while adjusted compensation to revenue ratio is expected to be in the low 40s in 2022. In addition, we expect the sale of Intech to have an insignificant effect on our revenue and expenses for the remainder of 2022.
Performance fees associated with U.S. mutual funds are expected to further deteriorate in 2022. With benchmark performance for the remainder of 2022, we expect U.S. mutual fund performance fees of approximately negative $60.0 million on an annual basis.
We also anticipate certain macroeconomic headwinds for the remainder of 2022, including volatile and potentially declining markets, rising interest rates, inflation and the Russia/Ukraine conflict which could have an adverse impact to our revenue and expenses.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, JHG management evaluates our profitability and our ongoing operations using additional non-GAAP financial measures. These measures are not in accordance with, or a substitute for, GAAP, and our financial measures may be different from non-GAAP financial measures used by other companies. Management uses these performance measures to evaluate the business, and adjusted values are consistent with internal management reporting. We have provided a reconciliation below of our non-GAAP financial measures to the most directly comparable GAAP measures.
33
Alternative performance measures
The following is a reconciliation of revenue, operating expenses, operating income, net income attributable to JHG and diluted earnings per share to adjusted revenue, adjusted operating expenses, adjusted operating income, adjusted net income attributable to JHG and adjusted diluted earnings per share, respectively, for the three months ended March 31, 2022 and 2021 (in millions, except per share and operating margin data):
| Three months ended | |||||
| March 31, | |||||
| 2022 | 2021 | ||||
Reconciliation of revenue to adjusted revenue |
|
|
| |||
Revenue | $ | 620.0 | $ | 644.0 | ||
Management fees | (57.0) | (46.8) | ||||
Shareowner servicing fees | (52.2) | (50.0) | ||||
Other revenue |
| (32.6) |
| (30.6) | ||
Adjusted revenue(1) | $ | 478.2 | $ | 516.6 | ||
Reconciliation of operating expenses to adjusted operating expenses |
|
|
|
| ||
Operating expenses | $ | 495.4 | $ | 451.5 | ||
Long-term incentive plans(2) |
| (13.0) |
| 0.1 | ||
Distribution expenses(1) | (141.8) | (127.4) | ||||
General, administrative and occupancy(2) |
| (6.5) |
| (3.6) | ||
Impairment of goodwill and intangible assets(3) | (32.8) | (3.6) | ||||
Depreciation and amortization(3) |
| (1.9) |
| (1.9) | ||
Adjusted operating expenses | $ | 299.4 | $ | 315.1 | ||
Adjusted operating income | 178.8 | 201.5 | ||||
Operating margin(4) |
| 20.1% |
| 29.9% | ||
Adjusted operating margin(5) |
| 37.4% |
| 39.0% | ||
Reconciliation of net income attributable to JHG to adjusted net income attributable to JHG |
|
|
|
| ||
Net income attributable to JHG | $ | 78.7 | $ | 155.5 | ||
Long-term incentive plans(2) |
| 13.0 | (0.1) | |||
General, administrative and occupancy(2) |
| 6.5 | 3.6 | |||
Impairment of goodwill and intangible assets(3) | 32.8 | 3.6 | ||||
Depreciation and amortization(3) |
| 1.9 |
| 1.9 | ||
Investment gains (losses), net(6) | — | 0.2 | ||||
Other non-operating expenses, net(6) |
| 7.5 |
| (1.8) | ||
Income tax provision(7) |
| (14.6) |
| (1.4) | ||
Adjusted net income attributable to JHG |
| 125.8 |
| 161.5 | ||
Less: allocation of earnings to participating stock-based awards |
| (3.2) |
| (5.0) | ||
Adjusted net income attributable to JHG common shareholders | $ | 122.6 | $ | 156.5 | ||
Weighted-average common shares outstanding — diluted (two class) |
| 164.5 |
| 171.8 | ||
Diluted earnings per share (two class)(8) | $ | 0.47 | $ | 0.88 | ||
Adjusted diluted earnings per share (two class)(9) | $ | 0.75 | $ | 0.91 | ||
34
| (1) | We contract with third-party intermediaries to distribute and service certain of our investment products. Fees for distribution and servicing related activities are either provided for separately in an investment product’s prospectus or are part of the management fee. Under both arrangements, the fees are collected by us and passed through to third-party intermediaries who are responsible for performing the applicable services. The majority of distribution and servicing fees we collect are passed through to third-party intermediaries. JHG management believes that the deduction of distribution and servicing fees from revenue in the computation of adjusted revenue reflects the pass-through nature of these revenues. In certain arrangements, we perform the distribution and servicing activities and retain the applicable fee. Revenues for distribution and servicing activities performed by us are not deducted from GAAP revenue. |
| (2) | Adjustments for the three months ended March 31, 2022, consist primarily of long-term incentive plan expense associated with accelerated vesting of awards related to the retirement of our CEO and CIO, deal costs associated with the sale of Intech and rent expense for subleased office space. Adjustments for the three months ended March 31, 2021, consist primarily of rent expense for subleased office space. JHG management believes these costs do not represent our ongoing operations. |
| (3) | Investment management contracts have been identified as a separately identifiable intangible asset arising on the acquisition of subsidiaries and businesses. Such contracts are recognized at the net present value of the expected future cash flows arising from the contracts at the date of acquisition. For segregated mandate contracts, the intangible asset is amortized on a straight-line basis over the expected life of the contracts. In addition, the adjustment for the three months ended March 31, 2022, includes an out-of-period incremental goodwill impairment charge, and the adjustment for the three months ended March 31, 2021, includes an impairment charge related to our trademarks. JHG management believes these non-cash and acquisition-related costs are not representative of our ongoing operations. |
| (4) | Operating margin is operating income divided by revenue. |
| (5) | Adjusted operating margin is adjusted operating income divided by adjusted revenue. |
| (6) | Adjustments primarily relate to contingent consideration adjustments associated with prior acquisitions. In addition, the adjustment for the three months ended March 31, 2022, includes a one-time charge related to the sale of Intech. JHG management believes these costs are not representative of our ongoing operations. |
| (7) | The tax impact of the adjustments is calculated based on the applicable U.S. or foreign statutory tax rate as it relates to each adjustment. Certain adjustments are either not taxable or not tax-deductible. |
| (8) | Diluted earnings per share is net income attributable to JHG common shareholders divided by weighted-average diluted common shares outstanding. |
| (9) | Adjusted diluted earnings per share is adjusted net income attributable to JHG common shareholders divided by weighted-average diluted common shares outstanding. |
LIQUIDITY AND CAPITAL RESOURCES
Our capital structure, together with available cash balances, cash flows generated from operations, and further capital and credit market activities, if necessary, should provide us with sufficient resources to meet present and future cash needs, including operating and other obligations as they fall due and anticipated future capital requirements.
35
The following table summarizes key balance sheet data relating to our liquidity and capital resources as of March 31, 2022, and December 31, 2021 (in millions):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Cash and cash equivalents held by the Company | $ | 782.0 | $ | 1,106.0 | ||
Investment securities held by the Company | $ | 510.3 | $ | 551.0 | ||
Fees and other receivables | $ | 322.6 | $ | 351.6 | ||
Debt | $ | 309.7 | $ | 310.4 | ||
Cash and cash equivalents consist primarily of cash at banks held in money market funds. Cash and cash equivalents exclude cash held by consolidated VIEs and consolidated VREs, and investment securities exclude noncontrolling interests as these assets are not available for general corporate purposes.
Investment securities held by us represent seeded investment products (exclusive of noncontrolling interests), investments related to deferred compensation plans and other less significant investments.
We believe that existing cash and cash from operations should be sufficient to satisfy our short-term capital requirements. Expected short-term uses of cash include ordinary operating expenditures, seed capital investments, interest expense, dividend payments, income tax payments and common stock repurchases. We may also use available cash for other general corporate purposes and acquisitions.
Regulatory Capital
We are subject to regulatory oversight by the SEC, the Financial Industry Regulatory Authority (“FINRA”), the U.S. Commodity Futures Trading Commission (“CFTC”), the Financial Conduct Authority (“FCA”) and other international regulatory bodies. We strive to ensure that we are compliant with our regulatory obligations at all times. Our primary capital requirement relates to the FCA-supervised regulatory group (a sub-group of our company), comprising Janus Henderson (UK) Holdings Limited, all of its subsidiaries and Janus Henderson Investors International Limited (“JHIIL”). JHIIL is included as a connected undertaking to meet the requirements of the Investment Firm Prudential Regime (“IFPR”) for MiFID investment firms (“MIFIDPRU”). The combined capital requirement is £204.2 million ($268.9 million), resulting in £256.7 million ($338.0 million) of capital above the requirement as of March 31, 2022, based upon internal calculations and taking into account the effect of dividends related to first quarter 2022 results that will be paid in the second quarter 2022. Capital requirements in other jurisdictions are not significant in aggregate. The FCA-supervised regulatory group is also subject to liquidity requirements and holds a sufficient surplus above these requirements.
Short-Term Liquidity and Capital Resources
Common Stock Repurchases
On May 3, 2022, the Board approved a new on-market share buyback program (“2022 Corporate Buyback Program”) pursuant to which we are authorized to repurchase up to $200.0 million of our common stock on the NYSE and CHESS Depository Interests (“CDIs”) on the Australian Securities Exchange (“ASX”) at any time prior to the date of our 2023 Annual General Meeting of Shareholders.
On July 28, 2021, the Board approved an on-market share buyback program (“2021 Corporate Buyback Program”) pursuant to which we were authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2022 Annual General Meeting of Shareholders. We commenced repurchases under the 2021 Corporate Buyback Program in August 2021, and during the three months ended March 31, 2022, we repurchased 1,258,640 shares of our common stock and CDIs for $43.3 million.
Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements. We usually satisfy these entitlements by transferring shares of existing
36
common stock that we repurchase on-market for this purpose. We purchased 2,931,432 shares at an average price of $32.43 in satisfaction of employee awards and entitlements during the three months ended March 31, 2022.
Dividends
The payment of cash dividends is within the discretion of our Board of Directors and depends on many factors, including our results of operations, financial condition, capital requirements, general business conditions and legal requirements.
Dividends declared and paid during the three months ended March 31, 2022, were as follows:
Dividend | Date | Dividends paid | Date | |||||
per share |
| declared | (in US$ millions) |
| paid | |||
$ | 0.38 | February 2, 2022 |
| $ | 64.3 | February 28, 2022 | ||
On May 3, 2022, the Board approved a 2.6% increase in the quarterly cash dividends and declared a $0.39 per share dividend for the first quarter 2022. The quarterly dividend will be paid on May 31, 2022, to shareholders of record at the close of business on May 16, 2022.
Long-Term Liquidity and Capital Resources
Expected long-term commitments as of March 31, 2022, include principal and interest payments related to the 2025 Senior Notes and operating and finance lease payments. We expect to fund our long-term commitments with existing cash and cash generated from operations or by accessing capital and credit markets as necessary.
2025 Senior Notes
The 2025 Senior Notes have a principal amount of $300.0 million, pay interest at 4.875% semiannually on February 1 and August 1 of each year, and mature on August 1, 2025.
Defined Benefit Pension Plan
The latest triennial valuation of our defined benefit pension plan resulted in a surplus of $2.6 million.
Off-Balance Sheet Arrangements
As of March 31, 2022, we have a $10.0 million unfunded loan commitment with Intech, which is not reflected in our condensed consolidated financial statements. Refer to Note 2 — Dispositions for further information on the loan commitment.
Other Sources of Liquidity
At March 31, 2022, we had a $200 million Credit Facility. The Credit Facility includes an option for us to request an increase to our borrowing capacity under the Credit Facility of up to an additional $50.0 million. The maturity date of the Credit Facility is February 16, 2024. Additionally, as a result of LIBOR’s phase out, our credit facility was amended to incorporate other short-term borrowing rates. Specifically, the SOFR was designated as the successor rate to USD LIBOR and the SONIA was designated as the successor rate to GBP LIBOR.
The Credit Facility may be used for general corporate purposes and bears interest on borrowings outstanding at the relevant interbank offer rate plus a spread.
The Credit Facility contains a financial covenant with respect to leverage. The financing leverage ratio cannot exceed 3.00x EBITDA. At the latest practicable date before the date of this report, we were in compliance with all covenants, and there were no outstanding borrowings under the Credit Facility.
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Cash Flows
Cash flow data for the three months ended March 31, 2022 and 2021, was as follows (in millions):
| Three months ended | |||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash flows provided by (used for): |
|
|
|
| ||
Operating activities | $ | (57.5) | $ | 25.8 | ||
Investing activities |
| (16.9) |
| 23.4 | ||
Financing activities |
| (214.8) |
| (322.5) | ||
Effect of exchange rate changes on cash and cash equivalents |
| (16.0) |
| 1.8 | ||
Net change in cash and cash equivalents |
| (305.2) |
| (271.5) | ||
Cash balance at beginning of period |
| 1,118.6 |
| 1,108.1 | ||
Cash balance at end of period | $ | 813.4 | $ | 836.6 | ||
Operating Activities
Fluctuations in operating cash flows are attributable to changes in net income and working capital items, which can vary from period to period based on the amount and timing of cash receipts and payments.
Investing Activities
Cash (used for) provided by investing activities for the three months ended March 31, 2022 and 2021, was as follows (in millions):
| Three months ended | |||||
March 31, | ||||||
| 2022 |
| 2021 | |||
(Purchases) sales of investment securities, net | $ | (34.2) | $ | 51.4 | ||
Sales (purchases) of investment securities by consolidated seeded investment products, net | 13.0 | (28.1) | ||||
Purchases of property, equipment and software |
| (2.9) |
| (1.6) | ||
Cash received (paid) on settled seed capital hedges, net | 11.7 | (1.8) | ||||
Other |
| (4.5) |
| 3.5 | ||
Cash (used for) provided by investing activities | $ | (16.9) | $ | 23.4 | ||
Cash outflows from investing activities were $16.9 million during the three months ended March 31, 2022, and cash inflows from investing activities were $23.4 million during the three months ended March 31, 2021. Cash outflows from investing activities during the three months ended March 31, 2022, were primarily due to net purchases of investment securities. When comparing the three months ended March 31, 2022, to the three months ended March 31, 2021, the change in cash (used for) provided by investing activities was primarily due to increases in net purchases of investment securities, partially offset by increases in net sales of investment securities by consolidated seeded investment products and cash received from the settlement of hedges related to our seed capital hedge program.
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Financing Activities
Cash used for financing activities for the three months ended March 31, 2022 and 2021, was as follows (in millions):
| Three months ended | |||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Dividends paid to shareholders | $ | (64.3) | $ | (61.7) | ||
Third-party (purchases) sales in consolidated seeded investment products, net |
| (11.7) |
| 30.2 | ||
Purchase of common stock for stock-based compensation plans |
| (94.5) |
| (61.5) | ||
Purchase of common stock from Dai-ichi Life and share buyback program |
| (43.3) |
| (230.2) | ||
Proceeds from stock-based compensation plans | 0.5 | 0.8 | ||||
Other |
| (1.5) |
| (0.1) | ||
Cash used for financing activities | $ | (214.8) | $ | (322.5) | ||
Cash outflows from financing activities were $214.8 million and $322.5 million during the three months ended March 31, 2022 and 2021, respectively. Cash outflows from financing activities during the three months ended March 31, 2022, were primarily due to purchases of common stock for stock-based compensation plans and the share buyback program, dividends paid to shareholders and net third-party purchases in investment securities within consolidated seeded investment products. When comparing the three months ended March 31, 2022, to the three months ended March 31, 2021, the change in cash used for financing activities was primarily due to an increase in third-party purchases in consolidated seeded investment products and the purchase of common stock for stock-based compensation plans. These increases were partially offset by the purchase of common stock from Dai-ichi Life, as part of the Dai-ichi Life secondary public offering, which was recognized during the three months ended March 31, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in our exposure to market risks from that previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 4. Controls and Procedures
As of March 31, 2022, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Disclosure controls and procedures are designed by us to ensure that we record, process, summarize and report within the time periods specified in the SEC’s rule and forms the information we must disclose in reports that we file with or submit to the SEC. Roger Thompson, our interim CEO and Chief Financial Officer, reviewed and participated in management’s evaluation of the disclosure controls and procedures. Based on this evaluation, Mr. Thompson concluded that as of the date of their evaluation, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1. Financial Statements, Note 15 — Commitments and Contingencies.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Common Stock Purchases
On May 3, 2022, the Board approved the 2022 Corporate Buyback Program pursuant to which we are authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2023 Annual General Meeting of Shareholders.
On July 28, 2021, the Board approved the 2021 Corporate Buyback Program pursuant to which we are authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2022 Annual General Meeting of Shareholders. We commenced repurchases under the 2021 Corporate Buyback Program in August 2021, and during the three months ended March 31, 2022, we repurchased 1,258,640 shares of our common stock and CDIs for $43.3 million.
Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements. We usually satisfy these entitlements by transferring shares of existing common stock that we repurchase on-market for this purpose (“Share Plans Repurchases”). During the first quarter 2022, we purchased 2,931,432 shares on-market for $95.1 million in satisfaction of employee awards and entitlements.
The following is a summary of our common stock repurchases by month during the three months ended March 31, 2022, including repurchases under the 2021 Corporate Buyback Programs and Share Plans Repurchases.
| Total |
|
| Total number of shares |
| Approximate U.S. dollar value | ||||
number of | Average | purchased as part of | of shares that may yet | |||||||
shares | price paid per | publicly announced | be purchased under the | |||||||
Period | purchased | share | programs | programs (end of month, in millions) | ||||||
January 1, 2022, through |
| 2,951 | $ | 36.09 |
| — |
| $ | 58 | |
February 1, 2022, through |
| 1,343,351 |
| 33.87 |
| — |
| $ | 58 | |
March 1, 2022, through |
| 2,843,770 |
| 32.62 |
| 1,258,640 |
| $ | 15 | |
Total |
| 4,190,072 | $ | 33.02 |
| 1,258,640 |
|
| ||
Items 3, 4 and 5.
Not applicable.
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Item 6. Exhibits
Filed with this Report:
Exhibit |
| Document |
| Regulation S-K |
10.1 | CEO Offer Letter, dated March 23, 2022, between Janus Henderson Group plc and Ali Dibadj* | 10 | ||
10.2 | 10 | |||
10.3 | 10 | |||
15.1 | 15 | |||
31 | 31 | |||
32 | 32 | |||
101.INS | XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | 101 | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | 101 | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | 101 | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | 101 | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | 101 | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | 101 | ||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) | 104 | ||
*Management contract or compensatory plan or agreement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 4, 2022
Janus Henderson Group plc | |
/s/ Roger Thompson | |
Roger Thompson, | |
Interim Chief Executive Officer | |
Chief Financial Officer | |
(Interim Principal Executive Officer and Principal Financial Officer) | |
/s/ Brennan Hughes | |
Brennan Hughes, | |
Chief Accounting Officer and Treasurer | |
(Principal Accounting Officer) |
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