Q3 2024 Janus Henderson Group PLC Earnings Call
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Speaker Change: Initiated private market capabilities for clients with the closings of Mek capital partners in September in victory Park capital on October <unk>.
Speaker Change: As I said before both of these are skating to where the puck is going on behalf of our clients.
Speaker Change: BK allows Janus Henderson early entry into the rapidly expanding emerging markets private capital space.
Speaker Change: <unk>, which I'll talk about more on the next slide specializes in asset backed lending.
Speaker Change: Along with executing our strategic vision, we're making progress in other areas of the business.
Speaker Change: As I mentioned, we delivered consecutive quarters of positive net flows and market share gains in key regions, which demonstrates that we are on the path to delivering consistent growth over the long term.
Speaker Change: In addition to the net flows this quarter importantly, Janus Henderson also generated positive organic net new revenue in the third quarter fee.
Speaker Change: The pressures are relentless in its industry and not all AUM is created equal. So we're pleased with that result, we're seeing success across a mix of capabilities and regions, including higher fee strategies, such as hedge funds informatics.
Speaker Change: In September we announced a unique and innovative affinity partnership with the American cancer Society through this pioneering partnership Janus Henderson will donate the equivalent of 50% of its management fee revenue from all AUM and our government money market fund in other words for every one dollar Janus Henderson receives in fees the Acs will.
Speaker Change: Also received $1 to support cancer research advocacy and patient support.
Speaker Change: Intermediary net flows are positive and represent the best quarterly result in almost three years.
Speaker Change: Institutional net outflows of $500 million.
Speaker Change: Following a directional improved second quarter, we talked publicly about the need to replenish a sustainable pipeline.
Speaker Change: Pleased with the work out distribution team is doing and we're encouraged by the leading indicators and increasing number of opportunities across all our regions, but the continued development of maturation of the pipeline that will take time.
Speaker Change: That's outflows for the self directed channel, which includes direct and seek market investors is flat to the prior quarter at $900 million.
Slide eight is flows in the quarter by capability.
Speaker Change: Equity flows were negative one $5 billion, which was relatively stable compared to quarter, two and improved from negative $2 $3 billion a year ago.
Despite the challenging environment for active equities gross sales for equities improved 39% on a year over year basis with.
With increases in the U S EMEA, Latam and Asia Pacific.
Net inflows for fixed income with $2 $2 billion.
Several strategies contributed to the positive fixed income flows in the intermediary channel fixed income Etfs delivered further strong positive flows of $2 $4 billion in the quarter led by flows in J AAA.
Speaker Change: Other strategies contributing to the positive flows or multi sector credits in Australia, and tactical income and offsetting these inflows when there are outflows in the lower fee institutional channel.
Total net outflows from multi asset capability.
Speaker Change: Yes.
Speaker Change: We've maintained a strong liquidity position and we continue to balance the capital needs and the investment opportunities of the business with returning capital to shareholders.
Along these lines. The board has approved an incremental $50 million on the existing repurchase authorization, bringing the total authorized up to $200 million.
Speaker Change: Our capital allocation philosophy has not changed the incremental buyback authorization reflects our improved financial outlook better cash flow generation.
Our strong and stable balance sheet.
We've maintained a healthy quarterly dividend and have reduced shares outstanding by roughly 21% since the commencement of our buyback program in 2018.
During the first three quarters of 2024, we've returned $343 million, including $155 million via share repurchases.
With that I'd like to turn it back over to Ali for a brief wrap up before we take Q&A.
Ali: Thanks, Roger wrapping up on slide 14.
Continue to make progress across the business building on the results of past quarters.
Ali: There's more work to do we believe we are on the path to delivering consistent results over time.
<unk> performance is solid across all time periods versus benchmark and peers next.
Net flows were positive for the second consecutive quarter reflect a 36% increase in gross sales compared to the third quarter a year ago.
Ali: This marks our third quarter of net inflows in the last seven quarters and provides a tangible indication that strategic plan is starting to take hold.
Speaker Change: Adjusted diluted EPS increased 42% compared to the prior year, reflecting market gains investment performance positive net flows operating leverage high ROI investments and nonoperating benefits.
Our strong balance sheet and financial results allow us to continue returning cash to shareholders through dividends and share buybacks, while reinvesting in the business for future growth.
Think about flows and some of the momentum you talked about how do you how should we characterize the pace of investment as we think about 2025.
Speaker Change: Given as I said earlier some of the success Youre having today.
Hi, Dan Thanks for the question.
Speaker Change: You're right I mean, there is a we are seeing some early success and we definitely define it as early success and there are things. We are doing is that Lisa just talked about.
The launch of the ETF.
Speaker Change: Franchise in Europe.
Speaker Change: Hopefully we will see reflect some of the growth we've seen in the U S, but will need and we will need to support it we need to do marketing around the ETF business in Europe. As an example, but we're also doing things around the world to capture that opportunity. There are also other things that.
Speaker Change: That are out there whether they be.
The results of our success growing our AUM results in some higher investment admin costs. Some of that is coming through in this quarter that you can say.
And there's also obviously inflation out there so costs will cost will be higher next year.
We've given some guidance around the fourth quarter.
Our non comp costs will go up in the fourth quarter again totally in line with our guidance nothing is changing there a little bit at that is one off as we really have some opportunity in the fourth quarter.
And we will really be pushing some things hard in the fourth quarter, where we really think we can succeed but.
Speaker Change: So costs.
Will will probably increase in Q4, I'm, sorry will increase in Q4 will probably increase a little bit as we get into next year as well, but we will give full guidance on that on the next call.
Thank you Dean.
Our next question comes from the line of Patrick Davitt with Autonomous Research. Your line is now open Patrick.
Patrick: Hey, good morning, everyone.
Follow up on Dan's ETF.
Patrick: Dan ETF questions, obviously, a good problem to have but without the strong inflows to the AAA Etfs you would still be in fairly consistent outflow. So I'm curious if you have any updated.
On the potential to get.
The large flagship active equity products back to inflow and <unk>.
Patrick: World.
Patrick: He still has little demand for products like that regardless of performance. Thank you.
Speaker Change: Thanks, Patrick.
You're right. We're obviously very pleased about the progress.
Across the board from a flows perspective, but absolutely the star.
Speaker Change: That has helped us as an ETF side now to be clear.
Speaker Change: It's not just one product.
Patrick: That's driving it right. We have now four products across the board that as I mentioned, a second ago over $1 billion, we have a whole suite of products that we want to bring bring to bear and so firstly, if you focus on Etfs and I'll answer the second part of your question for.
From an ETF perspective, our view very strongly is that you have to have the combination of great investment strategies put in the right vehicle and we clearly have many great investment strategies.
Some that are according to our strategy of protecting grow amplified diversify some that are in the amplified bucket that we haven't brought to clients in a form that they want to consume their small strategies, let's call. It that and we think we can put those in ETF form given the reputation we've built given the abilities process wise and client.
Service Wise, we've built to deliver great investment performance and Ah.
Patrick: The form factor that they seem to want to consume and that's just not in the U S. That's overseas as well against starting in in Europe, but also then in APAC and Latam. So so the ETF franchise per say, we will continue to grow and yes. We are building on the success that we've had and certainly starting with one and then now.
For crossing over $1 billion Mark so.
<unk> is not a one trick pony so to speak is something we want to build on and grow that on the on the core of our business again that goes a little bit more to the protecting growth part of our strategy absolutely very focused on that what we're finding is more and more on a global basis, we're seeing our market share gains in those.
Patrick: In those categories.
You're right broadly speaking mutual funds are not growing categories, but if we can continue to gain market share like we are right. Now we do think that the aggregate of our diversified business can deliver organic sales growth over time I'll. Just note to you that this quarter, we did deliver revenue growth so net new revenue growth.
With the broad base of our firms opportunity set for our clients and that includes Etfs of course all of those are lower fees. It also includes improvement across regions and product categories. So.
Patrick: We're building on and everything else as part of protecting grow we need to and want to deliver to our clients.
And we will continue to gain market share and hopefully turn that into growth as well.
Just putting some some facts around what are these just said with some data around that.
I think it's 13 strategies with more than $100 million of net flow this quarter.
That includes mid cap growth in the U S that includes.
Global Tech leaders. It includes enhanced index includes the European strategy European equity strategy in fixed income, it's not just the securitized area multi sector credits is so significant.
Significant net inflows.
One of our hedge funds.
One of our hedge funds.
Pretty significant inflows as well so.
It's you always wanted to be broader but like I say I think 13 of our strategies in more than $100 million this quarter.
Patrick: Thanks.
Thank you Patrick.
Our next question comes from the line of Bill Katz with TD Cowen. Your line is I will bendel.
Okay. Thank you very much for taking the question I did join a little late so I apologize for that I think you guided for performance fees to be up year on year, which was a nice surprise to what we were thinking about I was wondering if you could unpack that a little bit if you've already covered this I apologize, but if you could unpack it between maybe what youre seeing in the non mutual fund platform and then based on our math I think that's sort of move.
Patrick: As to breakeven in the fourth quarter is that about the right way of thinking about the delta here as we look quarter to quarter or year on year. Thank you.
Speaker Change: Yeah, Hi, Bill.
Yes, we haven't talked about on the call. So you didn't miss anything and I Hope the high school was good.
As we sit here today.
Speaker Change: Estimate as you say fourth quarter performance space, Yeah, what we said on the call was higher yes, there'll be significant that will be higher than the fourth quarter of 'twenty three.
Speaker Change: Yes that is.
Speaker Change: Two reasons one is the improvement in the U S. Mutual fund performance fees, that's really pleasing to say that you saw.
Speaker Change: This quarter was minus 18, I think a year ago minus nine this year.
Speaker Change: And while we don't know what were adding on we do know what's dropping off we drop a pretty.
Speaker Change: <unk> Q1, 'twenty, sorry, Q4 'twenty one.
Speaker Change: So we'd like to see that improve further in Q4.
Speaker Change: On top of that.
We expect some positive performed posted performance space from some of the very strong investment performance and hedge funds.
Speaker Change: But.
Speaker Change: We'll see where we are at the end of the year. Obviously, the result will be dependent on performance over the remainder of the year. So it's those two pieces.
The mutual fund performance fees I know you've talked about.
Speaker Change: And that is moving the right way.
And as I say, we've got some strong performance at the moment in hedge funds that we obviously hope continues until the end of the year.
Okay. That's helpful and then just as a follow up.
Notice that the board increased the buyback authorization by $50 million up to I think $200 million and just given what looks like a very strong balance sheet at the end of the quarter I'm not sure. There's any timing in there of sort of ins and outs, but just conceptually you've done a couple of deals now your balance sheet is in great shape.
Buying back more stock how do we think about just sort of incremental deployment from here and maybe you could sort of parse that between what you might be looking at on the inorganic side versus capital return to shareholders. Thank you.
Speaker Change: Yes.
And I think we've been very consistent in our messaging around around capital.
We yes, we have a strict hierarchy of needs.
And at the bottom of that we will return capital if we don't see an immediate need for it so the board.
Speaker Change: <unk>.
Additional $50 million, our expectation is to do that by the by the AGM next year.
Speaker Change: And we look at.
Speaker Change: So we will look at that.
In terms of the things.
We want to do should there be something else, we want to do in terms of seed capital or any other M&A, obviously that would.
Speaker Change: That may change, but our expectations that we would do that we would do that buybacks between now and the.
And the AUM and the mix of the mix of the buyback and the dividend is something we look at.
Speaker Change: So.
As we look at the dividend as we always do.
Each quarter and particularly at year end.
Speaker Change: The way that with our board.
Speaker Change: And just to add Roger Bill.
Roger Bill: Obviously, you have the flexibility given our balance sheet to invest both back in the business organically, but also as you've seen and you will hopefully continue to see inorganically.
In a way that bolsters, our business for clients and ultimately for shareholders as well.
Roger Bill: Thank you Bill.
Speaker Change: Our next question comes from the line of Craig Siegenthaler with Bank of America. Your line is now open Craig.
Craig: Good morning, Ali hope everyone's doing well.
My question is on the insurance channel. So we've watched you guys be very active on the M&A front expanding into privates and Etfs, but we think one area, where <unk> can do more as an insurance. So we wanted to get an update on your appetite to form strategic partnerships and.
Speaker Change: Agreements or raise SMA with third party life companies.
Do you have enough product now, especially in private credit with the victory acquisition.
Which could help you compete in this channel.
Hey, Craig Thanks for the question.
It's certainly on our minds as we think strategically about protecting growing and diversifying.
We have a strong base I'd take three points number one we have a strong base of clients that our insurance clients right now some of the most sophisticated insurance firms in the world literally globally rely on us to manage their boat Ta and also their separate account businesses and.
Speaker Change: The feedback from all of them is quite positive obviously, we'd like to to have more of those relationships and we start from a good base as point number one point number two is there is obviously a lot of activity in this space right now you see deals happening all over the place.
As you'd imagine we are knowledgeable about some of the deals that are out there given given the background of my.
Background in the background the team here, so we see a lot of those come by.
We will be very selective and doing the right thing that isn't.
Speaker Change: Giving away the farm so to speak just to have an insurance relationship, but we see a lot of opportunity in having insurance relationships. The most important thing for us, though for one as insurance relationships is to make sure that culturally just like any M&A culturally we're aligned.
Speaker Change: To be fair, that's something that a lot of people.
Overlook it's something that we're very very focused on because if we want to make a partnership with an insurance company. We want to make sure. They were culturally aligned to grow the business for them for us based on the IMA structure that one could craft. So yes, we're very active there.
And I think we will be.
I was even more tools in our toolkit with victory Park capital.
Speaker Change: Yeah.
Thanks Ali.
We have a follow up on a pre evercore and and I know, it's early innings, but have there been any additions to the platform.
Speaker Change: In <unk> in October.
And also I think potentially could we see you add to your minority equity stake.
And I know there was a big 200 billion AUM are managed to those added really end of the year, but I think that was before <unk>. So we're looking for anything incremental.
Yes. Thanks, Thanks, a lot for the question on protocol, we are very very pleased with the progress we're seeing on private core and just just to remind everybody <unk> core.
Essentially sits at the Nexus.
Of institutional quality alternative investment managers, who want to access the private wealth business and our private wealth clients, our clients, who want to get access but need different form factors need client support need a triage of sorts as well and that's essentially what <unk>.
<unk> provides with really great success. So youre right, we had the $200 billion alternative asset manager of a well known asset manager that that came in to the platform with knock on wood. It was good success for them. We have now a I guess $71 billion.
Technology focus probably premier technology focus investment firm that's on the platform, we have about a $50 billion.
Speaker Change: Real estate manager.
Gonna come on the platform if not already.
We have a $40 billion private equity firm.
That is newer that's coming on the platform to another kind of very well known and we're getting significant flow from folks, it's tens and tens I know the exact number but let's just say tens and tens of GPS who are extraordinarily high performing again institutional quality, who need help Janus Henderson.
Seeing it pick up in activity has the pace of Rfps picked up in the last two months and could this be an opportunity for Janus Henderson.
Speaker Change: Yes.
And maybe just.
Speaker Change: With mandates.
In a situation like this.
Yes, yes, but I guess.
With mandates and situation like this.
Is it is the timeframe.
Speaker Change: Somewhat faster or kind of similar to what a typical kind of institutional mandate.
Speaker Change: B.
On the institutional side, it's a little bit faster. So typically you would you would talk about.
Speaker Change: 12 to 24 months honestly from an RFP perspective here you are talking about things in several quarters on institutional side.
When unfortunate things like that happen, which candidly known wishes on anybody but when they happen.
Speaker Change: They move a little bit more quickly on institutional side of things.
Just to be clear as well are things move much more quickly on the intermediary side.
So often intermediary can have much more flexibility in our A's et cetera that is something that we hope.
Hope to continue to get our fair share of particularly with some of the ETF platforms that we have.
Okay, great. Thank you for the color.
Speaker Change: Thank you Mike.
Speaker Change: Our next question goes to the line of John Dunn.
John Dunn: Where ISI.
Your line is now open John.
John Dunn: Thank you.
So the multi asset segment remains.
We can bring to bear in the intermediary channel. The other piece of the solutions business is on the institutional.
John Dunn: Institutional side of things.
We have won mandates from some of the most sophisticated sovereign wealth funds to run models for them to.
John Dunn: To run.
John Dunn: Adaptive strategy as we call them, which use options signals for example, too.
Identify when there are paradigm shifts in the markets and so you can be much more nimble with how you allocate some of your assets are the large sovereign wealth fund and we think we're going to see some more progress there so yeah.
<unk> multi asset is balanced we're quite bullish given the market environment right. Now there is a return on both sides of it.
All of that fund and also the solutions, we certainly hope that that builds up as a real business for us over time.
Speaker Change: Got it and then my other one was.
Speaker Change: How are you thinking about integrating your acquisitions are there going to be more like affiliates or something something more integrated in to the extent you do more in private credit.
Speaker Change: Would it be like bolting on to victory Park.
Yes, just maybe your philosophy around that.
Yes, we're not big believers in boutique models as <unk> seen other people play in other words independent to just loosely tied into a holding company we have historically not seen that work.
In most instances, we very much believe in what we call integrating smartly, we'd like to integrate where we think we can add value I E distribution.
Regulatory compliance legal.
Speaker Change: Those types of things.
But not integrate in areas, where the firm can't add value. So we.
Very much around what the people are on the teams. So are they the right people do they have the right relationships. We think we are there mostly across the board. We then think a lot about the product do we have the right products that.
Are there can we build them organically or inorganically we.
Speaker Change: We think then about the process people go through so what are the process people take him what kind of data can we give them who are they looking to in the marketplace.
And that's something that changes quite a bit when we bring in new people certainly new leadership to bring on board.
Speaker Change: And then we absolutely have to think about.
Speaker Change: The incentives that we build for folks do we have the right incentives in place to have them aligned with growth of the business.
And that has to be put in place as well so as we go down the line and each of those elements change the people the products the pay incentives and I'll say the process and the data that we used for that and Thats something that we started in the U S.
We changed that quite a bit and I think youre seeing at least early signs maybe a little bit later now, but early signs of the fruit and labor, where we now have five consecutive quarters in U S intermediary business with positive flows.
We picked up a lot of those experiences in broth.
Speaker Change: Some of those are being put in place and now you have a second consecutive quarter of positive flows in that area and again, we're applying those to the rest of the business. So those are the main changes that we're going through it.
It's soup to nuts and it feels like we're certainly on the right track and a great great leadership team that we have on the distribution side right now is delivering on that.
All of this to your second part of your question is very focus the way, we do all of those three or four things to deliver better client outcomes.
Have to deliver on the investment performance that is first and foremost what we do but we have to deliver them in a manner that clients can easily be.
I'll bring to bear globally, among our insurance clients are already having conversations with that and the fourth area, which we.
We think also adds opportunities they have something called triumph capital markets or TCM as we call. It that it provides a structured financing.
Speaker Change: Solutions to non banking financial institutions. So we can bring that to bear as well. So those four together, we think create a very broad based at least four legs to the stool. So to speak that we believe we can grow and bring those opportunities to a broad set of clients both geographically and also channel wise.
Especially if you're bringing <unk> to the mix.
I appreciate all color. Thanks again.
Speaker Change: Thank you Luke.
Speaker Change: That will conclude the question and answer session. So I will now pass the conference back over to you Mr. <unk> for closing remarks.
Speaker Change: Thanks Megan.
Just wanted to end the call by thanking everyone at Janus Henderson.
Speaker Change: Whether they be in the support functions. The it operations functions the investment teams our client groups everywhere across the firm for all the hard work to deliver these are very clearly strong results and signs that we're on the right track and most importantly, most importantly, delivering to our $16 million declined $60 million.
Brighter futures are trying to deliver around the world as well as to our shareholders and all of our other stakeholders. So thank you for your interest. Thank you for your hard work at Janus Henderson and bye for now.
That concludes today's conference call. Thank you for your participation and hope you have a wonderful rest of your day.
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