Franklin Resources, Inc. Announces Second Quarter Results

Rhea-AI Summary

Franklin Resources, Inc. (NYSE: BEN) reported a strong financial performance for the quarter ending March 31, 2021. Net income surged to $381.8 million or $0.74 per diluted share, marking an 11% increase from the previous quarter. Adjusted net income reached $403.5 million with diluted earnings per share of $0.79, an 8% rise quarter-over-quarter. Operating revenues rose by 4% to $2.08 billion, a significant 58% increase year-over-year. The firm experienced positive net inflows in alternative assets totaling $6.2 billion, doubling the previous quarter. Total assets under management stood at $1.498 trillion.

Positive

• Net income increased to $381.8 million, up 11% quarter-over-quarter.
• Adjusted net income reached $403.5 million, an 8% rise from the previous quarter.
• Operating revenues rose 4% to $2.08 billion, a 58% increase year-over-year.
• Alternative asset inflows nearly doubled to $6.2 billion from the prior quarter.
• Total assets under management reached $1.498 trillion.

Negative

• Long-term net outflows of $4.2 billion during the quarter.

Franklin Resources, Inc. (the “Company”) [NYSE: BEN] today announced net income¹ of $381.8 million or $0.74 per diluted share for the quarter ended March 31, 2021, as compared to $345.3 million or $0.67 per diluted share for the previous quarter, and $79.1 million or $0.16 per diluted share for the quarter ended March 31, 2020. Operating income² was $456.3 million for the quarter ended March 31, 2021, as compared to $409.1 million for the previous quarter and $339.9 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 principles.³ Adjusted net income³ was $403.5 million and adjusted diluted earnings per share³ was $0.79 for the quarter ended March 31, 2021, as compared to $373.4 million and $0.73 for the previous quarter, and $332.8 million and $0.66 for the quarter ended March 31, 2020. Adjusted operating income³ was $581.1 million for the quarter ended March 31, 2021, as compared to $549.9 million for the previous quarter and $385.9 million in the prior year.

“We are pleased with our continued progress during our second fiscal quarter,” said Jenny Johnson, President and CEO of Franklin Resources, Inc. “After only two quarters as a combined firm, we are experiencing organic growth in a number of key areas, and we are encouraged and excited by our collective potential. Notably, we’re seeing strong performance and momentum across a broad base of investment strategies. Our expanded distribution effort drove an increase in gross sales of 32% from the prior quarter from an array of funds, vehicles and asset classes, led by U.S. retail.

“This quarter, we saw positive net flows into Benefit Street Partners, Clarion Partners, ClearBridge, Fiduciary Trust International, Franklin Equity Group, Franklin Templeton Fixed Income, Martin Currie, Royce and Western Asset. Alternative asset inflows of $6.2 billion nearly doubled from the prior quarter, with record net inflows of $2.9 billion, driven primarily by our real estate, alternative credit, hedge fund and infrastructure strategies. We now have $131 billion in alternative assets under management. Fixed income inflows increased by 27% from the prior quarter to $53.5 billion, driven by a diverse group of fixed income strategies, including core bond, core plus and corporates.

“We’ve created a differentiated global investment management firm which balances scale and specialization and offers expanded opportunities for our shareholders, clients and employees, as well as the financial professionals with whom we partner. Our financial results reflect meaningful progress, and our balance sheet continues to provide strong financial flexibility. I could not be prouder of our employees who demonstrate on a daily basis their professionalism, work ethic and resilience, and are squarely focused on helping our clients around the world achieve the most important milestones of their lives.”

		Quarter Ended								% Change			Quarter Ended				% Change
		31-Mar-21				31-Dec-20				Qtr. vs. Qtr.			31-Mar-20				Year vs. Year
Financial Results2
(in millions, except per share data)
Operating revenues		$	2,076.5			$	1,995.1			4	%		$	1,311.2			58	%
Operating income		456.3				409.1				12	%		339.9				34	%
Operating margin		22.0		%		20.5		%					25.9		%
Net income1		$	381.8			$	345.3			11	%		$	79.1			383	%
Diluted earnings per share		0.74				0.67				10	%		0.16				363	%
As adjusted (non-GAAP):3
Adjusted operating income		$	581.1			$	549.9			6	%		$	385.9			51	%
Adjusted operating margin		38.0		%		37.2		%					43.2		%
Adjusted net income		$	403.5			$	373.4			8	%		$	332.8			21	%
Adjusted diluted earnings per share		0.79				0.73				8	%		0.66				20	%
Assets Under Management
(in billions)
Ending		$	1,498.9			$	1,498.0			0	%		$	580.3			158	%
Average4		1,497.9				1,443.8				4	%		655.8				128	%
Long-term net flows		(4.2		)		(4.5		)					(25.4		)

Total assets under management (“AUM”) were $1,498.9 billion at March 31, 2021, up $0.9 billion during the quarter due to $3.9 billion of net market change, distributions and other and $1.2 billion of cash management net inflows, partially offset by $4.2 billion of long-term net outflows.

Cash and cash equivalents and investments were $5.2 billion at March 31, 2021, as compared to $4.3 billion at September 30, 2020. Including the Company’s direct investments in consolidated investment products, cash and cash equivalents and investments were $6.2 billion at March 31, 2021, as compared to $5.1 billion at September 30, 2020. Total stockholders’ equity was $11.7 billion at March 31, 2021, as compared to $11.0 billion at September 30, 2020. The Company had 504.3 million shares of common stock outstanding at March 31, 2021, as compared to 495.1 million shares outstanding at September 30, 2020. The Company repurchased 1.7 million shares of its common stock for a total cost of $45.8 million during the quarter ended March 31, 2021.

Conference Call Information

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

Ms. Johnson and Messrs. Johnson, Nicholls and Spector will also lead a live teleconference today at 10:00 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 (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 3991013, after 1:00 p.m. Eastern Time on May 4, 2021 through May 11, 2021, 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 INCOME2 Unaudited
(in millions, except per share data)		Three Months Ended March 31,								% Change			Six Months Ended March 31,								% Change
		2021				2020							2021				2020
Operating Revenues
Investment management fees		$	1,598.4			$	908.2			76	%		$	3,138.8			$	1,887.9			66	%
Sales and distribution fees		413.6				341.7				21	%		810.5				693.2				17	%
Shareholder servicing fees		55.7				54.8				2	%		105.1				104.8				0	%
Other		8.8				6.5				35	%		17.2				14.5				19	%
Total operating revenues		2,076.5				1,311.2				58	%		4,071.6				2,700.4				51	%
Operating Expenses
Compensation and benefits		732.3				365.7				100	%		1,457.8				755.1				93	%
Sales, distribution and marketing		541.8				423.9				28	%		1,048.3				867.8				21	%
Information systems and technology		117.5				61.8				90	%		234.0				124.3				88	%
Occupancy		53.8				34.4				56	%		109.5				68.9				59	%
Amortization of intangible assets		57.9				4.4				NM			116.1				9.2				NM
General, administrative and other		116.9				81.1				44	%		240.5				162.3				48	%
Total operating expenses		1,620.2				971.3				67	%		3,206.2				1,987.6				61	%
Operating Income		456.3				339.9				34	%		865.4				712.8				21	%
Other Income (Expenses)
Investment and other income (losses), net		67.1				(181.0)				NM			144.3				(113.1		)		NM
Interest expense		(15.9		)		(3.7		)		330	%		(45.6		)		(9.8		)		365	%
Investment and other income (losses) of consolidated investment products, net		111.2				(40.9		)		NM			202.3				(25.7		)		NM
Expenses of consolidated investment products		(5.2		)		(11.4		)		(54	%)		(15.6		)		(15.7		)		(1	%)
Other income (expenses), net		157.2				(237.0		)		NM			285.4				(164.3		)		NM
Income before taxes		613.5

FAQ

What were the Q2 2021 earnings for Franklin Resources (BEN)?

Franklin Resources reported net income of $381.8 million, or $0.74 per diluted share for Q2 2021.

How did Franklin Resources' revenue change in Q2 2021?

Operating revenues increased by 4% quarter-over-quarter, totaling $2.08 billion.

What were the adjusted earnings per share for BEN in Q2 2021?

The adjusted diluted earnings per share for BEN was $0.79.

Did Franklin Resources experience any asset inflows or outflows in Q2 2021?

The firm reported long-term net outflows of $4.2 billion but saw alternative asset inflows of $6.2 billion.

What is the total assets under management for Franklin Resources as of March 31, 2021?

Total assets under management were $1.498 trillion.