Franklin Resources(BEN) - 2024 Q3 - Quarterly Results

Financial Highlights Franklin Resources reported GAAP net income of $174.0 million and adjusted net income of $326.4 million for Q3 2024, with total AUM reaching $1,646.6 billion - The company repurchased 4.3 million shares of its common stock for a total cost of $101.5 million during the quarter[8] Q3 2024 Key Financial Results (GAAP) | Metric | Q3 2024 (ended Jun 30) | Q2 2024 (ended Mar 31) | Q3 2023 (ended Jun 30) | | :--- | :--- | :--- | :--- | | Net Income | $174.0M | $124.2M | $227.5M | | Diluted EPS | $0.32 | $0.23 | $0.44 | | Operating Income | $222.5M | $129.3M | $314.9M | Q3 2024 Key Financial Results (Adjusted, Non-GAAP) | Metric | Q3 2024 (ended Jun 30) | Q2 2024 (ended Mar 31) | Q3 2023 (ended Jun 30) | | :--- | :--- | :--- | :--- | | Adjusted Net Income | $326.4M | $306.6M | $326.1M | | Adjusted Diluted EPS | $0.60 | $0.56 | $0.63 | | Adjusted Operating Income | $424.9M | $419.6M | $476.8M | CEO Commentary and Strategic Initiatives CEO Jenny Johnson highlighted diversification, strong net flows in key areas, and strategic technology investments - The company is executing its long-term diversification plan, leading to positive net flows in multi-asset and alternative strategies[4] - Strong performance was noted in retail Separately Managed Accounts (SMAs), Canvas®, and Exchange-Traded Funds (ETFs), with ETFs generating over $3 billion in net inflows[4] - The non-U.S. business recorded its fifth consecutive quarter of positive net flows, ending the quarter with approximately $492 billion in AUM[4] - Key technology and strategic investments announced during the quarter include: - Collaboration with Microsoft to build an advanced financial AI platform for sales and marketing[5] - A planned strategic minority investment in Envestnet[5] - Selection of a single platform to unify investment management technologies across public market asset classes[5] Assets Under Management (AUM) and Flows Total AUM reached $1,646.6 billion as of June 30, 2024, influenced by cash management inflows, market changes, and long-term outflows AUM and Flows Summary - Total AUM increased by 15% year-over-year, from $1,431.5 billion at June 30, 2023 to $1,646.6 billion at June 30, 2024[7] AUM and Flows Summary (in billions) | Metric | Three Months Ended Jun 30, 2024 | Three Months Ended Jun 30, 2023 | | :--- | :--- | :--- | | Beginning AUM | $1,644.7 | $1,422.1 | | Long-term net flows | $(3.2) | $0.2 | | Cash management net flows | $3.0 | $(7.3) | | Total net flows | $(0.2) | $(7.1) | | Net market change, distributions and other | $2.1 | $16.5 | | Ending AUM | $1,646.6 | $1,431.5 | AUM by Asset Class AUM by Asset Class (in billions) | Asset Class | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :--- | :--- | :--- | :--- | | Equity | $595.0 | $592.7 | $458.0 | | Fixed Income | $564.5 | $571.4 | $505.1 | | Alternative | $254.5 | $255.5 | $257.2 | | Multi-Asset | $168.1 | $163.4 | $148.3 | | Cash Management | $64.5 | $61.7 | $62.9 | | Total AUM | $1,646.6 | $1,644.7 | $1,431.5 | AUM by Sales Region AUM by Sales Region (in billions) | Region | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :--- | :--- | :--- | :--- | | United States | $1,155.0 | $1,155.9 | $1,026.0 | | International | $491.6 | $488.8 | $405.5 | | Total AUM | $1,646.6 | $1,644.7 | $1,431.5 | Detailed AUM Flows by Asset Class - For the quarter, Alternative and Multi-Asset strategies experienced positive long-term net inflows of $1.4 billion and $1.8 billion respectively, while Equity and Fixed Income saw long-term net outflows[17] Net Flows by Asset Class for Q3 2024 (in billions) | Asset Class | Long-term Net Flows | Cash Management Net Flows | Total Net Flows | | :--- | :--- | :--- | :--- | | Equity | $(1.6) | — | $(1.6) | | Fixed Income | $(4.8) | — | $(4.8) | | Alternative | $1.4 | — | $1.4 | | Multi-Asset | $1.8 | — | $1.8 | | Cash Management | — | $3.0 | $3.0 | | Total | $(3.2) | $3.0 | $(0.2) | Consolidated Financial Statements Q3 2024 saw total operating revenues of $2.12 billion, operating income of $222.5 million, and net income of $174.0 million - Quarter-over-quarter, operating income increased 72% from $129.3 million in Q2 2024 to $222.5 million in Q3 2024, primarily due to a 13% decrease in compensation and benefits expense[13] Consolidated Statement of Income Summary (Three Months Ended June 30) | (in millions, except per share data) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $2,122.9 | $1,969.0 | 8% | | Total operating expenses | $1,900.4 | $1,654.1 | 15% | | Operating Income | $222.5 | $314.9 | (29%) | | Net Income Attributable to Franklin Resources, Inc. | $174.0 | $227.5 | (24%) | | Diluted Earnings per Share | $0.32 | $0.44 | (27%) | | Dividends Declared per Share | $0.31 | $0.30 | 3% | Supplemental Non-GAAP Financial Measures Non-GAAP measures, including adjusted operating income and net income, are provided to offer useful financial performance indicators and facilitate peer comparison - Management believes non-GAAP measures are useful for evaluating relative performance against industry peers by excluding certain items not considered reflective of underlying operations[19] - Key adjustments to derive non-GAAP figures include excluding acquisition-related items (retention, amortization), special termination benefits, and the impact of consolidating investment products[21][24] Reconciliation of GAAP to Adjusted Operating Income (in millions) | | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Operating income (GAAP) | $222.5 | $129.3 | $314.9 | | Adjustments (e.g., acquisition-related, amortization) | $202.4 | $290.3 | $161.9 | | Adjusted operating income (Non-GAAP) | $424.9 | $419.6 | $476.8 | Reconciliation of GAAP to Adjusted Net Income (in millions) | | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net income attributable to Franklin Resources, Inc. (GAAP) | $174.0 | $124.2 | $227.5 | | Adjustments (net of tax) | $152.4 | $182.4 | $98.6 | | Adjusted net income (Non-GAAP) | $326.4 | $306.6 | $326.1 | Company Overview and Forward-Looking Statements Franklin Templeton is a global investment management firm with over $1.6 trillion in AUM, and this report contains forward-looking statements subject to inherent risks - Franklin Templeton is a global investment management organization with over 1,500 investment professionals and over $1.6 trillion in AUM as of June 30, 2024[29] - The report includes forward-looking statements based on current expectations and assumptions, which are subject to inherent risks and uncertainties that could cause actual results to differ materially[30][31] - The company undertakes no obligation to update forward-looking statements unless required by law[32]