Janus Capital Group (JNS)

Q4 2011 Earnings Call

January 26, 2012 10:00 am ET

Executives

Bruce Lewis Koepfgen - Executive Vice President, Chief Financial Officer, and Member of Executive Committee

Unknown Executive -

Richard Mac Coy Weil - Chief Executive Officer, Director and Chairman of the Executive Committee

Brennan A. Hughes - Principal Accounting Officer, Vice President and Controller

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Matthew Kelley - Morgan Stanley, Research Division

Michael Carrier - Deutsche Bank AG, Research Division

William R. Katz - Citigroup Inc, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Roger A. Freeman - Barclays Capital, Research Division

Presentation

Operator

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Good morning. My name is Michael, and I'll be your conference facilitator today. I would like to welcome everyone to the Janus Capital Fourth Quarter and Full-Year 2011 Earnings Conference Call. [Operator Instructions] Before the company begins, I would like to reference their standard legal disclaimer, which also accompanies the full slide presentation located in the Investor Relations area of janus.com.

Statements made in the presentation today may contain forward-looking information about management's plans, projections, expectations, strategic objectives, business prospects, anticipated financial results, anticipated results of litigation and regulatory proceedings and other similar matters. A variety of factors, many of which are beyond the company's control, affect the operations, performance, business strategy and results of Janus, and could cause actual results and experiences to differ materially from the expectations and objectives expressed in their statements.

These factors include, but are not limited to, the factors described in Janus' reports filed with the SEC, which are available on their website, www.janus.com, and on the SEC's website, www.sec.gov. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Janus does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date these statements were made. Investors should, however, consult any further disclosures Janus may make in its reports filed with the SEC.

Thank you. Now it's my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Capital Group. Mr. Weil, you may begin your conference.

Richard Mac Coy Weil

Thank you, operator. Welcome everybody to the fourth quarter and full-year 2011 earnings call for Janus Capital Group. Thank you for your time and attention.

Looking back at the last year, I think it's clear that Janus is becoming a stronger and more diverse company. But we currently face some challenges in our fundamental equity performance, particularly in our Janus managed funds.

During the year, we maintained strong financial discipline. Our operating income increased 11% versus prior year and margins improved to 31.8% compared to 20.7% -- 27.7% in the prior year. We're particularly proud of that discipline.

As you know, as we've talked about before, it's important to us to maintain a strong balance sheet so that we can remain a good and stable partner for our clients and for our employees through the full and volatile market cycles.

In this past year, we generated $225 million of cash flow from operations and we had $672 million of cash and marketable securities at December 31. We also made significant headway against our strategic priorities. We further diversified our business through successfully building our fixed income and we made important strides in institutional and our international businesses, all while maintaining a focus on operational excellence and as I mentioned also, cost control.

Our mathematical equity performance and net flows improved substantially in 2011. Perkins maintained its record of very strong long-term performance. Its global value strategy is top decile for the past year and its very important small and mid-cap strategies were top decile for the last 5 years. So Perkins remains an exceptionally strong and leading value manager.

We recruited new talent and I'm most proud probably of that. We recruited new talent both inside the investment team and elsewhere around the firm and coupled with the very strong folks who are already here, I think we have an excellent team.

Fourth quarter 2011 EPS was $0.19 compared to $0.15 in the quarter, bringing our full year to $0.78 compared to $0.88 in the prior year. Assets under management at December were $148.2 billion, which is a 5.1% increase from September. Our total long-term net flows were still negative at $4 billion in the fourth quarter compared to $2.4 billion in the third quarter, bringing full-year net negative $12.2 billion.

Again, we make the point on the bottom of Page 3 of the presentation around the operating margin and the full-year margin at 31.8% fulfills our target that we set in discussions with you a year ago for low 30% margin. So we're proud of that.

On Page 4 of the presentation, I outlined a little bit about the progress we made against our long-term strategic vision. As you know, it's been very important for our strategy to build out our fixed income franchise, that's been an exceptionally strong success story for us. We finished the year with more than $20 billion in fixed income AUM for the first time in the firm's history.

We have a strong growth rate and in 2011, net flows were positive $4.9 billion in this business. We also strategically expanded our global distribution and product capabilities, realigned our sales and really restructured our non-U.S. sales force. We've earned buy recommendations from a number of non-U.S. consultants and we believe that our non-U.S. business is well positioned to move forward in the future.

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