Franklin Resources(BEN) - 2025 Q2 - Quarterly Report

Assets Under Management (AUM) - Total assets under management (AUM) as of March 31, 2025, were $1,540.6 billion, an 8% decrease from$ 1,675.7 billion at September 30, 2024[68]. - Average AUM for the three months ended March 31, 2025, was $1,570.5 billion, a 1% decrease from$ 1,581.1 billion in the same period of 2024[73]. - AUM at March 31, 2025, was $1,540.6 billion, down from$ 1,644.7 billion at March 31, 2024, representing a 6% decrease[84]. - AUM decreased by $35.1 billion, or 2%, during the three months ended March 31, 2025, primarily due to$ 26.2 billion of long-term net outflows and a negative impact of $11.6 billion from net market changes[79]. - Cash management AUM increased by 12% to$ 68.9 billion as of March 31, 2025, compared to $61.7 billion in the previous year[72]. - AUM in the U.S. decreased by 7% to$ 1,071.3 billion as of March 31, 2025, compared to $1,155.9 billion in the previous year[84]. - The mix of average AUM for equity increased to 40% in 2025 from 35% in 2024, while fixed income decreased to 29% from 35%[73]. Revenue and Income - Operating revenues for the three months ended March 31, 2025, were$ 2,111.4 million, a 2% decrease compared to $2,152.8 million for the same period in 2024[71]. - Total operating revenues for the six months ended March 31, 2025, were$ 4,363.0 million, up from $4,143.9 million in 2024, representing an increase of 5%[132]. - Net income attributable to Franklin Resources, Inc. for the three months ended March 31, 2025, was$ 151.4 million, a 22% increase from $124.2 million in the prior year[71]. - Adjusted net income for the six months ended March 31, 2025, was$ 574.9 million, a 9% decrease from $635.1 million in the same period of 2024[71]. - Diluted earnings per share for the three months ended March 31, 2025, increased to$ 0.26 from $0.23 in 2024, a rise of 13%[133]. Expenses and Cost Management - Total operating expenses for the three months ended March 31, 2025, were$ 1,965.8 million, a decrease of 3% compared to $2,023.5 million in the same period of 2024[99]. - Compensation and benefits expenses decreased by$ 108.2 million (11%) for the three months ended March 31, 2025, primarily due to headcount reductions[99]. - The company plans to focus on expense management while investing strategically in systems and technology to enhance service quality[70]. - The effective investment management fee rate excluding performance fees was 41.4 basis points for the three months ended March 31, 2025, unchanged from the same period in 2024[93]. - Total operating expenses increased by 5% to $3,998.4 million for the six months ended March 31, 2025, compared to$ 3,808.1 million in the prior year[99]. Cash Flow and Investments - Operating cash flows for the six months ended March 31, 2025, were $(195.3) million, compared to$ (115.3) million in 2024, indicating a worsening cash flow situation[134]. - Cash and cash equivalents as of March 31, 2025, were $2,714.3 million, down from$ 3,261.1 million in 2024, a decrease of 17%[137]. - Net cash used in investing activities increased to $(1,020.6) million for the six months ended March 31, 2025, compared to$ (410.8) million in 2024, indicating a significant rise in investment expenditures[134]. - The company expects to invest more of its post-dividend free cash flow into business growth, including seed capital and acquiring resources for investment teams[146]. Market Performance and Flows - Long-term net flows for the three months ended March 31, 2025, were negative at $(26.2) billion, compared to positive net flows of$ 6.9 billion in the same period of 2024[76]. - Long-term inflows increased by 2% to $86.8 billion compared to the prior year, driven by higher inflows in alternative private funds and equity[80]. - Long-term outflows increased by 45% to$ 113.0 billion, largely due to higher outflows from fixed income vehicles and ongoing regulatory investigations[80]. - The market depreciation primarily occurred in the equity asset class, with a $16.7 billion decrease attributed to market conditions[81]. Shareholder Actions - The company repurchased 0.5 million shares at a cost of$ 10.0 million during the three months ended March 31, 2025, and 0.8 million shares at a cost of $15.8 million during the six months ended March 31, 2025[148]. - The company declared regular dividends of$ 0.64 per share during the six months ended March 31, 2025, compared to $0.62 per share in 2024, reflecting a 3% increase[147]. - The company authorized the repurchase of up to an additional 27.2 million shares in December 2023, bringing the total available for repurchase to 40.0 million shares[148]. Tax and Regulatory Matters - The effective income tax rate increased to 72.8% for the three months ended March 31, 2025, compared to 26.4% in the prior year, primarily due to losses of consolidated investment products (CIPs) with no related tax benefits[124]. - Investments held by consolidated investment products generated losses of$ 164.7 million for the three months ended March 31, 2025, compared to gains of $89.9 million in the prior year[121].