Franklin Resources, Inc. Announces First Quarter Results
SAN MATEO, Calif.--(BUSINESS WIRE)--January 29, 2024--
Franklin Resources, Inc. (the “Company”) [NYSE: BEN] today announced net income(1) of $251.3 million or $0.50 per diluted share for the quarter ended December 31, 2023, as compared to $295.5 million or $0.58 per diluted share for the previous quarter, and $165.6 million or $0.32 per diluted share for the quarter ended December 31, 2022. Operating income was $206.5 million for the quarter ended December 31, 2023, as compared to $338.3 million for the previous quarter and $194.0 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 income(2) was $328.5 million and adjusted diluted earnings per share(2) was $0.65 for the quarter ended December 31, 2023, as compared to $427.0 million and $0.84 for the previous quarter, and $262.4 million and $0.51 for the quarter ended December 31, 2022. Adjusted operating income(2) was $417.0 million for the quarter ended December 31, 2023, as compared to $511.7 million for the previous quarter and $395.1 million for the prior year.
“Our first fiscal quarter results reflect ongoing momentum in a number of significant areas across asset classes, investment vehicles and geographies to meet the varied needs of our diverse global client base,” said Jenny Johnson, President and CEO of Franklin Resources, Inc. “During the quarter, we saw positive net flows into alternatives, multi-asset, equity, ETFs and SMAs. We also continued to see aggregate positive net flows in non-U.S. regions.
“Reflecting client demand, we continue to see robust growth in our private market strategies. Our three largest alternative managers, Benefit Street Partners, Clarion Partners and Lexington Partners, each had net inflows in the quarter with a combined total of $3.8 billion. Earlier this month, Lexington Partners announced the closing of its latest flagship global secondary fund with $22.7 billion of total capital commitments and with approximately 20% of the capital raised in the fund coming from the wealth management channel. The fund ranks among the largest raised to date in the secondary market and significantly exceeded Lexington’s prior secondary fund, which closed with $14 billion raised in 2020. Also this month, Benefit Street Partners closed its fifth flagship private credit fund with $4.7 billion of total capital commitments. Reflecting the strong demand for the asset class, Benefit Street Partners exceeded its fundraise target.
“We were pleased to close our acquisition of Putnam Investments from Great-West Lifeco on January 1, 2024. With $148 billion in assets under management, Putnam adds complementary investment capabilities and a track record of strong investment performance with 87% or higher of mutual fund AUM outperforming its peers over all standard time periods. The transaction also enhances our presence in the attractive retirement and insurance markets. The addition of Putnam brings Franklin Templeton’s total AUM to approximately $1.6 trillion.
“We continue to focus on strong expense discipline and our net cash and investments position allows us to continue to invest in growth and innovation for the benefit of all our stakeholders.”
Quarter
Quarter Ended % Change Ended % Change
-------------------------- ------------
Qtr. vs. Year vs.
31-Dec-23 30-Sep-23 Qtr. 31-Dec-22 Year
--------------- ------------ ------------ ---------- ------------ ----------
Financial
Results
(in millions,
except per
share data)
Operating
revenues $1,991.1 $1,986.1 0% $1,967.1 1%
Operating income 206.5 338.3 (39%) 194.0 6%
Operating margin 10.4% 17.0% 9.9%
Net income(1) $ 251.3 $ 295.5 (15%) $ 165.6 52%
Diluted earnings
per share 0.50 0.58 (14%) 0.32 56%
As adjusted
(non-GAAP):(2)
---------------
Adjusted
operating
income $ 417.0 $ 511.7 (19%) $ 395.1 6%
Adjusted
operating
margin 27.3% 32.4% 27.5%
Adjusted net
income $ 328.5 $ 427.0 (23%) $ 262.4 25%
Adjusted diluted
earnings per
share 0.65 0.84 (23%) 0.51 27%
Assets Under
Management
(in billions)
Ending $1,455.5 $1,374.2 6% $1,387.7 5%
Average(3) 1,394.2 1,419.1 (2%) 1,353.5 3%
Long-term net
flows (5.0) (6.9) (10.9)
Total assets under management (“AUM”) were $1,455.5 billion at December 31, 2023, up $81.3 billion or 6% during the quarter due to the positive impact of $81.6 billion of net market change, distributions, and other, and $4.7 billion of cash management net inflows, offset in part by $5.0 billion of long-term net outflows.
Cash and cash equivalents and investments were $5.6 billion and, including the Company’s direct investments in consolidated investment products (“CIPs”), were $6.7 billion(4) at December 31, 2023. Total stockholders’ equity was $12.6 billion and the Company had 494.7 million shares of common stock outstanding at December 31, 2023. The Company repurchased 2.4 million shares of its common stock for a total cost of $58.8 million during the quarter ended December 31, 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 09627581. 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 627581# after 2:00 p.m. Eastern Time on January 29, 2024 through February 5, 2024, 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
Three Months Ended
December 31,
---------------------------- -------------------------- -----
(in millions, except per %
share data) 2023 2022 Change
---------------------------- ------- ------- ---------
Operating Revenues
Investment management fees $1,652.2 $1,631.8 1%
Sales and distribution fees 296.4 291.9 2%
Shareholder servicing fees 32.5 33.4 (3%)
Other 10.0 10.0 0%
------- ------- -----
Total operating
revenues 1,991.1 1,967.1 1%
------- ------- -----
Operating Expenses
Compensation and benefits 968.3 979.2 (1%)
Sales, distribution and
marketing 400.8 388.6 3%
Information systems and
technology 131.0 121.4 8%
Occupancy 66.7 54.5 22%
Amortization of intangible
assets 85.8 83.2 3%
General, administrative and
other 132.0 146.2 (10%)
------- ------- -----
Total operating
expenses 1,784.6 1,773.1 1%
------- ------- -----
Operating Income 206.5 194.0 6%
------- ------- -----
Other Income (Expenses)
Investment and other income,
net 173.2 91.1 90%
Interest expense (18.8) (30.9) (39%)
Investment and other losses
of consolidated investment
products, net (23.8) (13.6) 75%
Expenses of consolidated
investment products (5.9) (11.5) (49%)
------- ------- -----
Other income, net 124.7 35.1 255%
------- ------- -----
Income before taxes 331.2 229.1 45%
Taxes on income 74.9 60.3 24%
------- ------- -----
Net income 256.3 168.8 52%
Less: net income (loss)
attributable to
Redeemable
noncontrolling
interests 9.5 (1.5) NM
Nonredeemable
noncontrolling
interests (4.5) 4.7 NM