Franklin Resources(BEN) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record long-term inflows of $118.6 billion, up 40% from the prior quarter and 22% from the prior year quarter [7] - Assets under management (AUM) ended the quarter at $1.68 trillion, reflecting an increase due to long-term net inflows and the acquisition of Apera [8] - Adjusted Operating Income was $437.3 million, influenced by lower performance fees and higher average AUM [19] Business Line Data and Key Metrics Changes - Long-term net inflows were $28 billion, with record AUM and positive net flows across equity, multi-asset, and alternative strategies [8] - Public markets generated positive net flows totaling $30.4 billion, with equity net inflows of $19.8 billion for the quarter [9] - Private markets saw $10.8 billion raised during the quarter, including $9.5 billion in private market assets [10] Market Data and Key Metrics Changes - The institutional pipeline of long, but unfunded mandates remains strong at $20.4 billion, indicating sustained demand for investment capabilities [9] - The ETF platform reached a new high with $58 billion in AUM, generating $7.5 billion in net flows, marking its 17th consecutive positive quarter [15] - Digital assets AUM is $1.8 billion, including approximately $900 million in tokenized funds and approximately $800 million in crypto ETFs [17] Company Strategy and Development Direction - The company is focused on delivering integrated solutions and long-term strategic relationships, aligning with client needs for resilience in portfolios [4][6] - M&A activities are aimed at filling product gaps and enhancing distribution capabilities, with a focus on alternatives and high net worth segments [36][37] - The company is leveraging advancements in technology, including AI and blockchain, to enhance operational efficiency and client offerings [17][88] Management's Comments on Operating Environment and Future Outlook - Management noted significant market turbulence and economic uncertainty, emphasizing the need for resilience in investment portfolios [4] - The company is confident in its diversified business model and global scale to capture long-term trends reshaping the industry [20] - Management highlighted the importance of AI in driving efficiency and potential consolidation in the asset management industry [76][80] Other Important Information - The company has been recognized as one of the best places to work in money management, reflecting its commitment to employee engagement [20] - The firm is actively expanding its private credit platform and has seen strong momentum in fundraising across various asset classes [11][13] Q&A Session Summary Question: Cost Flexibility and Savings - Management indicated that expenses are expected to be in line with 2025, with a focus on achieving $200 million in cost savings [22][23] Question: M&A Activity and Contingent Liabilities - Management confirmed that contingent consideration related to recent transactions is minimal, with no significant liabilities expected [26][27] Question: Long-term Margin Expectations - Management projected operating margins to exceed 30% by fiscal 2027, with ongoing efforts to streamline operations and integrate acquisitions [46][47] Question: AI's Impact on Consolidation - Management discussed how AI could drive consolidation in the asset management industry, emphasizing the need for scale to compete effectively [76][78] Question: Blockchain and Tokenization Strategy - Management highlighted the efficiency of blockchain technology and its potential to reduce operational costs significantly, while also discussing the hurdles to broader adoption [86][88]