Janus Henderson(US:JHG)2023-05-03 19:57Financial Data and Key Metrics Changes - Assets under management increased by 8% to $310.5 billion, driven by positive market conditions, foreign exchange impacts, and $5.5 billion in net inflows [5][17] - Net inflows for the quarter were $5.5 billion, a significant improvement compared to $11 billion in net outflows from the previous quarter [37][41] - Adjusted revenue decreased by 5% compared to the prior quarter, primarily due to lower seasonal performance fees [41][43] - Adjusted operating income for the first quarter was $106 million, down 14% from the prior quarter, with an adjusted operating margin of 27.5% [45] Business Line Data and Key Metrics Changes - Institutional net inflows were $6.9 billion, with significant contributions from various strategies including $4.1 billion from enhanced index mandates [10][40] - Equity net inflows were $3.3 billion, a recovery from $7.5 billion in outflows in the previous quarter [11] - Fixed income net inflows were $3.6 billion, compared to $1.9 billion in outflows in the prior quarter, indicating a positive trend in this segment [40] Market Data and Key Metrics Changes - The U.S. intermediary channel showed improvement with net outflows reduced to $700 million from $3.4 billion in the previous quarter [9] - EMEA region experienced declines due to risk-off sentiment and higher interest rates, particularly affecting the UK market [38] - Fixed income ETFs had positive flows of $780 million, led by specific products like AAA CLO ETF and mortgage-backed securities ETF [12] Company Strategy and Development Direction - The company is focused on three strategic pillars: Protect & Grow core businesses, Amplify strengths not fully leveraged, and Diversify where clients give the right to win [19][21] - The firm aims to exit unprofitable assets under management (AUM) to improve overall profitability, which may negatively impact flows in the short term [6][61] - A national brand campaign was launched to enhance the Janus Henderson brand, reflecting a shift in marketing strategy [47] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatile market conditions, including recession fears and higher interest rates, but expressed optimism about the quarterly results [2][22] - The firm expects to see one to two quarters of positive flows over the next one to two years, indicating a cautious but hopeful outlook [6][22] - Management emphasized the importance of differentiating between strong and weak companies in the current investment climate to generate alpha [34] Other Important Information - The company maintains a strong liquidity position with cash and cash equivalents of $830 million, reflecting a conservative approach to capital management [17] - Performance fees for the second quarter are estimated to be negative, primarily due to U.S. mutual fund performance [42][46] - The adjusted compensation to revenue ratio was seasonally higher at 50.1%, influenced by payroll taxes and lower performance fees [15] Q&A Session All Questions and Answers Question: Can you contextualize the M&A activity and seller expectations? - The company is seeing a robust pipeline of M&A activity, with realistic seller expectations evolving, but emphasizes that M&A is not a primary growth strategy [50][76] Question: What drove the lower redemption rates this quarter? - The lower redemption rates were attributed to a solid quarter of flows and some clients waiting to see the effectiveness of the new strategy before committing [55][81] Question: Can you discuss the strategies or regions from which unprofitable AUM will be exited? - The company has a disciplined approach to reviewing mandates and will exit those that are not profitable, considering both fee rates and servicing costs [61][62] Question: How is the institutional pipeline being rebuilt? - The firm is reallocating resources and enhancing interactions with consultants to better position its products in the institutional market [69][90] Question: What is the outlook for performance fees for the full year? - The guidance for performance fees assumes relatively flat performance, with expectations for some funds at or around their high watermarks [66][98]