Janus Capital Group Earnings Analysis: Q2 2016 By The Numbers

| About: Janus Capital (JNS)

Janus Capital Group, Inc. (NYSE:JNS) reports financial results for the quarter ended June 30, 2016.

We analyze the earnings alongside the following peers of the company - Legg Mason, Inc. (NYSE:LM), BlackRock, Inc. (NYSE:BLK), AllianceBernstein Holding L.P. (NYSE:AB), Cohen & Steers, Inc. (NYSE:CNS) and Oaktree Capital Group, LLC Class A (NYSE:OAK) - that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 252.60 million, Net Earnings of USD 37.50 million.
  • Gross margins narrowed from 84.26% to 83.29% compared to the same period last year, operating (EBITDA) margins now 28.66% from 29.54%.
  • Year-on-year change in operating cash flow of 19.47% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2015-06-30 2015-09-30 2015-12-31 2016-03-31 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil.) 268.8 266.6 265.5 250.2 252.6
Revenue Growth (%YOY) 12.05 11.69 5.44 -6.33 -6.03
Earnings (mil.) 43.1 19.2 45 33.8 37.5
Earnings Growth (%YOY) 22.79 -51.39 -0.44 -21.4 -12.99
Net Margin (%) 16.03 7.2 16.95 13.51 14.85
EPS 0.23 0.1 0.25 0.19 0.21
Return on Equity (%) 10.71 4.63 10.64 7.93 8.74
Return on Assets (%) 6.33 2.73 6.28 4.77 5.32
Click to enlarge

Market Share Versus Profits

Revenues History

Earnings History

JNS's change in revenue this period compared to the same period last year of -6.03% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting the company is holding onto its market share. Also, for comparison purposes, revenues changed by 0.96% and earnings by 10.95% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company's year-on-year decline in earnings was influenced by a weakening in gross margins from 84.26% to 83.29%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 29.54% to 28.66% in this time frame. For comparison, gross margins were 83.41% and EBITDA margins were 27.26% in the previous period.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings - Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

JNS's change in operating cash flow of 19.47% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company's decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 26.71% to 25.14%; and (2) one-time items that contributed to a decrease in pretax margins from 25.89% to 25.61%

EBIT Margin Versus PreTax Margin

EBIT Margin History

PreTax Margin History

Company Profile

Janus Capital Group Inc. provides investment management, administration, distribution and related services to financial advisors, individuals and institutional clients through mutual funds, other pooled investment vehicles, separate accounts and sub-advised relationships in both domestic and international markets. It also provides investment management competencies across disciplines, including fundamental U.S. and global equities, mathematical equities, fixed income and alternatives through its subsidiaries, Janus Capital Management LLC, INTECH Investment Management LLC and Perkins Investment Management LLC.

The company's investment products are distributed through three channels: Retail Intermediary, Institutional and International. The Retail Intermediary channel serves financial intermediaries and retirement platforms, which include asset managers, banks and trusts, broker-dealers, independent planners and insurance companies. The Institutional channel serves corporations, endowments, foundations, Taft-Hartley funds and public fund clients. The International channel serves professional investors who are located outside of the United States. Activities in this sector include central and local government pension plans, corporate pension plans, multi-managers, insurance companies and private banks. Janus Capital Group was founded on January 1, 2003, and is headquartered in Denver, CO.

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