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INSERTING and REPLACING Franklin Resources, Inc. Announces Third Quarter Results

·7-min read

SAN MATEO, Calif., July 28, 2022--(BUSINESS WIRE)--Conference Call Information section, insert at end of second paragraph, second sentence: using access code 747484.

The updated release reads:

FRANKLIN RESOURCES, INC. ANNOUNCES THIRD QUARTER RESULTS

Franklin Resources, Inc. (the "Company") [NYSE: BEN] today announced net income1 of $256.4 million or $0.50 per diluted share for the quarter ended June 30, 2022, as compared to $349.6 million or $0.68 per diluted share for the previous quarter, and $438.4 million or $0.86 per diluted share for the quarter ended June 30, 2021. Operating income was $404.7 million for the quarter ended June 30, 2022, as compared to $463.0 million for the previous quarter and $478.1 million for the prior year. Results for the quarter ended June 30, 2022 include three months of Lexington Partners L.P.

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 $416.0 million and adjusted diluted earnings per share2 was $0.82 for the quarter ended June 30, 2022, as compared to $491.6 million and $0.96 for the previous quarter, and $493.7 million and $0.96 for the quarter ended June 30, 2021. Adjusted operating income2 was $566.9 million for the quarter ended June 30, 2022, as compared to $576.6 million for the previous quarter and $601.2 million for the prior year.

"Financial markets were exceptionally volatile during the first half of 2022 with substantial drawdowns in both equities and fixed income markets, challenging investor sentiment and industry flows," said Jenny Johnson, President and CEO of Franklin Resources, Inc. "While our assets under management and flows were impacted by these industry-wide pressures, we continued to benefit from a diversified mix of assets. As investors look to reposition their portfolios, we’ve seen interest in our alternative and multi-asset strategies which both experienced strong net inflows during the quarter. In addition, notwithstanding flow pressures in fixed income, investor interest remains robust across the asset class.

"We continue to make progress building our alternative asset business, which is less correlated to public markets. This quarter, we closed the acquisition of Lexington Partners, a global leader in secondary private equity and co-investments, and announced the acquisition of Alcentra, one of the largest European alternative credit managers. Pro forma for Alcentra’s AUM, our alternative credit AUM doubles to $77 billion and our aggregate alternative AUM increases to $263 billion, further diversifying our business into asset classes where we see growing client demand.

"Our quarterly financial results reflected the resilience of our business and the benefits of our efforts to further diversify our firm. We continue to maintain financial flexibility and expense discipline with a strong balance sheet."

Quarter Ended

% Change

Quarter Ended

% Change

30-Jun-22

31-Mar-22

Qtr. vs. Qtr.

30-Jun-21

Year vs. Year

Financial Results

(in millions, except per share data)

Operating revenues

$

2,031.3

$

2,081.0

(2

%)

$

2,172.9

(7

%)

Operating income

404.7

463.0

(13

%)

478.1

(15

%)

Operating margin

19.9

%

22.2

%

22.0

%

Net income1

$

256.4

$

349.6

(27

%)

$

438.4

(42

%)

Diluted earnings per share

0.50

0.68

(26

%)

0.86

(42

%)

As adjusted (non-GAAP):2

Adjusted operating income

$

566.9

$

576.6

(2

%)

$

601.2

(6

%)

Adjusted operating margin

35.3

%

35.7

%

36.5

%

Adjusted net income

$

416.0

$

491.6

(15

%)

$

493.7

(16

%)

Adjusted diluted earnings per share

0.82

0.96

(15

%)

0.96

(15

%)

Assets Under Management

(in billions)

Ending

$

1,379.8

$

1,477.5

(7

%)

$

1,552.1

(11

%)

Average3

1,439.8

1,516.1

(5

%)

1,531.0

(6

%)

Long-term net flows

(19.8

)

(11.7

)

(6.6

)

Total assets under management ("AUM") were $1,379.8 billion at June 30, 2022, down $97.7 billion or 7% during the quarter due to $135.5 billion of net market change, distributions and other and $19.8 billion of long-term net outflows, partially offset by $57.2 billion from the acquisition of Lexington Partners and $0.4 billion of cash management net inflows.

Cash and cash equivalents and investments4 were $5.5 billion and, including the Company’s direct investments in consolidated investment products, were $6.4 billion at June 30, 2022. Total stockholders’ equity was $12.3 billion and the Company had 498.4 million shares of common stock outstanding at June 30, 2022. The Company repurchased 2.0 million shares of its common stock for a total cost of $51.0 million during the quarter ended June 30, 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, Global Advisory Services and 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 (844) 200-6205 in the U.S., (833) 950-0062 in Canada or (929) 526-1599 in other locations using access code 747484. A replay of the teleconference can also be accessed by calling (866) 813-9403 in the U.S. using access code 388697 through August 4, 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
June 30,

%
Change

Nine Months Ended
June 30,

%
Change

2022

2021

2022

2021

Operating Revenues

Investment management fees

$

1,636.1

$

1,697.3

(4

%)

$

5,045.8

$

4,836.1

4

%

Sales and distribution fees

335.6

416.9

(20

%)

1,104.0

1,227.4

(10

%)

Shareholder servicing fees

46.9

50.5

(7

%)

146.8

155.6

(6

%)

Other

12.7

8.2

55

%

39.7

25.4

56

%

Total operating revenues

2,031.3

2,172.9

(7

%)

6,336.3

6,244.5

1

%

Operating Expenses

Compensation and benefits

766.7

771.4

(1

%)

2,321.8

2,229.2

4

%

Sales, distribution and marketing

440.3

531.0

(17

%)

1,432.8

1,579.3

(9

%)

Information systems and technology

125.9

121.8

3

%

376.6

355.8

6

%

Occupancy

53.8

54.6

(1

%)

163.1

164.1

(1

%)

Amortization of intangible assets

81.8

58.0

41

%

200.5

174.1

15

%

General, administrative and other

158.1

158.0

0

%

416.1

398.5

4

%

Total operating expenses

1,626.6

1,694.8

(4

%)

4,910.9

4,901.0

0

%

Operating Income

404.7

478.1

(15

%)

1,425.4

1,343.5

6

%

Other Income (Expenses)

Investment and other income, net

13.0

52.9

(75

%)

97.7

197.2

(50

%)

Interest expense

(28.9

)

(25.7

)

12

%

(71.1

)

(71.3

)

0

%

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

(74.4

)

61.0

NM

33.3

263.3

(87

%)

Expenses of consolidated investment products

(1.3

)

(10.9

)

(88

%)

(10.1

)

(26.5

)

(62

%)

Other income (expenses), net

(91.6

)

77.3

NM

49.8

362.7

(86

%)

Income before taxes

313.1

555.4

(44

%)

1,475.2

1,706.2

(14

%)

Taxes on income5

89.5

83.8

7

%

347.7

354.4

(2

%)

Net income

223.6

471.6

(53

%)

1,127.5

1,351.8

(17

%)

Less: net income (loss) attributable to

Redeemable noncontrolling interests

(0.5

)

33.7

NM

(50.2

)

64.4

NM

Nonredeemable noncontrolling interests

(32.3

)

(0.5

)

NM

118.5

121.9

(3

%)

Net Income Attributable to Franklin Resources, Inc.

$

256.4

$

438.4

(42

%)

$

1,059.2

$

1,165.5

(9

%)

Earnings per Share

Basic

$

0.50

$

0.86

(42

%)

$

2.07

$

2.27

(9

%)

Diluted

0.50

0.86

(42

%)

2.07

2.27

(9

%)

Dividends Declared per Share

$

0.29

$

0.28

4

%

$

0.87

$

0.84

4

%