Franklin Resources, Inc. (the “Company”) [NYSE: BEN] today
announced net income1 of $79.1 million or $0.16 per diluted share
for the quarter ended March 31, 2020, as compared to $350.5 million
or $0.70 per diluted share for the previous quarter, and $367.5
million or $0.72 per diluted share for the quarter ended March 31,
2019. The mark-to-market of the Company’s investment portfolio
resulted in significant nonoperating losses that drove the decline
in net income for the quarter ended March 31, 2020. Operating
income was $356.1 million for the quarter ended March 31, 2020, as
compared to $392.7 million for the previous quarter and $379.5
million in the prior year.
As supplemental information, the Company is providing certain
adjusted performance measures which are based on methodologies
other than generally accepted accounting principles2. Adjusted net
income2 was $332.8 million and adjusted diluted earnings per share
was $0.66 for the quarter ended March 31, 2020, as compared to
$338.3 million and $0.67 for the previous quarter, and $330.6
million and $0.65 for the quarter ended March 31, 2019. Adjusted
operating income2 was $385.9 million for the quarter ended March
31, 2020, as compared to $405.5 million for the previous quarter
and $406.6 million in the prior year.
“While the global impact of the COVID-19 pandemic is just
beginning to be understood, the virus has already profoundly
altered our world and its implications are far reaching,” said
Jenny Johnson, President and CEO of Franklin Resources, Inc. “Above
all else, this pandemic is a humanitarian issue – no matter where
you live around the globe, the virus has touched your life in some
way. We offer our heartfelt gratitude to the frontline healthcare
workers and other professionals who are keeping essential
operations functioning.
“Franklin Templeton remains focused on the health and safety of
our employees and their families, and our ability to maintain
high-quality service and stability for our clients is paramount. We
have fully activated our global business continuity plan to protect
our employees and have seamlessly moved to over 97% of our staff
working remotely. We are extremely proud of and grateful for how
our employees have adapted with great agility to operate under
these extraordinary conditions and keep our business running
efficiently.
“Being an active manager during this unprecedented time has
allowed us to find compelling investment opportunities amidst sharp
dislocations across sectors. With this backdrop, security selection
is critical. During the recent market volatility, we’re pleased to
see that our sound investment disciplines are producing strong
results, notably in the areas of U.S. equity, municipal bonds,
global macro, and global equity.
“Our acquisition of Legg Mason remains on track to close in the
third quarter of the calendar year, and integration plans are well
underway. We continue to see the long-term value of these combined
franchises and that our strategy to diversify and create new
opportunities is the right one. There’s excitement at both firms as
we continue to move forward with planning for a combined company
and working to satisfy the conditions to close. Our combined
company will offer a broader range of leading investment
strategies, a more encompassing geographical presence, a
diversified client base, and a resilient and adaptable platform
that can aptly navigate market cycles. It’s also premised on the
stability and continuity of our client-facing teams, while
providing opportunities to invest in our sales and client service
model. We are very focused on integration planning to meet these
goals. Following the close of the transaction, our financial
resources and flexibility will remain robust, an important
foundation of our company.”
Quarter Ended
% Change
Quarter Ended
% Change
31-Mar-20
31-Dec-19
Qtr. vs. Qtr.
31-Mar-19
Year vs. Year
Financial Results
(in millions, except per share data)
Operating revenues
$
1,338.3
$
1,412.7
(5
%)
$
1,433.8
(7
%)
Operating income
356.1
392.7
(9
%)
379.5
(6
%)
Operating margin
26.6
%
27.8
%
26.5
%
Net income¹
$
79.1
$
350.5
(77
%)
$
367.5
(78
%)
Diluted earnings per share
0.16
0.70
(77
%)
0.72
(78
%)
As adjusted
(non-GAAP):2
Adjusted operating income
$
385.9
$
405.5
(5
)%
$
406.6
(5
)%
Adjusted operating margin
43.2
%
42.6
%
41.9
%
Adjusted net income
$
332.8
$
338.3
(2
)%
$
330.6
1
%
Adjusted diluted earnings per share
0.66
0.67
(1
)%
0.65
2
%
Assets Under Management
(in billions)
Ending
$
580.3
$
698.3
(17
%)
$
712.3
(19
%)
Average3
655.8
693.8
(5
%)
688.6
(5
%)
Net flows
(25.4
)
(12.3
)
(6.3
)
Total assets under management (“AUM”) were $580.3 billion at
March 31, 2020, down $118.0 billion or 17% during the quarter due
to $98.2 billion of net market change, distributions and other and
$25.4 billion of net outflows, slightly offset by $5.6 billion from
an acquisition.
Cash and cash equivalents and investments were $7.6 billion at
March 31, 2020, as compared to $7.4 billion at September 30, 2019.
Including the Company’s direct investments in consolidated
investment products, cash and cash equivalents and investments were
$8.2 billion at March 31, 2020, as compared to $8.5 billion at
September 30, 2019. Total stockholders’ equity was $10.8 billion at
March 31, 2020, as compared to $10.6 billion at September 30, 2019.
The Company had 495.3 million shares of common stock outstanding at
March 31, 2020, as compared to 499.3 million shares outstanding at
September 30, 2019. The Company repurchased 2.9 million shares of
its common stock for a total cost of $64.6 million during the
quarter ended March 31, 2020.
Conference Call Information
A commentary on the results by President and CEO Jenny Johnson,
Executive Chairman Greg Johnson and Executive Vice President and
CFO Matthew Nicholls will be available today at approximately 8:30
a.m. Eastern Time. Access to the commentary will be available via
investors.franklinresources.com.
Ms. Johnson, Mr. Johnson and Mr. Nicholls will also lead a live
teleconference today at 11:00 a.m. Eastern Time to answer questions
of a material nature. Access to the teleconference will be
available via investors.franklinresources.com or by dialing (877)
407-8293 in the U.S. and Canada or (201) 689-8349 internationally.
A replay of the teleconference can also be accessed by calling
(877) 660-6853 in the U.S. and Canada or (201) 612-7415
internationally using access code 13701317, after 2:00 p.m. Eastern
Time on April 30, 2020 through May 30, 2020.
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 and
AUM)
Three Months Ended March
31,
%
Change
Six Months Ended March
31,
% Change
2020
2019
2020
2019
Operating Revenues
Investment management fees
$
908.2
$
992.4
(8
%)
$
1,887.9
$
1,964.2
(4
%)
Sales and distribution fees
341.7
358.5
(5
%)
693.2
713.3
(3
%)
Shareholder servicing fees
54.8
57.1
(4
%)
104.8
112.2
(7
%)
Other
33.6
25.8
30
%
65.1
55.6
17
%
Total operating revenues
1,338.3
1,433.8
(7
%)
2,751.0
2,845.3
(3
%)
Operating Expenses
Sales, distribution and marketing
423.9
449.4
(6
%)
867.8
893.9
(3
%)
Compensation and benefits
365.7
409.6
(11
%)
755.1
764.6
(1
%)
Information systems and technology
61.8
62.1
0
%
124.3
123.0
1
%
Occupancy
34.4
31.4
10
%
68.9
62.6
10
%
General, administrative and other
96.4
101.8
(5
%)
186.1
210.2
(11
%)
Total operating expenses
982.2
1,054.3
(7
%)
2,002.2
2,054.3
(3
%)
Operating Income
356.1
379.5
(6
%)
748.8
791.0
(5
%)
Other Income (Expenses)
Investment and other income (losses),
net
(249.0
)
118.7
NM
(189.4
)
59.6
NM
Interest expense
(4.2
)
(5.7
)
(26
%)
(10.9
)
(12.1
)
(10
%)
Other income (expenses), net
(253.2
)
113.0
NM
(200.3
)
47.5
NM
Income before taxes
102.9
492.5
(79
%)
548.5
838.5
(35
%)
Taxes on income
44.1
110.9
(60
%)
141.6
196.9
(28
%)
Net income
58.8
381.6
(85
%)
406.9
641.6
(37
%)
Less: net income (loss) attributable
to
Redeemable noncontrolling interests
(28.5
)
21.5
NM
(19.5
)
6.1
NM
Nonredeemable noncontrolling interests
8.2
(7.4
)
NM
(3.2
)
(7.9
)
(59
%)
Net Income Attributable to Franklin
Resources, Inc.
$
79.1
$
367.5
(78
%)
$
429.6
$
643.4
(33
%)
Earnings per Share
Basic
$
0.16
$
0.72
(78
%)
$
0.86
$
1.26
(32
%)
Diluted
0.16
0.72
(78
%)
0.86
1.25
(31
%)
Dividends Declared per Share
$
0.27
$
0.26
4
%
$
0.54
$
0.52
4
%
Average Shares Outstanding
Basic
491.5
504.7
(3
%)
493.1
507.6
(3
%)
Diluted
491.8
505.1
(3
%)
493.6
508.0
(3
%)
Operating Margin
26.6
%
26.5
%
27.2
%
27.8
%
AUM (in billions)
Ending
$
580.3
$
712.3
(19
%)
$
580.3
$
712.3
(19
%)
Average
655.8
688.6
(5
%)
671.4
691.1
(3
%)
Net flows
(25.4
)
(6.3
)
(37.7
)
(13.6
)
FRANKLIN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF
INCOME
Unaudited
(in millions, except per share data)
Three Months Ended
%
Change
Three Months Ended
31-Mar-20
31-Dec-19
30-Sep-19
30-Jun-19
31-Mar-19
Operating Revenues
Investment management fees
$
908.2
$
979.7
(7
%)
$
1,001.6
$
1,019.4
$
992.4
Sales and distribution fees
341.7
351.5
(3
%)
363.8
367.5
358.5
Shareholder servicing fees
54.8
50.0
10
%
51.4
52.7
57.1
Other
33.6
31.5
7
%
35.7
37.1
25.8
Total operating revenues
1,338.3
1,412.7
(5
%)
1,452.5
1,476.7
1,433.8
Operating Expenses
Sales, distribution and marketing
423.9
443.9
(5
%)
463.3
462.4
449.4
Compensation and benefits
365.7
389.4
(6
%)
382.4
437.7
409.6
Information systems and technology
61.8
62.5
(1
%)
69.8
65.7
62.1
Occupancy
34.4
34.5
0
%
38.8
32.2
31.4
General, administrative and other
96.4
89.7
7
%
106.7
103.8
101.8
Total operating expenses
982.2
1,020.0
(4
%)
1,061.0
1,101.8
1,054.3
Operating Income
356.1
392.7
(9
%)
391.5
374.9
379.5
Other Income (Expenses)
Investment and other income (losses),
net
(249.0
)
59.6
NM
11.3
44.2
118.7
Interest expense
(4.2
)
(6.7
)
(37
%)
(7.0
)
(5.6
)
(5.7
)
Other income (expenses), net
(253.2
)
52.9
NM
4.3
38.6
113.0
Income before taxes
102.9
445.6
(77
%)
395.8
413.5
492.5
Taxes on income4
44.1
97.5
(55
%)
86.5
158.9
110.9
Net income
58.8
348.1
(83
%)
309.3
254.6
381.6
Less: net income (loss) attributable
to
Redeemable noncontrolling interests
(28.5
)
9.0
NM
—
0.1
21.5
Nonredeemable noncontrolling interests
8.2
(11.4
)
NM
2.9
8.6
(7.4
)
Net Income Attributable to Franklin
Resources, Inc.
$
79.1
$
350.5
(77
%)
$
306.4
$
245.9
$
367.5
Earnings per Share
Basic
$
0.16
$
0.70
(77
%)
$
0.61
$
0.48
$
0.72
Diluted
0.16
0.70
(77
%)
0.61
0.48
0.72
Dividends Declared per Share
$
0.27
$
0.27
0
%
$
0.26
$
0.26
$
0.26
Average Shares Outstanding
Basic
491.5
494.7
(1
%)
497.9
501.6
504.7
Diluted
491.8
495.3
(1
%)
498.8
502.3
505.1
Operating Margin
26.6
%
27.8
%
27.0
%
25.4
%
26.5
%
AUM AND FLOWS
(in billions)
Three Months Ended March
31,
%
Change
Six Months Ended March
31,
% Change
2020
2019
2020
2019
Beginning AUM
$
698.3
$
649.9
7
%
$
692.6
$
717.1
(3
%)
Long-term sales
27.7
27.0
3
%
50.4
48.7
3
%
Long-term redemptions
(54.3
)
(36.2
)
50
%
(100.0
)
(78.6
)
27
%
Long-term net exchanges
(1.5
)
—
NM
(1.6
)
(0.5
)
220
%
Long-term reinvested distributions
2.7
2.9
(7
%)
13.5
16.8
(20
%)
Net flows
(25.4
)
(6.3
)
303
%
(37.7
)
(13.6
)
177
%
Acquisitions
5.6
26.4
(79
%)
5.6
26.4
(79
%)
Net market change, distributions and
other5
(98.2
)
42.3
NM
(80.2
)
(17.6
)
356
%
Ending AUM
$
580.3
$
712.3
(19
%)
$
580.3
$
712.3
(19
%)
AUM BY INVESTMENT OBJECTIVE
(in billions)
31-Mar-20
31-Dec-19
% Change
30-Sep-19
30-Jun-19
31-Mar-19
Equity
Global/international
$
114.7
$
163.5
(30
%)
$
158.4
$
169.8
$
174.4
United States
92.7
117.0
(21
%)
112.1
112.4
109.5
Total equity
207.4
280.5
(26
%)
270.5
282.2
283.9
Multi-Asset/Balanced
118.2
136.5
(13
%)
134.3
136.0
134.7
Fixed Income
Tax-free
64.9
66.7
(3
%)
66.3
65.0
63.4
Taxable
Global/international
113.3
136.7
(17
%)
144.6
154.9
152.5
United States
65.8
67.5
(3
%)
67.4
67.9
68.9
Total fixed income
244.0
270.9
(10
%)
278.3
287.8
284.8
Cash Management
10.7
10.4
3
%
9.5
9.2
8.9
Total AUM
$
580.3
$
698.3
(17
%)
$
692.6
$
715.2
$
712.3
Average AUM for the Three-Month
Period
$
655.8
$
693.8
(5
%)
$
702.0
$
710.8
$
688.6
AUM AND FLOWS - UNITED STATES AND
INTERNATIONAL6
As of and for the Three Months
Ended
(in billions)
31-Mar-20
% of Total
31-Dec-19
% of Total
31-Mar-19
% of Total
Long-Term Sales
United States
$
15.9
57
%
$
12.9
57
%
$
14.2
53
%
International
11.8
43
%
9.8
43
%
12.8
47
%
Total long-term sales
$
27.7
100
%
$
22.7
100
%
$
27.0
100
%
Long-Term Redemptions
United States
$
(31.9
)
59
%
$
(28.0
)
61
%
$
(20.6
)
57
%
International
(22.4
)
41
%
(17.7
)
39
%
(15.6
)
43
%
Total long-term redemptions
$
(54.3
)
100
%
$
(45.7
)
100
%
$
(36.2
)
100
%
AUM
United States
$
408.3
70
%
$
481.0
69
%
$
486.6
68
%
International
172.0
30
%
217.3
31
%
225.7
32
%
Total AUM
$
580.3
100
%
$
698.3
100
%
$
712.3
100
%
AUM AND FLOWS BY INVESTMENT
OBJECTIVE
(in billions)
Equity
Multi- Asset/ Balanced
Fixed Income
Cash Management
Total
for the three months ended March 31,
2020
Global/ International
United States
Tax-Free
Taxable Global/
International
Taxable
United
States
AUM at January 1, 2020
$
163.5
$
117.0
$
136.5
$
66.7
$
136.7
$
67.5
$
10.4
$
698.3
Long-term sales
4.6
6.4
5.1
2.5
6.7
2.4
—
27.7
Long-term redemptions
(12.6
)
(7.7
)
(8.3
)
(3.2
)
(18.9
)
(3.6
)
—
(54.3
)
Long-term net exchanges
(0.3
)
(0.1
)
(0.5
)
(0.3
)
(0.7
)
0.4
—
(1.5
)
Long-term reinvested distributions
0.1
0.1
1.1
0.4
0.8
0.2
—
2.7
Net flows
(8.2
)
(1.3
)
(2.6
)
(0.6
)
(12.1
)
(0.6
)
—
(25.4
)
Acquisition
—
—
5.6
—
—
—
—
5.6
Net market change, distributions and
other5
(40.6
)
(23.0
)
(21.3
)
(1.2
)
(11.3
)
(1.1
)
0.3
(98.2
)
AUM at March 31, 2020
$
114.7
$
92.7
$
118.2
$
64.9
$
113.3
$
65.8
$
10.7
$
580.3
(in billions)
Equity
Multi- Asset/
Balanced
Fixed Income
Cash
Management
Total
for the three months ended December 31,
2019
Global/
International
United
States
Tax-Free
Taxable
Global/
International
Taxable
United
States
AUM at October 1, 2019
$
158.4
$
112.1
$
134.3
$
66.3
$
144.6
$
67.4
$
9.5
$
692.6
Long-term sales
3.8
4.4
3.5
2.0
6.6
2.4
—
22.7
Long-term redemptions
(10.7
)
(7.6
)
(6.2
)
(1.9
)
(16.2
)
(3.1
)
—
(45.7
)
Long-term net exchanges
(0.2
)
0.1
0.1
0.1
(0.7
)
0.5
—
(0.1
)
Long-term reinvested distributions
2.4
4.8
1.9
0.4
1.0
0.3
—
10.8
Net flows
(4.7
)
1.7
(0.7
)
0.6
(9.3
)
0.1
—
(12.3
)
Net market change, distributions and
other5
9.8
3.2
2.9
(0.2
)
1.4
—
0.9
18.0
AUM at December 31, 2019
$
163.5
$
117.0
$
136.5
$
66.7
$
136.7
$
67.5
$
10.4
$
698.3
(in billions)
Equity
Multi-Asset/
Balanced
Fixed Income
Cash
Management
Total
for the three months ended March 31,
2019
Global/
International
United
States
Tax-Free
Taxable
Global/
International
Taxable
United
States
AUM at January 1, 2019
$
166.0
$
97.1
$
124.8
$
62.0
$
147.7
$
42.2
$
10.1
$
649.9
Long-term sales
5.1
4.1
3.1
1.8
11.1
1.8
—
27.0
Long-term redemptions
(12.0
)
(5.8
)
(4.4
)
(2.2
)
(8.6
)
(3.2
)
—
(36.2
)
Long-term net exchanges
(0.2
)
(0.1
)
0.1
0.2
—
—
—
—
Long-term reinvested distributions
0.1
—
1.1
0.4
1.1
0.2
—
2.9
Net flows
(7.0
)
(1.8
)
(0.1
)
0.2
3.6
(1.2
)
—
(6.3
)
Acquisition
—
—
—
—
—
26.4
—
26.4
Net market change, distributions and
other5
15.4
14.2
10.0
1.2
1.2
1.5
(1.2
)
42.3
AUM at March 31, 2019
$
174.4
$
109.5
$
134.7
$
63.4
$
152.5
$
68.9
$
8.9
$
712.3
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 are 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 as these
measures exclude the impact of consolidated investment products and
mitigate the margin variability related to sales and distribution
revenues and expenses across multiple distribution channels
globally. These non-GAAP measures also exclude acquisition-related
expenses, certain items which management considers to be
nonrecurring, unrealized investment gains and losses included in
investment and other income (losses), net, and the related income
tax effect of these adjustments, as applicable.
“Adjusted operating income,” “adjusted operating margin,”
“adjusted net income” and “adjusted diluted earnings per share” are
defined below, along with 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 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:
- Revenues and expenses of consolidated investment products, but
include revenues eliminated upon consolidation of investment
products.
- Acquisition-related retention compensation.
- Other acquisition-related expenses including professional fees
and fair value adjustments related to contingent consideration
liabilities and retention awards.
- Amortization and impairment of intangible assets.
- Special termination benefits related to voluntary separation
and workforce reduction initiatives of 4.5% of our global workforce
in the fiscal year ended September 30, 2019 (“fiscal year
2019”).
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:
- 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.
- Revenues of consolidated investment products, but include
revenues eliminated upon consolidation of investment products.
Adjusted Net Income
We define adjusted net income as net income attributable to
Franklin Resources, Inc. adjusted to exclude the following:
- Activities of consolidated investment products, including
revenues, expenses, investment and other income (losses), net, and
income (loss) attributable to noncontrolling interests, net of
amounts eliminated upon consolidation of investment products.
- Acquisition-related retention compensation.
- Other acquisition-related expenses including professional fees
and fair value adjustments related to contingent consideration
liabilities and retention awards.
- Amortization and impairment of intangible assets.
- Special termination benefits related to voluntary separation
and workforce reduction initiatives of 4.5% of our global workforce
in fiscal year 2019.
- Unrealized investment gains and losses included in investment
and other income (losses), net.
- Net income tax benefit of the above adjustments based on the
respective blended rates applicable to the adjustments.
Adjusted Diluted Earnings Per Share
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 adjusted operating income, adjusted operating
margin, adjusted net income and adjusted diluted earnings per
share, we adjust for activities of consolidated investment products
because the impact of consolidated products are not considered
reflective of the underlying results of our operations. We adjust
for acquisition-related retention compensation, other
acquisition-related expenses, and amortization and impairment of
intangible assets to facilitate comparability of our operating
results with the results of other asset management firms. We adjust
for special termination benefits related to certain voluntary
separation and workforce reduction initiatives because these items
are deemed nonrecurring. In calculating adjusted net income and
adjusted diluted earnings per share, we adjust for unrealized
investment gains and losses included in investment and other income
(losses), net because these items primarily relate to seed and
strategic investments which have been and 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
Fiscal Year Ended
31-Mar-20
31-Dec-19
30-Sep-19
30-Jun-19
31-Mar-19
31-Dec-18
30-Sep-19
Operating income
$
356.1
$
392.7
$
391.5
$
374.9
$
379.5
$
411.5
$
1,557.4
Add (subtract):
Operating income of consolidated
investment products*
(10.0
)
(13.1
)
(19.4
)
(18.8
)
(6.1
)
(15.5
)
(59.8
)
Acquisition-related retention
27.2
21.3
20.7
21.5
16.9
4.6
63.7
Other acquisition-related expenses
5.4
(0.2
)
0.1
(0.1
)
0.6
8.8
9.4
Amortization of intangible assets
4.4
4.8
5.0
5.1
3.9
0.7
14.7
Impairment of intangible assets
2.8
—
4.0
9.3
—
—
13.3
Special termination benefits
—
—
4.9
38.8
11.8
—
55.5
Adjusted operating income
$
385.9
$
405.5
$
406.8
$
430.7
$
406.6
$
410.1
$
1,654.2
Total operating revenues
$
1,338.3
$
1,412.7
$
1,452.5
$
1,476.7
$
1,433.8
$
1,411.5
$
5,774.5
Add (subtract):
Sales and distribution fees
(341.7
)
(351.5
)
(363.8
)
(367.5
)
(358.5
)
(354.8
)
(1,444.6
)
Allocation of investment management fees
for sales, distribution and marketing expenses
(82.2
)
(92.4
)
(99.5
)
(94.9
)
(90.9
)
(89.7
)
(375.0
)
Net revenues of consolidated investment
products*
(20.9
)
(16.8
)
(22.7
)
(21.4
)
(14.8
)
(15.5
)
(74.4
)
Adjusted operating revenues
$
893.5
$
952.0
$
966.5
$
992.9
$
969.6
$
951.5
$
3,880.5
Operating margin
26.6
%
27.8
%
27.0
%
25.4
%
26.5
%
29.2
%
27.0
%
Adjusted operating margin
43.2
%
42.6
%
42.1
%
43.4
%
41.9
%
43.1
%
42.6
%
(in millions, except per share data)
Three Months Ended
Fiscal Year Ended
31-Mar-20
31-Dec-19
30-Sep-19
30-Jun-19
31-Mar-19
31-Dec-18
30-Sep-19
Net income attributable to Franklin
Resources, Inc.
$
79.1
$
350.5
$
306.4
$
245.9
$
367.5
$
275.9
$
1,195.7
Add (subtract):
Net (income) loss of consolidated
investment products*
(16.4
)
4.6
(5.3
)
0.4
4.4
(3.2
)
(3.7
)
Acquisition-related retention
27.2
21.3
20.7
21.5
16.9
4.6
63.7
Other acquisition-related expenses
5.4
(0.2
)
0.1
(0.1
)
0.6
8.8
9.4
Amortization of intangible assets
4.4
4.8
5.0
5.1
3.9
0.7
14.7
Impairment of intangible assets
2.8
—
4.0
9.3
—
—
13.3
Special termination benefits
—
—
4.9
38.8
11.8
—
55.5
Unrealized investment (gains) losses
included in investment and other (income) losses, net
257.6
(36.4
)
29.9
(24.9
)
(66.9
)
81.9
20.0
Net income tax benefit of adjustments
(27.3
)
(6.3
)
(7.3
)
(14.5
)
(7.6
)
(7.9
)
(37.3
)
Adjusted net income
$
332.8
$
338.3
$
358.4
$
281.5
$
330.6
$
360.8
$
1,331.3
Diluted earnings per share
$
0.16
$
0.70
$
0.61
$
0.48
$
0.72
$
0.54
$
2.35
Adjusted diluted earnings per
share
0.66
0.67
0.71
0.55
0.65
0.70
2.62
__________________
*
The impact of consolidated investment
products is summarized as follows:
(in millions)
Three Months Ended
Fiscal Year Ended
31-Mar-20
31-Dec-19
30-Sep-19
30-Jun-19
31-Mar-19
31-Dec-18
30-Sep-19
Revenues of consolidated investment
products
$
27.1
$
23.5
$
29.7
$
28.3
$
21.0
$
26.1
$
105.1
Revenues eliminated upon consolidation of
investment products
(6.2
)
(6.7
)
(7.0
)
(6.9
)
(6.2
)
(10.6
)
(30.7
)
Net revenues of consolidated investment
products
20.9
16.8
22.7
21.4
14.8
15.5
74.4
Expenses of consolidated investment
products
10.9
3.7
3.3
2.6
8.7
—
14.6
Operating income of consolidated
investment products
10.0
13.1
19.4
18.8
6.1
15.5
59.8
Investment and other income (losses), net
of consolidated investment products
(16.9
)
(20.0
)
(12.4
)
(16.6
)
3.0
(24.7
)
(50.7
)
Less: income (loss) attributable to
noncontrolling interests of consolidated investment products
(23.3
)
(2.3
)
1.7
2.6
13.5
(12.4
)
5.4
Net income (loss) of consolidated
investment products
$
16.4
$
(4.6
)
$
5.3
$
(0.4
)
$
(4.4
)
$
3.2
$
3.7
Notes
1.
Net income represents net income
attributable to Franklin Resources, Inc.
2.
“Adjusted operating income,” “adjusted
operating margin,” “adjusted net income” and “adjusted diluted
earnings per share” 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 simple monthly
average AUM.
4.
Taxes on income for the quarter ended June
30, 2019 includes an $86.4 million reversal of a tax benefit
recognized in the prior fiscal year upon issuance of final
regulations by the U.S. Department of Treasury for the Tax Cuts and
Jobs Act of 2017.
5.
Net market change, distributions and other
includes appreciation (depreciation), distributions to investors
that represent return on investments and return of capital, foreign
exchange revaluation and net cash management.
6.
International includes North America-based
advisors serving non-resident clients.
Franklin Resources, Inc. is a global investment management
organization operating together with its subsidiaries as Franklin
Templeton. Franklin Templeton’s goal is to deliver better outcomes
by providing global and domestic investment management to retail,
institutional and sovereign wealth clients in over 170 countries.
Through specialized teams, the Company has expertise across all
asset classes, including equity, fixed income, alternatives and
custom multi-asset solutions. The Company’s more than 600
investment professionals are supported by its integrated, worldwide
team of risk management professionals and global trading desk
network. With employees in over 30 countries, the California-based
company has more than 70 years of investment experience and $580.3
billion in AUM as of March 31, 2020. 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
Statements in this press release regarding Franklin Resources,
Inc. and its subsidiaries, which are not historical facts, are
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. When used in this press
release, words or phrases generally written in the future tense
and/or preceded by words such as “will,” “may,” “could,” “expect,”
“believe,” “anticipate,” “intend,” “plan,” “seek,” “estimate” or
other similar words are forward-looking statements.
Forward-looking statements involve a number of known and unknown
risks, uncertainties and other important factors, some of which are
listed below, that could cause actual results and outcomes to
differ materially from any future results or outcomes expressed or
implied by such forward-looking statements. 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
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.
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, 2019 and our
subsequent Quarterly Reports on Form 10-Q:
- Our proposed acquisition of Legg Mason, Inc. remains subject to
transaction-related and other risks.
- Our business and operations are subject to adverse effects from
the outbreak and spread of contagious diseases such as COVID-19,
and we expect such adverse effects to continue.
- Volatility and disruption of the capital and credit markets,
and adverse changes in the global economy, may significantly affect
our results of operations and may put pressure on our financial
results.
- The amount and mix of our AUM are subject to significant
fluctuations.
- We are subject to significant risk of asset volatility from
changes in the global financial, equity, debt and commodity
markets.
- Our funds may be subject to liquidity risks or an unanticipated
large number of redemptions.
- A shift in our asset mix toward lower fee products may
negatively impact our revenues.
- We may not effectively manage risks associated with the
replacement of benchmark indices.
- Poor investment performance of our products could reduce the
level of our AUM or affect our sales, and negatively impact our
revenues and income.
- Harm to our reputation may negatively impact our revenues and
income.
- Our business operations are complex and a failure to perform
operational tasks properly or the misrepresentation of our services
and products resulting, without limitation, in the termination of
investment management agreements representing a significant portion
of our AUM, could have an adverse effect on our revenues and
income.
- We face risks, and corresponding potential costs and expenses,
associated with conducting operations and growing our business in
numerous countries.
- Our increasing focus on international markets as a source of
investments and sales of our products subjects us to increased
exchange rate and market-specific political, economic or other
risks that may adversely impact our revenues and income generated
overseas.
- We may review and pursue strategic transactions that could pose
risks to our business.
- Strong competition from numerous and sometimes larger companies
with competing offerings and products could limit or reduce sales
of our products, potentially resulting in a decline in our market
share, revenues and income.
- Increasing competition and other changes in the third-party
distribution and sales channels on which we depend could reduce our
income and hinder our growth.
- Any failure of our third-party providers to fulfill their
obligations, or our failure to maintain good relationships with our
providers, could adversely impact our business.
- We may be adversely affected if any of our third-party
providers is subject to a successful cyber or security attack.
- Our ability to manage and grow our business successfully can be
impeded by systems and other technological limitations.
- Any significant limitation, failure or security breach of our
information and cyber security infrastructure, software
applications, technology or other systems that are critical to our
operations could disrupt our business and harm our operations and
reputation.
- Our inability to recover successfully, should we experience a
disaster or other business continuity problem, could cause material
financial loss, regulatory actions, legal liability, and/or
reputational harm.
- We depend on key personnel and our financial performance could
be negatively affected by the loss of their services.
- Our future results are dependent upon maintaining an
appropriate expense level.
- Our ability to meet cash needs depends upon certain factors,
including the market value of our assets, our operating cash flows
and our perceived creditworthiness.
- We are dependent on the earnings of our subsidiaries.
- We are subject to extensive, complex, overlapping and
frequently changing rules, regulations, policies, and legal
interpretations.
- We may be adversely affected as a result of new or revised
legislation or regulations or by changes in the interpretation of
existing laws and regulations.
- Global regulatory and legislative actions and reforms have made
the regulatory environment in which we operate more costly and
future actions and reforms could adversely impact our financial
condition and results of operations.
- Failure to comply with the laws, rules or regulations in any of
the jurisdictions in which we operate could result in substantial
harm to our reputation and results of operations.
- Changes in tax laws or exposure to additional income tax
liabilities could have a material impact on our financial
condition, results of operations and liquidity.
- Our contractual obligations may subject us to indemnification
costs and liability to third parties.
- Regulatory and governmental examinations and/or investigations,
litigation and the legal risks associated with our business, could
adversely impact our AUM, increase costs and negatively impact our
profitability and/or our future financial results.
Any forward-looking statement made by us in this press release
speaks only as of the date on which it is made. 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. We
undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005478/en/
Franklin Resources, Inc. Investor Relations: Brian Sevilla (650)
312-4091, brian.sevilla@franklintempleton.com Media Relations: Matt
Walsh (650) 312-2245, matthew.walsh@franklintempleton.com
investors.franklinresources.com
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