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 September 30, 2021
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 ofincorporation or organization)
98-1376360(I.R.S. EmployerIdentification 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 Company 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 October 25, 2021, there were 170,584,530 shares of the Company’s common stock, $1.50 par value per share, issued and outstanding.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(U.S. Dollars in Millions, Except Share Data)
September 30,
December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
933.1
1,099.7
Investment securities
445.2
268.1
Fees and other receivables
359.5
373.6
OEIC and unit trust receivables
180.7
114.7
Assets of consolidated VIEs:
11.5
8.4
245.3
214.6
Other current assets
2.0
3.5
122.0
111.1
Total current assets
2,299.3
2,193.7
Non-current assets:
Property, equipment and software, net
63.7
77.9
Intangible assets, net
2,620.9
2,686.3
Goodwill
1,370.8
1,383.9
Retirement benefit asset, net
189.8
191.3
Other non-current assets
158.7
157.7
Total assets
6,703.2
6,690.8
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
229.4
232.1
Current portion of accrued compensation, benefits and staff costs
351.0
371.0
OEIC and unit trust payables
189.6
121.5
Liabilities of consolidated VIEs:
2.9
3.2
Total current liabilities
772.9
727.8
Non-current liabilities:
Accrued compensation, benefits and staff costs
36.9
53.7
Long-term debt
311.1
313.3
Deferred tax liabilities, net
644.7
627.4
Retirement benefit obligations, net
4.7
Other non-current liabilities
125.6
144.3
Total liabilities
1,895.9
1,871.2
Commitments and contingencies (See Note 14)
REDEEMABLE NONCONTROLLING INTERESTS
145.1
85.8
EQUITY
Common stock, $1.50 par value; 480,000,000 shares authorized, and 170,584,530 and 180,403,176 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively
255.9
270.6
Additional paid-in-capital
3,755.4
3,815.0
Treasury shares, 1,208,917 and 2,548,063 shares held at September 30, 2021, and December 31, 2020, respectively
(58.1)
(107.3)
Accumulated other comprehensive loss, net of tax
(376.9)
(324.0)
Retained earnings
1,070.3
1,062.1
Total shareholders’ equity
4,646.6
4,716.4
Nonredeemable noncontrolling interests
15.6
17.4
Total equity
4,662.2
4,733.8
Total liabilities, redeemable noncontrolling interests and equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(U.S. Dollars in Millions, Except per Share Data)
Three months ended
Nine months ended
Revenue:
Management fees
564.5
457.7
1,623.5
1,305.0
Performance fees
0.6
7.0
95.0
38.8
Shareowner servicing fees
67.6
192.4
151.3
Other revenue
54.7
50.1
158.9
146.3
Total revenue
687.4
568.5
2,069.8
1,641.4
Operating expenses:
Employee compensation and benefits
166.2
154.9
533.2
456.3
Long-term incentive plans
35.0
42.7
138.3
125.4
Distribution expenses
142.1
118.8
404.3
335.7
Investment administration
13.0
13.1
38.7
37.4
Marketing
7.5
5.3
20.4
15.7
General, administrative and occupancy
65.5
65.6
194.2
188.8
Impairment of goodwill and intangible assets
-
44.4
513.7
Depreciation and amortization
9.8
11.6
30.5
37.6
Total operating expenses
439.1
412.0
1,404.0
1,710.6
Operating income (loss)
248.3
156.5
665.8
(69.2)
Interest expense
(3.2)
(9.6)
(9.7)
Investment gains, net
25.5
8.1
25.3
Other non-operating income (expenses), net
3.6
(0.9)
0.8
39.9
Income (loss) before taxes
253.4
177.9
665.1
(13.7)
Income tax provision
(53.3)
(40.8)
(176.1)
(2.1)
Net income (loss)
200.1
137.1
489.0
(15.8)
Net loss (income) attributable to noncontrolling interests
(3.3)
(18.2)
(9.4)
Net income (loss) attributable to JHG
196.8
118.9
489.6
(25.2)
Earnings (loss) per share attributable to JHG common shareholders:
Basic
1.15
0.65
2.82
(0.14)
Diluted
1.14
2.81
Other comprehensive income (loss), net of tax:
Foreign currency translation gains (losses)
(59.6)
97.4
(53.1)
(41.1)
Actuarial gains
0.1
0.4
0.3
Other comprehensive income (loss), net of tax
(59.5)
97.5
(52.7)
Other comprehensive loss (income) attributable to noncontrolling interests
(11.0)
(0.2)
(7.3)
Other comprehensive income (loss) attributable to JHG
(58.7)
86.5
(52.9)
(48.1)
Total comprehensive income (loss)
140.6
234.6
436.3
(56.6)
Total comprehensive loss (income) attributable to noncontrolling interests
(2.5)
(29.2)
(16.7)
Total comprehensive income (loss) attributable to JHG
138.1
205.4
436.7
(73.3)
2
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 (loss) to net cash provided by operating activities:
Deferred income taxes
24.2
(109.8)
Stock-based compensation plan expense
50.7
52.2
Impairment of right-of-use operating asset
1.3
Gain on sale of Geneva
(16.2)
(8.1)
(25.3)
Contributions to pension plans in excess of costs recognized
(1.0)
(0.4)
Contingent consideration fair value adjustment
(7.1)
Other, net
(7.4)
(14.7)
Changes in operating assets and liabilities:
OEIC and unit trust receivables and payables
2.1
8.5
Other assets
(14.0)
54.9
Other accruals and liabilities
3.8
(53.4)
Net operating activities
614.2
425.5
Investing activities:
Sales (purchases) of:
Investment securities, net
(196.5)
48.8
Property, equipment and software
(5.9)
(16.5)
Investment securities by consolidated seeded investment products, net
(58.0)
(64.8)
Cash paid on settled seed capital hedges, net
(12.6)
(0.1)
Dividends received from equity-method investments
1.1
Receipt of contingent consideration payments from sale of Volantis
0.7
2.2
Receipt of contingent consideration payments from sale of Geneva
5.4
1.6
Proceeds from sale of Geneva
38.4
Net investing activities
(265.8)
10.0
Financing activities:
Proceeds from stock-based compensation plans
10.9
Purchase of common stock for stock-based compensation plans
(72.1)
(48.4)
Purchase of common stock from Dai-ichi Life and share buyback program
(305.2)
(103.4)
Dividends paid to shareholders
(191.5)
(198.1)
Payment of contingent consideration
(13.8)
Distributions to noncontrolling interests
(0.5)
Third-party sales in consolidated seeded investment products, net
61.2
64.8
Principal payments under capital lease obligations
(0.3)
Net financing activities
(497.4)
(299.8)
Cash and cash equivalents:
Effect of foreign exchange rate changes
(14.5)
(5.7)
Net change
(163.5)
130.0
At beginning of period
1,108.1
796.5
At end of period
944.6
926.5
Supplemental cash flow information:
Cash paid for interest
14.6
Cash paid for income taxes, net of refunds
169.2
130.6
Reconciliation of cash and cash equivalents:
909.0
Cash and cash equivalents held in consolidated VIEs
17.5
Total cash and cash equivalents
3
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 September 30, 2021
shares
stock
capital
loss
earnings
interests
equity
Balance at July 1, 2021
172.3
258.5
3,743.6
(67.6)
(318.2)
1,009.7
4,641.6
Net income
—
196.9
Other comprehensive loss
Dividends paid to shareholders ($0.38 per share)
Purchase of common stock for share buyback program
(1.7)
(2.6)
(72.4)
(75.0)
Fair value adjustments to redeemable noncontrolling interests
1.0
0.5
(0.6)
Vesting of stock-based compensation plans
(10.1)
10.1
16.0
Balance at September 30, 2021
170.6
Three months ended September 30, 2020
Balance at July 1, 2020
183.9
275.8
3,792.1
(114.6)
(501.7)
959.2
18.1
4,428.9
118.4
Other comprehensive income
Dividends paid to shareholders ($0.36 per share)
(65.5)
(3.7)
(46.5)
(50.2)
(2.7)
(4.0)
4.0
Balance at September 30, 2020
181.4
272.1
3,804.0
(111.2)
(415.2)
965.8
17.6
4,533.1
4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (Continued)
Nine months ended September 30, 2021
Balance at January 1, 2021
180.4
(1.4)
488.2
Dividends paid to shareholders ($1.12 per share)
(191.6)
(9.8)
(290.5)
(70.9)
(1.2)
(50.4)
50.4
Nine months ended September 30, 2020
Balance at January 1, 2020
187.0
280.5
3,828.5
(139.5)
(367.1)
1,284.1
19.7
4,906.2
Net loss
(1.6)
(26.8)
Dividends paid to shareholders ($1.08 per share)
(198.2)
(5.6)
(8.4)
(95.0)
(44.9)
(3.5)
(31.8)
31.8
5
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Basis of Presentation and Significant Accounting Policies
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, 2020. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date.
Recent Accounting Pronouncements Adopted
Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is part of the FASB’s initiative to reduce complexity in accounting standards. The ASU eliminates certain exceptions to the general principles of ASC 740, Income Taxes, and simplifies income tax accounting in several areas. We adopted the ASU, which was effective as of January 1, 2021. The adoption of this ASU did not have a material impact on our results of operations or financial position.
Note 2 — Consolidation
Variable Interest Entities
Consolidated Variable Interest Entities
Our consolidated variable interest entities (“VIEs”) as of September 30, 2021, and December 31, 2020, include certain consolidated seeded investment products in which we have an investment and act as the investment manager. The assets of these VIEs are not available to us or our creditors. We may not, under any circumstances, access cash, cash equivalents or other assets held by consolidated VIEs to use in our operating activities or otherwise. In addition, the investors in these VIEs have no recourse to the credit of JHG.
Unconsolidated Variable Interest Entities
The following table presents the carrying value of investment securities included on our Condensed Consolidated Balance Sheets pertaining to unconsolidated VIEs (in millions):
Unconsolidated VIEs
99.8
9.6
Our total exposure to unconsolidated VIEs represents the value of our economic ownership interest in the investment securities.
6
Voting Rights Entities
Consolidated Voting Rights Entities
The following table presents the balances related to consolidated voting rights entities (“VREs”) that were recorded on our Condensed Consolidated Balance Sheets, including our net interest in these products (in millions):
179.3
29.3
2.3
2.8
181.5
32.4
Redeemable noncontrolling interests in consolidated VREs
(23.5)
JHG's net interest in consolidated VREs
158.0
The increase in consolidated VREs is primarily due to approximately $163 million of seed capital investments into certain exchange-traded funds (“ETF”) products in September 2021.
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 investment securities included on our Condensed Consolidated Balance Sheets pertaining to unconsolidated VREs (in millions):
Unconsolidated VREs
56.0
63.6
Our total exposure to unconsolidated VREs represents the value of our economic ownership interest in the investment securities.
Note 3 — Investment Securities
Our investment securities as of September 30, 2021, and December 31, 2020, are summarized as follows (in millions):
Seeded investment products:
Consolidated VIEs
Consolidated VREs
Unconsolidated VIEs and VREs
155.8
73.2
Separate accounts
54.2
63.5
Pooled investment funds
Total seeded investment products
634.7
380.7
Investments related to deferred compensation plans
50.3
96.5
Other investments
5.5
Total investment securities
690.5
482.7
7
Trading Securities
Net unrealized gains on investment securities held as of the three and nine months ended September 30, 2021 and 2020, are summarized as follows (in millions):
Unrealized gains on investment securities held at period end
4.6
8.0
34.1
Investment Gains, Net
Investment gains, net on our Condensed Consolidated Statements of Comprehensive Income (Loss) included the following for the three and nine months ended September 30, 2021 and 2020 (in millions):
Seeded investment products and hedges, net
1.4
5.2
4.4
11.2
Third-party ownership interests in seeded investment products
3.0
(1.1)
8.7
Long Tail Alpha equity method investment
0.2
6.1
Deferred equity plan
Other
Cash Flows
Cash flows related to investment securities for the nine months ended September 30, 2021 and 2020, are summarized as follows (in millions):
Nine months ended September 30,
Sales,
Purchases
settlements
and
maturities
Investment securities by consolidated seeded investment products
(66.9)
8.9
(69.3)
4.5
(302.2)
105.7
(109.5)
158.3
8
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 volatility of certain seeded investments by using index and commodity futures (“futures”), index swaps, total return swaps (“TRSs”) and credit default swaps. Foreign currency exposures associated with our seeded investment products are also hedged by using foreign currency forward contracts and swaps.
We were party to the following derivative instruments as of September 30, 2021, and December 31, 2020 (in millions):
Notional value
September 30, 2021
December 31, 2020
Futures
164.5
Credit default swaps
164.4
Total return swaps
59.6
35.6
Foreign currency forward contracts and swaps
390.3
205.0
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 (Loss).
Derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. The derivative assets and liabilities as of September 30, 2021, and December 31, 2020, are summarized as follows (in millions):
Fair value
Derivative assets
12.2
9.1
Derivative liabilities
8.6
10.8
In addition to using derivative instruments to mitigate against market volatility of certain seeded investments, we also engage in short sales of securities to hedge seed investments. As of September 30, 2021, and December 31, 2020, the fair value of securities sold but not yet purchased was $2.9 million and $7.9 million, respectively. The cash received from the short sale and the obligation to repurchase the shares are classified in other current assets and accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets, respectively. Fair value adjustments are recognized in investment gains, net on our Condensed Consolidated Statements of Comprehensive Income (Loss).
Derivative Instruments in Consolidated Seeded Investment Products
Certain of our consolidated seeded investment products utilize derivative instruments to contribute to the achievement of defined investment objectives. These derivative instruments are classified within other current assets or accounts payable and accrued liabilities on 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 (Loss).
9
Our consolidated seeded investment products were party to the following derivative instruments as of September 30, 2021, and December 31, 2020 (in millions):
96.4
57.0
1.5
Interest rate swaps
75.0
Options
83.3
56.1
Derivative Instruments — Used in Foreign Currency Hedging Program
In January 2021, we implemented a balance sheet foreign currency hedging program (the “Program”) to take reasonable measures to minimize the effects of foreign currency remeasurement of monetary balance sheet accounts. The Program is not designed to eliminate all impacts of foreign currency risk; rather it is designed to reduce income statement volatility. The Program utilizes 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 was $104.7 million at September 30, 2021. The derivative assets and liabilities are generally recognized on a gross basis and included in other current assets or accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. The derivative assets and liabilities as of September 30, 2021, are summarized as follows (in millions):
1.9
Changes in fair value of the derivatives are recognized in other non-operating income (expenses), net on our Condensed Consolidated Statements of Comprehensive Income (Loss), and we recognized a loss of $0.8 million and a gain of $0.5 million during the three and nine months ended September 30, 2021, respectively. Foreign currency remeasurement is also recognized in other non-operating income (expenses), net on our Condensed Consolidated Statement of Comprehensive Income (Loss).
10
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 September 30, 2021 (in millions):
Fair value measurements using:
Quoted prices in
active markets for
identical assets
Significant other
Significant
and liabilities
observable inputs
unobservable inputs
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash equivalents
384.5
Investment securities:
194.7
43.8
6.8
Other investment securities
418.6
26.6
613.3
70.4
Seed hedge derivatives
Derivatives in consolidated seeded investment products
Volantis contingent consideration
Geneva contingent consideration
12.0
997.8
82.7
20.8
1,101.3
Liabilities:
Derivatives used in foreign currency hedging program
Securities sold, not yet purchased
Long-term debt(1)
336.8
Deferred bonuses
42.8
347.9
393.6
11
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, 2020 (in millions):
525.0
125.7
77.7
230.9
37.2
356.6
114.9
0.9
881.6
124.9
31.4
1,037.9
7.9
348.4
65.2
359.4
432.5
(1)
Carried at amortized cost and disclosed at fair value.
Level 1 Fair Value Measurements
Our Level 1 fair value measurements consist mostly of investments held by seeded investment products, investments in advised mutual funds, cash equivalents and investments related to deferred compensation plans 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 (“NAV”), which is considered a quoted price in an active market.
Level 2 Fair Value Measurements
Our Level 2 fair value measurements consist mostly of consolidated seeded investment products, derivative instruments and our long-term debt. The fair value of consolidated seeded investment products is determined by the underlying securities of the product. The fair value of our long-term debt is determined using broker quotes and recent trading activity, which are considered Level 2 inputs.
12
Level 3 Fair Value Measurements
Investment Securities
As of September 30, 2021, and December 31, 2020, certain securities within consolidated VIEs were valued using significant unobservable inputs, resulting in Level 3 classification. In addition, we have an investment in a private equity vehicle where the significant valuation inputs are unobservable.
Geneva Contingent Consideration
On December 3, 2019, Henderson Global Investors (North America), Inc. (“HGINA”), a subsidiary of the Company, entered into an agreement to sell its 100% ownership interest in Geneva Capital Management LLC (“Geneva”) to GCM Purchaser, LLC. The sale closed on March 17, 2020. Consideration included aggregate cash consideration of $38.4 million and contingent consideration (the “Earnout”) based on future revenue. Payments under the Earnout are to be made quarterly over a five-year term, with minimum aggregate payments of $20.5 million and maximum aggregate payments of $35.0 million. During the three and nine months ended September 30, 2021, we received a $1.9 million and $5.4 million contingent consideration payment, respectively.
Volantis Contingent Consideration
On April 1, 2017, we completed the sale of the Volantis UK Small Cap (“Volantis”) alternative team assets. Consideration for the sale was a 10% share of the management and performance fees generated by Volantis (excluding one particular fund) for a period of three years following the sale. In addition, consideration for the sale included 50% of the first £12 million of performance fees generated by the excluded fund referenced above. As of September 30, 2021, the fund has not reached the £12 million performance fee threshold. As a result, this fee sharing arrangement will remain in effect until the performance threshold is reached.
As of September 30, 2021, and December 31, 2020, the fair value of the Volantis contingent consideration was $2.0 million and $2.8 million, respectively.
Deferred Bonuses
Deferred bonuses represent liabilities to employees over the vesting period that will be settled by investments in our products. 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 assets for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Beginning of period fair value
26.5
29.2
12.8
Contingent consideration from sale of Geneva
18.9
Settlements
(5.2)
(9.2)
(2.2)
Fair value adjustments
Purchases of securities
2.7
Sales of securities
Foreign currency translation
End of period fair value
13
Changes in fair value of our individual Level 3 liabilities for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Three months ended September 30,
Deferred
bonuses
42.9
Vesting of deferred bonuses
Amortization of deferred bonuses
1.8
Contingent
consideration
21.2
76.6
(51.6)
24.0
26.7
Unrealized gains (losses)
Distributions
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 (“DCF”) 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 movements in our intangible assets and goodwill during the nine months ended September 30, 2021 and 2020 (in millions):
Foreign currency
Amortization
Disposal
Impairment
translation
Indefinite-lived intangible assets:
Investment management agreements
2,242.9
2,188.4
Trademarks
373.2
(3.6)
369.5
Definite-lived intangible assets:
Client relationships
170.9
(2.9)
168.0
Accumulated amortization
(100.7)
(5.8)
(105.0)
Net intangible assets
(44.4)
(15.2)
(13.1)
14
2019
2,490.3
(263.5)
(12.7)
2,214.1
380.8
(7.7)
373.0
364.7
(79.3)
(119.0)
166.1
(147.2)
(10.5)
61.4
(95.7)
3,088.6
(17.9)
(390.2)
(12.5)
2,657.5
1,504.3
(123.5)
(15.4)
1,341.9
Interim Impairment Assessment
During the second quarter of 2021, we performed an interim impairment assessment on a certain indefinite-lived intangible asset due to a significant decrease in assets under management (“AUM”) and unfavorable changes in the forecast on these specific assets. A DCF model was used to determine the estimated fair value of the investment management agreements. Some of the inputs used in the DCF model required significant management judgment, including the discount rate, terminal growth rate, forecasted financial results and market returns. The results of the DCF model revealed a fair value of nil and we therefore impaired the entire $40.8 million balance of the intangible asset. The impairment charge is included in the table above and recorded in goodwill and intangible asset impairment charges on the Condensed Consolidated Statements of Comprehensive Income (Loss).
Perkins Trademark
During the first quarter of 2021, as part of our ongoing strategic initiatives and looking globally at delivering excellent service to our clients and positioning our business for success, we completed a review of Perkins Investment Management (“Perkins”). To right-size our product portfolio and better align with the changing needs of clients, certain strategies were closed and the funds were liquidated during the second quarter of 2021. The majority of the Perkins value equity strategies were unaffected by this reorganization and they have continued under the Janus Henderson brand. The Perkins brand was discontinued and the marketing efforts for value equity strategies were incorporated under the Janus Henderson brand. During the first quarter 2021, we impaired the entire balance of the intangible asset associated with the Perkins trademark. The impairment charge of $3.6 million is included in the table above and recorded in goodwill and intangible asset impairment charges on the Condensed Consolidated Statements of Comprehensive Income (Loss).
Sale of Geneva
On December 3, 2019, HGINA, a subsidiary of JHG, entered into an agreement to sell its 100% ownership interest in Geneva to GCM Purchaser, LLC. The sale closed on March 17, 2020. The transaction included $17.9 million of net intangible assets and goodwill of $23.5 million, as disclosed in the disposal column above.
2020 Goodwill and Intangible Asset Impairments
In March 2020, the World Health Organization declared COVID-19 a pandemic, and global financial markets declined. This drove a sudden and severe decline in our AUM, which was a triggering event for performing an interim impairment assessment of our goodwill and intangible assets. Our interim impairment assessment revealed the carrying value of certain investment management agreements, trademarks, client relationships and goodwill exceeded their estimated fair value, and we recognized impairments of $263.5 million, $7.7 million, $92.6 million and $123.5 million, respectively, during the three months ended March 31, 2020. The results of the March 2020 interim assessment are included in the table above. The impairment charges were recorded in goodwill and intangible asset impairment charges on the Condensed Consolidated Statements of Comprehensive Income (Loss).
15
VelocityShares Exchange-Traded Notes
In June 2020, a third-party issuer announced its intent to delist and suspend further issuances of the majority of VelocityShares exchange-traded notes (“ETNs”). The announcement was considered a triggering event for performing an interim impairment assessment of the definite-lived intangible asset. We qualitatively assessed the asset and considered how the announcement is expected to negatively impact ETN asset levels in the short and long term. While there will likely continue to be short-term revenue associated with the ETNs after they are delisted, the asset value is expected to decrease until the products become fully liquidated. As such, we impaired the entire intangible asset associated with the VelocityShares ETNs in June 2020. The impairment charge of $26.4 million is included in the table above and recorded in goodwill and intangible asset impairment charges on the Condensed Consolidated Statements of Comprehensive Income (Loss).
Future Amortization
Expected future amortization expense related to client relationships is summarized below (in millions):
Future amortization
Amount
2021 (remainder of year)
2022
7.6
2023
7.3
2024
5.9
2025
Thereafter
34.4
63.0
Note 7 — Debt
Our debt as of September 30, 2021, and December 31, 2020, consisted of the following (in millions):
Carrying
Fair
value
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, 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 September 30, 2021, of $11.1 million, which will be amortized over the remaining life of the notes. The unamortized debt premium is recorded as a liability within long-term debt on our Condensed Consolidated Balance Sheets. JHG fully and unconditionally guarantees the obligations of Janus Capital Group Inc. (“JCG”) in relation to the 2025 Senior Notes.
16
Credit Facility
At September 30, 2021, we had a $200 million, unsecured, revolving credit facility (“Credit Facility”). 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 London Interbank Offered Rate (“LIBOR”); the Euro Interbank Offered Rate (“EURIBOR”) in relation to any loan in euro (“EUR”); or in relation to any loan in Australian dollar (“AUD”), the benchmark rate for that currency. As LIBOR is scheduled to be phased out at the end of 2021, we are working with our banking syndicate to find a suitable replacement. We are required to pay a quarterly commitment fee on any unused portion of the Credit Facility, which is also based on our long-term credit rating. Under the Credit Facility, our financing leverage ratio cannot exceed 3.00x EBITDA. At September 30, 2021, we were in compliance with all covenants contained in, and there were no outstanding borrowings under, the Credit Facility. The maturity date of the Credit Facility is February 16, 2024.
Note 8 — Income Taxes
Our effective tax rates for the three and nine months ended September 30, 2021 and 2020, were as follows:
Effective tax rate
21.0
%
22.9
(15.3)
The change in the three months ended September 30, 2020 and the three months ended September 30, 2021 is primarily related to the enactment of Finance Act 2020, where the United Kingdom (“UK”) government announced the UK tax rate would remain at 19% and not reduce to 17% as scheduled, resulting in a deferred tax expense in the three months ended September 30, 2020.
The effective tax rate for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was impacted by the enactment of Finance Act 2021 during the second quarter of 2021, which increased the UK corporation tax rate from 19% to 25% beginning in April 2023. As a result, the UK deferred tax assets and liabilities expected to be settled after 2023 were revalued from 19% to 25%, creating a non-cash deferred tax expense of $31.0 million. The effective tax rate for the nine months ended September 30, 2020, was also impacted by the enactment of Finance Act 2020, as discussed above. In addition, there were significant impairments of intangible assets and goodwill in the first quarter of 2020, which contributed to a pre-tax book loss for the nine months ended September 30, 2020. The majority of the impairment charges were related to temporary differences, which adjusted deferred income taxes and did not have a direct impact on the effective tax rate.
As of September 30, 2021, and December 31, 2020, we had $14.9 million and $15.8 million of unrecognized tax benefits held for uncertain tax positions, respectively. We estimate that the existing liability for uncertain tax positions could decrease by up to $0.6 million within the next 12 months, without giving effect to changes in foreign currency translation.
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Note 9 — Noncontrolling Interests
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests as of September 30, 2021, and December 31, 2020, consisted of the following (in millions):
Consolidated seeded investment products
130.2
70.6
Intech:
Employee appreciation rights
12.7
12.3
Founding member ownership interests
Total redeemable noncontrolling interests
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 underlying securities included in the portfolios of seeded products. Redemptions of investments by third parties in any particular seeded product are redeemed from the net assets of such seeded product and cannot be redeemed from the assets of our other seeded products or from our other assets.
The following table presents the movement in redeemable noncontrolling interests in consolidated seeded investment products for the three and nine months ended September 30, 2021 and 2020 (in millions):
Opening balance
109.2
453.7
662.8
Changes in market value
18.8
Changes in ownership
18.4
(413.1)
58.5
(610.0)
11.4
7.1
Closing balance
70.8
Intech
Intech Investment Management LLC (“Intech”) ownership interests held by a founding member had an estimated fair value of $2.2 million as of September 30, 2021, representing an approximate 1.1% ownership of Intech. This founding member is entitled to retain his remaining Intech interests for the remainder of his life and has the option to require us to purchase his ownership interests in Intech at fair value.
Intech employee appreciation rights are amortized using a graded vesting method over the respective vesting period. The appreciation rights are exercisable upon termination of employment from Intech to the extent vested. Upon exercise, the appreciation rights are settled in Intech equity.
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Nonredeemable Noncontrolling Interests
Nonredeemable noncontrolling interests as of September 30, 2021, and December 31, 2020, were as follows (in millions):
Nonredeemable noncontrolling interests in:
Seed capital investments
Total nonredeemable noncontrolling interests
Note 10 — Long-Term Incentive and Employee Compensation
The following table presents restricted stock and mutual fund awards granted during the three and nine months ended September 30, 2021 (in millions):
Restricted stock
69.5
Mutual fund awards
75.5
145.0
Restricted stock and mutual fund awards generally vest and will be recognized using a graded vesting method over a three- or four-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 Credit
The components of net periodic benefit credit in respect of defined benefit plans for the three and nine months ended September 30, 2021 and 2020, include the following (in millions):
Service cost
(0.7)
Interest cost
(2.8)
(4.3)
(12.9)
Amortization of prior service cost
Expected return on plan assets
3.3
13.9
Net periodic benefit credit
Total cost
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Note 12 — Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Foreign
Retirement benefit
Retirementbenefit
currency
asset, net
Beginning balance
(308.1)
(521.0)
19.3
Other comprehensive income (loss)
97.6
Amounts reclassified from accumulated other comprehensive loss
Total other comprehensive income (loss)
Less: other comprehensive loss (income) attributable to noncontrolling interests
Ending balance
(366.9)
(10.0)
(434.6)
19.4
(313.6)
(10.4)
(386.2)
19.1
(48.9)
(48.8)
(39.5)
(4.2)
(3.9)
(1.3)
The components of other comprehensive income (loss), net of tax for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Pre-tax
Tax
Net
amount
impact
Foreign currency translation adjustments
(60.2)
98.2
Reclassifications to net income
(60.1)
98.1
20
(50.5)
(41.0)
(54.4)
1.7
(42.3)
Note 13 — Earnings (Loss) and Dividends Per Share
Earnings (Loss) Per Share
The following is a summary of the earnings (loss) per share calculation for the three and nine months ended September 30, 2021 and 2020 (in millions, except per share data):
Allocation of earnings to participating stock-based awards
(5.4)
(14.1)
Net income (loss) attributable to JHG common shareholders
191.4
115.4
475.5
Weighted-average common shares outstanding — basic
167.1
178.4
168.7
Dilutive effect of nonparticipating stock-based awards
Weighted-average common shares outstanding — diluted
167.8
178.8
169.4
Earnings (loss) per share:
Basic (two class)
Diluted (two class)
The following instruments are anti-dilutive and have not been included in the weighted-average diluted shares outstanding calculation (in millions):
Unvested nonparticipating stock awards
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.
21
The following is a summary of cash dividends paid during the nine months ended September 30, 2021:
Dividend
Date
Dividends paid
per share
declared
(in US$ millions)
paid
0.36
February 3, 2021
61.7
March 3, 2021
0.38
April 28, 2021
65.0
May 27, 2021
July 28, 2021
August 25, 2021
On October 27, 2021, our Board of Directors declared a cash dividend of $0.38 per share. The quarterly dividend will be paid on November 24, 2021, to shareholders of record at the close of business on November 8, 2021.
Note 14 — Commitments and Contingencies
Related Party Transactions
On February 4, 2021, Dai-ichi Life Holdings, Inc. (“Dai-ichi Life”) announced its intention to sell all 30,668,922 shares of JHG common stock it owned by means of a registered secondary public offering. On February 9, 2021, Dai-ichi Life completed the secondary offering, and as part of the offering, we repurchased 8,048,360 shares of common stock from Dai-ichi Life for approximately $230.0 million through Goldman Sachs & Co. LLC (“as underwriter”) at the price at which the shares of common stock were sold to the public in the secondary offering, less the underwriting discount. As a result of the completion of the secondary offering, Dai-ichi Life no longer owns any shares of JHG common stock. We did not receive any proceeds from Dai-ichi Life’s sale of common stock in the secondary offering.
Litigation and Other Regulatory Matters
We are periodically involved in various legal proceedings and other regulatory matters. Although there can be no assurances, based on information currently available, we believe that it is probable that the ultimate outcome of matters that are pending or threatened will not have a material effect on our consolidated financial statements.
With respect to the unaudited financial statements of Janus Henderson Group plc as of and for the three-month and nine-month periods ended September 30, 2021, appearing herein, PricewaterhouseCoopers LLP (United States) reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated October 28, 2021, appearing herein, states that they did not audit and they do not express an opinion on the unaudited financial statements. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP (United States) is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial statements because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP (United States) within the meaning of Sections 7 and 11 of the Act.
22
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Janus Henderson Group plc
Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of Janus Henderson Group plc and its subsidiaries (the “Company”) as of September 30, 2021, and the related condensed consolidated statements of comprehensive income (loss) and of changes in equity for the three-month and nine month periods ended September 30, 2021 and 2020 and the condensed consolidated statements of cash flows for the nine month periods ended September 30, 2021 and 2020, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 24, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
October 28, 2021
23
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 (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “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, risks, uncertainties, assumptions and factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, 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 an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Charters for the Audit Committee, Compensation Committee, Risk Committee, and Nominating and Corporate Governance 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 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 five capabilities: Equities, Fixed Income, Multi-Asset, Quantitative Equities and Alternatives.
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, the CEO, on an aggregated basis. Strategic and financial management decisions are determined centrally by the CEO and, on this basis, we operate as a single-segment investment management business.
24
Revenue
Revenue primarily consists of management fees and performance fees. Management fees are generally based on a percentage of the market value of our 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 hurdle rate. 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 and client contracts allow for negative performance fees where there is underperformance against the relevant index.
THIRD QUARTER 2021 SUMMARY
Third Quarter 2021 Highlights
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 third quarter 2021 was $687.4 million, an increase of $118.9 million, or 21%, from the third quarter 2020, primarily due to increases of $106.8 million in management fees and $13.9 million in shareowner servicing fees driven by an increase in average AUM.
Total operating expenses for the third quarter 2021 were $439.1 million, an increase of $27.1 million, or 7%, compared to operating expenses in the third quarter 2020, primarily due to a $23.3 million increase in distribution expenses driven by an increase in average AUM.
Operating income for the third quarter 2021 was $248.3 million, an increase of $91.8 million, or 59%, compared to the third quarter 2020. Our operating margin was 36.1% in the third quarter 2021 compared to 27.5% in the third quarter 2020.
25
Net income attributable to JHG in the third quarter 2021 was $196.8 million, an increase of $77.9 million, or 66%, compared to the third quarter 2020 due to the factors impacting revenue and operating expense discussed above. In addition, net loss (income) attributable to noncontrolling interests improved by $14.9 million from the third quarter 2020, primarily due to the consolidation of third-party ownership interests in seeded investment products and fair value adjustments in relation to our seeded investment products. This increase was partially offset by a $20.8 million decline in investment gains, net and a $12.5 million increase in our income tax provision, primarily driven by the increase in pre-tax book income.
Investment Performance of Assets Under Management
The following table is a summary of investment performance as of September 30, 2021:
Percentage of AUM outperforming benchmark
1 year
3 years
5 years
10 years
Equities
64
56
60
84
Fixed Income
98
96
99
Multi-Asset
97
Quantitative Equities
41
32
Alternatives
94
100
Total JHG
72
67
86
Assets Under Management
Our AUM as of September 30, 2021, was $419.3 billion, an increase of $17.7 billion, or 4.4%, from December 31, 2020, driven primarily by positive market movements of $33.0 billion, partially offset by net redemptions of $11.0 billion.
Our non-U.S. dollar (“USD”) AUM is primarily denominated in British pounds (“GBP”), EUR and AUD. During the three and nine months ended September 30, 2021 and 2020, the USD strengthened against AUD, GBP and EUR, resulting in a $3.5 billion and $4.3 billion decrease in our AUM, respectively. As of September 30, 2021, approximately 31% of our AUM was non-USD denominated, resulting in a net unfavorable currency effect, particularly in products exposed to GBP.
VelocityShares ETNs and certain index products are not included within our AUM because we are not the named adviser or subadviser to ETNs or index products. VelocityShares ETN assets totaled $0.3 billion and $0.6 billion as of September 30, 2021, and December 31, 2020, respectively. VelocityShares index product assets not included within our AUM totaled $2.1 billion and $2.7 billion as of September 30, 2021, and December 31, 2020, respectively.
26
Our AUM and flows by capability for the three and nine months ended September 30, 2021 and 2020, were as follows (in billions):
Closing AUM
June 30,
Net sales
Reclassifications
Sales
Redemptions(1)
(redemptions)
Markets
FX(2)
and disposals(3)
By capability
240.1
236.2
80.5
(1.5)
79.5
53.2
2.6
(1.8)
53.9
43.4
(4.5)
(4.4)
39.1
10.4
(0.8)
10.6
427.6
(21.2)
419.3
219.4
(32.6)
(6.0)
24.6
81.5
16.5
(15.5)
(2.0)
48.0
42.0
(8.3)
(7.8)
4.9
10.7
(3.8)
401.6
55.1
(66.1)
33.0
179.1
5.8
(10.9)
(5.1)
188.9
70.2
(4.1)
75.1
40.3
2.5
43.6
37.5
40.7
336.7
15.8
(18.7)
19.8
358.3
204.0
22.5
(38.7)
5.6
74.8
20.2
(22.5)
(2.3)
39.8
8.3
45.2
11.0
(3.1)
374.8
(78.4)
(23.3)
27
Our AUM and flows by client type for the three and nine months ended September 30, 2021, were as follows (in billions):
Redemptions
FX
and disposals
By client type:
Intermediary
206.7
12.9
(11.7)
1.2
Institutional
133.1
125.8
Self-directed
87.8
86.8
192.9
(40.6)
15.2
(1.9)
127.6
(21.1)
(11.1)
81.1
Average Assets Under Management
The following table presents our average AUM by capability for the three and nine months ended September 30, 2021 (in billions):
Average AUM
243.5
234.2
80.9
80.8
51.8
41.9
42.1
10.5
431.9
419.4
Closing Assets Under Management
The following table presents the closing AUM, split by client type and client location, as of September 30, 2021 (in billions):
By client type
28
By client location
North America
233.4
EMEA and LatAm
128.1
Asia Pacific
57.8
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. Other investments, including over-the-counter (“OTC”) 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 Committee is 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. The translation of GBP to USD is the primary driver of foreign currency translation in expenses. The GBP weakened against the USD during the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020. Meaningful foreign currency translation impacts to our operating expenses are discussed in the Operating Expenses section below. Revenue is also impacted by foreign currency translation, but the impact is generally determined by the primary currency of the individual funds.
29
Three months
Nine months
ended
2021 vs. 2020
Revenue (in millions):
(91)
n/m
*
* n/m - Not meaningful.
Management fees increased by $106.8 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to the impact of higher average AUM, which caused a $103.1 million increase in management fees and an increase in management fee margins, which led to a $2.4 million increase in management fees.
Management fees increased by $318.5 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to the impact of higher average AUM, which caused a $293.7 million increase in management fees and an increase in management fee margins, which led to an $18.4 million increase in management fees.
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 product range performance fees are recognized on a quarterly or annual basis. The investment management fee 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 compared to a specified benchmark index. Performance fees by product type consisted of the following for the three and nine months ended September 30, 2021 and 2020 (in millions):
Performance fees (in millions):
SICAVs
UK OEICs and unit trusts
6.4
19.2
(92)
Offshore absolute return funds and other
4.1
Segregated mandates
4.2
23.5
82
Investment trusts
U.S. mutual funds
(5.5)
(8.2)
73
Total performance fees
91
30
For the three months ended September 30, 2021, performance fees declined $6.4 million compared to the three months ended September 30, 2020, primarily due to a $6.4 million decrease in UK open ended investment company (“OEIC”) performance fees. These UK OEICs performance fees are mainly related to the absolute return strategy, which switched from a quarterly to annual measurement period. The next annual measurement period runs to May 2022.
For the nine months ended September 30, 2021, performance fees improved $56.2 million compared to the nine months ended September 30, 2020, primarily due to a $51.4 million improvement in Société d’Investissement à Capital Variable (“SICAV”) performance fee crystallizations. The strategies contributing to the improvement in SICAV performance are primarily the absolute return strategy and European equities.
Shareowner servicing fees are primarily composed of mutual fund servicing fees, which are driven by AUM. For the three months ended September 30, 2021, servicing fees increased $13.9 million compared to the three months ended September 30, 2020, primarily due to an increase in average AUM.
For the nine months ended September 30, 2021, shareowner servicing fees increased $41.1 million compared to the nine months ended September 30, 2020, primarily due to an increase in average AUM.
Other revenue is primarily composed of 12b-1 distribution fees, general administration charges, VelocityShares ETN fees and other fee revenue. Other revenue increased by $4.6 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to an increase of $6.7 million in 12b-1 fees and servicing fees driven by an improvement in average AUM, which was partially offset by a $1.9 million decrease in ETN licensing fees due to the delisting and the ongoing liquidation of VelocityShares ETNs.
Other revenue increased by $12.6 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to an increase of $14.7 million in 12b-1 fees and servicing fees driven by an improvement in average AUM, as well as a $6.7 million increase in general administration charges due to higher AUM. These increases were partially offset by a $10.1 million decrease in ETN licensing fees due to the delisting and the ongoing liquidation of VelocityShares ETNs.
Operating Expenses
Operating expenses (in millions):
(18)
42
(0)
(16)
(19)
31
Employee compensation and benefits increased by $11.3 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily driven by increases of $8.1 million in variable compensation mainly due to a higher annual bonus pool and other variable compensation. Variable compensation, including bonus pools, is generally calculated as a percentage of operating income excluding incentive compensation (pre-incentive operating income) and is allocated to employees by management on a discretionary basis. Also contributing to the increase in employee compensation and benefits was a $4.2 million increase in salary and benefits due to higher headcount driven by the conversion of temporary staff to full-time employees, annual and one-time base-pay increases of $3.2 million and unfavorable foreign currency translation of $2.5 million. These increases were partially offset by a $3.5 million decrease in temporary staffing charges due to the aforementioned conversion of temporary staff to full-time employees and a decrease of $3.2 million in project charges driven by more internal labor costs capitalized during the three months ended September 30, 2021.
Employee compensation and benefits increased by $76.9 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily driven by increases of $66.7 million in variable compensation, mainly due to a higher annual bonus pool and other variable compensation, unfavorable foreign currency translation of $15.3 million, a $9.2 million increase in salary and benefits due to higher headcount, and annual and one-time base-pay increases of $6.6 million. These increases were partially offset by a $11.1 million decrease in temporary staffing charges due to the conversion of temporary staff to full-time employees and a decrease of $9.8 million in project charges driven by more internal labor costs capitalized during the nine months ended September 30, 2021.
Long-term incentive plan expenses decreased $7.7 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily driven by a $6.0 million decrease in fair value adjustments related to mutual fund share awards and certain long-term incentive awards and a decrease of $2.4 million due to the roll-off of vested awards exceeding new awards during the three months ended September 30, 2021. These decreases were partially offset by unfavorable foreign currency translation of $0.7 million.
Long-term incentive plan expenses increased $12.9 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily driven by an $11.8 million increase in fair value adjustments related to mutual fund share awards and certain long-term incentive awards, unfavorable foreign currency translation of $4.6 million and $1.2 million in higher payroll taxes on vestings. These increases were partially offset by a decrease of $4.7 million due to the roll-off of vested awards exceeding new awards during the nine months ended September 30, 2021.
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 $23.3 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to an increase of $21.1 million driven by an improvement in average AUM subject to distribution charges.
Distribution expenses increased $68.6 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to an increase of $70.3 million from an improvement in average AUM subject to distribution charges.
Marketing expenses increased $2.2 million and $4.7 million during the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively, primarily due to an increase in marketing events and advertising campaigns during the three and nine months ended September 30, 2021.
General, administrative and occupancy expenses decreased by $0.1 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due a $4.6 million decrease in consultancy fees related to certain project costs. This decrease was partially offset by a $2.2 million increase in information technology costs, primarily driven by software vendor servicing fees, unfavorable foreign currency translation of $1.2 million, a $1.1 million increase in travel and entertainment, and a $1.1 million increase in charitable contributions during the three months ended September 30, 2021.
General, administrative and occupancy expenses increased by $5.4 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to unfavorable foreign currency translation of $8.4 million and a $4.3 million increase in information technology costs, primarily related to software vendor servicing fees. These increases were partially offset by decreases of $7.6 million in consultancy fees related to certain project costs and $2.4 million in travel expenses as a result of reduced travel during the COVID-19 pandemic during the nine months ended September 30, 2021.
Goodwill and intangible asset impairment charges decreased by $469.3 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The decrease is primarily due to a $487.3 million impairment of our goodwill and certain mutual fund investment management agreements and client relationships, and a $26.4 million impairment of the VelocityShares ETN definite-lived intangible asset recognized during the nine months ended September 30, 2020. These decreases are partially offset by a $44.4 million impairment of certain indefinite-lived intangible assets, and the Perkins brand name, both recognized during the nine months ended September 30, 2021. During the first quarter of 2021, we completed a review of Perkins. To right-size our product portfolio and more closely align with the changing needs of clients, certain strategies were closed and the funds liquidated during the second quarter of 2021. The Perkins brand was discontinued, and marketing efforts for value equity strategies were incorporated under the Janus Henderson brand.
Depreciation and amortization expenses decreased by $1.8 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to a decrease in the depreciation of internally developed software.
Depreciation and amortization expenses decreased by $7.1 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to a decrease in the amortization of intangible assets resulting from the sale of Geneva and the impairment of certain client relationships recognized during the nine months ended September 30, 2020, as well as a decrease in the depreciation of internally developed software recognized during the nine months ended September 30, 2021.
Non-Operating Income and Expenses
Non-operating income and expenses (in millions):
(82)
(68)
(98)
33
The components of investment gains, net for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Investment gains, net (in millions):
(73)
(61)
(83)
(50)
(66)
(86)
(20)
Investment gains, net moved unfavorably by $20.8 million and $17.2 million during the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively. Movements in investment gains, net are primarily due to fair value adjustments in relation to our seeded investment products, deferred equity plan and consolidation of third-party ownership interests in seeded investment products.
Other non-operating income (expenses), net improved $4.5 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020 primarily due to favorable foreign currency translation of $4.4 million during the three months ended September 30, 2021.
Other non-operating income (expenses), net declined $39.1 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The decrease was primarily due to a $16.2 million gain and $7.1 million contingent consideration adjustment in relation to the sale of Geneva recognized during the nine months ended September 30, 2020, and $16.3 million of unfavorable foreign currency translation when comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020.
Income tax (benefit) provision
34
The components of net loss (income) attributable to noncontrolling interests for the three and nine months ended September 30, 2021 and 2020, were as follows (in millions):
Net loss (income) attributable to noncontrolling interests (in millions):
(3.0)
(18.1)
(8.7)
83
Majority-owned subsidiaries
(200)
Total net loss (income) attributable to noncontrolling interests
Net loss (income) attributable to noncontrolling interests improved by $14.9 million and $10.0 million during the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, respectively. The increase was primarily due to third-party ownership interests in consolidated seeded investment products and fair value adjustments in relation to our seeded investment products.
2021 Operating Expenses
The 2021 expectation for non-compensation operating expenses growth is now expected to be at the high end of the mid-single digits. The expectation for full year 2021 adjusted compensation to revenue ratio is now anticipated at the low end of the 40% to 42% range. The expectation for full year 2021 statutory tax rate is 23%-25%.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, JHG management evaluates 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.
35
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 September 30, 2021 and 2020 (in millions, except per share and operating margin data):
Reconciliation of revenue to adjusted revenue
(53.0)
(47.9)
(55.4)
(42.8)
(33.7)
(28.1)
Adjusted revenue(1)
545.3
449.7
Reconciliation of operating expenses to adjusted operating expenses
Operating expenses
Employee compensation and benefits(2)
Long-term incentive plans(2)
Distribution expenses(1)
(142.1)
(118.8)
General, administrative and occupancy(2)
Depreciation and amortization(3)
Adjusted operating expenses
292.3
287.6
Adjusted operating income
253.0
162.1
Operating margin(4)
36.1%
27.5%
Adjusted operating margin(5)
46.4%
36.0%
Reconciliation of net income attributable to JHG to adjusted net income attributable to JHG
Other non-operating income (expenses), net(6)
Income tax provision(7)
Adjusted net income attributable to JHG
199.5
129.6
Less: allocation of earnings to participating stock-based awards
Adjusted net income attributable to JHG common shareholders
194.0
Weighted-average common shares outstanding — diluted (two class)
Diluted earnings per share (two class)(8)
Adjusted diluted earnings per share (two class)(9)
1.16
0.70
36
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 September 30, 2021, and December 31, 2020 (in millions):
Cash and cash equivalents held by the Company
930.8
1,096.9
Investment securities held by the Company
265.9
238.8
Debt
37
Cash and cash equivalents consist primarily of cash at banks and in money market funds. Cash and cash equivalents and investment securities held by consolidated VIEs and VREs are not available for general corporate purposes and have been excluded from the table above.
Investment securities held by us represent seeded investment products (exclusive of investments held by consolidated VIEs and VREs), investments related to deferred compensation plans and other less significant investments.
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 Capital International Limited (“JCIL”). JCIL is included to meet the requirements of certain regulations under the Banking Consolidation Directive. The combined capital requirement is £198.4 million ($267.5 million), resulting in £284.0 million ($383.0 million) of capital above the requirement as of September 30, 2021, based on internal calculations and taking into account the effect of dividends related to third quarter 2021 results that will be paid in the fourth quarter 2021. Capital requirements in other jurisdictions are not significant.
Short-Term Liquidity and Capital Resources
Common Stock Repurchases
On July 28, 2021, the Board approved a new on-market share buyback program (“2021 Corporate Buyback Program”) pursuant to which we are authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the Australian Securities Exchange (“ASX”) at any time prior to the date of our 2022 Annual General Meeting. We commenced repurchases under the 2021 Corporate Buyback Program in August 2021, and during the three months ended September 30, 2021 we repurchased 1,765,459 shares of our common stock and CDIs for $75.0 million.
On February 3, 2020, the Board approved an on-market share buyback program pursuant to which we were authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2021 Annual General Meeting (the “2020 Corporate Buyback Program”). We commenced repurchases under the 2020 Corporate Buyback Program in March 2020, and during the first quarter of 2021, we repurchased 4,827 shares of our common stock and CDIs for $0.2 million related to the 2020 Corporate Buyback Program. We terminated the 2020 Corporate Buyback Program on February 9, 2021, following completion of the Block Repurchase described below.
On February 4, 2021, Dai-ichi Life announced its intention to sell all 30,668,922 shares of JHG common stock it owned by means of a registered secondary public offering. On February 9, 2021, Dai-ichi Life completed the secondary offering and as part of the offering, we repurchased 8,048,360 shares of common stock from Dai-ichi Life (the “Block Repurchase”) for approximately $230.0 million through Goldman Sachs & Co. LLC (“as underwriter”) at the price at which the shares of common stock were sold to the public in the secondary offering, less the underwriting discount. The Block Repurchase was authorized by the Board and is distinct from the 2020 Corporate Buyback Program. We did not receive any proceeds from Dai-ichi Life’s sale of common stock in the secondary offering.
Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements. We usually satisfy these entitlements by transferring shares of common stock that we repurchase on-market for this purpose. We purchased 5,869 shares at an average price of $42.35 in satisfaction of employee awards and entitlements during the three months ended September 30, 2021.
38
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 nine months ended September 30, 2021, were as follows:
Long-Term Liquidity and Capital Resources
Expected long-term commitments as of September 30, 2021, include principal and interest payments related to the 2025 Senior Notes, operating and finance lease payments, Intech senior profits interests awards, Intech appreciation rights and phantom interests, and Intech noncontrolling interests. 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.
Intech has granted long-term incentive awards to retain and incentivize employees. The awards consist of appreciation rights, profits interests and phantom interests, and are designed to give recipients an equity-like stake in Intech. The grant date fair value of the appreciation rights is amortized using a graded basis over the 10-year vesting period. The awards are exercisable upon termination of employment from Intech to the extent vested. The profits interests and phantom interests awards entitle recipients to 9.0% of Intech’s pre-incentive profits.
Defined Benefit Pension Plan
The latest triennial valuation of our defined benefit pension plan resulted in a surplus of $16.2 million. An update to the triennial valuation is underway and is expected to be completed in the fourth quarter of 2021.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet arrangements that may provide, or require us to provide, financing, liquidity, market or credit risk support that are not reflected in our condensed consolidated financial statements.
Other Sources of Liquidity
At September 30, 2021, we had a $200 million Credit Facility. The 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 February 16, 2024.
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.
39
The Credit Facility contains a financial covenant with respect to leverage. The 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.
Cash flow data for the nine months ended September 30, 2021 and 2020, 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) provided by investing activities for the nine months ended September 30, 2021 and 2020, was as follows (in millions):
(Purchases) sales of investment securities, net
Purchases of investment securities by consolidated seeded investment products, net
Purchase of property, equipment and software
Cash paid on settled hedges, net
7.2
Cash (used for) provided by investing activities
Cash outflows from investing activities were $265.8 million during the nine months ended September 30, 2021, and cash inflows from investing activities were $10.0 million during the nine months ended September 30, 2020. Cash outflows from investing activities during the nine months ended September 30, 2021, were primarily due to net purchases of investment securities and net purchases of investment securities by consolidated seeded investment products. When comparing the nine months ended September 30, 2021, to the nine months ended September 30, 2020, the change in cash (used for) provided by investing activities was primarily due to increases in the purchase of investment securities and net cash paid to settle hedges related to our seed capital hedge program. These increases were partially offset by proceeds from the sale of Geneva recognized during the nine months ended September 30, 2020.
40
Financing Activities
Cash used for financing activities for the nine months ended September 30, 2021 and 2020, was as follows (in millions):
Purchase of common stock from Dai-ichi and share buyback program
Cash used for financing activities
Cash outflows from financing activities were $497.4 million and $299.8 million during the nine months ended September 30, 2021 and 2020, respectively. Cash outflows from financing activities during the nine months ended September 30, 2021, were primarily due to the purchase of common stock from Dai-ichi Life, the share buyback program and stock-based compensation plans and dividends paid to shareholders, partially offset by net sales of investment securities within consolidated seeded investment products. When comparing the nine months ended September 30, 2021, to the nine months ended September 30, 2020, the change in cash used for financing activities was primarily due to the purchase of common stock from Dai-ichi Life and the purchase of common stock for stock-based compensation plans.
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, 2020.
Item 4. Controls and Procedures
As of September 30, 2021, 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. Richard M. Weil, 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. Weil 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 third quarter of 2021 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 2. Unregistered Sales of Equity Securities and Use of Proceeds
Common Stock Purchases
On July 28, 2021, the Board approved the 2021 Corporate Buyback Program pursuant to which we are authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2022 Annual General Meeting. We commenced repurchases under the 2021 Corporate Buyback Program in August 2021, and during the three months ended September 30, 2021, we repurchased 1,765,459 shares of our common stock and CDIs for $75.0 million.
On February 3, 2020, the Board approved the 2020 Corporate Buyback Program, pursuant to which we were authorized to repurchase up to $200.0 million of our common stock on the NYSE and CDIs on the ASX at any time prior to the date of our 2021 Annual General Meeting. We commenced repurchases under the 2020 Corporate Buyback Program in March 2020, and during the first quarter of 2021, we repurchased 4,827 shares of our common stock and CDIs for $0.2 million related to the 2020 Corporate Buyback Program. We terminated the 2020 Corporate Buyback Program on February 9, 2021, following completion of the Block Repurchase described below.
On February 4, 2021, Dai-ichi Life announced its intention to sell all 30,668,922 shares of JHG common stock it owned by means of a registered secondary public offering. On February 9, 2021, Dai-ichi Life completed the secondary offering and as part of the offering, we repurchased 8,048,360 shares of common stock from Dai-ichi Life in the Block Repurchase for approximately $230.0 million through Goldman Sachs & Co. LLC as underwriter at the price at which the shares of common stock were sold to the public in the secondary offering, less the underwriting discount. The Block Repurchase was authorized by the Board and is distinct from the 2020 Corporate Buyback Program. We did not receive any proceeds from Dai-ichi Life’s sale of common stock in the secondary offering.
Some of our executives and employees obtain rights to receive our common stock as part of their remuneration arrangements and employee entitlements. We usually satisfy these entitlements by transferring shares of existing common stock that we repurchase on-market for this purpose (“Share Plans Repurchases”). During the third quarter 2021, we purchased 5,869 shares on-market for $0.2 million in satisfaction of employee awards and entitlements.
The following is a summary of our common stock repurchases by month during the nine months ended September 30, 2021, including repurchases under the 2021 and 2020 Corporate Buyback Programs and Share Plans Repurchases.
Total number of shares
Approximate U.S. dollar value
number of
Average
purchased as part of
of shares that may yet
price paid per
publicly announced
be purchased under the
Period
purchased
share
programs
programs (end of month, in millions)
January 1, 2021, through January 31, 2021
2,479
32.14
69
February 1, 2021, through February 28, 2021
9,819,360
28.80
4,827
March 1, 2021, through March 31, 2021
342,268
30.12
April 1, 2021, through April 30, 2021
2,764
34.31
May 1, 2021, through May 31, 2021
25,292
37.24
June 1, 2021, through June 30, 2021
252,436
38.88
July 1, 2021, through July 31, 2021
2,155
42.09
200
August 1, 2021, through August 31, 2021
865,452
42.63
863,881
163
September 1, 2021, through September 30, 2021
903,721
42.41
901,578
125
12,215,927
31.05
1,770,286
Items 3, 4 and 5.
Not applicable.
43
Item 6. Exhibits
Filed with this Report:
ExhibitNo.
Document
Regulation S-KItem 601(b)Exhibit No.
15.1
Letter regarding unaudited interim financial information
31.1
Certification of Richard M. Weil, Chief Executive Officer of Registrant
31.2
Certification of Roger Thompson, Chief Financial Officer of Registrant
32.1
Certification of Richard M. Weil, 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
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)
44
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: October 28, 2021
Janus Henderson Group plc
/s/ Richard Weil
Richard Weil,
Director and Chief Executive Officer
(Principal Executive Officer)
/s/ Roger Thompson
Roger Thompson,
Chief Financial Officer
(Principal Financial Officer)
/s/ Brennan Hughes
Brennan Hughes,
Chief Accounting Officer and Treasurer
(Principal Accounting Officer)
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