Janus Henderson: Return to Positive Flows Does Not Remove Janus Henderson’s Long-Term Headwinds

While there was little in narrow-moat Janus Henderson’s JHG first-quarter results to alter our long-term view of the firm, we are likely to increase our fair value estimate 5%-10% to account for higher levels of asset under management, or AUM, than we had been projecting for the firm at this point in the cycle. The company reported adjusted earnings per share of USD 0.55 for the March quarter, better than the FactSet consensus estimate of USD 0.49 and our own USD 0.52 forecast. Much of the difference was due to the company generating higher levels of managed assets, revenue, and earnings than we had forecast.

Janus Henderson closed out the March quarter with USD 310.5 billion in AUM, up 8.1% sequentially but still down 14.0% year over year. That said, this was still better than our forecast for USD 304.2 billion at the end of the first quarter. Net inflows of USD 5.5 billion were a welcome surprise, marking the first quarter of positive flows for Janus Henderson since the third quarter of 2017. We’re not going to make too much of this, though, as management has noted that positive flows will be tougher to come by going forward, and that the first quarter’s flows were a product of both lower redemptions than normal and the funding of several large institutional mandates. Even so, we view this as progress as Janus Henderson works to find ways to deliver positive flows on a more consistent basis.

With average AUM down 23.2% year over year, the company’s first-quarter revenue declined just 20.0%, aided in a large part by a higher realization rate (of 52.5 basis points versus 51.0 basis points in the year-ago period) primarily due to mix shift. As for profitability, first-quarter adjusted operating margins of 27.5% were 990 basis points lower year over year, as well as our forecast for 30%-32% for all of 2023, but we would note that comparables ease some as we move through the remainder of the year.