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Franklin Resources, Inc. Announces Third Quarter Results

Franklin Resources, Inc. (the “Company”) [NYSE: BEN] today announced net income1 of $227.5 million or $0.44 per diluted share for the quarter ended June 30, 2023, as compared to $194.2 million or $0.38 per diluted share for the previous quarter, and $256.4 million or $0.50 per diluted share for the quarter ended June 30, 2022. Operating income was $314.9 million for the quarter ended June 30, 2023, as compared to $255.1 million for the previous quarter and $404.7 million for the prior year.

As supplemental information, the Company is providing certain adjusted performance measures which are based on methodologies other than generally accepted accounting principles. Adjusted net income2 was $326.1 million and adjusted diluted earnings per share2 was $0.63 for the quarter ended June 30, 2023, as compared to $316.7 million and $0.61 for the previous quarter, and $416.0 million and $0.82 for the quarter ended June 30, 2022. Adjusted operating income2 was $476.8 million for the quarter ended June 30, 2023, as compared to $440.2 million for the previous quarter and $566.9 million for the prior year.

“Our efforts to further diversify our business over the past several years are reflected in this quarter’s results, with long-term net flows turning positive, investment performance remaining strong and adjusted operating income improving by 8% compared to the prior quarter,” said Jenny Johnson, President and CEO of Franklin Resources, Inc.

“We continued to make good progress on executing our long-term plan across asset classes, investment vehicles and geographies. We generated positive net flows in alternative and multi-asset strategies reflecting growing areas of client demand. Our largest alternative managers, Benefit Street Partners, Clarion Partners and Lexington Partners, generated a combined total of almost $5 billion of net inflows, including over $1 billion from the wealth management channel, and we saw positive net flows in ETFs, SMAs and the high-net-worth channel. Flow trends continued to improve across all geographies benefiting from our regional sales model and strategy, with our EMEA and Asia Pacific regions both reporting positive long-term net flows.

“One of our strategic priorities has been to increase our scale in key segments of the industry. This quarter, we were excited to announce the establishment of a long-term partnership with the Power Corporation of Canada and Great-West Lifeco, which includes our pending acquisition of Putnam Investments, with $136 billion in AUM. Great-West will also make an initial incremental allocation of $25 billion to our specialist investment managers and become a long-term shareholder in Franklin Resources.

“The agreement aligns with our focus to further grow insurance client assets and broadens the relationship between Franklin Templeton and the Power Group of Companies in the key areas of retirement, asset management and wealth management. The transaction will also enable us to further increase our investment in retirement and insurance to better serve each and every client in these important segments.

”Our balance sheet remains strong with $6.9 billion of cash and investments and provides financial flexibility in support of continued investment in the business.”

 

 

Quarter Ended

 

% Change

 

Quarter Ended

 

% Change

 

 

30-Jun-23

 

31-Mar-23

 

Qtr. vs. Qtr.

30-Jun-22

 

Year vs. Year

Financial Results

 

 

 

 

 

 

 

 

 

(in millions, except per share data)

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

1,969.0

 

 

$

1,927.2

 

 

2

%

$

2,031.3

 

 

(3

%)

Operating income

 

 

314.9

 

 

 

255.1

 

 

23

%

 

404.7

 

 

(22

%)

Operating margin

 

 

16.0

%

 

 

13.2

%

 

 

 

19.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Net income¹

 

$

227.5

 

 

$

194.2

 

 

17

%

$

256.4

 

 

(11

%)

Diluted earnings per share

 

 

0.44

 

 

 

0.38

 

 

16

%

 

0.50

 

 

(12

%)

 

 

 

 

 

 

 

 

 

 

As adjusted (non-GAAP):2

 

 

 

 

 

 

 

 

 

Adjusted operating income

 

$

476.8

 

 

$

440.2

 

 

8

%

$

566.9

 

 

(16

%)

Adjusted operating margin

 

 

30.5

%

 

 

28.9

%

 

 

 

35.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income

 

$

326.1

 

 

$

316.7

 

 

3

%

$

416.0

 

 

(22

%)

Adjusted diluted earnings per share

 

 

0.63

 

 

 

0.61

 

 

3

%

 

0.82

 

 

(23

%)

 

 

 

 

 

 

 

 

 

 

Assets Under Management

 

 

 

 

 

 

 

 

 

(in billions)

 

 

 

 

 

 

 

 

 

Ending

 

$

1,431.5

 

 

$

1,422.1

 

 

1

%

$

1,379.8

 

 

4

%

Average3

 

 

1,419.6

 

 

 

1,419.5

 

 

0

%

 

1,439.8

 

 

(1

%)

Long-term net flows

 

 

0.2

 

 

 

(3.7

)

 

 

 

(19.8

)

 

 

Total assets under management (“AUM”) were $1,431.5 billion at June 30, 2023, up $9.4 billion or 1% during the quarter due to the positive impact of $16.5 billion of net market change, distributions, and other, and $0.2 billion of long-term net inflows, offset in part by $7.3 billion of cash management net outflows.

Cash and cash equivalents and investments4 were $6.0 billion and, including the Company’s direct investments in consolidated investment products, were $6.9 billion at June 30, 2023. Total stockholders’ equity was $12.5 billion and the Company had 499.0 million shares of common stock outstanding at June 30, 2023. The Company repurchased 2.0 million shares of its common stock for a total cost of $50.9 million during the quarter ended June 30, 2023.

Conference Call Information

A written commentary on the results by Jenny Johnson, President and CEO; Matthew Nicholls, Executive Vice President, CFO and COO; and Adam Spector, Executive Vice President, Head of Global Distribution will be available via investors.franklinresources.com today at approximately 8:30 a.m. Eastern Time.

Ms. Johnson and Messrs. Nicholls and Spector will also lead a live teleconference today at 11:00 a.m. Eastern Time to answer questions. Access to the teleconference will be available via investors.franklinresources.com or by dialing (+1) (888) 396-8049 in North America or (+1) (416) 764-8646 in other locations using access code 10114833. A replay of the teleconference can also be accessed by calling (+1) (877) 674-7070 in North America or (+1) 416-764-8692 in other locations using access code 114833# after 2:00 p.m. Eastern Time on July 28, 2023 through August 4, 2023, or via investors.franklinresources.com.

Analysts and investors are encouraged to review the Company’s recent filings with the U.S. Securities and Exchange Commission and to contact Investor Relations at (650) 312-4091 before the live teleconference for any clarifications or questions related to the earnings release or written commentary.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

 

(in millions, except per share data)

 

Three Months Ended

June 30,

 

%

Change

 

Nine Months Ended

June 30,

 

%

Change

 

 

 

2023

 

 

 

2022

 

 

 

 

2023

 

 

 

2022

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

1,613.4

 

 

$

1,636.1

 

 

(1

%)

 

$

4,818.5

 

 

$

5,045.8

 

 

(5

%)

 

Sales and distribution fees

 

 

304.0

 

 

 

335.6

 

 

(9

%)

 

 

897.3

 

 

 

1,104.0

 

 

(19

%)

 

Shareholder servicing fees

 

 

38.8

 

 

 

46.9

 

 

(17

%)

 

 

115.5

 

 

 

146.8

 

 

(21

%)

 

Other

 

 

12.8

 

 

 

12.7

 

 

1

%

 

 

32.0

 

 

 

39.7

 

 

(19

%)

 

Total operating revenues

 

 

1,969.0

 

 

 

2,031.3

 

 

(3

%)

 

 

5,863.3

 

 

 

6,336.3

 

 

(7

%)

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

841.2

 

 

 

766.7

 

 

10

%

 

 

2,667.7

 

 

 

2,321.8

 

 

15

%

 

Sales, distribution and marketing

 

 

406.8

 

 

 

440.3

 

 

(8

%)

 

 

1,202.0

 

 

 

1,432.8

 

 

(16

%)

 

Information systems and technology

 

 

127.3

 

 

 

125.9

 

 

1

%

 

 

376.7

 

 

 

376.6

 

 

0

%

 

Occupancy

 

 

56.9

 

 

 

53.8

 

 

6

%

 

 

171.1

 

 

 

163.1

 

 

5

%

 

Amortization of intangible assets

 

 

85.4

 

 

 

81.8

 

 

4

%

 

 

254.6

 

 

 

200.5

 

 

27

%

 

General, administrative and other

 

 

136.5

 

 

 

158.1

 

 

(14

%)

 

 

427.2

 

 

 

416.1

 

 

3

%

 

Total operating expenses

 

 

1,654.1

 

 

 

1,626.6

 

 

2

%

 

 

5,099.3

 

 

 

4,910.9

 

 

4

%

 

Operating Income

 

 

314.9

 

 

 

404.7

 

 

(22

%)

 

 

764.0

 

 

 

1,425.4

 

 

(46

%)

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income, net

 

 

51.2

 

 

 

13.0

 

 

294

%

 

 

267.9

 

 

 

97.7

 

 

174

%

 

Interest expense

 

 

(34.9

)

 

 

(28.9

)

 

21

%

 

 

(99.3

)

 

 

(71.1

)

 

40

%

 

Investment and other income (losses) of consolidated investment products, net

 

 

1.7

 

 

 

(74.4

)

 

NM

 

 

 

75.3

 

 

 

33.3

 

 

126

%

 

Expenses of consolidated investment products

 

 

(0.8

)

 

 

(1.3

)

 

(38

%)

 

 

(15.7

)

 

 

(10.1

)

 

55

%

 

Other income (expenses), net

 

 

17.2

 

 

 

(91.6

)

 

NM

 

 

 

228.2

 

 

 

49.8

 

 

358

%

 

Income before taxes

 

 

332.1

 

 

 

313.1

 

 

6

%

 

 

992.2

 

 

 

1,475.2

 

 

(33

%)

 

Taxes on income

 

 

84.1

 

 

 

89.5

 

 

(6

%)

 

 

237.3

 

 

 

347.7

 

 

(32

%)

 

Net income

 

 

248.0

 

 

 

223.6

 

 

11

%

 

 

754.9

 

 

 

1,127.5

 

 

(33

%)

 

Less: net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

26.8

 

 

 

(0.5

)

 

NM

 

 

 

108.5

 

 

 

(50.2

)

 

NM

 

 

Nonredeemable noncontrolling interests

 

 

(6.3

)

 

 

(32.3

)

 

(80

%)

 

 

59.1

 

 

 

118.5

 

 

(50

%)

 

Net Income Attributable to Franklin Resources, Inc.

 

$

227.5

 

 

$

256.4

 

 

(11

%)

 

$

587.3

 

 

$

1,059.2

 

 

(45

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.50

 

 

(12

%)

 

$

1.14

 

 

$

2.07

 

 

(45

%)

 

Diluted

 

 

0.44

 

 

 

0.50

 

 

(12

%)

 

 

1.14

 

 

 

2.07

 

 

(45

%)

 

Dividends Declared per Share

 

$

0.30

 

 

$

0.29

 

 

3

%

 

$

0.90

 

 

$

0.87

 

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

490.7

 

 

 

487.5

 

 

1

%

 

 

490.3

 

 

 

489.1

 

 

0

%

 

Diluted

 

 

491.4

 

 

 

487.9

 

 

1

%

 

 

491.0

 

 

 

489.7

 

 

0

%

 

 

Operating Margin

 

16.0

%

 

19.9

%

 

 

 

13.0

%

 

22.5

%

 

 

 

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(in millions, except per share data)

 

Three Months Ended

 

%

Change

 

Three Months Ended

 

30-Jun-23

 

31-Mar-23

 

 

31-Dec-22

 

30-Sep-22

 

30-Jun-22

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

1,613.4

 

 

$

1,573.3

 

`

3

%

 

$

1,631.8

 

 

$

1,571.0

 

 

$

1,636.1

 

Sales and distribution fees

 

 

304.0

 

 

 

301.4

 

 

1

%

 

 

291.9

 

 

 

311.0

 

 

 

335.6

 

Shareholder servicing fees

 

 

38.8

 

 

 

43.3

 

 

(10

%)

 

 

33.4

 

 

 

46.2

 

 

 

46.9

 

Other

 

 

12.8

 

 

 

9.2

 

 

39

%

 

 

10.0

 

 

 

10.8

 

 

 

12.7

 

Total operating revenues

 

 

1,969.0

 

 

 

1,927.2

 

 

2

%

 

 

1,967.1

 

 

 

1,939.0

 

 

 

2,031.3

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

841.2

 

 

 

847.3

 

 

(1

%)

 

 

979.2

 

 

 

768.0

 

 

 

766.7

 

Sales, distribution and marketing

 

 

406.8

 

 

 

406.6

 

 

0

%

 

 

388.6

 

 

 

412.8

 

 

 

440.3

 

Information systems and technology

 

 

127.3

 

 

 

128.0

 

 

(1

%)

 

 

121.4

 

 

 

123.6

 

 

 

125.9

 

Occupancy

 

 

56.9

 

 

 

59.7

 

 

(5

%)

 

 

54.5

 

 

 

55.8

 

 

 

53.8

 

Amortization of intangible assets

 

 

85.4

 

 

 

86.0

 

 

(1

%)

 

 

83.2

 

 

 

81.5

 

 

 

81.8

 

General, administrative and other

 

 

136.5

 

 

 

144.5

 

 

(6

%)

 

 

146.2

 

 

 

148.8

 

 

 

158.1

 

Total operating expenses

 

 

1,654.1

 

 

 

1,672.1

 

 

(1

%)

 

 

1,773.1

 

 

 

1,590.5

 

 

 

1,626.6

 

Operating Income

 

 

314.9

 

 

 

255.1

 

 

23

%

 

 

194.0

 

 

 

348.5

 

 

 

404.7

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

Investment and other income (losses), net

 

 

51.2

 

 

 

125.6

 

 

(59

%)

 

 

91.1

 

 

 

(6.6

)

 

 

13.0

 

Interest expense

 

 

(34.9

)

 

 

(33.5

)

 

4

%

 

 

(30.9

)

 

 

(27.1

)

 

 

(28.9

)

Investment and other income (losses) of consolidated investment products, net

 

 

1.7

 

 

 

87.2

 

 

(98

%)

 

 

(13.6

)

 

 

(51.0

)

 

 

(74.4

)

Expenses of consolidated investment products

 

 

(0.8

)

 

 

(3.4

)

 

(76

%)

 

 

(11.5

)

 

 

(9.6

)

 

 

(1.3

)

Other income (expenses), net

 

 

17.2

 

 

 

175.9

 

 

(90

%)

 

 

35.1

 

 

 

(94.3

)

 

 

(91.6

)

Income before taxes

 

 

332.1

 

 

 

431.0

 

 

(23

%)

 

 

229.1

 

 

 

254.2

 

 

 

313.1

 

Taxes on income

 

 

84.1

 

 

 

92.9

 

 

(9

%)

 

 

60.3

 

 

 

48.5

 

 

 

89.5

 

Net income

 

 

248.0

 

 

 

338.1

 

 

(27

%)

 

 

168.8

 

 

 

205.7

 

 

 

223.6

 

Less: net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

26.8

 

 

 

83.2

 

 

(68

%)

 

 

(1.5

)

 

 

3.3

 

 

 

(0.5

)

Nonredeemable noncontrolling interests

 

 

(6.3

)

 

 

60.7

 

 

NM

 

 

 

4.7

 

 

 

(30.3

)

 

 

(32.3

)

Net Income Attributable to Franklin Resources, Inc.

 

$

227.5

 

 

$

194.2

 

 

17

%

 

$

165.6

 

 

$

232.7

 

 

$

256.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.38

 

 

16

%

 

$

0.32

 

 

$

0.46

 

 

$

0.50

 

Diluted

 

 

0.44

 

 

 

0.38

 

 

16

%

 

 

0.32

 

 

 

0.46

 

 

 

0.50

 

Dividends Declared per Share

 

$

0.30

 

 

$

0.30

 

 

0

%

 

$

0.30

 

 

$

0.29

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

490.7

 

 

 

490.7

 

 

0

%

 

 

489.6

 

 

 

487.7

 

 

 

487.5

 

Diluted

 

 

491.4

 

 

 

491.4

 

 

0

%

 

 

490.2

 

 

 

488.2

 

 

 

487.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

16.0 %

13.2 %

9.9 %

18.0 %

19.9%

AUM AND FLOWS

(in billions)

 

Three Months Ended

June 30,

 

%

Change

 

Nine Months Ended

June 30,

 

%

Change

 

 

2023

 

 

 

2022

 

 

 

 

2023

 

 

 

2022

 

 

Beginning AUM

 

$

1,422.1

 

 

$

1,477.5

 

 

(4

%)

 

$

1,297.4

 

 

$

1,530.1

 

 

(15

%)

Long-term inflows

 

 

67.4

 

 

 

77.4

 

 

(13

%)

 

 

199.7

 

 

 

260.5

 

 

(23

%)

Long-term outflows

 

 

(67.2

)

 

 

(97.2

)

 

(31

%)

 

 

(214.1

)

 

 

(267.9

)

 

(20

%)

Long-term net flows

 

 

0.2

 

 

 

(19.8

)

 

NM

 

 

 

(14.4

)

 

 

(7.4

)

 

95

%

Cash management net flows

 

 

(7.3

)

 

 

0.4

 

 

NM

 

 

 

5.9

 

 

 

(0.9

)

 

NM

 

Total net flows

 

 

(7.1

)

 

 

(19.4

)

 

(63

%)

 

 

(8.5

)

 

 

(8.3

)

 

2

%

Acquisitions

 

 

 

 

 

57.2

 

 

(100

%)

 

 

34.9

 

 

 

64.9

 

 

(46

%)

Net market change, distributions and other5

 

 

16.5

 

 

 

(135.5

)

 

NM

 

 

 

107.7

 

 

 

(206.9

)

 

NM

 

Ending AUM

 

$

1,431.5

 

 

$

1,379.8

 

 

4

%

 

$

1,431.5

 

 

$

1,379.8

 

 

4

%

Average AUM

 

$

1,419.6

 

 

$

1,439.8

 

 

(1

%)

 

$

1,396.1

 

 

$

1,498.4

 

 

(7

%)

AUM BY ASSET CLASS

(in billions)

 

30-Jun-23

 

31-Mar-23

 

% Change

 

31-Dec-22

 

30-Sep-22

 

30-Jun-22

Fixed Income

 

$

505.1

 

$

510.1

 

(1

%)

 

$

494.8

 

$

490.9

 

$

536.3

Equity

 

 

458.0

 

 

437.1

 

5

%

 

 

419.1

 

 

392.3

 

 

424.9

Alternative

 

 

257.2

 

 

258.2

 

0

%

 

 

257.4

 

 

225.1

 

 

224.8

Multi-Asset

 

 

148.3

 

 

146.1

 

2

%

 

 

141.4

 

 

131.5

 

 

136.2

Cash Management

 

 

62.9

 

 

70.6

 

(11

%)

 

 

75.0

 

 

57.6

 

 

57.6

Total AUM

 

$

1,431.5

 

$

1,422.1

 

1

%

 

$

1,387.7

 

$

1,297.4

 

$

1,379.8

Average AUM for the Three-Month Period

 

$

1,419.6

 

$

1,419.5

 

0

%

 

$

1,353.5

 

$

1,373.6

 

$

1,439.8

AUM BY SALES REGION

(in billions)

 

30-Jun-23

 

31-Mar-23

 

% Change

 

31-Dec-22

 

30-Sep-22

 

30-Jun-22

United States

 

$

1,026.0

 

$

1,017.1

 

1

%

 

$

993.1

 

$

971.3

 

$

1,034.3

International

 

 

 

 

 

 

 

 

 

 

 

 

Europe, Middle East and Africa

 

 

162.0

 

 

159.9

 

1

%

 

 

156.4

 

 

126.6

 

 

133.6

Asia-Pacific

 

 

129.6

 

 

127.7

 

1

%

 

 

123.4

 

 

118.4

 

 

131.1

Americas, excl. U.S.

 

 

113.9

 

 

117.4

 

(3

%)

 

 

114.8

 

 

81.1

 

 

80.8

Total international

 

 

405.5

 

 

405.0

 

0

%

 

 

394.6

 

 

326.1

 

 

345.5

Total

 

$

1,431.5

 

$

1,422.1

 

1

%

 

$

1,387.7

 

$

1,297.4

 

$

1,379.8

AUM AND FLOWS BY ASSET CLASS

(in billions)

 

 

 

 

 

 

 

 

 

 

 

 

for the three months ended

June 30, 2023

 

Fixed

Income

 

Equity

 

Alternative

 

Multi-Asset

 

Cash

Management

 

Total

AUM at April 1, 2023

 

$

510.1

 

 

$

437.1

 

 

$

258.2

 

 

$

146.1

 

 

$

70.6

 

 

$

1,422.1

 

Long-term inflows

 

 

26.5

 

 

 

23.0

 

 

 

7.3

 

 

 

10.6

 

 

 

 

 

 

67.4

 

Long-term outflows

 

 

(29.6

)

 

 

(26.0

)

 

 

(3.3

)

 

 

(8.3

)

 

 

 

 

 

(67.2

)

Long-term net flows

 

 

(3.1

)

 

 

(3.0

)

 

 

4.0

 

 

 

2.3

 

 

 

 

 

 

0.2

 

Cash management net flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.3

)

 

 

(7.3

)

Total net flows

 

 

(3.1

)

 

 

(3.0

)

 

 

4.0

 

 

 

2.3

 

 

 

(7.3

)

 

 

(7.1

)

Net market change, distributions and other5

 

 

(1.9

)

 

 

23.9

 

 

 

(5.0

)

 

 

(0.1

)

 

 

(0.4

)

 

 

16.5

 

AUM at June 30, 2023

 

$

505.1

 

 

$

458.0

 

 

$

257.2

 

 

$

148.3

 

 

$

62.9

 

 

$

1,431.5

 

(in billions)

 

 

 

 

 

 

 

 

 

 

 

 

for the three months ended

March 31, 2023

 

Fixed

Income

 

Equity

 

Alternative

 

Multi-Asset

 

Cash

Management

 

Total

AUM at January 1, 2023

 

$

494.8

 

 

$

419.1

 

 

$

257.4

 

 

$

141.4

 

 

$

75.0

 

 

$

1,387.7

 

Long-term inflows

 

 

31.5

 

 

 

17.1

 

 

 

4.9

 

 

 

8.3

 

 

 

 

 

 

61.8

 

Long-term outflows

 

 

(29.7

)

 

 

(25.4

)

 

 

(3.6

)

 

 

(6.8

)

 

 

 

 

 

(65.5

)

Long-term net flows

 

 

1.8

 

 

 

(8.3

)

 

 

1.3

 

 

 

1.5

 

 

 

 

 

 

(3.7

)

Cash management net flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4.3

)

 

 

(4.3

)

Total net flows

 

 

1.8

 

 

 

(8.3

)

 

 

1.3

 

 

 

1.5

 

 

 

(4.3

)

 

 

(8.0

)

Net market change, distributions and other5

 

 

13.5

 

 

 

26.3

 

 

 

(0.5

)

 

 

3.2

 

 

 

(0.1

)

 

 

42.4

 

AUM at March 31, 2023

 

$

510.1

 

 

$

437.1

 

 

$

258.2

 

 

$

146.1

 

 

$

70.6

 

 

$

1,422.1

 

(in billions)

 

 

 

 

 

 

 

 

 

 

 

 

for the three months ended

June 30, 2022

 

Fixed

Income

 

Equity

 

Alternative

 

Multi-Asset

 

Cash

Management

 

Total

AUM at April 1, 2022

 

$

595.0

 

 

$

515.4

 

 

$

157.9

 

 

$

151.9

 

 

$

57.3

 

 

$

1,477.5

 

Long-term inflows

 

 

35.2

 

 

 

24.5

 

 

 

5.9

 

 

 

11.8

 

 

 

 

 

 

77.4

 

Long-term outflows

 

 

(49.5

)

 

 

(33.7

)

 

 

(3.8

)

 

 

(10.2

)

 

 

 

 

 

(97.2

)

Long-term net flows

 

 

(14.3

)

 

 

(9.2

)

 

 

2.1

 

 

 

1.6

 

 

 

 

 

 

(19.8

)

Cash management net flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.4

 

 

 

0.4

 

Total net flows

 

 

(14.3

)

 

 

(9.2

)

 

 

2.1

 

 

 

1.6

 

 

 

0.4

 

 

 

(19.4

)

Acquisition

 

 

 

 

 

 

 

 

57.2

 

 

 

 

 

 

 

 

 

57.2

 

Net market change, distributions and other5

 

 

(44.4

)

 

 

(81.3

)

 

 

7.6

 

 

 

(17.3

)

 

 

(0.1

)

 

 

(135.5

)

AUM at June 30, 2022

 

$

536.3

 

 

$

424.9

 

 

$

224.8

 

 

$

136.2

 

 

$

57.6

 

 

$

1,379.8

 

Supplemental Non-GAAP Financial Measures

As supplemental information, we are providing performance measures for “adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share,” each of which is based on methodologies other than generally accepted accounting principles (“non-GAAP measures”). Management believes these non-GAAP measures are useful indicators of our financial performance and may be helpful to investors in evaluating our relative performance against industry peers.

“Adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share” are defined below, followed by reconciliations of operating income, operating margin, net income attributable to Franklin Resources, Inc. and diluted earnings per share on a U.S. GAAP basis to these non-GAAP measures. Non-GAAP measures should not be considered in isolation from, or as substitutes for, any financial information prepared in accordance with U.S. GAAP, and may not be comparable to other similarly titled measures of other companies. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate.

Adjusted Operating Income

We define adjusted operating income as operating income adjusted to exclude the following:

  • Elimination of operating revenues upon consolidation of investment products.
  • Acquisition-related items:
    • Acquisition-related retention compensation.
    • Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.
    • Amortization of intangible assets.
    • Impairment of intangible assets and goodwill, if any.
  • Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
  • Impact on compensation and benefits expense from gains and losses on investments related to deferred compensation plans, which is offset in investment and other income (losses), net.
  • Impact on compensation and benefits expense related to minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests.

Adjusted Operating Margin

We calculate adjusted operating margin as adjusted operating income divided by adjusted operating revenues. We define adjusted operating revenues as operating revenues adjusted to exclude the following:

  • Elimination of operating revenues upon consolidation of investment products.
  • Acquisition-related performance-based investment management fees which are passed through as compensation and benefits expense.
  • Sales and distribution fees and a portion of investment management fees allocated to cover sales, distribution and marketing expenses paid to the financial advisers and other intermediaries who sell our funds on our behalf.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

We define adjusted net income as net income attributable to Franklin Resources, Inc. adjusted to exclude the following:

  • Activities of CIPs.
  • Acquisition-related items:
    • Acquisition-related retention compensation.
    • Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.
    • Amortization of intangible assets.
    • Impairment of intangible assets and goodwill, if any.
    • Write off of noncontrolling interests related to the wind down of an acquired business.
    • Interest expense for amortization of Legg Mason debt premium from acquisition-date fair value adjustment.
  • Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
  • Net gains or losses on investments related to deferred compensation plans which are not offset by compensation and benefits expense.
  • Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests.
  • Unrealized investment gains and losses.
  • Net income tax expense of the above adjustments based on the respective blended rates applicable to the adjustments.

We define adjusted diluted earnings per share as diluted earnings per share adjusted to exclude the per share impacts of the adjustments applied to net income in calculating adjusted net income.

In calculating our non-GAAP measures, we adjust for the impact of CIPs because it is not considered reflective of our underlying results of operations. Acquisition-related items and special termination benefits are excluded to facilitate comparability to other asset management firms. We adjust for compensation and benefits expense related to funded deferred compensation plans because it is partially offset in other income (expense), net. We adjust for compensation and benefits expense and net income (loss) attributable to redeemable noncontrolling interests to reflect the economics of certain profits interest arrangements. Sales and distribution fees and a portion of investment management fees generally cover sales, distribution and marketing expenses and, therefore, are excluded from adjusted operating revenues. In addition, when calculating adjusted net income and adjusted diluted earnings per share we exclude unrealized investment gains and losses included in investment and other income (losses) because the related investments are generally expected to be held long term.

The calculations of adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share are as follows:

(in millions)

 

Three Months Ended

 

Nine Months Ended

30-Jun-23

 

31-Mar-23

 

30-Jun-22

 

30-Jun-23

 

30-Jun-22

Operating income

 

$

314.9

 

 

$

255.1

 

 

$

404.7

 

 

$

764.0

 

 

$

1,425.4

 

Add (subtract):

 

 

 

 

 

 

 

 

 

 

Elimination of operating revenues upon consolidation of investment products*

 

 

12.1

 

 

 

9.1

 

 

 

13.0

 

 

 

26.3

 

 

 

38.5

 

Acquisition-related retention

 

 

21.3

 

 

 

23.2

 

 

 

44.2

 

 

 

108.1

 

 

 

118.4

 

Compensation and benefits expense from gains (losses) on deferred compensation, net

 

 

10.1

 

 

 

10.6

 

 

 

(19.3

)

 

 

26.3

 

 

 

(30.4

)

Other acquisition-related expenses

 

 

8.7

 

 

 

14.0

 

 

 

31.5

 

 

 

45.3

 

 

 

58.9

 

Amortization of intangible assets

 

 

85.4

 

 

 

86.0

 

 

 

81.8

 

 

 

254.6

 

 

 

200.5

 

Special termination benefits

 

 

12.2

 

 

 

31.8

 

 

 

0.7

 

 

 

54.9

 

 

 

7.8

 

Compensation and benefits expense related to minority interests in certain subsidiaries

 

 

12.1

 

 

 

10.4

 

 

 

10.3

 

 

 

32.6

 

 

 

10.3

 

Adjusted operating income

 

$

476.8

 

 

$

440.2

 

 

$

566.9

 

 

$

1,312.1

 

 

$

1,829.4

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

1,969.0

 

 

$

1,927.2

 

 

$

2,031.3

 

 

$

5,863.3

 

 

$

6,336.3

 

Add (subtract):

 

 

 

 

 

 

 

 

 

 

Acquisition-related pass through performance fees

 

 

(11.6

)

 

 

(8.0

)

 

 

 

 

 

(164.1

)

 

 

(0.4

)

Sales and distribution fees

 

 

(304.0

)

 

 

(301.4

)

 

 

(335.6

)

 

 

(897.3

)

 

 

(1,104.0

)

Allocation of investment management fees for sales, distribution and marketing expenses

 

 

(102.8

)

 

 

(105.2

)

 

 

(104.7

)

 

 

(304.7

)

 

 

(328.8

)

Elimination of operating revenues upon consolidation of investment products*

 

 

12.1

 

 

 

9.1

 

 

 

13.0

 

 

 

26.3

 

 

 

38.5

 

Adjusted operating revenues

 

$

1,562.7

 

 

$

1,521.7

 

 

$

1,604.0

 

 

$

4,523.5

 

 

$

4,941.6

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

16.0

%

 

 

13.2

%

 

 

19.9

%

 

 

13.0

%

 

 

22.5

%

Adjusted operating margin

 

 

30.5

%

 

 

28.9

%

 

 

35.3

%

 

 

29.0

%

 

 

37.0

%

(in millions, except per share data)

 

Three Months Ended

 

Nine Months Ended

30-Jun-23

 

31-Mar-23

 

30-Jun-22

 

30-Jun-23

 

30-Jun-22

Net income attributable to Franklin Resources, Inc.

 

$

227.5

 

 

$

194.2

 

 

$

256.4

 

 

$

587.3

 

 

$

1,059.2

 

Add (subtract):

 

 

 

 

 

 

 

 

 

 

Net (income) loss of consolidated investment products*

 

 

1.5

 

 

 

8.5

 

 

 

(6.8

)

 

 

6.4

 

 

 

3.3

 

Acquisition-related retention

 

 

21.3

 

 

 

23.2

 

 

 

44.2

 

 

 

108.1

 

 

 

118.4

 

Other acquisition-related expenses

 

 

12.7

 

 

 

20.1

 

 

 

37.6

 

 

 

61.5

 

 

 

65.4

 

Amortization of intangible assets

 

 

85.4

 

 

 

86.0

 

 

 

81.8

 

 

 

254.6

 

 

 

200.5

 

Special termination benefits

 

 

12.2

 

 

 

31.8

 

 

 

0.7

 

 

 

54.9

 

 

 

7.8

 

Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense

 

 

(0.5

)

 

 

(6.0

)

 

 

6.1

 

 

 

(14.1

)

 

 

8.6

 

Unrealized investment (gains) losses

 

 

9.4

 

 

 

(1.9

)

 

 

45.7

 

 

 

(23.2

)

 

 

117.8

 

Interest expense for amortization of debt premium

 

 

(6.3

)

 

 

(6.4

)

 

 

(6.3

)

 

 

(19.0

)

 

 

(18.9

)

Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests

 

 

(1.0

)

 

 

(0.3

)

 

 

0.5

 

 

 

(0.9

)

 

 

0.5

 

Net income tax expense of adjustments

 

 

(36.1

)

 

 

(32.5

)

 

 

(43.9

)

 

 

(110.4

)

 

 

(101.4

)

Adjusted net income

 

$

326.1

 

 

$

316.7

 

 

$

416.0

 

 

$

905.2

 

 

$

1,461.2

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.44

 

 

$

0.38

 

 

$

0.50

 

 

$

1.14

 

 

$

2.07

 

Adjusted diluted earnings per share

 

 

0.63

 

 

 

0.61

 

 

 

0.82

 

 

 

1.76

 

 

 

2.86

 

__________________

* The impact of CIPs is summarized as follows:

(in millions)

 

Three Months Ended

 

Nine Months Ended

30-Jun-23

 

31-Mar-23

 

30-Jun-22

 

30-Jun-23

 

30-Jun-22

Elimination of operating revenues upon consolidation

 

$

(12.1

)

 

$

(9.1

)

 

$

(13.0

)

 

$

(26.3

)

 

$

(38.5

)

Other income (expenses), net

 

 

7.3

 

 

 

62.9

 

 

 

(33.6

)

 

 

67.4

 

 

 

48.8

 

Less: income (loss) attributable to noncontrolling interests

 

 

(3.3

)

 

 

62.3

 

 

 

(53.4

)

 

 

47.5

 

 

 

13.6

 

Net income (loss)

 

$

(1.5

)

 

$

(8.5

)

 

$

6.8

 

 

$

(6.4

)

 

$

(3.3

)

 

 

 

 

 

 

 

 

 

 

 

Notes

1.

Net income represents net income attributable to Franklin Resources, Inc.

2.

“Adjusted net income,” “adjusted diluted earnings per share,” “adjusted operating income” and “adjusted operating margin” are based on methodologies other than generally accepted accounting principles. See “Supplemental Non-GAAP Financial Measures” for definitions and reconciliations of these measures.

3.

Average AUM represents monthly average AUM.

4.

Cash and cash equivalents and investments includes approximately $300 million at June 30, 2023 attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests.

5.

Net market change, distributions and other includes appreciation (depreciation), distributions to investors that represent return on investments and return of capital, and foreign exchange revaluation.

Franklin Resources, Inc. (NYSE: BEN) is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the Company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,300 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and over $1.4 trillion in AUM as of June 30, 2023. The Company posts information that may be significant for investors in the Investor Relations and News Center sections of its website, and encourages investors to consult those sections regularly. For more information, please visit investors.franklinresources.com.

Forward-Looking Statements

Some of the statements herein may include forward-looking statements that reflect our current views with respect to future events, financial performance and market conditions. Such statements are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and generally can be identified by words or phrases written in the future tense and/or preceded by words such as “anticipate,” “believe,” “could,” “depends,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “potential,” “seek,” “should,” “will,” “would,” or other similar words or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that may cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements, including pandemic-related risks, market and volatility risks, investment performance and reputational risks, global operational risks, competition and distribution risks, third-party risks, technology and security risks, human capital risks, cash management risks, and legal and regulatory risks. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them and are cautioned against doing so. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other possible future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. They are neither statements of historical fact nor guarantees or assurances of future performance. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

These and other risks, uncertainties and other important factors are described in more detail in our recent filings with the U.S. Securities and Exchange Commission, including, without limitation, in Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and our subsequent Quarterly Reports on Form 10-Q. If a circumstance occurs after the date of this press release that causes any of our forward-looking statements to be inaccurate, whether as a result of new information, future developments or otherwise, we undertake no obligation to announce publicly the change to our expectations, or to make any revision to our forward-looking statements, to reflect any change in assumptions, beliefs or expectations, or any change in events, conditions or circumstances upon which any forward-looking statement is based, unless required by law.

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