Janus Henderson Earnings: Bear Market Recovery Underway, but Headwinds Remain for the Firm

There was little in narrow-moat-rated Janus Henderson’s JHG second-quarter results to alter our long-term view of the firm. We are leaving our USD 26 (AUD 39) per share fair value estimate in place and view the shares as being slightly to modestly overvalued right now.

Janus Henderson closed out the June quarter with USD 322.1 billion in assets under management, or AUM, up 3.7% sequentially and 7.5% year over year. This was better than our forecast calling for USD 315.9 billion in AUM, with the difference due to better flow results than we were forecasting. Total net outflows of USD 500 million during the quarter were better than our projection for USD 6.7 billion in outflows, as the firm’s equity platform posted no outflows during the period (compared with our forecast for USD 4.3 billion in outflows) and its fixed-income operations had USD 1 billion in inflows (as opposed to USD 1.1 billion in outflows in our forecast). While we view this as progress as Janus Henderson works toward delivering positive flows on a more consistent basis, results over the past couple of quarters have been due to significantly lower redemptions than we’ve seen historically, as opposed to improved sales.

With average AUM down 3.9% year over year, the company’s second-quarter revenue declined 7.0%, driven in large part by a reduction in the firm’s realization rate due to both mix shift and ongoing industry fee compression. The company’s first-half revenue decline of 13.9% was slightly worse than our forecast calling for a 10% decline, but the firm does have easier comparables in the back half of the year. As for profitability, first-half adjusted (GAAP) operating margins of 30.2% (21.6%) were 490 (410) basis points lower year over year, as well as our forecast for 32%-34% for all of 2023, but much as we noted with the company’s top line, comparables on the operating income line will ease some as we move through the remainder of the year.