Core Viewpoint - Franklin Resources, Inc. (BEN) reported a preliminary assets under management (AUM) of $1.53 trillion as of April 30, 2025, reflecting a marginal decrease from the previous month due to long-term net outflows of $10 billion, which included $10 billion from Western Asset Management, partially offset by positive foreign exchange impacts [1] AUM Breakdown by Asset Class - Equity assets amounted to $597.3 billion, showing a slight decline from the previous month [2] - Fixed income AUM was $439.5 billion, down 1.5% from the prior month [2] - Alternative AUM increased marginally to $253.8 billion [2] - Multi-asset AUM stood at $174.2 billion, falling nearly 1% from March 2025 [2] - Cash management balance rose to $70 billion, up 1.6% from the previous month [2] Company Performance and Outlook - April was challenging for BEN due to long-term net outflows; however, improvements in alternative AUM and cash management, along with efforts for inorganic growth, are expected to support financials [3] - Over the past six months, BEN shares have decreased by 2.9%, contrasting with a 14% decline in the industry [4] Zacks Rank and Comparisons - Franklin currently holds a Zacks Rank 5 (Strong Sell) [6] - Other companies in the sector, such as Alliance Cap Management L.P. (AB) and Victory Capital Holdings, Inc. (VCTR), are set to announce their monthly performances soon, with AB shares rising 36.9% and VCTR shares gaining 16.6% over the past year [6]

Core Viewpoint - Franklin Resources Inc. reported second-quarter fiscal 2025 adjusted earnings of 47 cents per share, matching the Zacks Consensus Estimate but down from 56 cents in the prior year [1][2] Financial Performance - Net income on a GAAP basis was $151.4 million, reflecting a year-over-year increase of 21.9% [2] - Total operating revenues decreased by 1.9% year over year to $2.11 billion, surpassing the Zacks Consensus Estimate of $1.98 billion [3] - Investment management fees fell by 2.4% year over year to $1.67 billion, while sales and distribution fees increased by 1.8% to $364.9 million [4] - Total operating expenses declined by 2.9% year over year to $1.97 billion, with an operating margin of 6.9%, up from 6% in the previous year [5] Assets Under Management (AUM) - As of March 31, 2025, total AUM was $1.54 trillion, down 2.2% sequentially, with long-term net outflows of $26.2 billion during the quarter [6] - The average AUM decreased by 3.9% sequentially to $1.57 trillion [6] Capital Position - As of March 31, 2025, cash and cash equivalents and investments totaled $6.1 billion, while total stockholders' equity was $13.2 billion [7] Capital Distribution - In the reported quarter, the company repurchased 0.5 million shares for $10 million [8] Strategic Outlook - The company is focusing on diversifying its business through acquisitions and enhancing its distribution platform, which may support revenue growth despite rising expenses from technological upgrades [9]

Financial Data and Key Metrics Changes - The company's assets under management (AUM) ended the quarter at $1,540 billion, a decrease from the prior quarter due to long-term net outflows at Western Asset and negative market impacts [18][19] - Adjusted operating income was $377.2 million, a decrease of 8.6% from the prior quarter, primarily due to compensation expenses and the impact of Western [28][29] Business Line Data and Key Metrics Changes - Long-term inflows increased by 9% quarter over quarter, with gross sales increasing across all asset classes [19] - Multi-asset and alternatives generated a combined $9.7 billion in positive net flows, while equity long-term inflows were $38.9 billion, despite equity net outflows of $5.4 billion primarily in growth strategies [20][21] - Fixed income net outflows were $30.5 billion, but excluding Western, there were net inflows of $2.8 billion in multisector, munis, stable value, and high yield strategies [20][21] Market Data and Key Metrics Changes - The institutional unfunded pipeline increased by $2.3 billion to $20.4 billion during the quarter, the highest level since 2022 [6] - The company noted a shift in global market dynamics, with several foreign markets outperforming US indices for the first time in years [9][10] Company Strategy and Development Direction - The company aims to help clients navigate market volatility and benefit from emerging trends, emphasizing a diversified approach to asset allocation and portfolio construction [5][6] - There is a focus on growth in alternative assets, ETFs, and digital assets, with significant investments in these areas [22][30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding global equity markets, citing uncertainty tied to US growth and tariff impacts [11][12] - The company anticipates that increased market volatility may spur interest in secondary private equity offerings and alternative credit businesses [16][17] Other Important Information - The company has offices in over 30 countries, with approximately 30% of AUM in countries outside the US [9] - The ETF business saw its fourteenth consecutive quarter of positive net flows, attracting $4.1 billion during the quarter [25][26] Q&A Session Summary Question: Guidance on fiscal year expenses given market movements - Management expects effective fee rates to remain around 38 basis points for the third quarter, with expenses projected to be flat compared to 2024 [36][39] Question: Estimate for base fee organic growth rate including Western - Management noted that long-term net flows excluding Western were about $7.4 billion, with positive flows in fixed income and alternatives [44][45] Question: Update on fixed income strategies and Western's health - Western experienced $10 billion in outflows but also had $5 billion in gross sales, indicating ongoing institutional interest [78][79] Question: Insights on international business contributions - The company reported positive momentum in gross sales across all regions, with AUM of approximately $470 billion outside the US [90]

Core Insights - Franklin Resources reported $2.11 billion in revenue for the quarter ended March 2025, reflecting a year-over-year decline of 1.9% and an EPS of $0.47 compared to $0.56 a year ago, with revenue exceeding the Zacks Consensus Estimate of $1.98 billion by 6.66% [1] Financial Performance - Total Net Flows were reported at $-23.5 billion, slightly better than the average estimate of $-23.99 billion [4] - Assets Under Management (AUM) for Fixed Income stood at $446 billion, Multi-Asset at $175.8 billion, Equity at $598.1 billion, Total AUM at $1,540.6 billion, Alternatives at $251.8 billion, and Cash Management at $68.9 billion, all compared to respective analyst estimates [4] - Operating Revenues from Investment Management Fees were $1.67 billion, a decrease of 2.4% year over year, while Sales and Distribution Fees increased by 1.8% year over year to $364.90 million [4] Market Performance - Shares of Franklin Resources have returned +4.4% over the past month, outperforming the Zacks S&P 500 composite's -0.5% change, although the stock currently holds a Zacks Rank 4 (Sell) indicating potential underperformance in the near term [3]

Financial Data and Key Metrics Changes - Assets under management (AUM) decreased to $1,540 billion, primarily due to long-term net outflows at Western Asset and negative market impacts [18][19] - Adjusted operating income was $377.2 million, a decrease of 8.6% from the prior quarter, mainly due to compensation expenses and the impact of Western [27][28] Business Line Data and Key Metrics Changes - Long-term inflows increased by 9% quarter over quarter, with gross sales rising across all asset classes [19] - Multi-asset and alternatives generated a combined $9.7 billion in positive net flows, while equity long-term inflows were $38.9 billion, despite net outflows of $5.4 billion in growth strategies [20][21] - Fixed income net outflows were $30.5 billion, but excluding Western, there were net inflows of $2.8 billion [20][21] Market Data and Key Metrics Changes - The institutional unfunded pipeline increased by $2.3 billion to $20.4 billion, the highest level since 2022 [5] - International markets accounted for approximately $470 billion, or about 30% of AUM, with positive net flows in the EMEA and Americas regions [7][26] Company Strategy and Development Direction - The company aims to leverage market volatility to enhance client asset growth through diversified investment solutions [4][17] - Focus on expanding alternative assets and wealth management channels, projecting $800 billion to be allocated to democratize alternatives industry-wide over the next five years [22][64] - Continued integration of Western Asset to create efficiencies while maintaining investment team autonomy [28] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously constructive on global equity markets, citing concerns over US growth and tariff impacts [10][11] - The company anticipates that a recession in the US is not a foregone conclusion, with the economy being better insulated compared to export-dependent countries [11][12] - Positive sentiment around the potential for growth in private markets and alternatives, with a strong focus on educating financial advisers [63][64] Other Important Information - The company launched its first perpetual secondary private equity fund, raising an initial $2 billion [23] - The ETF business saw its fourteenth consecutive quarter of positive net flows, attracting $4.1 billion during the quarter [24][25] Q&A Session Summary Question: Guidance on fiscal year expenses given market movements - Management expects effective fee rates to remain around 38 basis points, with expenses projected to be flat compared to 2024 [36][39] Question: Estimate for base fee organic growth rate including Western - Management noted that long-term net flows excluding Western were about $7.4 billion, with positive flows in fixed income and alternatives [45][46] Question: Update on fixed income strategies and Western's health - Western experienced $10 billion in outflows but also had $5 billion in gross sales, indicating ongoing institutional interest [78][79] Question: Contribution of international business to revenues and flows - The company reported positive momentum in gross sales across all regions, with AUM outside the US at approximately $470 billion [92]

Franklin Resources (BEN) came out with quarterly earnings of $0.47 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.56 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this investment manager would post earnings of $0.53 per share when it actually produced earnings of $0.59, delivering a surprise of 11.32%.Over the last four quarters, the company has surpassed consensus EPS estimates two times.Franklin Resources ...

Assets Under Management (AUM) - Total assets under management (AUM) as of March 31, 2025, were $1,540.6 billion, an 8% decrease from $1,675.7 billion at September 30, 2024[68]. - Average AUM for the three months ended March 31, 2025, was $1,570.5 billion, a 1% decrease from $1,581.1 billion in the same period of 2024[73]. - AUM at March 31, 2025, was $1,540.6 billion, down from $1,644.7 billion at March 31, 2024, representing a 6% decrease[84]. - AUM decreased by $35.1 billion, or 2%, during the three months ended March 31, 2025, primarily due to $26.2 billion of long-term net outflows and a negative impact of $11.6 billion from net market changes[79]. - Cash management AUM increased by 12% to $68.9 billion as of March 31, 2025, compared to $61.7 billion in the previous year[72]. - AUM in the U.S. decreased by 7% to $1,071.3 billion as of March 31, 2025, compared to $1,155.9 billion in the previous year[84]. - The mix of average AUM for equity increased to 40% in 2025 from 35% in 2024, while fixed income decreased to 29% from 35%[73]. Revenue and Income - Operating revenues for the three months ended March 31, 2025, were $2,111.4 million, a 2% decrease compared to $2,152.8 million for the same period in 2024[71]. - Total operating revenues for the six months ended March 31, 2025, were $4,363.0 million, up from $4,143.9 million in 2024, representing an increase of 5%[132]. - Net income attributable to Franklin Resources, Inc. for the three months ended March 31, 2025, was $151.4 million, a 22% increase from $124.2 million in the prior year[71]. - Adjusted net income for the six months ended March 31, 2025, was $574.9 million, a 9% decrease from $635.1 million in the same period of 2024[71]. - Diluted earnings per share for the three months ended March 31, 2025, increased to $0.26 from $0.23 in 2024, a rise of 13%[133]. Expenses and Cost Management - Total operating expenses for the three months ended March 31, 2025, were $1,965.8 million, a decrease of 3% compared to $2,023.5 million in the same period of 2024[99]. - Compensation and benefits expenses decreased by $108.2 million (11%) for the three months ended March 31, 2025, primarily due to headcount reductions[99]. - The company plans to focus on expense management while investing strategically in systems and technology to enhance service quality[70]. - The effective investment management fee rate excluding performance fees was 41.4 basis points for the three months ended March 31, 2025, unchanged from the same period in 2024[93]. - Total operating expenses increased by 5% to $3,998.4 million for the six months ended March 31, 2025, compared to $3,808.1 million in the prior year[99]. Cash Flow and Investments - Operating cash flows for the six months ended March 31, 2025, were $(195.3) million, compared to $(115.3) million in 2024, indicating a worsening cash flow situation[134]. - Cash and cash equivalents as of March 31, 2025, were $2,714.3 million, down from $3,261.1 million in 2024, a decrease of 17%[137]. - Net cash used in investing activities increased to $(1,020.6) million for the six months ended March 31, 2025, compared to $(410.8) million in 2024, indicating a significant rise in investment expenditures[134]. - The company expects to invest more of its post-dividend free cash flow into business growth, including seed capital and acquiring resources for investment teams[146]. Market Performance and Flows - Long-term net flows for the three months ended March 31, 2025, were negative at $(26.2) billion, compared to positive net flows of $6.9 billion in the same period of 2024[76]. - Long-term inflows increased by 2% to $86.8 billion compared to the prior year, driven by higher inflows in alternative private funds and equity[80]. - Long-term outflows increased by 45% to $113.0 billion, largely due to higher outflows from fixed income vehicles and ongoing regulatory investigations[80]. - The market depreciation primarily occurred in the equity asset class, with a $16.7 billion decrease attributed to market conditions[81]. Shareholder Actions - The company repurchased 0.5 million shares at a cost of $10.0 million during the three months ended March 31, 2025, and 0.8 million shares at a cost of $15.8 million during the six months ended March 31, 2025[148]. - The company declared regular dividends of $0.64 per share during the six months ended March 31, 2025, compared to $0.62 per share in 2024, reflecting a 3% increase[147]. - The company authorized the repurchase of up to an additional 27.2 million shares in December 2023, bringing the total available for repurchase to 40.0 million shares[148]. Tax and Regulatory Matters - The effective income tax rate increased to 72.8% for the three months ended March 31, 2025, compared to 26.4% in the prior year, primarily due to losses of consolidated investment products (CIPs) with no related tax benefits[124]. - Investments held by consolidated investment products generated losses of $164.7 million for the three months ended March 31, 2025, compared to gains of $89.9 million in the prior year[121].

Financial Performance - Net income for Q2 2025 was $151.4 million, or $0.26 per diluted share, down 7% from the previous quarter and up 22% year-over-year[3]. - Adjusted net income decreased by 21% to $254.4 million, with adjusted diluted earnings per share at $0.47, a 20% decline from the previous quarter[3]. - Operating revenues for the quarter were $2,111.4 million, a 6% decrease from the previous quarter[8]. - Total operating revenues for the three months ended March 31, 2025, were $2,111.4 million, a decrease of 2% compared to $2,152.8 million in the same period of 2024[14]. - Investment management fees decreased by 2% to $1,673.6 million for the three months ended March 31, 2025, compared to $1,713.9 million in the same period of 2024[14]. - Net income attributable to Franklin Resources, Inc. was $151.4 million for the three months ended March 31, 2025, representing a 22% increase from $124.2 million in the same period of 2024[14]. - Earnings per share (EPS) for the three months ended March 31, 2025, were $0.26, up 13% from $0.23 in the same period of 2024[14]. - Operating income increased by 13% to $145.6 million for the three months ended March 31, 2025, compared to $129.3 million in the same period of 2024[14]. - Total operating expenses decreased by 3% to $1,965.8 million for the three months ended March 31, 2025, compared to $2,023.5 million in the same period of 2024[14]. - Compensation and benefits expenses decreased by 11% to $920.0 million for the three months ended March 31, 2025, compared to $1,028.2 million in the same period of 2024[14]. - The operating margin improved to 6.9% for the three months ended March 31, 2025, compared to 6.0% in the same period of 2024[14]. - Dividends declared per share increased by 3% to $0.32 for the three months ended March 31, 2025, compared to $0.31 in the same period of 2024[14]. - Adjusted operating income for the three months ended March 31, 2025, was $377.2 million, compared to $412.8 million for the previous quarter and $419.6 million for the same period last year[26]. - Total operating revenues for the three months ended March 31, 2025, were $2,111.4 million, down from $2,251.6 million in the previous quarter and $2,152.8 million in the same period last year[26]. - Adjusted net income for the three months ended March 31, 2025, was $254.4 million, compared to $320.5 million in the previous quarter and $306.6 million in the same period last year[27]. - Diluted earnings per share for the three months ended March 31, 2025, were $0.26, down from $0.29 in the previous quarter and $0.23 in the same period last year[27]. - Adjusted diluted earnings per share for the three months ended March 31, 2025, were $0.47, compared to $0.59 in the previous quarter and $0.56 in the same period last year[27]. - The company reported an operating margin of 6.9% for the three months ended March 31, 2025, compared to 9.7% in the previous quarter and 6.0% in the same period last year[26]. - The adjusted operating margin for the three months ended March 31, 2025, was 23.4%, down from 24.5% in the previous quarter and 25.2% in the same period last year[26]. Assets Under Management (AUM) - Total Assets Under Management (AUM) was $1,540.6 billion, a decrease of $35.1 billion during the quarter, primarily due to $26.2 billion in long-term net outflows[8]. - The company's beginning AUM for the three months ended March 31, 2025, was $1,575.7 billion, compared to $1,455.5 billion for the same period in 2024, reflecting a year-over-year increase of 8.2%[16]. - Long-term inflows for the three months ended March 31, 2025, were $86.8 billion, up from $84.9 billion in the same period of 2024, indicating a growth of 2.2%[16]. - Long-term outflows increased significantly to $113.0 billion for the three months ended March 31, 2025, compared to $78.0 billion in the same period of 2024, representing a rise of 44.9%[16]. - The total net flows for the three months ended March 31, 2025, were negative at $(23.5) billion, contrasting with positive net flows of $2.1 billion in the same period of 2024[16]. - The ending AUM as of March 31, 2025, was $1,540.6 billion, down 2.2% from $1,575.7 billion at the end of December 2024[17]. - The average AUM for the three months ended March 31, 2025, was $1,570.5 billion, a decrease of 4% from $1,634.5 billion in the previous quarter[17]. - The AUM by asset class showed a decline in equity AUM to $598.1 billion, down 4% from $620.0 billion at the end of December 2024[17]. - The AUM in fixed income also decreased by 5% to $446.0 billion from $469.5 billion at the end of December 2024[17]. - Cash management AUM increased by 9% to $68.9 billion, up from $63.4 billion at the end of December 2024[17]. - The total AUM in the United States was $1,071.3 billion, a decrease of 3% from $1,102.5 billion at the end of December 2024[18]. - As of March 31, 2025, the company had $1.54 trillion in assets under management (AUM)[29]. Business Operations - Long-term inflows increased by 9% quarter-over-quarter, with multi-asset and alternatives generating $9.7 billion in positive net flows[3]. - The ETF business achieved $4.1 billion in positive net flows, marking the 14th consecutive quarter of growth[3]. - Fundraising in alternatives generated $6.8 billion, with private market assets totaling $6.1 billion, including the launch of the Franklin Lexington Private Markets Fund[4]. - The institutional pipeline of won-but-unfunded mandates rose by $2.3 billion to $20.4 billion, the highest level since 2022[3]. - Cash and cash equivalents were $5.0 billion, with total stockholders' equity at $13.2 billion[9]. - The company repurchased 0.5 million shares for a total cost of $10.0 million during the quarter[9]. - The company serves clients in over 150 countries, leveraging its expertise in equity, fixed income, alternatives, and multi-asset solutions[29]. - The company has over 1,500 investment professionals and more than 75 years of investment experience[29].

AUM and Flows - Ending AUM decreased to $1.54 trillion, a 2.2% decrease compared to the prior quarter and a 6.3% decrease compared to the prior year[8, 50] - Long-term net outflows were $26.2 billion[7] - Excluding Western Asset Management, long-term net inflows were $7.4 billion[7] - Alternatives fundraised $6.8 billion, with $6.1 billion in private market assets[7] - ETF experienced $4.1 billion of net flows, reaching a record high AUM of $37.0 billion[7] Financial Performance - Adjusted revenue was $1.61 billion, a 4% decrease compared to the prior quarter and a 3% decrease compared to the prior year[8, 55] - Adjusted operating income was $377.2 million, a 8.6% decrease from the prior quarter and a 10.1% decrease from the prior year[8, 39] - Adjusted net income was $254.4 million, a 20.6% decrease from the prior quarter and a 17% decrease from the prior year[8, 39] - Adjusted diluted EPS was $0.47, a 20.3% decrease from the prior quarter and a 16.1% decrease from the prior year[8, 39] - Adjusted effective fee rate was 38.3 bps, compared to 37.2 bps in the prior quarter and 38.5 bps in the prior year[8, 10] Capital Management - Total cash and investments were $6.1 billion as of March 31, 2025[48]

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