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Franklin Resources Inc. BEN reported second-quarter fiscal 2025 (ended March 31) adjusted earnings of 47 cents per share, which matched the Zacks Consensus Estimate. However, the bottom line compared unfavorably with 56 cents reported in the year-ago quarter.
BEN’s results were affected by lower revenues and assets under management (AUM) balance. Yet, lower expenses supported the results to some extent. In light of this, Franklin’s shares rose 1.1% in Friday’s pre-market trading session.
Net income (GAAP basis) was $151.4 million, up 21.9% year over year. Our estimate for the metric was $98.1 million.
Franklin’s Revenues & Expenses Decline Y/Y
Total operating revenues decreased 1.9% year over year to $2.11 billion in the fiscal second quarter. The fall was due to a decline in almost all the components except sales and distribution fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $1.98 billion.
Investment management fees declined 2.4% year over year to $1.67 billion. We projected the same to be $1.57 billion. Sales and distribution fees increased 1.8% to $364.9 million. We projected the metric to be $328 million. Shareholder-servicing fees fell 9% on a year-over-year basis to $61.9 million. We projected the metric to be $58.5 million. Other revenues decreased 12.7% to $11 million.
Total operating expenses fell 2.9% year over year to $1.97 billion. The decline was due to a decrease in compensation and benefits costs, occupancy expenses, and general, administrative, and other expenses. Our estimate for the metric was pegged at $1.88 billion.
Franklin reported an operating margin of 6.9% compared with 6% in the year-ago quarter.
Franklin’s AUM Declines
As of March 31, 2025, total AUM was $1.54 trillion, down 2.2% sequentially. We projected the same to be $1.51 trillion.
Franklin’s long-term net outflows were $26.2 billion in the reported quarter.
The average AUM was $1.57 trillion, which decreased 3.9% sequentially. We had projected an average AUM of $1.54 trillion.
Franklin’s Capital Position
As of March 31, 2025, cash and cash equivalents and investments were $6.1 billion, while total stockholders' equity was $13.2 billion.
Franklin’s Capital Distribution
In the reported quarter, Franklin repurchased 0.5 million shares for $10 million.
Our View on Franklin
Franklin’s efforts to diversify business through acquisitions, its rising AUM, and a strong distribution platform that offers it a first-mover advantage will aid its top line. However, a rising expense base due to the company’s focus on technological upgrades is likely to hurt the bottom line.