Janus Henderson(JHG) - 2018 Q4 - Annual Report

PART I Business Overview JHG is a global asset manager with $328.5 billion AUM (2018), specializing in active investment across major asset classes for institutional and retail clients - JHG is an independent global asset manager specializing in active investment across all major asset classes, formed by the merger of Henderson Group plc and Janus Capital Group Inc. on May 30, 2017[10] Metric | Metric | Value | | :----------------------- | :-------------------- | | Employees Worldwide | Approximately 2,300 | | Assets Under Management (AUM) (as of Dec 31, 2018) | $328.5 billion | | Primary Revenue Drivers | Management and Performance Fees | - JHG manages a broad range of actively managed investment products across five capabilities: Equities, Quantitative Equities, Fixed Income, Multi-Asset, and Alternatives[12] AUM by Channel (as of Dec 31, 2018) | Channel | AUM (in billions) | % of Total AUM | | :---------------- | :---------------- | :------------- | | Intermediary | $143.1 | 44% | | Institutional | $129.0 | 39% | | Self-Directed | $56.4 | 17% | - The investment management industry is highly competitive and subject to extensive global regulations, increasing compliance costs and supervisory agency powers[30][32] Risk Factors JHG faces significant market, operational, regulatory, and tax risks, including AUM dependence, intense competition, and global economic instability - JHG's results are highly dependent on AUM value, composition, and investment performance; declines due to redemptions, poor performance, or market/currency movements would negatively impact revenue[62][63] - The investment management industry is highly competitive, with downward pressure on fees from passive strategies and regulation, necessitating strong investment performance and product innovation[30][76][77] - Significant operational and technology risks include cyberattacks, data breaches, reliance on proprietary software (Intech), and third-party vendor dependencies, posing substantial loss and reputational harm[88][89][95][102][103] - JHG is subject to extensive and evolving global regulations (e.g., SEC, MiFID II), potentially increasing compliance costs, capital requirements, and enforcement actions, alongside impacts from Brexit and benchmark index changes[32][109][112][117][127][130][131] - Tax risks include changes in tax laws, potential disagreements with authorities, and the possibility of IRS treating JHG as a U.S. corporation under Section 7874[134][136] Unresolved Staff Comments No unresolved staff comments from the SEC regarding the company's filings - No unresolved staff comments[145] Properties JHG operates 29 global offices, including headquarters in London and major operations in Denver, with all spaces leased and deemed adequate - JHG operates 29 offices across the UK, Europe, North America, Asia, and Australia[146] Office Locations | Location | Square Footage | Lease Expiration | | :----------------- | :------------- | :--------------- | | London (HQ) | 107,000 sq ft | 2028 | | Denver, Colorado | 160,000 sq ft | 2025 (primary) | | Other 26 offices | 129,000 sq ft | Leased | Legal Proceedings Legal proceedings information is incorporated by reference from Note 18 in Part II, Item 8, Financial Statements and Supplementary Data - Legal proceedings information is incorporated by reference from Note 18 of the Financial Statements and Supplementary Data[147] Mine Safety Disclosures This item is not applicable to Janus Henderson Group plc - Not applicable[148] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities JHG's common stock trades on NYSE (JHG), with 47,481 holders (2018), completing a $100 million buyback in 2018 and approving a $200 million program for 2019 - JHG's common stock is traded on the New York Stock Exchange (NYSE) under the symbol JHG[150] Stock and Buyback Metrics | Metric | Value | | :-------------------------------- | :-------------------- | | Holders of Record (Dec 31, 2018) | Approximately 47,481 | | 2018 Share Buyback Program | $100 million | | Shares Repurchased in 2018 | 3,993,374 | | 2019 Approved Share Buyback Program | Up to $200 million | - JHG's policy is to purchase shares on-market for annual share grants associated with variable compensation, rather than issuing new shares to employees[154] Selected Financial Data Selected financial data for five years ending 2018, with pre-merger data (2014-2016) not comparable to post-merger (2017-2018) - Financial data for 2016, 2015, and 2014 are pre-merger and not comparable with 2017 or 2018, with 2017 including the impact of the Merger from May 30, 2017[157][158] Selected Financial Data (2018 vs. 2017, in millions, except per share) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :------------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total Revenues | $2,306.4 | $1,818.3 | $488.1 | 26.8% | | Operating Expenses | $1,656.6 | $1,376.0 | $280.6 | 20.4% | | Operating Income | $649.8 | $442.3 | $207.5 | 46.9% | | Operating Margin | 28.2% | 24.3% | 3.9 pp | - | | Net Income Attributable to JHG | $523.8 | $655.5 | $(131.7) | (20.1%) | | Diluted EPS | $2.61 | $3.93 | $(1.32) | (33.6%) | | Cash Flows from Operating Activities | $670.8 | $444.1 | $226.7 | 51.0% | | Ending AUM (in billions) | $328.5 | $370.8 | $(42.3) | (11.4%) | | Average AUM (in billions) | $367.7 | $262.1 | $105.6 | 40.3% | - The 2017 income tax provision included a one-time tax benefit of $340.7 million related to new U.S. tax legislation, significantly impacting net income for that year[161] Management's Discussion and Analysis of Financial Condition and Results of Operations of Janus Henderson Group plc Detailed analysis of JHG's financial performance, highlighting 2018 revenue growth (27%), operating income increase (47%), net income decrease (20%), and AUM decline (11%) - JHG operates as a single segment investment management business, with strategic and financial management decisions determined centrally by the CEO[164] 2018 Financial Performance Highlights | Metric | 2018 Value | Change from 2017 | | :-------------------------------- | :----------- | :--------------- | | Total Revenues | $2,306.4M | +27% | | Operating Income | $649.8M | +47% | | Operating Margin | 28.2% | +3.9 pp | | Net Income Attributable to JHG | $523.8M | (20%) | | Diluted EPS | $2.61 | - | | AUM (Dec 31, 2018) | $328.5B | (11%) | | AUM Outperforming Benchmarks (1-yr) | 55% | - | | AUM Outperforming Benchmarks (3-yr) | 61% | - | | AUM Outperforming Benchmarks (5-yr) | 72% | - | - The decrease in net income attributable to JHG in 2018 was mainly due to an increase in income taxes from a higher effective tax rate, contrasting with a one-time tax benefit recorded in 2017 due to U.S. tax law changes[174] AUM Movements (2018, in billions) | Factor | Impact | | :-------------------------------- | :------------------- | | Net Redemptions | $(18.1) | | Adverse Market Movements | $(15.7) | | Unfavorable Foreign Exchange | $(8.5) | | Total Decrease in AUM | $(42.3) | Revenue Breakdown (2018 vs. 2017, in millions) | Revenue Type | 2018 | 2017 | Change ($) | Change (%) | | :------------------------- | :---------- | :---------- | :---------- | :--------- | | Management fees | $1,947.4 | $1,480.9 | $466.5 | 31.5% | | Performance fees | $7.1 | $103.9 | $(96.8) | (93.2%) | | Shareowner servicing fees | $154.2 | $87.3 | $66.9 | 76.6% | | Other revenue | $197.7 | $146.2 | $51.5 | 35.2% | | Total Revenue | $2,306.4 | $1,818.3 | $488.1 | 26.8% | Operating Expenses Breakdown (2018 vs. 2017, in millions) | Expense Type | 2018 | 2017 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Employee compensation and benefits | $613.0 | $543.3 | $69.7 | 12.8% | | Long-term incentive plans | $188.6 | $150.8 | $37.8 | 25.1% | | Distribution expenses | $446.7 | $351.9 | $94.8 | 26.9% | | Investment administration | $46.9 | $43.8 | $3.1 | 7.1% | | Marketing | $37.9 | $31.2 | $6.7 | 21.5% | | General, administrative and occupancy | $253.7 | $202.2 | $51.5 | 25.5% | | Depreciation and amortization | $69.8 | $52.8 | $17.0 | 32.2% | | Total Operating Expenses | $1,656.6 | $1,376.0 | $280.6 | 20.4% | - JHG's effective tax rate was 24.5% in 2018, compared to (47.1)% in 2017, with the 2017 rate benefiting from a re-measurement of deferred tax assets and liabilities due to U.S. tax legislation[224] Cash Flow Summary (in millions) | Activity | 2018 | 2017 | 2016 | | :-------------------------- | :---------- | :---------- | :---------- | | Operating Activities | $670.8 | $444.1 | $235.1 | | Investing Activities | $100.9 | $519.5 | $(108.3) | | Financing Activities | $(616.8) | $(504.7) | $(338.6) | | Net Change in Cash | $122.4 | $471.0 | $(260.5) | | Cash Balance at End of Year | $916.6 | $794.2 | $323.2 | - Key accounting policies and estimates include the valuation of investment securities, contingent consideration, goodwill and intangible assets, retirement benefit plans, and income taxes, all requiring significant management judgment[265] Quantitative and Qualitative Disclosures about Market Risk JHG faces market risks from AUM fluctuations, volatile performance fees, investment securities, and foreign currency, mitigated by derivative hedging programs - Management fee revenues are directly affected by fluctuations in the market value of Assets Under Management (AUM)[286] - Performance fees, recognized from $7.1 million in 2018, are highly volatile and dependent on investment performance against benchmarks or absolute returns[288] Hypothetical 10% Market Price Change Impact on Investment Securities (Dec 31, 2018, in millions) | Investment Securities | Fair Value | Fair Value (10% Increase) | Fair Value (10% Decrease) | | :---------------------------------- | :--------- | :------------------------ | :------------------------ | | Seeded investment products | $447.5 | $492.3 | $402.8 | | Investments related to deferred compensation plans | $120.3 | $132.3 | $108.3 | | Other | $6.7 | $7.4 | $6.0 | | Total Investment Securities | $574.5 | $632.0 | $517.1 | - JHG uses derivative instruments (futures, credit default swaps, index swaps, total return swaps, foreign currency forward contracts) in an economic hedge program to mitigate market volatility and foreign currency risk on seeded investments[290] Impact of 10% Currency Weakening on Unhedged Financial Assets/Liabilities (Dec 31, 2018, in millions) | Currency | Net Income Attributable to JHG | Other Comprehensive Income Attributable to JHG | | :------------------ | :------------------------------------------- | :----------------------------------------------------------- | | Great British pound | $(13.9) | $176.2 | | Australian dollar | $(4.2) | $27.9 | | Euro | $(0.6) | $0.8 | Financial Statements and Supplementary Data JHG's audited consolidated financial statements for 2018, 2017, and 2016, including balance sheets, income statements, cash flows, and equity changes, with auditor reports and detailed notes - The consolidated financial statements for 2018, 2017, and 2016 are presented in accordance with U.S. GAAP[319] - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and affirmed the effectiveness of internal control over financial reporting as of December 31, 2018[297] Consolidated Balance Sheet Highlights (in millions) | Metric (as of Dec 31) | 2018 | 2017 | | :---------------------- | :---------- | :---------- | | Total Assets | $6,911.9 | $7,272.7 | | Total Liabilities | $1,915.0 | $2,206.9 | | Total Equity | $4,860.8 | $4,875.5 | Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric (Year ended Dec 31) | 2018 | 2017 | 2016 | | :------------------------- | :---------- | :---------- | :---------- | | Total Revenue | $2,306.4 | $1,818.3 | $1,018.2 | | Operating Income | $649.8 | $442.3 | $232.1 | | Net Income Attributable to JHG | $523.8 | $655.5 | $189.0 | Consolidated Statements of Cash Flows Highlights (in millions) | Activity (Year ended Dec 31) | 2018 | 2017 | 2016 | | :--------------------------- | :---------- | :---------- | :---------- | | Operating Activities | $670.8 | $444.1 | $235.1 | | Investing Activities | $100.9 | $519.5 | $(108.3) | | Financing Activities | $(616.8) | $(504.7) | $(338.6) | | Cash at End of Year | $916.6 | $794.2 | $323.2 | - The notes to the financial statements provide detailed information on critical accounting policies, including revenue recognition, fair value measurements, goodwill and intangible assets, and the impact of recent accounting pronouncements[322][369][354][387][407] Note 1 — Description of the Business JHG is an independent global asset manager specializing in active investment across major asset classes, incorporated in Jersey, tax resident in the UK, with shares on NYSE and CDIs on ASX - JHG is an independent global asset manager specializing in active investment across major asset classes, managing a broad range of investment products for institutional and retail investors[317] - JHG is incorporated in Jersey, Channel Islands, tax resident and domiciled in the UK, with ordinary shares traded on the NYSE and CDIs on the ASX[318] Note 2 — Summary of Significant Accounting Policies This note outlines JHG's significant accounting policies, including U.S. GAAP compliance, single segment reporting, revenue recognition, goodwill and intangible asset treatment, and fair value measurement hierarchy - The consolidated financial statements are prepared in accordance with U.S. GAAP, with the post-Merger functional currency of JHG being USD[319][320] - JHG operates as a single segment investment management business, with resources allocated and managed on an aggregated basis by the CEO[323] - Revenue recognition follows a five-step process, with management fees generally based on a percentage of AUM and performance fees recognized when specific criteria are achieved[369][370][371] - Goodwill and intangible assets are recognized at fair value during acquisitions; goodwill and indefinite-lived intangibles are not amortized but tested for impairment annually, while definite-lived intangibles are amortized over their estimated useful lives[387][390][391] - Fair value measurements are classified within a three-level hierarchy (Level 1: quoted prices in active markets, Level 2: significant other observable inputs, Level 3: significant unobservable inputs), with significant management judgment required for Level 3 valuations[357][358][361] Note 3 — Recent Accounting Pronouncements This note details the adoption of new accounting standards, including ASC 606 (revenue recognition) and ASU 2016-01 (financial instruments) in 2018, and the anticipated impact of ASC 842 (leases) in 2019 - JHG adopted the new revenue recognition standard (ASC 606) effective January 1, 2018, using the retrospective method, increasing certain revenues and expenses but with no impact on net income[407][409][410] - The financial instruments standard (ASU 2016-01) was adopted on January 1, 2018, reclassifying a $2.5 million unrealized gain and requiring all equity investments to be measured at fair value through earnings[411][412] - The new lease accounting standard (ASC 842) will be adopted effective January 1, 2019, with an anticipated recording of approximately $133 million in right-of-use assets and $150 million in corresponding lease liabilities[418][419][420] Note 4 — Acquisitions This note details the May 30, 2017, merger of equals with JCG, involving a $2,630.2 million consideration and the allocation of purchase price to acquired assets and assumed liabilities - On May 30, 2017, JHG completed a merger of equals with JCG, with a fair value of consideration transferred to JCG common stockholders of $2,630.2 million[426][427] Final Purchase Price Allocation (in millions) | Category | Amount | | :-------------------------- | :------- | | Assets Acquired | | | Cash and cash equivalents | $417.2 | | Investment securities | $270.4 | | Intangible assets | $2,785.0 | | Goodwill | $726.5 | | Liabilities Assumed | | | Long-term debt | $481.8 | | Deferred tax liabilities | $1,034.3 | Acquired Intangible Assets (in millions) | Asset Type | Fair Value | Useful Life (weighted average in years) | | :-------------------------- | :--------- | :------------------------------------ | | Mutual funds | $2,155.0 | Indefinite | | Separate accounts | $202.0 | 15 | | ETNs | $33.0 | 15 | | ETFs | $14.0 | Indefinite | | Trademarks | $381.0 | Indefinite | | Total | $2,785.0 | | Note 5 — Consolidation JHG consolidates seeded investment products classified as Variable Interest Entities (VIEs) or Voting Rights Entities (VREs) if it is the primary beneficiary or holds a majority voting interest - JHG performs periodic consolidation analyses for seeded investment products, classifying them as Variable Interest Entities (VIEs) or Voting Rights Entities (VREs) and consolidating if JHG is the primary beneficiary or holds a majority voting interest[324][327][329] - Assets of consolidated VIEs and VREs are not available for JHG's general corporate purposes, and investors in these entities have no recourse to JHG's credit[437][440] JHG's Net Interest in Consolidated VREs (in millions) | Metric (as of Dec 31) | 2018 | 2017 | | :---------------------- | :----- | :----- | | Total Assets | $15.3 | $23.2 | | Redeemable noncontrolling interests | $(6.0) | $(6.6) | | JHG's Net Interest | $9.3 | $16.6 | Note 6 — Investment Securities This note details JHG's investment securities, including seeded products and deferred compensation investments, and the use of derivatives for economic hedging against market and currency risks JHG's Investment Securities (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Seeded investment products | $447.5 | $597.9 | | Investments related to deferred compensation plans | $120.3 | $94.0 | | Other investments | $6.7 | $8.2 | | Total Investment Securities | $574.5 | $700.1 | - JHG maintains an economic hedge program using derivative instruments (futures, credit default swaps, index swaps, total return swaps, foreign currency forward contracts) to mitigate market volatility and foreign currency risk on certain seeded investments[444] Investment Gains (Losses), Net (in millions) | Category (Year ended Dec 31) | 2018 | 2017 | 2016 | | :--------------------------- | :------ | :----- | :------ | | Seeded investment products and derivatives, net | $(42.6) | $4.0 | $(12.4) | | Gain on sale of Volantis | — | $10.2 | — | | Other | $1.7 | $3.8 | $0.7 | | Total | $(40.9) | $18.0 | $(11.7) | Note 7 — Goodwill and Intangible Assets This note details JHG's goodwill and intangible assets, including amortization policies, annual impairment assessments, and the impact of the 2018 transfer of U.S. back-office functions Goodwill and Intangible Assets (in millions) | Asset Type (as of Dec 31) | 2018 | 2017 | | :-------------------------- | :---------- | :---------- | | Net Intangible Assets | $3,123.3 | $3,204.8 | | Goodwill | $1,478.0 | $1,533.9 | - Indefinite-lived intangible assets (investment management contracts, trademarks) are not amortized, while definite-lived client relationships are amortized over an estimated weighted-average life of approximately 13 years[452] - JHG performs annual impairment assessments for goodwill and indefinite-lived intangible assets; in 2018, the fair value of the reporting unit exceeded its carrying value by $1.6 billion, but certain intangible assets are at risk of impairment in 2019 due to AUM declines[457][458][273][274] - A $7.2 million impairment was recorded in 2018 for Gartmore investment management agreements (definite-lived intangible assets)[459][216] - On March 31, 2018, JHG completed a transaction transferring its U.S. back-office, middle-office, and custody functions to BNP Paribas, resulting in a $22.3 million gain and a $9.5 million goodwill reduction[455] Note 8 — Equity Method Investments This note details JHG's equity method investments, including interests in Long Tail Alpha and the acquisition of Optimum Investment Management Limited in 2018, and associated net gains Equity Method Investments (in millions) | Metric (as of Dec 31) | 2018 | 2017 | | :---------------------- | :----- | :----- | | Carrying Value | $7.8 | $5.9 | - JHG's equity method investments include interests in Long Tail Alpha (20% owned) and, as of December 31, 2017, Optimum Investment Management Limited (50% owned, fully acquired in 2018)[461][462] - The Group recognized a net gain of $2.0 million from equity method investments in 2018, compared to a $0.6 million loss in 2017[462] Note 9 — Fair Value Measurements This note outlines JHG's fair value measurements, categorized into a three-level hierarchy based on input observability, and details the valuation of contingent consideration liabilities and assets - Fair value measurements are categorized into a three-level hierarchy based on the observability of inputs: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[357][358] Fair Value Measurements (in millions) as of December 31, 2018 | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Assets: | | | | | | Cash equivalents | $381.8 | — | — | $381.8 | | Investment securities | $298.3 | $257.0 | $19.2 | $574.5 | | Seed hedge derivatives | — | $3.2 | — | $3.2 | | Derivatives in consolidated seeded investment products | — | $0.9 | — | $0.9 | | Volantis contingent consideration | — | — | $3.9 | $3.9 | | Total Assets | $680.1 | $261.1 | $23.1 | $964.3 | | Liabilities: | | | | | | Derivatives in consolidated seeded investment products | — | $2.1 | — | $2.1 | | Financial liabilities in consolidated seeded investment products | $0.4 | — | — | $0.4 | | Seed hedge derivatives | — | $1.1 | — | $1.1 | | Long-term debt (disclosed at fair value) | — | $301.4 | — | $301.4 | | Deferred bonuses | — | — | $68.5 | $68.5 | | Contingent consideration | — | — | $61.3 | $61.3 | | Total Liabilities | $0.4 | $304.6 | $129.8 | $434.8 | | Redeemable Noncontrolling Interests: | | | | | | Consolidated seeded investment products | — | — | $121.6 | $121.6 | | Intech | — | — | $14.5 | $14.5 | | Total Redeemable Noncontrolling Interests | — | — | $136.1 | $136.1 | - Contingent consideration liabilities for Geneva, Perennial, and Kapstream are measured at fair value using discounted cash flows, with key unobservable inputs including forecast revenues and the probability of meeting performance targets[470][471][473][477] - The Volantis contingent consideration asset had a fair value of $3.9 million as of December 31, 2018, and the VelocityShares contingent consideration expired in November 2018 with a fair value of nil[469][478][479] Note 10 — Debt This note details JHG's debt, including 4.875% Senior Notes due 2025 and the redemption of 0.750% Convertible Senior Notes due 2018, alongside its $200 million unsecured revolving credit facility Debt Summary (in millions) | Debt Type (as of Dec 31) | 2018 Carrying Value | 2018 Fair Value | 2017 Carrying Value | 2017 Fair Value | | :------------------------- | :------------------ | :-------------- | :------------------ | :-------------- | | 4.875% Senior Notes due 2025 | $319.1 | $301.4 | $322.0 | $323.4 | | 0.750% Convertible Senior Notes due 2018 | — | — | $57.2 | $57.3 | | Total Debt | $319.1 | $301.4 | $379.2 | $380.7 | - The 0.750% Convertible Senior Notes due 2018 were redeemed and settled with cash for $95.3 million during 2018, reducing the carrying value to zero[490] - JHG has a $200 million unsecured revolving credit facility, maturing February 16, 2024, with no borrowings outstanding as of December 31, 2018, and is in compliance with all covenants[492] Note 11 — Income Taxes This note details JHG's income tax expense, effective tax rates, and deferred tax liabilities, highlighting the 2017 tax benefit from U.S. tax reform and the 2018 valuation allowance against deferred tax assets Income Tax Expense (Benefit) (in millions) | Category (Year ended Dec 31) | 2018 | 2017 | 2016 | | :--------------------------- | :---------- | :---------- | :---------- | | Current Income Taxes | $172.7 | $144.6 | $32.6 | | Deferred Income Taxes (Benefits) | $(10.5) | $(355.6) | $2.0 | | Total Income Tax Expense (Benefit) | $162.2 | $(211.0) | $34.6 | Effective Income Tax Rate | Year ended Dec 31 | Rate | | :------------------ | :------ | | 2018 | 24.5% | | 2017 | (47.1)% | | 2016 | 16.3% | - The 2017 effective tax rate included a significant benefit from the re-measurement of deferred tax assets and liabilities due to the U.S. Tax Cuts and Jobs Act[497] Net Deferred Tax Liabilities (in millions) | Metric (as of Dec 31) | 2018 | 2017 | | :---------------------- | :---------- | :---------- | | Deferred tax liabilities, net | $(729.9) | $(752.6) | - A valuation allowance of $55.6 million was established against deferred tax assets in 2018 where realization is unlikely, primarily due to foreign net operating losses[501] - Unrecognized tax benefits totaled $12.4 million as of December 31, 2018, with an estimated potential decrease of $0.6 million within the next 12 months[503][506] Note 12 — Other Financial Statement Captions This note provides detailed breakdowns of JHG's other current assets, accounts payable and accrued liabilities, and other non-current liabilities as of December 31, 2018 and 2017 Other Current Assets (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Prepaid expenses | $22.6 | $24.1 | | Current corporation tax | $4.3 | $3.5 | | Other current assets | $42.5 | $48.3 | | Total | $69.4 | $75.9 | Accounts Payable and Accrued Liabilities (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Accrued commissions | $42.2 | $44.4 | | Accrued rebates | $30.2 | $24.4 | | Other accrued liabilities | $84.7 | $48.0 | | Current corporation tax | $28.0 | $33.7 | | Contingent consideration | $13.8 | $24.9 | | Dai-ichi option | — | $26.1 | | Derivatives | $1.1 | $10.5 | | Other current liabilities | $33.2 | $80.9 | | Total | $233.2 | $292.9 | Other Non-Current Liabilities (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Non-current tax liabilities | $10.6 | $13.7 | | Other creditors | $10.3 | $20.7 | | Deferred consideration | $47.5 | $26.2 | | Other non-current accrued liabilities | $10.8 | $39.0 | | Total | $79.2 | $99.6 | Note 13 — Noncontrolling Interests This note details JHG's redeemable and nonredeemable noncontrolling interests, primarily in consolidated seeded investment products and Intech, and factors influencing their valuation Redeemable Noncontrolling Interests (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Consolidated seeded investment products | $121.6 | $174.9 | | Intech (Appreciation rights) | $10.9 | $11.0 | | Intech (Founding member ownership interests) | $3.6 | $4.4 | | Total | $136.1 | $190.3 | - Redeemable noncontrolling interests in consolidated seeded investment products are impacted by changes in JHG's ownership, third-party investment, and market volatility of underlying securities[510] Nonredeemable Noncontrolling Interests (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Seed capital investments | $8.3 | $24.9 | | Intech | $13.2 | $13.3 | | Total | $21.5 | $38.2 | Note 14 — Long‑Term Incentive Compensation This note describes JHG's various stock-based and liability-settled long-term incentive plans, including Intech awards, and details the associated compensation expense and unrecognized amounts - JHG operates various stock-based compensation plans, including Deferred Equity Plan (DEP), Restricted Share Plan (RSP), Buy As You Earn Share Plan (BAYE), Sharesave Plan (SAYE), Company Share Option Plan (CSOP), Executive Shared Ownership Plan (ExSOP), Restricted Stock Awards (RSA), Price-Vesting Units, Mutual Fund Share Awards (MFSA), and Intech Long-Term Incentive Awards[515] - Intech Long-Term Incentive Awards, granted to retain and incentivize employees, consist of appreciation rights, profits interests, and phantom interests, designed to provide an equity-like stake in Intech[535][536] Long-Term Incentive Compensation Expense (in millions) | Category (Year ended Dec 31) | 2018 | 2017 | 2016 | | :--------------------------- | :----- | :----- | :----- | | Stock-based payments expense | $81.6 | $66.8 | $37.3 | | DEP Funds - liability settled | $54.9 | $41.4 | $35.0 | | MFSA - liability settled | $24.3 | $20.7 | — | | Profits interests and other | $18.4 | $12.3 | — | | Social Security costs | $9.4 | $10.3 | $13.2 | | Total Charge | $188.6 | $151.5 | $85.5 | Unrecognized Long-Term Incentive Compensation (in millions) | Category (as of Dec 31, 2018) | Unrecognized Compensation | Weighted Average Years | | :---------------------------- | :------------------------ | :--------------------- | | Stock-based payments expense | $70.1 | 2.0 | | DEP Funds - liability settled | $39.0 | 1.4 | | MFSA - liability settled | $21.3 | 2.6 | | Profits interests and other | $27.4 | 5.4 | | Social Security costs | $17.7 | 1.0 | | Total Remaining Charge | $175.5 | 2.4 | Note 15 — Retirement Benefit Plans This note details JHG's defined contribution plans and the defined benefit Janus Henderson Group UK Pension Scheme (JHGPS), including its funded status, asset allocation, and net periodic benefit cost - JHG sponsors defined contribution plans for U.S. and international employees, with 401(k) matching contributions of 5.0% of eligible compensation for U.S. employees[554][555][556] - The main defined benefit pension plan, the Janus Henderson Group UK Pension Scheme (JHGPS), closed to new members in 1999, had a surplus of $15.3 million (£12.0 million) on a technical provisions basis as of December 31, 2018[557][559] Net Retirement Benefit Asset (in millions) | Metric (as of Dec 31) | 2018 | 2017 | | :---------------------- | :----- | :----- | | Fair value of plan assets | $849.5 | $941.8 | | Benefit obligation | $(613.3) | $(719.1) | | Funded status | $236.2 | $222.7 | | Tax at source | $(33.4) | $(28.0) | | Net Retirement Benefit Asset | $202.8 | $194.7 | - JHGPS plan assets are strategically allocated, with approximately 25% in a growth portfolio and 75% in bond assets, and $198.0 million of assets held in JHG-managed funds as of December 31, 2018[563][562] Net Periodic Benefit Cost (in millions) | Component (Year ended Dec 31) | 2018 | 2017 | 2016 | | :---------------------------- | :----- | :----- | :----- | | Service cost | $(1.2) | $(1.2) | $(1.2) | | Interest cost | $(17.3) | $(19.2) | $(22.6) | | Expected return on plan assets | $21.3 | $20.3 | $25.6 | | Net Periodic Benefit Credit | $4.4 | $1.5 | $1.8 | Note 16 — Accumulated Other Comprehensive Loss This note details changes in JHG's accumulated other comprehensive loss, primarily driven by foreign currency translation adjustments, impacting the balance as of December 31, 2018 Changes in Accumulated Other Comprehensive Loss (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :---------- | :---------- | | Beginning balance | $(301.8) | $(434.5) | | Other comprehensive income (loss) | $(120.6) | $111.9 | | Less: attributable to noncontrolling interests | $1.4 | $20.8 | | Ending balance | $(423.5) | $(301.8) | - Foreign currency translation adjustments were the primary driver of changes in accumulated other comprehensive loss, with a $(124.3) million impact in 2018[571] Note 17 — Earnings and Dividends Per Share This note provides JHG's earnings per share calculations and dividends paid per share for 2018, 2017, and 2016, noting the Board's discretion in dividend payments Earnings Per Share Calculation (in millions, except per share data) | Metric (Year ended Dec 31) | 2018 | 2017 | 2016 | | :------------------------- | :----- | :----- | :----- | | Net income attributable to JHG | $523.8 | $655.5 | $189.0 | | Diluted EPS | $2.61 | $3.93 | $1.66 | | Weighted-average diluted common shares outstanding | 195.9 | 162.3 | 111.1 | Dividends Paid Per Share | Year ended Dec 31 | Pre-Merger (GBP) | Post-Merger (USD) | | :------------------ | :--------------- | :---------------- | | 2018 | — | $1.4000 | | 2017 | £0.0915 | $0.6400 | | 2016 | £0.1040 | — | - The payment of cash dividends is at the discretion of JHG's Board of Directors, depending on financial performance, capital requirements, and legal requirements[575] Note 18 — Commitments and Contingencies This note outlines JHG's future minimum rental commitments and details significant legal proceedings and regulatory matters, including class action lawsuits and an ex-employee court case Future Minimum Rental Commitments (in millions) | Year ended Dec 31 | Amount | | :------------------ | :----- | | 2019 | $33.1 | | 2020 | $31.7 | | 2021 | $29.2 | | 2022 | $25.1 | | 2023 | $23.2 | | Thereafter | $63.1 | | Total | $205.4 | - JHG is involved in various legal proceedings and regulatory matters, including class action lawsuits related to VelocityShares Daily Inverse VIX Short-Term ETN (XIV), which the company is strongly defending[579][581][584] - A court case involving an ex-employee regarding Fund Transfer Fees and deferred remuneration was appealed, with the Court of Appeal ruling in favor of JHG, entitling the Group to approximately $5.0 million in fees and $0.3 million in interest[580] Note 19 — Related Party Transactions This note details JHG's related party transactions, including $1,953.2 million in revenues from managed funds and investment management fees from Dai-ichi separate accounts - JHG recognized revenues of $1,953.2 million in 2018 from managed funds that are related parties and not consolidated[587] Fees Receivable from Managed Funds (in millions) | Category (as of Dec 31) | 2018 | 2017 | | :------------------------ | :----- | :----- | | Accrued income | $187.2 | $261.6 | | Accounts receivable | $29.7 | $39.8 | - Investment management fees attributable to Dai-ichi separate accounts were $14.9 million in 2018 and $11.0 million in 2017[587] Note 20 — Geographic Information This note provides a breakdown of JHG's operating revenues and long-lived assets by geographic area for 2018, 2017, and 2016, highlighting regional contributions Operating Revenues by Geographic Area (in millions) | Region (Year ended Dec 31) | 2018 | 2017 | 2016 | | :------------------------- | :---------- | :---------- | :---------- | | U.S. | $1,338.7 | $818.1 | $172.1 | | UK | $649.4 | $669.0 | $536.7 | | Luxembourg | $255.9 | $280.9 | $282.7 | | International | $62.4 | $50.3 | $26.7 | | Total | $2,306.4 | $1,818.3 | $1,018.2 | Long-Lived Assets by Geographic Area (in millions) | Region (as of Dec 31) | 2018 | 2017 | | :---------------------- | :---------- | :---------- | | UK | $366.8 | $397.0 | | U.S. | $2,604.2 | $2,629.8 | | Australia | $219.3 | $245.1 | | Other | $2.5 | $3.5 | | Total | $3,192.8 | $3,275.4 | Note 21 — Selected Quarterly Financial Data (Unaudited) This note presents unaudited selected quarterly financial data for 2018 and 2017, adjusted for the new revenue recognition standard, providing a granular view of performance - Quarterly financial data for 2018 and 2017 are presented, adjusted for the new revenue recognition standard adopted on January 1, 2018[592] Selected Quarterly Financial Data (2018, in millions, except per share) | Metric | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | Full Year 2018 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------------- | | Total revenue | $587.7 | $592.4 | $581.2 | $545.1 | $2,306.4 | | Operating income | $176.2 | $175.3 | $148.3 | $150.0 | $649.8 | | Net income attributable to JHG | $165.2 | $140.6 | $111.2 | $106.8 | $523.8 | | Diluted EPS attributable to JHG common shareholders | $0.82 | $0.70 | $0.55 | $0.54 | $2.61 | Selected Quarterly Financial Data (2017, in millions, except per share) | Metric | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | Full Year 2017 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------------- | | Total revenue | $233.0 | $396.6 | $566.9 | $621.8 | $1,818.3 | | Operating income | $50.8 | $56.7 | $138.2 | $196.6 | $442.3 | | Net income attributable to JHG | $42.6 | $41.7 | $99.5 | $471.7 | $655.5 | | Diluted EPS attributable to JHG common shareholders | $0.38 | $0.28 | $0.49 | $2.32 | $3.93 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[594] Controls and Procedures JHG's management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with no material changes during the quarter - JHG's disclosure controls and procedures were evaluated as effective as of December 31, 2018[596] - Management believes internal control over financial reporting is effective as of December 31, 2018, based on the COSO framework[306] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2018[598] Other Information No other information to report under this item - No other information to report[599] PART III Directors, Executive Officers and Corporate Governance This section details JHG's Board of Directors and Executive Officers, their qualifications, and corporate governance practices, including the Officer Code of Ethics and independent audit committee financial experts - The Board of Directors includes Richard Gillingwater (Chairman), Glenn Schafer (Vice-Chairman), Richard Weil (CEO), Kalpana Desai, Jeffrey Diermeier, Kevin Dolan, Eugene Flood Jr., Lawrence Kochard, Angela Seymour-Jackson, and Tatsusaburo Yamamoto[602] - Key executive officers include Richard Weil (CEO), Roger Thompson (CFO), and Enrique Chang (Global Chief Investment Officer)[634] - JHG's Officer Code of Ethics applies to the CEO and Senior Financial Officers, and corporate governance guidelines are substantially in compliance with NYSE requirements[639][643] - All directors, except CEO Richard Weil, are independent; Jeffrey Diermeier and Kalpana Desai qualify as 'audit Committee financial experts'[647][731] - The Nominating and Corporate Governance Committee seeks talented and experienced candidates with diverse professional backgrounds to ensure a balance of knowledge, experience, skills, expertise, and diversity on the Board[641][642] Executive Compensation JHG's executive compensation links pay to performance, shareholder returns, and talent retention, comprising base pay, benefits, and variable incentives, with a scorecard approach for co-CEOs in 2018 - JHG's compensation policies link pay with performance, drive long-term shareholder returns, and manage risk, aiming to attract, motivate, and retain exceptional talent[649] - Compensation elements include base pay, benefits and pension, and variable incentive compensation (Short Term Incentive (STI) and Long Term Incentive (LTI) awards, including Performance Stock Units (PSUs))[651] 2018 Total Compensation for Executive Officers (in $) | Executive Officer | Base Salary | Variable Comp (STI) | Variable Comp (LTI) | Total Variable Comp | Benefits and Pension | Other | Total 2018 | | :---------------- | :---------- | :------------------ | :------------------ | :------------------ | :------------------- | :---------- | :--------- | | Richard M. Weil, CEO | 650,000 | 3,965,000 | 3,965,000 | 7,930,000 | 55,599 | 465,480 | 9,101,079 | | Andrew Formica, former Co-CEO | 593,319 | 3,577,000 | 4,353,000 | 7,930,000 | 77,243 | 2,683,956 | 11,284,518 | | Other Executive Officers | 1,479,976 | 5,511,743 | 6,357,892 | 11,869,635 | 138,859 | 362,178 | 13,850,648 | - The 2018 variable incentive compensation for co-CEOs was determined using a scorecard approach with weightings: Investment Excellence (30%), Financial Results (40%), and Strategic Results (30%), resulting in an overall performance multiplier of 1.0 to 1.5[661][675] - Richard Weil's base salary was adjusted to $725,000, effective January 1, 2019, following his appointment as sole CEO[677] - Settlement agreements were made with former Co-CEO Andrew Formica and Global Head of Distribution Phil Wagstaff upon their resignations, including severance payments and bonus entitlements[689][690] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of JHG common stock by major shareholders (e.g., Dai-ichi Life Holdings, Inc. with 15.61%) and insiders, along with information on equity compensation plans Beneficial Ownership of Common Stock (as of Feb 22, 2019) | Name | Shares Beneficially Owned | Percentage | | :---------------------------------- | :------------------------ | :--------- | | Dai-ichi Life Holdings, Inc. | 30,668,922 | 15.61% | | Silchester International Investors LLP | 16,833,086 | 8.57% | | The Vanguard Group Inc. | 16,048,918 | 8.17% | | BlackRock, Inc. | 12,671,455 | 6.45% | | Richard Weil, CEO and Director | 951,771 | * | | All Directors and Executive Officers as a Group (13 persons) | 1,459,786 | * | Equity Compensation Plan Information (as of Feb 22, 2019) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights () | Weighted-average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) () | | :-------------------------------- | :------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :-------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity comp plans approved by shareholders | 601,039 | $20.71 | 4,613,327 | | Equity comp plans not approved by shareholders | — | — | 372,345 | - JHG utilizes several equity-based LTI plans, including the Deferred Equity Plan (DEP), Long Term Incentive Plan (LTIP), Restricted Share Plan (RSP), 2010 LTI Plan, and 2012 Employment Inducement Award Plan (EIA), to encourage employee equity ownership and align interests with company success[708][709][710][711][712] Certain Relationships and Related Transactions, and Director Independence JHG's policy requires Audit Committee pre-approval for related party transactions, notably with Dai-ichi Life Holdings, Inc., which holds 15.0% of shares and has specific investment and Board designation rights - JHG's related party transaction policy requires pre-approval by the Audit Committee for transactions exceeding $120,000[713] - An Amended Investment and Strategic Cooperation Agreement with Dai-ichi Life Holdings, Inc. includes an ownership limit of 20% of JHG's shares and a commitment for Dai-ichi to maintain at least $2 billion in JHG investment products[716][717][718] - Dai-ichi has the right to designate a representative to JHG's Board of Directors, subject to maintaining a certain shareholding level[720] - The agreement imposes standstill restrictions, transfer limitations, and preemptive rights for Dai-ichi regarding JHG shares[721][722][723] - As of February 22, 2019, Dai-ichi beneficially owned approximately 15.0% of JHG common stock[730] - The Board of Directors has determined that all directors, except the CEO, are independent based on NYSE Listing Standards and JHG's Corporate Governance Guidelines[731] Principal Accountant Fees and Services This section details fees paid to PricewaterhouseCoopers (PwC) for audit and other services in 2018 ($4.48 million) and 2017 ($5.29 million), with Audit Committee pre-approval ensuring independence Fees Paid to PricewaterhouseCoopers (in $) | Fee Type | 2018 | 2017 | | :---------------- | :---------- | :---------- | | Audit Fees | $3,028,000 | $2,748,000 | | Audit-Related Fees | $922,100 | $696,200 | | Tax Fees | $13,500 | $198,800 | | All Other Fees | $514,371 | $1,642,310 | | Total | $4,477,971 | $5,285,310 | - Audit services included the audit of consolidated financial statements, reviews of quarterly reports, and attestation work for internal control over financial reporting[732] - The Audit Committee pre-approves all services and associated fee ranges for the independent auditor to ensure independence and appropriate oversight[734][735][736] PART IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the 10-K report, including financial statements, auditor reports, and a comprehensive list of exhibits incorporating various material contracts and certifications - The financial statements and related notes, along with the report of PricewaterhouseCoopers LLP, are included in Part II, Item 8[739] - A detailed list of exhibits is provided, incorporating by reference key documents such as the Agreement and Plan of Merger, facility agreements, various equity compensation plans, and the Amended and Restated Investment and Strategic Cooperation Agreement with Dai-ichi Life Holdings, Inc.[741][742][743][746][748][749][750][751] - Certifications from the CEO and CFO (pursuant to Rule 13a-14(a)/15d-14(a) and Section 1350 of Sarbanes-Oxley Act) and XBRL exhibits are also included[751][753] Form 10‑K Summary No Form 10-K summary is provided - No Form 10-K Summary is provided[754]