Janus Henderson(JHG) - 2019 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the first quarter of 2019 Condensed Consolidated Balance Sheets | Balance Sheet Items (USD in Millions) | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $7,023.1 | $6,911.9 | | Cash and cash equivalents | $717.1 | $880.4 | | Intangible assets, net | $3,125.4 | $3,123.3 | | Goodwill | $1,493.6 | $1,478.0 | | Total Liabilities | $2,011.0 | $1,915.0 | | Long-term debt | $318.4 | $319.1 | | Total Equity | $4,875.1 | $4,860.8 | Condensed Consolidated Statements of Comprehensive Income | Income Statement (USD in Millions, Except per Share) | Three months ended March 31, 2019 | Three months ended March 31, 2018 | | :--- | :--- | :--- | | Total Revenue | $519.3 | $587.7 | | Management fees | $441.9 | $502.9 | | Total Operating Expenses | $394.8 | $411.5 | | Operating Income | $124.5 | $176.2 | | Net Income Attributable to JHG | $94.1 | $165.2 | | Diluted Earnings Per Share | $0.48 | $0.82 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activities (USD in Millions) | Three months ended March 31, 2019 | Three months ended March 31, 2018 | | :--- | :--- | :--- | | Net cash from Operating activities | $(34.7) | $61.7 | | Net cash from Investing activities | $51.3 | $11.6 | | Net cash from Financing activities | $(198.3) | $(208.2) | | Net change in cash and cash equivalents | $(176.7) | $(128.8) | Notes to the Condensed Consolidated Financial Statements - The Group adopted a new lease accounting standard on January 1, 2019, recognizing $129.8 million in right-of-use (ROU) assets and $146.4 million in corresponding lease liabilities[22][24] - Total investment securities were $568.1 million as of March 31, 2019, a slight decrease from $574.5 million at year-end 2018[36] - As of March 31, 2019, the Group had $318.4 million in carrying value of 4.875% Senior Notes due 2025 and an undrawn $200 million revolving credit facility[84][86] - The effective tax rate for Q1 2019 was 23.0%, up from 22.5% in Q1 2018, primarily due to an increase in non-deductible compensation-related expenses[87] - The Board of Directors declared a cash dividend of $0.36 per share on May 2, 2019, following a dividend of the same amount paid in February 2019[102] - The Group is involved in several class-action lawsuits related to VelocityShares exchange-traded notes (ETNs), which it believes are without merit and is strongly defending[107][110] Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion analyzes Q1 2019 financial results, AUM trends, revenues, expenses, and capital resources First Quarter 2019 Summary - Assets Under Management (AUM) increased by 8.8% from year-end 2018 to $357.3 billion, driven by positive market performance and favorable currency translation, which was partially offset by net outflows[133] | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.48 | $0.82 | | Adjusted Diluted EPS (Non-GAAP) | $0.56 | $0.71 | | Revenue | $519.3M | $587.7M | | Operating Income | $124.5M | $176.2M | | Net Income attributable to JHG | $94.1M | $165.2M | - The company declared a $0.36 per share dividend and repurchased 1.26 million shares for $30.9 million during the quarter[133] Assets Under Management | AUM Roll-Forward (USD in Billions) | Q1 2019 | | :--- | :--- | | Beginning AUM (Dec 31, 2018) | $328.5 | | Net Sales (Redemptions) | $(7.4) | | Market Performance | $34.9 | | Foreign Exchange (FX) | $1.3 | | Ending AUM (Mar 31, 2019) | $357.3 | - Long-term investment performance remains strong, with 69% of AUM outperforming benchmarks over a three-year basis and 74% over a five-year basis as of March 31, 2019[133][139] | AUM by Client Type (Mar 31, 2019) | Amount (USD in Billions) | | :--- | :--- | | Intermediary | $155.2 | | Institutional | $138.7 | | Self-directed | $63.4 | | Total | $357.3 | | AUM by Client Location (Mar 31, 2019) | Amount (USD in Billions) | | :--- | :--- | | North America | $192.2 | | EMEA & LatAm | $108.6 | | Asia-Pacific | $56.5 | | Total | $357.3 | Results of Operations - Total revenue decreased by 12% to $519.3 million in Q1 2019 from $587.7 million in Q1 2018, primarily driven by a $61.0 million (12%) decrease in management fees due to lower average AUM[134][156][157] - Performance fees were negative at $(5.6) million in Q1 2019, a decline from $(3.9) million in Q1 2018, mainly due to underperformance in mutual funds relative to their benchmarks[158] - Total operating expenses decreased by 4% to $394.8 million in Q1 2019 from $411.5 million in Q1 2018, mainly due to a $15.4 million reduction in distribution expenses[135][161][164] - Long-term incentive plan expenses increased by $8.4 million year-over-year, primarily due to new awards and fair value adjustments[163] Non-GAAP Financial Measures | GAAP vs. Adjusted (Non-GAAP) Metrics (USD in Millions) | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Operating Income (GAAP) | $124.5 | $176.2 | | Adjustments | $18.9 | $12.6 | | Adjusted Operating Income | $143.4 | $188.8 | | Operating Margin (GAAP) | 24.0% | 30.0% | | Adjusted Operating Margin | 34.4% | 40.1% | | Net Income Attributable to JHG (GAAP) | $94.1 | $165.2 | | Adjustments | $15.9 | $(21.6) | | Adjusted Net Income Attributable to JHG | $110.0 | $143.6 | - Adjustments to GAAP figures primarily include removing merger integration costs, amortization of intangible assets, and fair value adjustments on certain liabilities to better reflect ongoing operations[179][180] Liquidity and Capital Resources | Key Liquidity Data (USD in Millions) | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents held by the Group | $716.9 | $879.0 | | Investment securities held by the Group | $261.5 | $277.9 | | Debt | $318.4 | $319.1 | - The Group commenced a new on-market share buyback program of up to $200 million, purchasing 1.26 million shares for $30.9 million in Q1 2019[189] - The Group maintains a $200 million unsecured revolving credit facility, which was undrawn as of March 31, 2019[201] Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes in market risk exposures from the prior annual report - There were no material changes in market risk exposures since the last annual report[208] Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of March 31, 2019 - Management concluded that the Group's disclosure controls and procedures were effective as of March 31, 2019[209][210] - No material changes to internal control over financial reporting were identified during the first quarter of 2019[211] PART II — OTHER INFORMATION Legal Proceedings This section details ongoing class-action lawsuits and a favorable judgment in an ex-employee case - The company is defending against several class action lawsuits concerning VelocityShares ETNs, alleging misleading statements, and believes the claims are without merit[107][109][110] - On February 15, 2019, a UK court ruled in favor of a JHG subsidiary in an appeal, resulting in an award of approximately $5.3 million plus costs to the Group[105] Risk Factors This section states no material changes to risk factors from the 2018 Annual Report - There were no material changes in risk factors from those reported in the 2018 Annual Report on Form 10-K[213] Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchase activities, including a new $200 million buyback program - A new on-market share buyback program of up to $200 million was approved on February 4, 2019, and commenced on March 5, 2019[214] | Share Repurchases (Q1 2019) | Total Shares Purchased | Average Price Paid | Shares for Buyback Program | Value of Buyback Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | January | 30,777 | $22.39 | — | — | | February | 1,531,114 | $23.40 | — | $200 | | March | 1,269,514 | $24.53 | 1,258,443 | $169 | | Total | 2,831,405 | $23.89 | 1,258,443 | | - In addition to the buyback program, JHG purchased 1,572,962 shares for $37.1 million to satisfy employee remuneration arrangements[215] Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and plans - Key exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and the Third Amended and Restated Employee Stock Purchase Plan (Exhibit 10.19.9)[222][224]