Franklin Q3 Earnings Beat, AUM Rises Sequentially, Stock Down

Core Viewpoint - Franklin Resources Inc. reported third-quarter fiscal 2025 adjusted earnings of 49 cents per share, exceeding the Zacks Consensus Estimate of 48 cents, but down from 60 cents in the same quarter last year. The results were influenced by improved assets under management (AUM), although lower revenues and higher expenses negatively impacted performance [1][10]. Financial Performance - Net income on a GAAP basis was $92.3 million, reflecting a 46.9% decline year over year, compared to an estimate of $131.2 million [2]. - Total operating revenues decreased by 2.8% year over year to $2.06 billion, although this figure surpassed the Zacks Consensus Estimate of $2 billion [3]. - Investment management fees fell by 2.9% year over year to $1.64 billion, while sales and distribution fees decreased by 1.8% to $351.9 million. Shareholder-servicing fees also declined by 3.1% to $59.9 million, and other revenues dropped by 11.6% to $11.4 million [4]. - Total operating expenses increased slightly year over year to $1.91 billion, driven by higher compensation and benefits costs, technology expenses, and other operational costs. The operating margin shrank to 7.5% from 10.5% in the previous year [5]. Assets Under Management (AUM) - As of June 30, 2025, total AUM was $1.61 trillion, marking a 4.6% sequential increase, despite long-term net outflows of $9.3 billion during the quarter. The average AUM was $1.57 trillion, showing a slight decrease on a sequential basis [6]. Capital Position and Distribution - As of June 30, 2025, the company held cash and cash equivalents of $6.8 billion, with total stockholders' equity at $13.1 billion [7]. - In the reported quarter, Franklin repurchased 7.3 million shares for $157.4 million [8]. Strategic Outlook - The company is focusing on diversifying its business through acquisitions and leveraging its rising AUM and strong distribution platform, which may support revenue growth. However, increasing expenses related to technological upgrades could pressure profitability [11].