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Franklin Resources, Inc. Announces Second Quarter Results

·7 min read

SAN MATEO, Calif., May 03, 2022--(BUSINESS WIRE)--Franklin Resources, Inc. (the "Company") [NYSE: BEN] today announced net income1 of $349.6 million or $0.68 per diluted share for the quarter ended March 31, 2022, as compared to $453.2 million or $0.88 per diluted share for the previous quarter, and $381.8 million or $0.74 per diluted share for the quarter ended March 31, 2021. Operating income was $463.0 million for the quarter ended March 31, 2022, as compared to $557.7 million for the previous quarter and $456.3 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 $491.6 million and adjusted diluted earnings per share2 was $0.96 for the quarter ended March 31, 2022, as compared to $553.6 million and $1.08 for the previous quarter, and $403.5 million and $0.79 for the quarter ended March 31, 2021. Adjusted operating income2 was $576.6 million for the quarter ended March 31, 2022, as compared to $685.9 million for the previous quarter and $581.1 million for the prior year.

"This quarter’s market volatility highlighted the benefits of diversification and global scale in our business," said Jenny Johnson, President and CEO of Franklin Resources, Inc. "While industry-wide pressures, particularly in taxable fixed income, contributed to long-term net outflows, we experienced long-term net inflows, primarily into higher fee products, in the multi-asset category and at our alternative specialist investment managers, Benefit Street Partners and Clarion Partners, each of which reported record assets under management.

"This quarter, we continued to make significant progress on our corporate priorities – especially as they relate to diversifying our client offerings in alternatives, customization in SMAs, wealth management and ETFs. Most notably, we continue to place an emphasis on thoughtfully building out our alternative asset business, as illustrated by last month’s close of the Lexington Partners’ acquisition, which added key complementary capabilities in secondary private equity and co-investments. With the addition of Lexington, Franklin Templeton increased its presence in alternatives by 39% to become a $215 billion manager of alternative assets, an area of increasing importance for both individual and institutional investors. Our strong financial flexibility continues to allow us to make investments in our business that further diversify our firm and position us to address evolving client demand."

Quarter Ended

% Change

Quarter Ended

% Change

31-Mar-22

31-Dec-21

Qtr. vs. Qtr.

31-Mar-21

Year vs. Year

Financial Results

(in millions, except per share data)

Operating revenues

$

2,081.0

$

2,224.0

(6

%)

$

2,076.5

0

%

Operating income

463.0

557.7

(17

%)

456.3

1

%

Operating margin

22.2

%

25.1

%

22.0

%

Net income¹

$

349.6

$

453.2

(23

%)

$

381.8

(8

%)

Diluted earnings per share

0.68

0.88

(23

%)

0.74

(8

%)

As adjusted (non-GAAP):2

Adjusted operating income

$

576.6

$

685.9

(16

%)

$

581.1

(1

%)

Adjusted operating margin

35.7

%

39.8

%

38.0

%

Adjusted net income

$

491.6

$

553.6

(11

%)

$

403.5

22

%

Adjusted diluted earnings per share

0.96

1.08

(11

%)

0.79

22

%

Assets Under Management

(in billions)

Ending

$

1,477.5

$

1,578.1

(6

%)

$

1,498.9

(1

%)

Average3

1,516.1

1,554.2

(2

%)

1,497.9

1

%

Long-term net flows

(11.7

)

24.1

(4.2

)

Total assets under management ("AUM") were $1,477.5 billion at March 31, 2022, down $100.6 billion or 6% during the quarter due to $81.8 billion of net market change, distributions and other, $11.7 billion of long-term net outflows and $7.1 billion of cash management net outflows.

Cash and cash equivalents and investments were $5.8 billion at March 31, 2022, as compared to $5.9 billion at September 30, 2021. Including the Company’s direct investments in consolidated investment products, cash and cash equivalents and investments were $6.8 billion at March 31, 2022, as compared to $6.9 billion at September 30, 2021. Total stockholders’ equity was $12.2 billion at March 31, 2022, as compared to $11.8 billion at September 30, 2021. The Company had 500.4 million shares of common stock outstanding at March 31, 2022, as compared to 501.8 million shares outstanding at September 30, 2021. The Company repurchased 2.7 million shares of its common stock for a total cost of $80.8 million during the quarter ended March 31, 2022.

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 (833) 350-1245 in the U.S. and Canada or (236) 712-2205 internationally. A replay of the teleconference can also be accessed by calling (800) 585-8367 in the U.S. and Canada or (416) 621-4642 internationally using access code 7452235, after 2:00 p.m. Eastern Time on May 3, 2022 through May 10, 2022, 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 commentary.

FRANKLIN RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(in millions, except per share data)

Three Months Ended
March 31,

%
Change

Six Months Ended
March 31,

%
Change

2022

2021

2022

2021

Operating Revenues

Investment management fees

$

1,649.2

$

1,598.4

3

%

$

3,409.7

$

3,138.8

9

%

Sales and distribution fees

370.2

413.6

(10

%)

768.4

810.5

(5

%)

Shareholder servicing fees

52.2

55.7

(6

%)

99.9

105.1

(5

%)

Other

9.4

8.8

7

%

27.0

17.2

57

%

Total operating revenues

2,081.0

2,076.5

0

%

4,305.0

4,071.6

6

%

Operating Expenses

Compensation and benefits

752.5

732.3

3

%

1,555.1

1,457.8

7

%

Sales, distribution and marketing

482.4

541.8

(11

%)

992.5

1,048.3

(5

%)

Information systems and technology

126.9

117.5

8

%

250.7

234.0

7

%

Occupancy

53.0

53.8

(1

%)

109.3

109.5

0

%

Amortization of intangible assets

60.4

57.9

4

%

118.7

116.1

2

%

General, administrative and other

142.8

116.9

22

%

258.0

240.5

7

%

Total operating expenses

1,618.0

1,620.2

0

%

3,284.3

3,206.2

2

%

Operating Income

463.0

456.3

1

%

1,020.7

865.4

18

%

Other Income (Expenses)

Investment and other income, net

27.7

67.1

(59

%)

84.7

144.3

(41

%)

Interest expense

(22.9

)

(15.9

)

44

%

(42.2

)

(45.6

)

(7

%)

Investment and other income of consolidated investment products,net

3.0

111.2

(97

%)

107.7

202.3

(47

%)

Expenses of consolidated investment products

(4.6

)

(5.2

)

(12

%)

(8.8

)

(15.6

)

(44

%)

Other income, net

3.2

157.2

(98

%)

141.4

285.4

(50

%)

Income before taxes

466.2

613.5

(24

%)

1,162.1

1,150.8

1

%

Taxes on income

107.1

128.1

(16

%)

258.2

270.6

(5

%)

Net income

359.1

485.4

(26

%)

903.9

880.2

3

%

Less: net income (loss) attributable to

Redeemable noncontrolling interests

(57.2

)

12.0

NM

(49.7

)

30.7

NM

Nonredeemable noncontrolling interests

66.7

91.6

(27

%)

150.8

122.4

23

%

Net Income Attributable to Franklin Resources, Inc.

$

349.6

$

381.8

(8

%)

$

802.8

$

727.1

10

%

Earnings per Share

Basic

$

0.68

$

0.74

(8

%)

$

1.57

$

1.42

11

%

Diluted

0.68

0.74

(8

%)

1.57

1.42

11

%

Dividends Declared per Share

$

0.29

$

0.28

4

%

$

0.58

...