# JANUS HENDERSON GROUP PLC (JHG) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from JANUS HENDERSON GROUP PLC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1274173/000155837023002417/jhg-20221231x10k.htm
Accession: 0001558370-23-002417
Filing date: 2023-02-28
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed section bleed.
Confidence: high

Company profile: /company/JHG/
All MD&A years: /company/JHG/mda/
Previous year: /company/JHG/mda/fy2021/ (FY 2021)
Next year: /company/JHG/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

We are an independent global asset manager, specializing in active investment across all major asset classes. We actively manage a broad range of investment products for institutional and retail investors across four capabilities: Equities, Fixed Income, Multi-Asset and Alternatives.

30

Table of Contents

Segment Considerations

We are a global asset manager and manage a range of investment products, operating across various product lines, distribution channels and geographic regions. However, information is reported to the chief operating decision-maker, our Chief Executive Officer (“CEO”), on an aggregated basis. Strategic and financial management decisions are determined centrally by our CEO and, on this basis, we operate as a single-segment investment management business.

Revenue

Revenue primarily consists of management fees and performance fees. Management fees are generally based on a percentage of the market value of our 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.

2022 SUMMARY

2022 Highlights

[[GREPCENT_TABLE]]
[["","\u25cf","Solid long-term investment performance, with 41%, 67%, 70% and 75% of our AUM outperforming benchmarks on a one-, three-, five- and 10-year basis, respectively, as of December 31, 2022."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","AUM decreased to $287.3 billion, down (34%) from the year ended December 31, 2021, due to challenged global markets, net outflows, the disposition of Intech and U.S. dollar appreciation. Net outflows of $36.5 billion primarily reflect market uncertainty and investment underperformance in key strategies."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","2022 diluted earnings per share was $2.23, or $2.60 on an adjusted basis. Refer to the Non-GAAP Financial Measures section for information on adjusted non-GAAP figures."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","During the year ended December 31, 2022, the Board of Directors declared and paid $1.55 per share dividends."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","During the year ended December 31, 2022, we acquired 3.3 million shares of our common stock for $98.9 million as part of the share buyback program."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","Strong balance sheet and cash generation, with $1.2 billion in cash and cash equivalents and $473.3 million of cash provided by operating activities in the year ended December 31, 2022."]]
[[/GREPCENT_TABLE]]

​

Financial Summary

Results are reported on a U.S. GAAP basis. Adjusted non-GAAP figures are presented in the Non-GAAP Financial Measures section.

Revenue for the year ended December 31, 2022, was $2,203.6 million, a decrease of $563.4 million, or (20%), compared to the year ended December 31, 2021. Key drivers of the decrease include the following:

​

[[GREPCENT_TABLE]]
[["","\u25cf","A decline of $390.0 million in management fees and $36.7 million in shareowner servicing fees primarily due to the impact of lower average AUM."]]
[[/GREPCENT_TABLE]]

​

31

Table of Contents

[[GREPCENT_TABLE]]
[["","\u25cf","A decline of $113.4 million in performance fees driven primarily by the relative performance of certain investment products being below the established high-water mark and an increase in negative mutual fund performance fees."]]
[[/GREPCENT_TABLE]]

​

Total operating expenses for the year ended December 31, 2022, were $1,713.8 million, a decline of $232.3 million, or (12%), compared to operating expenses for the year ended December 31, 2021. Key drivers of the decrease include the following:

​

[[GREPCENT_TABLE]]
[["","\u25cf","A decrease of $86.1 million in intangible asset and goodwill impairment charges."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","A decrease of $81.8 million in employee compensation and benefits due to lower variable compensation charges."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","A decrease of $55.8 million in distribution expenses primarily due to lower average AUM."]]
[[/GREPCENT_TABLE]]

​

Operating income for the year ended December 31, 2022, was $489.8 million, a decrease of $331.1 million, or (40%), compared to the year ended December 31, 2021. Our operating margin was 22.2% in 2022 compared to 29.7% in 2021.

Net income attributable to JHG for the year ended December 31, 2022, was $372.4 million, a decrease of $247.6 million, or (40%), compared to the year ended December 31, 2021. In addition to the aforementioned factors affecting revenue and operating expenses, key drivers of the decrease include the following:

​

[[GREPCENT_TABLE]]
[["","\u25cf","A decrease of $104.4 million in our provision for income taxes, primarily due to a decrease in pre-tax income."]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","An unfavorable movement of $114.1 million in investment gains (losses), net, partially offset by an improvement of $90.3 million in net loss (income) attributable to noncontrolling interests in 2022 compared to 2021. Movements in investment gains (losses), net and net loss (income) attributable to noncontrolling interests are primarily due to market movements in relation to our seeded investment products and derivative instruments and the consolidation or deconsolidation of third-party ownership interests in seeded investment products."]]
[[/GREPCENT_TABLE]]

​

Investment Performance of Assets Under Management

​

The following table is a summary of our investment performance as of December 31, 2022:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Percentage of AUM outperforming benchmark","","1 year","","3 years","","5 years","","10 years"],["Equities","","58","%","54","%","57","%","64","%"],["Fixed Income","","18","%","78","%","89","%","90","%"],["Multi-Asset","","5","%","96","%","96","%","99","%"],["Alternatives","","34","%","100","%","100","%","100","%"],["Total","","41","%","67","%","70","%","75","%"]]
[[/GREPCENT_TABLE]]

​

Assets Under Management

Our AUM as of December 31, 2022, was $287.3 billion, a decrease of $145.0 billion, or (34%), from December 31, 2021, driven primarily by unfavorable market movements of $68.3 billion and $28.3 billion due to the disposition of Intech Investment Management LLC (“Intech”). Net redemptions of $36.5 billion, or $30.8 billion when excluding Intech, also contributed to the decline in AUM.

​

Our non-USD AUM is primarily denominated in GBP, EUR and AUD. During the year ended December 31, 2022, the USD strengthened against GBP, EUR and AUD, resulting in an $11.9 billion decrease in our AUM. As of December 31, 2022, approximately 32% of our AUM was non-USD-denominated.

​

32

Table of Contents

Our AUM and flows by capability for the years ended December 31, 2022, 2021 and 2020, were as follows (in billions):

​

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Closing AUM","","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","Closing AUM"],["\u200b","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Net sales","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Reclassifications","\u200b","December 31,"],["\u200b","","2020","","Sales","","Redemptions(1)","\u200b","(redemptions)","","Markets","","FX(2)","","and disposals(3)","","2021"],["By capability:","","\u200b","","","\u200b","","","\u200b","","\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Equities","\u200b","$","219.4","\u200b","$","34.7","\u200b","$","(43.9)","\u200b","$","(9.2)","\u200b","$","36.0","\u200b","$","(1.9)","\u200b","$","\u2014","\u200b","$","244.3"],["Fixed Income","\u200b","","81.5","\u200b","","22.1","\u200b","","(21.0)","\u200b","","1.1","\u200b","","(1.1)","\u200b","","(1.9)","\u200b","","\u2014","\u200b","","79.6"],["Multi-Asset","\u200b","","48.0","\u200b","","12.3","\u200b","","(8.1)","\u200b","","4.2","\u200b","","7.7","\u200b","","(0.2)","\u200b","","\u2014","\u200b","","59.7"],["Quantitative Equities","\u200b","","42.0","\u200b","","0.6","\u200b","","(12.6)","\u200b","","(12.0)","\u200b","","8.0","\u200b","\u200b","\u2014","\u200b","","\u2014","\u200b","","38.0"],["Alternatives","\u200b","","10.7","\u200b","","4.7","\u200b","","(5.0)","\u200b","","(0.3)","\u200b","","0.7","\u200b","","(0.4)","\u200b","","\u2014","\u200b","","10.7"],["Total","\u200b","$","401.6","\u200b","$","74.4","\u200b","$","(90.6)","\u200b","$","(16.2)","\u200b","$","51.3","\u200b","$","(4.4)","\u200b","$","\u2014","\u200b","$","432.3"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Closing AUM","","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","Closing AUM"],["\u200b","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Net sales","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Reclassifications","\u200b","December 31,"],["\u200b","","2019","","Sales","","Redemptions(1)","\u200b","(redemptions)","","Markets","","FX(2)","","and disposals(3)","","2020"],["By capability:","","\u200b","","","\u200b","","","\u200b","","\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Equities","\u200b","$","204.0","\u200b","$","32.8","\u200b","$","(49.1)","\u200b","$","(16.3)","\u200b","$","33.6","\u200b","$","2.2","\u200b","$","(4.1)","\u200b","$","219.4"],["Fixed Income","\u200b","","74.8","\u200b","","28.9","\u200b","","(30.0)","\u200b","","(1.1)","\u200b","","4.6","\u200b","","3.2","\u200b","","\u2014","\u200b","","81.5"],["Multi-Asset","\u200b","","39.8","\u200b","","11.4","\u200b","","(7.9)","\u200b","","3.5","\u200b","","4.8","\u200b","","0.1","\u200b","","(0.2)","\u200b","","48.0"],["Quantitative Equities","\u200b","\u200b","45.2","\u200b","\u200b","2.4","\u200b","\u200b","(11.8)","\u200b","\u200b","(9.4)","\u200b","\u200b","6.0","\u200b","\u200b","0.2","\u200b","\u200b","\u2014","\u200b","\u200b","42.0"],["Alternatives","\u200b","","11.0","\u200b","","2.8","\u200b","","(3.9)","\u200b","","(1.1)","\u200b","","0.2","\u200b","","0.5","\u200b","","0.1","\u200b","","10.7"],["Total","\u200b","$","374.8","\u200b","$","78.3","\u200b","$","(102.7)","\u200b","$","(24.4)","\u200b","$","49.2","\u200b","$","6.2","\u200b","$","(4.2)","\u200b","$","401.6"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Redemptions include the impact of client transfers."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","FX reflects movements in AUM resulting from changes in foreign currency rates as non-USD-denominated AUM is translated into USD."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]