Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission File Number 001-38103
JANUS HENDERSON GROUP PLC
(Exact name of registrant as specified in its charter)
Jersey, Channel Islands (State or other jurisdiction of incorporation or organization)
98-1376360 (I.R.S. Employer Identification No.)
201 Bishopsgate
London, United Kingdom (Address of principal executive offices)
EC2M3AE (Zip Code)
+44 (0) 20 7818 1818
(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
Common Stock, $1.50 Per Share Par Value
JHG
New York Stock Exchange
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 registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ☐
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). Yes ☒ No ☐
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.
Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐
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 ☐ No ☒
As of July 30, 2024, there were 159,264,003 shares of the registrant’s common stock, $1.50 par value per share, issued and outstanding.
2024 FORM 10‑Q QUARTERLY REPORT
TABLE OF CONTENTS
Page
PART I. Financial Information
Item 1.
Financial Statements (unaudited)
1
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Comprehensive Income
2
Condensed Consolidated Statements of Cash Flows
3
Condensed Consolidated Statements of Changes in Equity
4
Notes to the Condensed Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 4.
Controls and Procedures
PART II. Other Information
Legal Proceedings
28
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
29
Signatures
30
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(U.S. Dollars in Millions, Except Share Data)
June 30,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
Investments
Fees and other receivables
OEIC and unit trust receivables
Assets of consolidated VIEs:
Other current assets
Total current assets
Non-current assets:
Property, equipment and software, net
Intangible assets, net
Goodwill
Retirement benefit asset, net
Other non-current assets
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:
Total current liabilities
Non-current liabilities:
Accrued compensation, benefits and staff costs
Long-term debt
Deferred tax liabilities, net
Retirement benefit obligations, net
Other non-current liabilities
Total liabilities
Commitments and contingencies (See Note 14)
REDEEMABLE NONCONTROLLING INTERESTS
EQUITY
Common stock, $1.50 par value; 480,000,000 shares authorized, and 159,643,633 and 163,338,035 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively
Additional paid-in capital
Treasury shares, 40,439 and 41,444 shares held at June 30, 2024, and December 31, 2023, respectively
Accumulated other comprehensive loss, net of tax
Retained earnings
Total shareholders’ equity
Nonredeemable noncontrolling interests
Total equity
Total liabilities, redeemable noncontrolling interests and equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(U.S. Dollars in Millions, Except Per Share Data)
Three months ended
Six months ended
Revenue:
Management fees
Performance fees
Shareowner servicing fees
Other revenue
Total revenue
Operating expenses:
Employee compensation and benefits
Long-term incentive plans
Distribution expenses
Investment administration
Marketing
General, administrative and occupancy
Depreciation and amortization
Total operating expenses
Operating income:
Interest expense
Investment gains, net
Other non-operating income, net
Income before taxes
Income tax provision
Net income
Net income 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
Reclassification of foreign currency translation to net income
Actuarial gains
Other comprehensive income (loss), net of tax
Other comprehensive loss (income) attributable to noncontrolling interests
Other comprehensive income (loss) attributable to JHG
Total comprehensive income
Total comprehensive income attributable to noncontrolling interests
Total comprehensive income attributable to JHG
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(U.S. Dollars in Millions)
CASH FLOWS PROVIDED BY (USED FOR):
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes
Stock-based compensation plan expense
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:
Investments, net
Property, equipment and software
Investments by consolidated seeded investment products, net
Cash paid on settled seed capital hedges, net
Net investing activities
Financing activities:
Purchase of common stock for stock-based compensation plans
Purchase of common stock for the share buyback program
Dividends paid to shareholders
Third-party capital invested into consolidated seeded investment products, net
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 held in consolidated VIEs
Total cash and cash equivalents
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Amounts in Millions)
Accumulated
Additional
other
Nonredeemable
Number of
Common
paid-in
Treasury
comprehensive
Retained
noncontrolling
Total
Three months ended June 30, 2024
shares
stock
capital
loss
earnings
interests
equity
Balance at April 1, 2024
Other comprehensive income
Dividends paid to shareholders ($0.39 per share)
Vesting of stock-based compensation plans
Proceeds from stock-based compensation plans
Balance at June 30, 2024
Three months ended June 30, 2023
Balance at April 1, 2023
Balance at June 30, 2023
Six months ended June 30, 2024
Balance at January 1, 2024
Other comprehensive loss
Dividends paid to shareholders ($0.78 per share)
Six months ended June 30, 2023
Balance at January 1, 2023
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Basis of Presentation
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, 2023. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” to require disclosure of certain significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025. We do not expect the adoption of this new guidance to have a material impact on the condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025. We do not expect the adoption of this new guidance to have a material impact on the condensed consolidated financial statements.
Note 2 — Consolidation
Variable Interest Entities
Consolidated Variable Interest Entities
Our consolidated variable interest entities (“VIEs”) as of June 30, 2024, and December 31, 2023, 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.
Unconsolidated Variable Interest Entities
The following table presents the carrying value of investments included in our Condensed Consolidated Balance Sheets pertaining to unconsolidated VIEs as of June 30, 2024, and December 31, 2023 (in millions):
Unconsolidated VIEs
Our total exposure to unconsolidated VIEs represents the value of our economic ownership interest in the investments.
Voting Rights Entities
Consolidated Voting Rights Entities
The following table presents the balances related to consolidated voting rights entities (“VREs”) that were recorded in our Condensed Consolidated Balance Sheets, including our net interest in these products, as of June 30, 2024, and December 31, 2023 (in millions):
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 investments included in our Condensed Consolidated Balance Sheets pertaining to unconsolidated VREs as of June 30, 2024, and December 31, 2023 (in millions):
Unconsolidated VREs
Our total exposure to unconsolidated VREs represents the value of our economic ownership interest in the investments.
Note 3 — Investments
Our investments as of June 30, 2024, and December 31, 2023, are summarized as follows (in millions):
Current investments:
Seeded investment products:
Consolidated VIEs
Consolidated VREs
Unconsolidated VIEs and VREs
Separately managed accounts
Total seeded investment products
Investments related to deferred compensation plans
Other investments
Total current investments
Non-current investments:
Equity method investments
Total investments
Investment gains, net in our Condensed Consolidated Statements of Comprehensive Income included the following for the three and six months ended June 30, 2024 and 2023 (in millions):
Seeded investment products and hedges, net
Third-party ownership interests in seeded investment products
Other
Net unrealized gains (losses), excluding noncontrolling interests, on seeded investment products and associated derivative instruments still held at period end for the six months ended June 30, 2024 and 2023, are summarized as follows (in millions):
Unrealized gains (losses), net
Gains and losses attributable to third-party ownership interests in seeded investment products are noncontrolling interests and are not included in net income attributable to JHG.
Equity Method Investments
Our equity method investment includes a 49% interest in Privacore Capital (“Privacore”). Beginning on January 1, 2025, for a 60-day period, we have the right, but not the obligation, to cause Privacore to issue additional shares such that after issuance, we would own 99% of Privacore on a fully diluted basis in exchange for a cash capital contribution representing the fair market value of such additional shares. If the JHG option is exercised, we will have the right, but not the obligation, to purchase the remaining 1% equity interest in Privacore from the principals in exchange for the fair market value of such shares.
Cash Flows
Cash flows related to our investments for the six months ended June 30, 2024 and 2023, are summarized as follows (in millions):
Six months ended June 30,
Purchases
Sales,
and
settlements and
Net
settlements
maturities
cash flow
Investments by consolidated seeded investment products
Note 4 — Derivative Instruments
Derivative Instruments Used to Hedge Seeded Investment Products
We maintain an economic hedge program that uses derivative instruments to mitigate against market exposure of certain seeded investments by using index and commodity futures (“futures”), total return swaps and credit default swaps. Certain foreign currency exposures associated with our seeded investment products are also hedged by using foreign currency forward contracts.
We were party to the following derivative instruments as of June 30, 2024, and December 31, 2023 (in millions):
Notional value
June 30, 2024
December 31, 2023
Futures
Credit default swaps
Total return swaps
Foreign currency forward contracts
The derivative instruments are not designated as hedges for accounting purposes. Changes in fair value of the derivatives are recognized in investment gains, net in our Condensed Consolidated Statements of Comprehensive Income. The changes in fair value of the derivative instruments for the three and six months ended June 30, 2024 and 2023, are summarized as follows (in millions):
Foreign currency forward contracts and swaps
Total gains (losses) from derivative instruments
Derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or in accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets. The derivative liabilities as of June 30, 2024, and December 31, 2023, are summarized as follows (in millions):
Fair value
Derivative liabilities
Derivative assets as of June 30, 2024, and December 31, 2023, were insignificant.
Derivative Instruments Used in Consolidated Seeded Investment Products
Certain of our consolidated seeded investment products use 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 in our Condensed Consolidated Balance Sheets. Gains and losses on these derivative instruments are classified within investment gains, net in our Condensed Consolidated Statements of Comprehensive Income.
Our consolidated seeded investment products were party to the following derivative instruments as of June 30, 2024, and December 31, 2023 (in millions):
As of June 30, 2024, and December 31, 2023, the derivative assets and liabilities in our Condensed Consolidated Balance Sheets were insignificant.
Derivative Instruments — Foreign Currency Hedging Program
We maintain a foreign currency hedging program to take reasonable measures to minimize the income statement effects of foreign currency remeasurement of monetary balance sheet accounts. The program uses foreign currency forward contracts and swaps to achieve its objectives, and it is considered an economic hedge for accounting purposes.
The notional value of the foreign currency forward contracts and swaps as of June 30, 2024, and December 31, 2023, is summarized as follows (in millions):
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 in our Condensed Consolidated Balance Sheets. As of June 30, 2024, and December 31, 2023, the derivative assets and liabilities were insignificant.
Changes in fair value of the derivatives are recognized in other non-operating income, net in our Condensed Consolidated Statements of Comprehensive Income. Foreign currency remeasurement is also recognized in other non-operating income, net in our Condensed Consolidated Statements of Comprehensive Income. For the three and six months ended June 30, 2024 and 2023, the change in fair value of the foreign currency forward contracts and swaps was insignificant.
Note 5 — 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 June 30, 2024 (in millions):
Fair value measurements using:
Quoted prices in
Significant
active markets for
identical assets
observable
unobservable
and liabilities
inputs
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash equivalents
Liabilities:
Long-term debt(1)
Deferred bonuses
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, 2023 (in millions):
(1)
Carried at amortized cost in our Condensed Consolidated Balance Sheets and disclosed in this table at fair value.
Level 1 Fair Value Measurements
Our Level 1 fair value measurements consist mostly of investments held by consolidated and unconsolidated seeded investment products and cash equivalents 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, which is considered a quoted price in an active market.
Level 2 Fair Value Measurements
Our Level 2 fair value measurements consist mostly of investments held by consolidated investment products and our long-term debt. 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 our long-term debt is determined using recent trading activity, which is considered a Level 2 input.
Level 3 Fair Value Measurements
As of June 30, 2024, and December 31, 2023, certain investments within consolidated VIEs were valued using significant unobservable inputs, resulting in Level 3 classification.
Deferred Bonuses
Deferred bonuses represent liabilities to employees over the vesting period that will be settled by investments in our products or cash. Upon vesting, employees receive the value of the investment product selected by the participant, adjusted for gains or losses attributable to the product. 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 liabilities for the three and six months ended June 30, 2024 and 2023, were as follows (in millions):
Beginning of period fair value
Fair value adjustments
Vesting of deferred bonuses
Amortization of deferred bonuses
Additions
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 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 6 — Goodwill and Intangible Assets
The following tables present activity in our intangible assets and goodwill balances during the six months ended June 30, 2024 and 2023 (in millions):
Foreign
currency
Amortization
translation
Indefinite-lived intangible assets:
Investment management agreements
Trademarks
Definite-lived intangible assets:
Client relationships
Accumulated amortization
Net intangible assets
2022
Note 7 — Debt
Our debt as of June 30, 2024, and December 31, 2023, consisted of the following (in millions):
4.875% Senior Notes due 2025
4.875% Senior Notes Due 2025
The 4.875% Senior Notes due 2025 (“2025 Senior Notes”) have a principal value of $300.0 million as of June 30, 2024, pay interest at 4.875% semiannually on February 1 and August 1 of each year, and mature on August 1, 2025. The 2025 Senior Notes include unamortized debt premium, net at June 30, 2024, of $3.1 million, which will be amortized over the remaining life of the notes. The unamortized debt premium is recorded as a liability in long-term debt in our Condensed Consolidated Balance Sheets. JHG fully and unconditionally guarantees the obligations of Janus Henderson US (Holdings) Inc. in relation to the 2025 Senior Notes.
Credit Facility
On June 30, 2023, we entered into a new $200 million, unsecured, revolving credit facility (“Credit Facility”) and terminated our former Credit Facility as it was approaching its expiration date. The new 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 new Credit Facility had a maturity date of June 30, 2028, with two one-year extension options that can be exercised at the discretion of JHG with the lender’s consent on the first and second anniversary of the date of the agreement. We exercised the option to extend the term of the Credit Facility on the first anniversary of the agreement. The revised maturity date of the Credit Facility is June 30, 2029. JHG and its subsidiaries may use the Credit Facility for general corporate purposes. The rate of interest for each interest period is the aggregate of the applicable margin, which is based on our long-term credit rating and the Secured Overnight Financing Rate (“SOFR”) in relation to any loan in U.S. dollars (“USD”), the Sterling Overnight Index Average (“SONIA”) in relation to any loan in British pounds (“GBP”), the Euro Interbank Offered Rate (“EURIBOR”) in relation to any loan in euros (“EUR”) or the Bank Bill Swap Rate (“BBSW”) in relation to any loan in Australian dollars (“AUD”). We are also required to pay a quarterly commitment fee on any unused portion of the Credit Facility, which is based on our long-term credit rating. If our credit rating falls below a certain threshold, as defined in the Credit Facility, our financing leverage ratio cannot exceed 3.00x EBITDA. At June 30, 2024, we were in compliance with all covenants in, and there were no borrowings under, the Credit Facility.
Note 8 — Income Taxes
Our effective tax rates for the three and six months ended June 30, 2024 and 2023, were as follows:
Effective tax rate
The effective tax rate for the three and six months ended June 30, 2024, compared to the same periods in 2023, was impacted by the release of accumulated foreign currency translation reserves that are treated as non-taxable for tax purposes during the period. In addition, the tax rate was impacted by the disallowed noncontrolling interest expense from seeded investment products.
As of June 30, 2024, we had $26.0 million of unrecognized tax benefits held for uncertain tax positions. We estimate the existing liability for uncertain tax positions could decrease by up to $6.5 million within the next 12 months without giving effect to changes in foreign currency translation.
The Organisation for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as “Pillar 2”), with certain aspects of Pillar 2 effective January 1, 2024, and other aspects effective January 1, 2025. On June 20, 2023, Finance (No. 2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for accounting periods starting on or after December 31, 2023. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are introducing legislation to implement Pillar 2. As of June 30, 2024, the impact of Pillar 2 on our effective tax rate, consolidated results of operations, financial position and cash flows were not significant to the financial statements.
Note 9 — Noncontrolling Interests
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests as of June 30, 2024, and December 31, 2023, consisted of the following (in millions):
Consolidated seeded investment products
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 net assets of our other seeded products or from our other net assets.
The following table presents the movement in redeemable noncontrolling interests in consolidated seeded investment products for the three and six months ended June 30, 2024 and 2023 (in millions):
Opening balance
Changes in market value
Changes in ownership
Closing balance
Note 10 — Long-Term Incentive Compensation
The following table presents restricted stock and mutual fund awards granted during the three and six months ended June 30, 2024 (in millions):
Restricted stock
Mutual fund awards
Restricted stock and mutual fund awards generally vest and will be recognized using a graded vesting method over a three-year period.
Note 11 — 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 Cost
The components of net periodic benefit cost in respect of defined benefit plans for the three and six months ended June 30, 2024 and 2023, include the following (in millions):
Interest cost
Amortization of prior service cost
Amortization of net gain
Expected return on plan assets
Net periodic benefit cost
Note 12 — Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax for the three and six months ended June 30, 2024 and 2023, were as follows (in millions):
Three months ended June 30,
Retirement
benefit
asset, net
Beginning balance
Reclassifications to net income(1)
Total other comprehensive income
Less: other comprehensive loss (income) attributable to noncontrolling interests
Ending balance
Other comprehensive income (loss)
Total other comprehensive income (loss)
(1) Reclassifications to net income are primarily related to the release of accumulated foreign currency translation reserves during the period in which a JHG entity liquidated.
The components of other comprehensive income (loss), net of tax for the three and six months ended June 30, 2024 and 2023, were as follows (in millions):
Pre-tax
Tax
amount
impact
Foreign currency translation adjustments
Note 13 — Earnings and Dividends Per Share
Earnings Per Share
The following is a summary of the earnings per share calculation for the three and six months ended June 30, 2024 and 2023 (in millions, except per share data):
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 per share:
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 six months ended June 30, 2024:
Dividend
Date
Dividends paid
per share
declared
(in US$ millions)
paid
January 31, 2024
February 28, 2024
May 1, 2024
May 29, 2024
On July 31, 2024, our Board of Directors declared a cash dividend of $0.39 per share for the second quarter 2024. The quarterly dividend will be paid on August 28, 2024, to shareholders of record at the close of business on August 12, 2024.
Note 14 — Commitments and Contingencies
Commitments and contingencies may arise in the normal course of business.
Litigation and Other Regulatory Matters
We are periodically involved in various legal proceedings and other regulatory matters.
Sandra Schissler v Janus Henderson US (Holdings) Inc., Janus Henderson Advisory Committee, and John and Jane Does 1-30
On September 9, 2022, a class action complaint, captioned Schissler v. Janus Henderson US (Holdings) Inc., et al., was filed in the United States District Court for the District of Colorado. Named as defendants are Janus Henderson US (Holdings) Inc. (“Janus US Holdings”) and the Advisory Committee to the Janus 401(k) and Employee Stock Ownership Plan (the “Plan”). The complaint purports to be brought on behalf of a class consisting of participants and beneficiaries of the Plan that invested in Janus Henderson funds on or after September 9, 2016. On January 10, 2023, in response to the defendants’ motion to dismiss filed on November 23, 2022, an amended complaint was filed against the same defendants. The amended complaint names two additional plaintiffs, Karly Sissel and Derrick Hittson. As amended, the complaint alleges that for the period September 9, 2016, through September 9, 2022, among other things, the defendants breached fiduciary duties of loyalty and prudence by (i) selecting higher-cost Janus Henderson funds over less expensive investment options, (ii) retaining Janus Henderson funds despite their alleged underperformance and (iii) failing to consider actively managed funds outside of Janus Henderson to add as investment options. The amended complaint also alleges that Janus US Holdings failed to monitor the Advisory Committee with respect to the foregoing. The amended complaint seeks various declaratory, equitable and monetary relief in unspecified amounts. On February 9, 2023, the defendants filed an amended motion to dismiss the amended complaint. On March 13, 2023, the plaintiffs filed an opposition to the amended motion to dismiss. The defendants filed their reply to the plaintiffs’ opposition on March 28, 2023. On September 7, 2023, a magistrate judge issued a report and recommendation, which recommended that the motion to dismiss be granted in part and denied in part. On September 21, 2023, the parties filed objections to the report and recommendation. Briefing on the parties’ objections concluded on October 12, 2023. On January 22, 2024, the district court judge adopted the magistrate judge’s report and recommendation and entered an order granting in part and denying in part Janus US Holdings’ motion to dismiss. Janus US Holdings believes that it has substantial defenses and intends to vigorously defend against these claims.
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 (“Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (“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, changes in interest rates and inflation, volatility or disruption in financial markets, our investment performance as compared to third-party benchmarks or competitive products, redemptions and other withdrawals from the funds and accounts we manage, and other risks, uncertainties, assumptions and factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, 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 a website 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, Human Capital and Compensation Committee, Governance and Nominations Committee, and Risk 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 the 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. Our strategy revolves around three strategic pillars: Protect and Grow, Amplify, and Diversify, emphasizing relentless focus and disciplined execution in our core business for future success as a global active asset manager. Our strategy aims to foster sustained net new revenue and organic growth while also capitalizing on opportunistic inorganic growth opportunities to generate value for all of our stakeholders. We serve a diverse clientele worldwide, comprising intermediaries, institutional investors and self-directed clients. To cater to regional needs effectively, we maintain local presence across most markets and provide investment materials tailored to local customs, preferences and languages supported by our global distribution team.
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, our Chief Executive Officer (“CEO”), on an aggregated basis. Strategic and financial management decisions are determined centrally by our 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 assets under management (“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 high-water mark. 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 contracts allow for negative performance fees where there is underperformance against the relevant index.
SECOND QUARTER 2024 SUMMARY
Second Quarter 2024 Highlights
●
We achieved solid investment performance, with 69%, 63%, 66% and 84% of our AUM outperforming relevant benchmarks on a one-, three-, five- and 10-year basis, respectively, as of June 30, 2024.
Second quarter 2024 net inflows of $1.7 billion reflect net inflows in Intermediary and Institutional.
Second quarter 2024 diluted earnings per share was $0.81, or $0.85 on an adjusted basis, an increase of 50% and 37% from June 30, 2023, respectively. Refer to the Non-GAAP Financial Measures section below for information on adjusted non-GAAP figures.
AUM increased to $361.4 billion, up 2.5% from March 31, 2024, and 12% from June 30, 2023.
We returned $96.7 million in capital to shareholders through dividends and share buybacks during the second quarter 2024.
On July 31, 2024, our Board of Directors declared a $0.39 per share dividend for the second quarter 2024.
On July 1, 2024, we closed the previously announced acquisition of Tabula Investment Management.
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 second quarter 2024 was $588.4 million, an increase of $71.9 million, or 14%, compared to the second quarter 2023. The key driver of the increase was:
An increase of $49.3 million in management fees primarily due to a market-driven increase in average AUM compared to the second quarter 2023.
Total operating expenses for the second quarter 2024 were $424.1 million, an increase of $25.5 million, or 6%, compared to the second quarter 2023. Key drivers of the increase included:
An increase of $18.6 million in employee compensation and benefits primarily due to higher variable compensation charges as a result of an increase in operating income.
An increase of $12.0 million in distribution expenses primarily driven by an increase in average AUM.
Operating income for the second quarter 2024 was $164.3 million, an increase of $46.4 million, or 39%, compared to the second quarter 2023. Our operating margin was 27.9% in the second quarter 2024 compared to 22.8% in the second quarter 2023.
Net income attributable to JHG for the second quarter 2024 was $129.7 million, an increase of $39.9 million, or 44%, compared to the second quarter 2023. In addition to the aforementioned factors affecting revenue and operating expenses, key drivers of the variance included:
An increase of $13.4 million in our income tax provision, primarily due to higher operating income in the second quarter 2024.
Investment Performance of Assets Under Management
The following table is a summary of investment performance as of June 30, 2024:
Percentage of AUM outperforming benchmark(1)
1 year
3 years
5 years
10 years
Equities
Fixed Income
Multi-Asset
Alternatives
Assets Under Management
Our AUM as of June 30, 2024, was $361.4 billion, an increase of $26.5 billion, or 8%, from December 31, 2023, driven primarily by positive market performance of $29.6 billion.
Our non-USD AUM is primarily denominated in GBP, EUR and AUD. During the three months ended June 30, 2024, the USD weakened against GBP and AUD and strengthened against EUR, resulting in a $0.3 billion increase in our AUM. During the six months ended June 30, 2024, the USD strengthened against GBP, EUR and AUD, resulting in a $1.8 billion decrease in our AUM. As of June 30, 2024, approximately 28% of our AUM was non-USD-denominated.
Our AUM and flows by capability for the three and six months ended June 30, 2024 and 2023, were as follows (in billions):
Closing AUM
March 31,
Net sales
Reclassifications
Sales
Redemptions(1)
(redemptions)
Markets
FX(2)
and disposals(3)
By capability:
Redemptions include the impact of client transfers.
(2)
FX reflects movements in AUM resulting from changes in foreign currency rates as non-USD-denominated AUM is translated into USD.
(3)
Reclassifications relate to the reclassification of existing funds from multi-asset to fixed income and from alternatives to equities.
Our AUM and flows by client type for the three and six months ended June 30, 2024 and 2023, were as follows (in billions):
By client type:
Intermediary
Self-directed
Institutional
Reclassifications relate to the reclassification of existing funds from intermediary to institutional.
Average Assets Under Management
The following table presents our average AUM by capability for the three and six months ended June 30, 2024 and 2023 (in billions):
2024 vs. 2023
Average AUM by capability:
Closing Assets Under Management
The following table presents the closing AUM by client location as of June 30, 2024 and 2023 (in billions):
Closing AUM by client location:
North America
EMEA and Latin America
Asia Pacific
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, the 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 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 committees are 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. Revenue is impacted by foreign currency translation, but the impact is generally determined by the primary currency of the individual funds. Expenses are also impacted by foreign currency translation, primarily driven by the translation of GBP to USD. The GBP strengthened against the USD during the three months ended June 30, 2024, and weakened against the USD during the six months ended June 30, 2024, compared to the same periods in 2023. Meaningful foreign currency translation impacts to our revenue and operating expenses are discussed below.
Revenue (in millions):
11%
73%
10%
9%
13%
* n/m — Not meaningful.
Management fees increased by $49.3 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and by $94.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increases in management fees were primarily due to an improvement in average AUM.
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 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, over a 36-month rolling period, compared to a specified benchmark index. Performance fees by product type consisted of the following for the three and six months ended June 30, 2024 and 2023 (in millions):
Performance fees (in millions):
SICAVs
n/m*
UK OEICs and unit trusts
Absolute return funds and other funds
Segregated mandates
Investment trusts
(92)%
U.S. mutual funds
23%
Total performance fees
Performance fees improved by $13.3 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and by $15.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increases were primarily due to an improvement in performance of Société d’Investissement À Capital Variable (“SICAVs”), UK Open Ended Investment Companies (“UK OEICs”) and unit trusts and the U.S mutual funds. These improvements were partially offset by a decline in performance of certain investment trusts.
Shareowner servicing fees are primarily composed of U.S. mutual fund servicing fees, which are driven by AUM. Shareowner servicing fees increased by $5.2 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and by $10.9 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increases in shareowner servicing fees were primarily due to an improvement in average mutual fund AUM.
Other revenue is primarily composed of 12b-1 distribution fees, general administration charges and other fee revenue. General administration charges include reimbursements from funds for various fees and expenses paid for by the investment manager on behalf of the funds. Other revenue increased by $4.1 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and by $7.7 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increases in other revenue were primarily due to an improvement in average AUM.
Operating Expenses
Operating expenses (in millions):
Employee compensation and benefits increased by $18.6 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase was primarily driven by an increase of $16.5 million in variable compensation, mainly due to higher profitability and $2.4 million of base-pay increases.
Employee compensation and benefits increased by $44.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was primarily driven by an increase of $34.8 million in variable compensation, mainly due to higher profitability, $4.8 million of base-pay increases and unfavorable foreign currency translation of $1.8 million.
For the year ended December 31, 2024, we anticipate an adjusted compensation to revenue ratio in the range of 43% to 45%.
Long-term incentive plan expenses decreased by $1.2 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to a decrease of $2.7 million for the roll-off of vested awards and the forfeiture of awards related to departed employees exceeding the roll-on of new awards and the acceleration of expense related to departed employees.
Long-term incentive plan expenses decreased by $6.3 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to a decrease of $9.5 million for the roll-off of vested awards and the forfeiture of awards related to departed employees exceeding the roll-on of new awards and the acceleration of expense related to departed employees. This decline was partially offset by a $2.7 million increase driven by market appreciation of mutual fund share awards and certain long-term incentive awards.
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 $12.0 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and by $22.4 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increases in distribution expenses were primarily due to an improvement in average AUM subject to distribution expenses.
General, administrative and occupancy expenses decreased by $5.3 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease was primarily due to a $4.7 million insurance reimbursement related to a separately managed account trade error that occurred in 2023 and a $3.4 million decrease in consultancy fees related to certain project costs. These decreases were partially offset by a $2.9 million increase in the amortization of capitalized cloud computing costs, primarily related to the order management system transformation project that was completed in the second quarter of 2023.
General, administrative and occupancy expenses increased by $2.2 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was primarily due to a $6.9 million increase in the amortization of capitalized cloud computing costs, primarily related to the order management system transformation project that was completed in the second quarter of 2023, partially offset by a $4.7 million insurance reimbursement related to a separately managed account trade error that occurred in 2023.
2024 Non-compensation operating expenses
For the year ended December 31, 2024, we anticipate adjusted non-compensation expense growth in the mid- to high-single digits. The anticipated growth in our non-compensation expense is due to planned investments supporting our strategic initiatives, as well as anticipated inflation and amortization of certain capitalized costs.
Non-Operating Income and Expenses
Non-operating income and expenses (in millions):
—%
18%
(37)%
The components of investment gains, net for the three and six months ended June 30, 2024 and 2023, were as follows (in millions):
Investment gains, net (in millions):
(26)%
(70)%
(11)%
Movements in investment gains, net are primarily due to the consolidation and deconsolidation of third-party ownership interests in seeded investment products and fair value adjustments in relation to our seeded investment products.
Other non-operating income, net moved favorably by $0.6 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to a $3.4 million increase in interest income driven by higher interest rates on cash balances and a $1.8 million fair value adjustment on an option agreement. These increases were partially offset by a $5.5 million release of accumulated foreign currency translation adjustments related to liquidated JHG entities.
Other non-operating income, net improved $28.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to a $16.5 million release of accumulated foreign currency translation adjustments related to liquidated JHG entities, an $8.3 million increase in interest income driven by higher interest rates on cash balances and a $2.4 million fair value adjustment on an option agreement.
For the remainder of the year ended December 31, 2024, we expect significant foreign currency translation adjustments to be reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to other non-operating income, net on the Condensed Consolidated Statements of Comprehensive Income due to the anticipated liquidation of certain non-operating JHG entities. The timing of the reclassifications is uncertain and dependent on the progression of the liquidation process. Our current net estimate is $155 million, which would unfavorably impact other non-operating income, net on the Condensed Consolidated Statements of Comprehensive Income. However, the adjustments could be significantly lower or higher than this amount due to the progression of the liquidation process and, to a lesser extent, changes in foreign currency rates.
For the year ended December 31, 2024, we expect our tax rate on adjusted net income attributable to JHG to be in the range of 23% to 25%.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, we evaluate 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.
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 June 30, 2024 and 2023 (in millions, except per share and operating margin data):
Reconciliation of revenue to adjusted revenue
Adjusted revenue(1)
Reconciliation of operating expenses to adjusted operating expenses
Operating expenses
Employee compensation and benefits(2)
Long-term incentive plans(2)
Distribution expenses(1)
General, administrative and occupancy(2)
Depreciation and amortization(3)
Adjusted operating expenses
Adjusted operating income
Operating margin(4)
Adjusted operating margin(5)
Reconciliation of net income attributable to JHG to adjusted net income attributable to JHG
Investment gains, net(6)
Other non-operating income, net(6)
Income tax benefit (provision)(7)
Adjusted net income attributable to JHG
Less: allocation of earnings to participating stock-based awards
Adjusted net income attributable to JHG common shareholders
Diluted earnings per share(8)
Adjusted diluted earnings per share(9)
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. In addition to the adjustments related to distribution and servicing activities, other revenue for the three months ended June 30, 2024, also includes an adjustment related to an employee secondment arrangement with a joint venture. The arrangement is pass-through in nature, and we believe the costs do not represent our ongoing operations.
Adjustments for the three months ended June 30, 2024, include a $4.7 million insurance reimbursement related to a separately managed account trade error that occurred in 2023, acquisition related expenses and the acceleration of long-term incentive plan expense related to the departure of certain employees. Adjustments for the three months ended June 30, 2023, primarily relate to redundancy expenses and the acceleration of long-term incentive plan expense related to the departure of certain employees. JHG management believes these costs are not representative of our ongoing operations. Additionally, within the reconciliation of operating expenses to adjusted operating expenses for the three months ended June 30, 2024, employee compensation and benefits also includes an adjustment related to an employee secondment arrangement with a joint venture. The arrangement is pass-through in nature, and we believe the costs do not represent our ongoing operations.
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. 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 for the three months ended June 30, 2024, consist primarily of the release of accumulated foreign currency translation adjustments related to JHG liquidated entities. The adjustment for the three months ended June 30, 2023, includes a correction of previously recognized earnings associated with an equity method investment. 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.
The following table summarizes key balance sheet data relating to our liquidity and capital resources as of June 30, 2024, and December 31, 2023 (in millions):
Cash and cash equivalents held by the Company
Investments held by the Company
Cash and cash equivalents primarily consist of cash held at banks, on-demand deposits, investments in money market instruments, highly liquid short-term debt securities and commercial paper with a maturity date of three months or less. Cash and cash equivalents exclude cash held by consolidated VIEs and consolidated VREs, and investments exclude noncontrolling interests as these assets are not available for general corporate purposes.
Investments held by us represent seeded investment products (exclusive of noncontrolling interests), investments related to deferred compensation plans and other less significant investments classified as current assets in our Condensed Consolidated Balance Sheets.
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 Markets in Financial Instruments Directive (“MiFID”) investment firms (“MIFIDPRU”). The combined capital requirement is £136.0 million ($171.9 million), resulting in £327.6 million ($414.1 million) of capital above the requirement as of June 30, 2024, based upon internal calculations and taking into account the effect of foreseeable dividends. The increase in the surplus since March 31, 2024, is primarily due to the recognition of profits for the year ended December 31, 2023, as part of regulatory capital. 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 Purchases - Corporate Buyback Program
On October 31, 2023, our Board of Directors approved the 2023 Corporate Buyback Program pursuant to which we were authorized to repurchase up to $150.0 million of our common stock on the NYSE at any time prior to the date of our 2024 Annual General Meeting of Shareholders, which was held on May 1, 2024. As of April 30, 2024, cumulative shares repurchased under the 2023 Corporate Buyback Program were 5,196,059 for $150 million.
On May 1, 2024, our Board of Directors approved the 2024 Corporate Buyback Program to which we are authorized to repurchase up to $150.0 million of our common stock on the NYSE at any time prior to the date of our 2025 Annual General Meeting of Shareholders. As of June 30, 2024, cumulative shares repurchased under the 2024 Corporate Buyback Program were 818,213 for $27.3 million.
Common Stock Purchases - Share Plan Purchases
On October 31, 2023, our Board of Directors separately approved the repurchase of up to 4 million additional shares of common stock for the purpose of making grants to executives and employees at any time prior to the date of our 2024 Annual General Meeting of Shareholders, which was held on May 1, 2024. Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements (“Share Plan Repurchases”). We satisfy these entitlements by transferring shares of existing common stock that we repurchase on-market for this purpose. These repurchases are in addition to the repurchases under the Corporate Buyback Program discussed above. As of April 30, 2024, cumulative shares repurchased under the Share Plan Repurchases were 2,268,377 for $70.0 million.
On May 1, 2024, our Board of Directors also approved the repurchase of up to 5 million additional shares of common stock to make grants to executives and employees at any time prior to the date of our 2025 Annual General Meeting of Shareholders. As of June 30, 2024, cumulative shares repurchased under the 2024 Share Plan Repurchases were 250,001 shares for $8.6 million.
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 six months ended June 30, 2024, were as follows:
On July 31, 2024, our Board of Directors declared a $0.39 per share dividend for the second quarter 2024. The quarterly dividend will be paid on August 28, 2024, to shareholders of record at the close of business on August 12, 2024.
Long-Term Liquidity and Capital Resources
Expected long-term commitments as of June 30, 2024, 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
As of December 31, 2023, our defined benefit pension plan had a net retirement asset of $85.3 million.
Other Sources of Liquidity
On June 30, 2023, we entered into a new $200 million unsecured, revolving Credit Facility and terminated our former Credit Facility as it was approaching its expiration date. The new 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 June 30, 2029.
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. Should our long-term credit rating fall below a predefined threshold, our 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. Refer to Note 7 — Debt for further information on the Credit Facility.
Cash flow data for the six months ended June 30, 2024 and 2023, was as follows (in millions):
Cash flows provided by (used for):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash balance at beginning of period
Cash balance at end of period
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 investing activities for the six months ended June 30, 2024 and 2023, was as follows (in millions):
Purchases of investments, net
Purchases of investments by consolidated seeded investment products, net
Purchases of property, equipment and software
Cash used for investing activities
We periodically add new investment strategies to our investment product offerings by providing the initial cash investment, or seeding, in a product. The primary purpose of seeded investment products is to generate an investment performance track record in these products and leverage that track record to attract third-party investors. We may redeem our seed capital investments for a variety of reasons, including when third-party investments in the relevant product are sufficient to sustain the investment strategy. The cash associated with seeding and redeeming seeded investment products is reflected in the above table as purchases of investments, net.
We consolidate certain seeded investment products into our group financial statements. The purchases and sales of investments within consolidated seeded investment products are disclosed separately from our capital contributions to seed a product. We also maintain an economic hedge program that uses derivative instruments to mitigate against market exposure of certain seeded investments. The cash received and paid as part of this program is reflected in the table above.
The transactions discussed above represent a majority of the activity within investing activities on our Condensed Consolidated Statements of Cash Flows.
Financing Activities
Cash provided by (used for) financing activities for the six months ended June 30, 2024 and 2023, was as follows (in millions):
Cash provided by (used for) financing activities
The majority of cash flows within financing activities were driven by the payment of dividends to shareholders, the purchase of common stock as part of the 2024 Corporate Buyback Program and for stock-based compensation plans, and third-party capital invested into consolidated seeded investment products, net. Third-party capital invested into consolidated seeded investment products, net represents the cash received from third-party investors in a seeded investment product that is consolidated into our group financial statements. When a third-party investor redeems the investment, a cash outflow is disclosed as a distribution.
CRITICAL ACCOUNTING ESTIMATES
We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. In general, management’s estimates are based on historical experience, information from third-party professionals, as appropriate, and various other assumptions that are believed to be reasonable under current facts and circumstances. Actual results could differ from those estimates made by management. There were no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023.
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, 2023.
Item 4. Controls and Procedures
As of June 30, 2024, 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. Ali Dibadj, our CEO, and Roger Thompson, our Chief Financial Officer, reviewed and participated in management’s evaluation of the disclosure controls and procedures. Based on this evaluation, Mr. Dibadj and 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 second quarter 2024 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 14 — Commitments and Contingencies.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, could have a material adverse effect on our financial condition, results of operations and value of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On October 31, 2023, our Board of Directors separately approved the repurchase of up to 4 million additional shares of common stock to make grants to executives and employees at any time prior to the date of our 2024 Annual General Meeting of Shareholders, which was held on May 1, 2024. Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements (“Share Plan Repurchases”). We satisfy these entitlements by transferring shares of existing common stock that we repurchase on-market for this purpose. These repurchases are in addition to the repurchases under the Corporate Buyback Program discussed above. As of April 30, 2024, cumulative shares repurchased under the Share Plan Repurchases were 2,268,377 for $70.0 million.
The following table summarizes our common stock repurchases by month during the three months ended June 30, 2024.
Total number of shares
value of shares that
number of
Average
purchased as part of
may yet be purchased
price paid per
publicly announced
under the programs
Period
purchased
share
programs
(end of month, in millions)
April 1, 2024, through April 30, 2024
May 1, 2024, through May 31, 2024
June 1, 2024, through June 30, 2024
Items 3 and 4.
Not applicable.
Item 5. Other Information
Trading Plans of Directors and Officers
During the quarter ended June 30, 2024, no director or Section 16 officer adopted, modified or terminated any Rule 10b5–1 trading arrangements or non-Rule 10b5–1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 6. Exhibits
Filed with This Report:
Exhibit
No.
Document
31.1
Certification of Ali Dibadj, Chief Executive Officer of Registrant
31.2
Certification of Roger Thompson, Chief Financial Officer of Registrant
32.1
Certification of Ali Dibadj, Chief Executive Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Roger Thompson, Chief Financial Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)
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: August 1, 2024
Janus Henderson Group plc
/s/ Ali Dibadj
Ali Dibadj,
Chief Executive Officer
(Principal Executive Officer)
/s/ Roger Thompson
Roger Thompson,
Chief Financial Officer
(Principal Financial Officer)
/s/ Berg Crawford
Berg Crawford,
Chief Accounting Officer
(Principal Accounting Officer)