Janus Capital Group (JNS) Q1 2012 Earnings Call April 24, 2012 10:00 am ET Executives Richard Mac Coy Weil - Chief Executive Officer, Director and Chairman of the Executive Committee Bruce Lewis Koepfgen - Chief Financial Officer, Executive Vice President and Member of Executive Committee Analysts Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division Michael Carrier - Deutsche Bank AG, Research Division Kenneth B. Worthington - JP Morgan Chase & Co, Research Division Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division William R. Katz - Citigroup Inc, Research Division Matthew Kelley - Morgan Stanley, Research Division Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division Cynthia Mayer - BofA Merrill Lynch, Research Division Marc S. Irizarry - Goldman Sachs Group Inc., Research Division Roger A. Freeman - Barclays Capital, Research Division Presentation Operator
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 is 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 first quarter 2012 Janus Capital Group call. I'm obviously Dick Weil and with me as usual is Bruce Koepfgen, our CFO. The story of the first quarter 2012 for us is one where we demonstrated fundamental business improvement across importantly both investment performance and better net flows. However, the expected performance fee impact we've discussed with you in prior quarters took full effect and more than offset fundamental business improvement in our financial results. Let me focus on investment performance for just a moment. Prior to the first quarter 2012, our Janus-managed large-cap growth strategies have been through a very difficult 18 months. In the first quarter, their performance improved dramatically. It's hard to generalize about many different portfolios but one very substantial difference is the change in the environment. Since the crisis at the end of 2008's correlations between stocks, the number of stocks and the broad index moving in the same direction on the same day had been very high. Buyers alternatively scared and optimistic about global macro and the stability of financial institutions have expressed those views by buying and selling beta or in other words, the index. In such periods, the rewards for differentiated bottoms-up stock picking are reduced. In such period, the more one looks like the index, the better. As a high-conviction fundamental manager, our Janus platform is not at its best during these periods.
During the first quarter of 2012, correlations have fallen dramatically to much more normal levels compared to history, and our differentiated stock picking has once again been rewarded. This gives us the opportunity to demonstrate the strengths of our research and our investment team. We recognize one quarter's good performance is far too short to fully remedy our recent underperformance, but Q1 2012's is a very good start.Turning to our quarterly results. Q1 2012 EPS was $0.12 compared to $0.19 in fourth quarter 2011. When evaluating this result, please take care to understand elements around both the fourth quarter of '11 and the first quarter of '12. Bruce Koepfgen will take you through the details of this more carefully, but the first quarter included about $0.03 charge due to 2 elements: change in LTI forfeiture estimates, less people are leaving than we expected; and charges related to our recent debt buyback. When you compare that against fourth quarter of last year, you should remember that about $0.05 of benefit in the fourth quarter of last year was from compensation reversals. Finally, I want to point out that we announced a 20% increase in our regular quarterly dividend. This small step demonstrates that our board is confident in the strength of our balance sheet, that we continue to generate strong free cash flow from operations and we take seriously our duty to return capital to our shareholders. With that, I'll turn it over to Bruce. Bruce Lewis Koepfgen Thanks, Dick. Good morning, everyone. As I work my work through the materials, I'll attempt to focus on a few items that I think help to explain our quarterly results. Read the rest of this transcript for free on seekingalpha.com