Good morning. My name is Nicole, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer period. In the interest of time, questions will be limited to one initial and one follow-up question. In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including but not limited to, those described in the forward-looking statements and risk factors sections of the company's most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. And now it is my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Henderson. Mr. Weil, you may begin your conference.

Thank you, operator. Welcome, everyone to the second quarter 2020 earnings call for the Janus Henderson Group. As usual I'm joined by Roger Thompson our CFO. Let me start by saying that I hope all of you and your families and your loved ones are all safe during this unprecedented global health crisis. As we've said on previous calls on the second and the fourth quarter we try and give a longer term perspective on our business. And so in line with that promise, today Roger will run through the quarterly results and I'll try and give you a bit more discussion on business and strategy. And then like usual we'll take your questions. Turning to slide 1. This quarter represents our three-year anniversary since the closing of the Janus Henderson merger. Before I turn it over to Roger to go over the quarterly results, I just want to touch a little bit on the strategic journey that we've been on over these three years. The industrial logic of the merger between Janus and Henderson was all about bringing two independently successful firms together because they had complementary strengths. And by joining them together, we felt we could gain the benefits of those complementary strengths and also increase scale and diversification. As we went through the merger we identified three immediate priorities. First, we needed to learn how to deliver growth from our enhanced global platform. Second, we needed to consolidate the business footprint and the infrastructure to leverage the benefits of scale. Third, we needed to deliver cost savings. Turning first to growth. The promise of growth has clearly taken longer to materialize than we planned, targeted or we would have liked. In this, most recent quarter our institutional flows have been particularly frustrating given the progress that we…

Thanks, Dick, and thank you everyone for joining us. I sincerely hope everyone and your friends, family and colleagues are safe and healthy. Looking at the second quarter's results. The market bounced back during the quarter provided a significantly better backdrop for AUM and financials compared to when we spoke last on the April earnings call. Net outflows of $8.2 billion are disappointing. However, with the strong markets AUM increased 14%. The overall flow figure marked a strong and important rebound in the intermediary business. Investment performance remains solid with 60% or more of assets beating their respective benchmarks over the one, three and five-year time period. Adjusted EPS of $0.67 was better, compared to the $0.60 and $0.61 for the prior quarter and the same period a year ago. And finally, we returned $88 million of cash to shareholders during the quarter by dividends and share repurchases. Moving to slide 4, investment performance. Investment performance remains solid, with 60%, 62% and 68% of firm-wide assets beating their benchmarks on a one, three and five-year basis as of June 30. Short-term improvements came primarily from our equity and fixed income capabilities. We're encouraged by INTECH's year-to-date performance. However, the longer-term performance remains a concern. Relative performance compared to peers is strong, with at least two-thirds of AUM represented in the top two Morningstar quartiles on a one, three and five-year basis, the majority of which is in the first quartile. Now turning to total company flows. For the quarter, net outflows were $8.2 billion compared to $12.2 billion last quarter. While flows improved quarter-over-quarter, the result is not where we expect it to be. The quarterly flow number reflects the continuing trend of positive flows into our intermediary business, whilst institutional saw significant outflows. Intermediary flows were positive for the…

Thank you, Roger. I mentioned at the beginning of our call that our strategy is simple excellence. And underneath that strategy we have five strategic priorities that I'd like to talk to you a little bit about right now. Turning to Slide 13. Our strategy is centered on the belief that a combination of relentless focus and disciplined execution across the fundamental parts of our core business that that will drive future success as a global active asset manager. Specifically, our strategy is designed to deliver organic growth and increasing profitability. Let's look at each of the pillars individually. Turning to Slide 14. I'd like to highlight some of the work that we've undertaken towards our goal of producing dependable investment outcomes. We have world-class investment teams and they have overwhelmingly demonstrated industry leading results exceeding both benchmarks and peers since the merger. While the downturn was a shock in many strategies and admittedly set us back in some places, long-term investment performance remains strong and our teams remain stable and focused. We're pleased that our one-year performance numbers have improved since last quarter. In the first half of the year we have taken steps to further strengthen our investment team. We've recruited some excellent talent. Greg Wilensky joined us earlier this year, as the Head of U.S. Fixed income; Matt Peron joined us in April, as Director of Research. And in addition to those crucial positions, we've made several high-quality additions to our already strong group of analysts. So we're very pleased that we continue to be able to recruit the talent at the top of the market the very best that we see in the marketplace. Turning to Slide 15. We take a look at how we have developed our client experience and enhanced our global distribution platform.…

Thank you. [Operator Instructions] And we'll take our first question from Ken Worthington from JPMorgan.

Hi. Good morning. I wanted to follow-up on your comments on the institutional business or institutional distribution. The assets there contracted this quarter, while other channels are growing. We know INTECH is a big part of that institutional channel. But at this point it's less than half of the assets. So how are the non-INTECH parts of your institutional distribution performing? And maybe what is the path to growing institutional assets even if INTECH continues to suffer outflows?

Thanks, Ken. Nice to hear from you. Institutional flows were about -- well just a little bit less than half INTECH and then it was a fairly diverse set of other things. We mentioned I think already in the comments that we had a substantial redemption from a strong multi-product client with whom we continue to have a great relationship but they were derisking their portfolio that was part of it. We had a redemption in our global value strategy out of Perkins in Chicago. We had some in other places as well. It was sort of a smattering of to me somewhat surprising hopefully one-off events that nailed us in this quarter. Our institutional business is not as strong as we needed to be. But we think with Suzanne Cain's leadership with Nick Adams who runs that business out of London, we're taking the right steps to strengthen it. And clearly looking at our contacts and communications with clients we have opportunities ahead to do substantially better than this mark, but that has to be delivered as Roger likes to point out that you don't count it until the cash comes in. But we're taking steps to strengthen the process, strengthen the technology, strengthen the team for the non-INTECH institutional business. And we're confident that's going to work. But the institutional business takes time and it's subject to lumpy flows one way or the other. And in this case in this quarter the lumpy flows were against us. And so we're just going to rededicate ourselves to making sure that doesn't happen again.

Okay. Thank you. And then on the direct channel you reopened the direct channel. I think while it was closed that maybe Janus didn't invest in some of the basic tools that some of your direct channel peers were making. So why have the risk to the intermediary channel from opening the direct channel diminished? And are you considering investing in the direct channel? And if so what are you planning?

Yes, we closed the direct channel in 2009 when investor preference has shifted and investors changed their choices from doing business with a single fund company to doing businesses with platforms that offered them a choice of many, many different asset managers of funds. And we were concerned as you pointed out I think about the potential for competition between adviser-led distribution and our direct distribution. And so since 2009 that's been closed. We've now reopened the D share class on July 6. And it's still too early to assess how effective that's going to be in improving flows in our direct channel business in the U.S., but it's not a huge investment in sort of competing with Fidelity. It's a way to better serve the needs of the existing shareholders and then folks close to them. It won't be a broad open retail push across the United States. But we think there's a good chance that we can improve the flows in our historic direct business with this moderate effort on reopening. And it's just too early to say if it's going to work but we're optimistic.

We'll move on to our next question from Ed Henning at CLSA.

Thank you for taking my question. Just a couple from me. Just further onto the flows. Obviously you've touched again on the strong pipeline and what you're doing there. But can you just run through gross sales and the movement especially maybe from month-to-month to get a feel of how that's tracking especially in equities because if you look at equities on the gross sales have trended down for the last three quarters on Slide 24?

Yes. I think gross sales -- gross sales have moved around certainly in the quarters. One of the biggest effects of that is what's happening in the relevant marketplaces especially in retail where you see gross sales, we're a pretty substantial participant in most of the large retail markets that are important to us around the world. And we're not going to escape huge trends that happen in those retail marketplaces. I don't think there's a bigger message to the gross sales number than that. We're not drawing one from the small changes that you see. It has a lot to do with investor appetite. But as we've said our investment performance remains strong and we're going to be subject to things like COVID in the first quarter and some summertime seasonality in the second quarter and you're going to see some of that across every player in the industry. But we're not drawing big messages from the changes in gross sales at this point.

And just on that with obviously COVID hitting early in the quarter, did it improve towards June -- towards the end of the quarter?

Not relatively it's -- yes there's ups and downs in different markets. So I think the -- I guess right at the beginning we were still coming out. So April was -- May and June were probably better than April. But again I wouldn't draw any huge lines from it.

Our next question comes from Mike Carrier from Bank of America.

Good morning and thanks for taking the question. I just have one. Roger I think you mentioned just on some of the U.S. growth strategies I think on like the SMID side some weaker performance. And I think you just indicated like on the second half it could impact flows. I just wanted to clarify like was that on the institutional side or would you say more on the intermediary side? I know you just like raising a flag just because the performance is a little weaker. So you could see something or if there was something like actually already known I mean that could impact the outlook? Thanks a lot.

I mean we -- yes. Thanks Mike. Yes. Thanks for clarifying or asking. I think we've got a range of strategies. There's some things that are fantastic. Our overall performance as we've talked about is pretty damn good. There's some things which we think are going to move faster. European equity I'd say is on the front foot for the first time in a while. So that's great to see. And you're starting to see that come through in our European flows. But our U.S., SMID and MID strategies which have been fantastic for years have had a tough few months. So I think we're just recognizing that they're big strategies and short-term performance has been pretty challenged, but they've been fantastic strategies for a very long time for clients. But I guess we're just putting that out.

And it's retail it's not institutional.

Yes not in institutional. Yes.

Great. Thanks a lot.

And we'll take our next question from Simon Fitzgerald from Evans & Partners.

Thank you very much for taking my question. I've just got one. Dick you mentioned before that you're going to be doing a review of how your cost structure could look and sort of a deep dive into how that cost structure might unfold. I'm wondering you to elaborate a little bit more whether this is part of a wider review about products and strategies and whether this may therefore lead to lower teams or a small amount of headcount or anything like that? Maybe you could just sort of give us a little bit more of a feel about what's behind that?

Sure. So this is a constant effort when you're managing a business and it's been a constant effort for us. I gave some examples in my earlier comments about some areas where we've simplified the business and step back from some things that we were previously doing. And we'll continue to look at choices like that on an ongoing basis. And we also look at trying to find more efficient ways to continue to deliver the BAU responsibilities and improve the quality of client service. So basically what we're saying is we think three years on from the merger a and b in light of the lessons that we're learning from working remotely and the power that the technology can have for our business we think it's a really appropriate time to sort of renew our commitment to that exercise. It's not a new exercise. It's a continuation of what we've been doing. But we'll raise it up on the priority list. We'll talk about it more and we'll drive to conclusions that we can come back and share with you all. And we haven't pre-judged anything in terms of whether there are choices to be made about further simplifying the business. Those are - but those are important questions to ask and we won't shirk from asking them.

And we'll take our next question from Dan Fannon from Jefferies.

This is James Steele filling in for Dan. So just firstly thanks for providing some additional color on where the institutional outflows are coming from. And I understand the one I think it was $1.6 million EMEA client derisking. I'm just curious if 00 especially since those aren't performance related if there's any opportunity to keep those assets in-house maybe move to a different strategy especially if the derisking activity is going to continue?

Yes. Thank you. Good question. It's the same question I ask when I see a flow like that since we have a great relationship with the client. We didn't happen to succeed in keeping those assets in-house at this time, but it's what should be on all of our minds and what we're trying to do. And obviously, we have plenty of more conservative choices for a client who's reallocating their asset allocation. But in this case the funds left, they didn't come back to us. But you're right to highlight. We have to do a better job of continuing to try and keep those flows in-house in our institutional business. And it's terrific that we've built this great strong relationship with the client. And we look forward to being able to recapture maybe some of those future flows back in other ways in the future, but this -- in this instance, we weren't able to keep it in-house.

Okay. Thanks. And then just as my follow-up, I believe you mentioned in the prepared remarks, it sounded like there is a delayed funding in one of the institutional businesses related to COVID. I was hoping you could quantify that or provide any additional color on asset class or if that's supposed expected to still fund this year?

No. No not really on a specific client-by-client basis, but what I was trying to indicate is, look, last quarter we came to you when we said we felt that the institutional pipeline was looking better than it had looked in a while. And then we come this quarter and we say, the institutional flows were pretty substantially more negative than what we wanted or expected, and we're frustrated by that. And we're just trying to be transparent about those two truths and say some of the stuff that we were hoping to achieve it's still hopefully coming, but a lot of clients have gone slower through their process of moving from pipeline and finals to funding. And that's a fairly broad truth. Maybe it's related to changing the processes to working from home or your guess is as good as mine in many ways. But we have noticed across the institutional business that the process of moving from pipeline to final decision to funding at each stage has gone a bit slower than it has in some prior times. And so we're still hopeful that we have good opportunities to do better on a go-forward basis. But we have to deliver and we have to prove it. We're just trying to be transparent with you through that process.

Understood. Thank you.

We'll take our next question from Nigel Pittaway from Citi.

Good morning guys. Just first of all just focusing a little bit more again on the intermediary channel. I mean, obviously, you're talking about $900 million of flows and 3% growth. But I mean, it's still sort of a relatively small number compared to the level of fund that you have in that channel. I mean -- and you've obviously flagged the headwinds from SMID and mid-cap growth, but some growth in European equities. I mean, do you think there's sort of any possibility that this could start to grow more substantially in reasonable time frames? Or is it just sort of a slow burn and it's very difficult to see that moving forward any more than it currently is?

Yes, Nigel, yes, absolutely is the answer. And I think we showed that going into -- or through the whole of the back end of last year remember intermediary flows turned positive at the half year. And by the fourth quarter we did $1.7 billion of positive flows. And as we said on the first -- on the first quarter call, the first six weeks of the year was at that level or actually slightly ahead of that level. So we're progressing pretty well at that stage. We then fell into a hole as did everyone else in the second six weeks. To do $1 billion of intermediary flows compared to the first quarter, we're pretty happy with to be honest, but it certainly isn't where we intend to stay no. And we've got a lot of things going the right way whether they be in fixed income, whether they be in equity, whether they be in multi-asset with balanced with U.K. absolute return. So there is a good trend there. We've got a focused list of products, which are performing very well. You're right we have called out with U.S. SMID and MID that they may slow us down a little bit in the second half, but we've got an awful lot of things that are firing.

Okay. Thanks for that. And then the second question is just on the LTIP. I mean, as you went through you said it was out of your control and driven by markets. But if we do look at what you've sort of shown us on slide 40, it does suggest that 2Q has taken a fair sort of probably more than its fair share would maybe be a way to describe it in terms of LTIP and what's coming in the remaining two quarters. So firstly is that true? And secondly given that you're sort of -- the related cost-to-income -- sorry, compensation ratio was mid-40s probably struck at the low of the market, isn't there a scope for that to be a bit better now moving forward?

For the second half of the question the answer is, yes. Our guidance going into the year is low to mid-40s. We said it was more like mid-40s with where the markets were at the end of the first quarter. With where they are now you should expect it to be more low to mid-40s as we guided at the beginning of the year. In terms of the LTI charge in the quarter that purely is the mark-to-market on it. Some of that is hedged and therefore that's part of the investment gain you see below the line. So you've just got a -- you got to take the rough with the smooth with that in Q1 we had a very low figure and that number came down in Q2 it goes up. So as far as saying it's sort of out of our control. We hedge what we can and the hedge part of that comes through below the line. So I think you should look at the first half on average. And as you say in the appendix on 40, we've shown what the future charges would be given markets where they are at the moment.

And our next question comes from Alex Blostein from Goldman Sachs.

Hi. Good morning everybody. So Dick, appreciate the strategy update. And I guess on this journey to simple excellence, what are the key financial and operating targets we should keep in mind? And I guess targets that you all spread up for yourself and your management team as you progress through this process and over what time frame?

Yes. We have internal measurements for the different parts of the story. I've tried to give you a sense of some of the underpinnings in this call. But I don't have more specific stuff to give you. Look the big score of the scoreboard is earnings and flows. And what we've told you is the big score is we need to get to positive organic growth and growing profitability. And those are the main metrics that are targeted in the strategy of simple excellence. And I don't think I can do a better job of highlighting the underpinnings of that than I have done.

Okay. I guess the…

I guess, the only other thing I'd add -- sorry, Alex, the only thing I'd add to that is around -- it's not -- we don't look at flow in isolation. We look at -- we look at quality flow. So it is about growing the profitability of our business. And I think the fee margin is something which shows that the assets we're adding are quality assets and again that's something we look to do over a period of time.

Yes. No, of course, that makes sense. I guess as a follow-up to that. So, when you talk about the second -- or I guess one of the pillars from this is revisiting the cost structure again more holistically. And I guess one of the things you mentioned is OMS portfolio risk systems data, et cetera; can you just remind us I guess what are you guys spending across these buckets today? Is it all in-source or is it outsourced? And what is really the opportunity you see there to rationalize some of the kind of tech stack and some of these services?

Yes, let me pick that up. They are pretty chunky investments as Dick said. They are in our guidance so you shouldn't be concerned that there is a bunch of costs coming down the track. And some of those things should have some improvement around the tech stack as you point out in our data and allow us to further simplify the business which as Dick pointed out is part of the strategy. But the main reason we're doing those things is for improved tools for our fund managers around CRM for our salesforces. And so it's around giving access to the best information. We want to have the best technology and we've got some work to do there. So, they're the investments we're making but that is baked into the current costs. And yes, we'd like to think there's some simplification of the back end of it. But it's more around improving the tools for our staff.

Yes, I'll just add look we need to be excellent or we should all go home. And in order to be excellent you got to have the proper tools and they have to be implemented in a simple way which can -- will make them cost-efficient and also more reliable. And we have scope to do much better across some of our infrastructure systems and data architecture and stewardship and those sorts of things. And we're making investments and we'll continue to make investments in those areas. And that's about driving to simple excellence. It's not as much about reducing the cost base. But in order to fund those investments and also to continue to deliver distributions and share buybacks and such to our owners we've got to be as efficient as humanly possible on how we're spending the money. And so it's a balance, right? And it's not a new balance but we're renewing our commitment to that to say let's go back and re-ask the hard questions and we'll get back to you about -- both sides of that about progress we're making on the retooling of the infrastructure and making the appropriate investments as well as the cost control side in the future.

And we'll take our next question from Andrei Stadnik with Morgan Stanley.

Good morning. Good afternoon. I just wanted to ask two questions. Firstly, if any call in terms of where the rate of flows actually are ceding to start the September quarter? Where they've headed in the month of July?

Andrei we don't really talk about monthly flows. We can see that publicly. But as we said our flows -- the flows in -- the intermediary flows in the third quarter are positive in all three regions across the U.S., in EMEA, in the U.K., and the U.K. particularly strongly, and in Australia. As Dick mentioned, we just launched a new fixed income ETF in Australia that will hopefully add to those intermediary flows. We've -- while we've been on the call we've just filed a preliminary registration for a new CLO ETF in the U.S. So, these are all things that we're moving forward with, but we're seeing flows across all regions.

My line must have been patchy earlier. And another question a fairly sort of kind of mechanical one. But in terms of the operating margin outlook for FY 2020. On the last call, you mentioned lower third in spread in margin would be more likely but we've seen some things on the cost and revenue side may be headed a little bit better. So, what should we be thinking about in terms of operating margin at this point?

Yes, I think a similar answer to my question to Nigel earlier. The guidance we gave at the middle of the year -- at the beginning of the year was -- it was mid-30s and we revised that down when the markets were lower. So, you should be expecting mid-30s margin sort of similar to 2019.

Thank you.

Our next question comes from Robert Lee from KBW.

Great. Thanks. Good morning. Thanks for taking my question. I was hoping if you can maybe drill into the intermediary channel a bit more in the U.S. If early placed will have better success. Could you maybe kind of parse that down a bit? I'm curious so in that there are so many different types of channels and products they had -- I don't think the sales there kind of just [Indiscernible] SMAs or more model portfolio -- products that go into model portfolio products that go into model portfolios? And then also any color on kind of wirehouse versus kind of the RIA channel in the direct platforms? Just trying to get a feel for where momentum is and the opportunities there.

Rob, a bit difficult to hear you. So perhaps we can follow-up with you afterwards. I think it was around the different parts of U.S. intermediary. Our SMA channel is certainly growing well. But let's pick up with you. We'll pick up with you off-line post completing the call.

Thank you. Sorry about that.

And we will be taking our final question today from James Cordukes from Credit Suisse. Q – James Cordukes: Hi, guys. Thanks for taking my question. Just an inquiry on the balanced fund you've obviously had some changes there interested in knowing what the response of the clients has been and whether there's been any engagement with the rating houses and how comfortable they are with the changes to the team there?

Sure. So yes, we've seen that Marc Pinto has announced that at the end of this coming March after a 26-year career, he'll be stepping down from the fund. The client reaction has been as good as we would hope at this point, but obviously it's really too early to say what effect that will have on a go-forward basis. Marc's successor has been a co-portfolio manager with him for a number of years. Jeremiah Buckley has been an excellent co-portfolio manager with Marc. So if you drew up a sort of an ideal transition I think this would probably fulfill all those conditions that you might describe. That said a transition is always a moment of higher risk for one of your big very successful strategies. And certainly, Marc has been just absolutely first-class for our business and for his clients in the balance fund for a long, long time and he will be missed as a person, as a leader, as an investor. But what he's done for the firm is give us great succession in terms of a partner carrying on in exactly the same style and given lots of warning and doing all the appropriate things in terms of client meetings and communications to make sure that this goes as smoothly as possible. So fingers crossed it is a transition and transitions are moments of heightened risk but I don't know how we could have done this transition better. Q – James Cordukes: All right. Thanks. And maybe just one for Roger on the buyback. I mean you completed about 10% of the $200 million buyback in the last quarter. And so, you're still committed to it. Should we expect purchases to increase in future quarters to make that up? And I guess tied into that is what have you -- what are your plans for the proceeds from the Geneva acquisition if you could remind us about again?

As you say we did go a little bit slower in Q2 and that was as we said that at the beginning of the quarter obviously, there's a lot of uncertainty and markets were at a low. So we did go slower this quarter. We are also kept out of the market a few days because of the 5% rule in Australia. So the buyback was pretty low. And with market levels where you are then you'd expect us to be stepping that up in Q3. The buyback is a $200 million buyback authorized through the end of Q1 next year. So we've done about $50 million of it. So you'd expect to see us back in the market shortly at an increased level. But again, being very careful and looking at volatility. The Geneva piece is part of our regular cash and capital. So I guess it's part of the $200 million the Board committed to at the end of the first quarter.

And ladies and gentlemen, that was our final question. That does conclude today's conference. We appreciate your participation today.