(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Exhibit No. | Description | ||
99.1 | |||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
FRANKLIN RESOURCES, INC. | ||
Date: | July 28, 2020 | /s/ Matthew Nicholls |
Matthew Nicholls | ||
Executive Vice President and Chief Financial Officer | ||
Date: | July 28, 2020 | /s/ Gwen L. Shaneyfelt |
Gwen L. Shaneyfelt | ||
Chief Accounting Officer |
Contact: | 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 |
Quarter Ended | % Change | Quarter Ended | % Change | |||||||||||||||
30-Jun-20 | 31-Mar-20 | Qtr. vs. Qtr. | 30-Jun-19 | Year vs. Year | ||||||||||||||
Financial Results | ||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||
Operating revenues | $ | 1,188.1 | $ | 1,338.3 | (11 | %) | $ | 1,476.7 | (20 | %) | ||||||||
Operating income | 253.7 | 356.1 | (29 | %) | 374.9 | (32 | %) | |||||||||||
Operating margin | 21.4 | % | 26.6 | % | 25.4 | % | ||||||||||||
Net income¹ | $ | 290.4 | $ | 79.1 | 267 | % | $ | 245.9 | 18 | % | ||||||||
Diluted earnings per share | 0.58 | 0.16 | 263 | % | 0.48 | 21 | % | |||||||||||
As adjusted (non-GAAP):2 | ||||||||||||||||||
Adjusted operating income | $ | 270.8 | $ | 385.9 | (30 | )% | $ | 430.7 | (37 | )% | ||||||||
Adjusted operating margin | 34.0 | % | 43.2 | % | 43.4 | % | ||||||||||||
Adjusted net income | $ | 348.9 | $ | 332.8 | 5 | % | $ | 281.5 | 24 | % | ||||||||
Adjusted diluted earnings per share | 0.70 | 0.66 | 6 | % | 0.55 | 27 | % | |||||||||||
Assets Under Management | ||||||||||||||||||
(in billions) | ||||||||||||||||||
Ending | $ | 622.8 | $ | 580.3 | 7 | % | $ | 715.2 | (13 | %) | ||||||||
Average3 | 605.0 | 655.8 | (8 | %) | 710.8 | (15 | %) | |||||||||||
Net flows | (11.3 | ) | (25.4 | ) | (5.4 | ) |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME Unaudited | ||||||||||||||||||||||
(in millions, except per share data and AUM) | Three Months Ended June 30, | % Change | Nine Months Ended June 30, | % Change | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||
Investment management fees | $ | 809.2 | $ | 1,019.4 | (21 | %) | $ | 2,697.1 | $ | 2,983.6 | (10 | %) | ||||||||||
Sales and distribution fees | 302.1 | 367.5 | (18 | %) | 995.3 | 1,080.8 | (8 | %) | ||||||||||||||
Shareholder servicing fees | 44.6 | 52.7 | (15 | %) | 149.4 | 164.9 | (9 | %) | ||||||||||||||
Other | 32.2 | 37.1 | (13 | %) | 97.3 | 92.7 | 5 | % | ||||||||||||||
Total operating revenues | 1,188.1 | 1,476.7 | (20 | %) | 3,939.1 | 4,322.0 | (9 | %) | ||||||||||||||
Operating Expenses | ||||||||||||||||||||||
Sales, distribution and marketing | 368.6 | 462.4 | (20 | %) | 1,236.4 | 1,356.3 | (9 | %) | ||||||||||||||
Compensation and benefits | 386.5 | 437.7 | (12 | %) | 1,141.6 | 1,202.3 | (5 | %) | ||||||||||||||
Information systems and technology | 62.1 | 65.7 | (5 | %) | 186.4 | 188.7 | (1 | %) | ||||||||||||||
Occupancy | 31.5 | 32.2 | (2 | %) | 100.4 | 94.8 | 6 | % | ||||||||||||||
General, administrative and other | 85.7 | 103.8 | (17 | %) | 271.8 | 314.0 | (13 | %) | ||||||||||||||
Total operating expenses | 934.4 | 1,101.8 | (15 | %) | 2,936.6 | 3,156.1 | (7 | %) | ||||||||||||||
Operating Income | 253.7 | 374.9 | (32 | %) | 1,002.5 | 1,165.9 | (14 | %) | ||||||||||||||
Other Income (Expenses) | ||||||||||||||||||||||
Investment and other income (losses), net | 22.9 | 44.2 | (48 | %) | (166.5 | ) | 103.8 | NM | ||||||||||||||
Interest expense | (6.8 | ) | (5.6 | ) | 21 | % | (17.7 | ) | (17.7 | ) | 0% | |||||||||||
Other income (expenses), net | 16.1 | 38.6 | (58 | %) | (184.2 | ) | 86.1 | NM | ||||||||||||||
Income before taxes | 269.8 | 413.5 | (35 | %) | 818.3 | 1,252.0 | (35 | %) | ||||||||||||||
Taxes on income4 | 16.1 | 158.9 | (90 | %) | 157.7 | 355.8 | (56 | %) | ||||||||||||||
Net income | 253.7 | 254.6 | 0 | % | 660.6 | 896.2 | (26 | %) | ||||||||||||||
Less: net income (loss) attributable to | ||||||||||||||||||||||
Redeemable noncontrolling interests | 31.3 | 0.1 | NM | 11.8 | 6.2 | 90 | % | |||||||||||||||
Nonredeemable noncontrolling interests | (68.0 | ) | 8.6 | NM | (71.2 | ) | 0.7 | NM | ||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 290.4 | $ | 245.9 | 18 | % | $ | 720.0 | $ | 889.3 | (19 | %) | ||||||||||
Earnings per Share | ||||||||||||||||||||||
Basic | $ | 0.58 | $ | 0.48 | 21 | % | $ | 1.44 | $ | 1.74 | (17 | %) | ||||||||||
Diluted | 0.58 | 0.48 | 21 | % | 1.44 | 1.74 | (17 | %) | ||||||||||||||
Dividends Declared per Share | $ | 0.27 | $ | 0.26 | 4 | % | $ | 0.81 | $ | 0.78 | 4 | % | ||||||||||
Average Shares Outstanding | ||||||||||||||||||||||
Basic | 490.4 | 501.6 | (2 | %) | 492.2 | 505.6 | (3 | %) | ||||||||||||||
Diluted | 490.7 | 502.3 | (2 | %) | 492.7 | 506.1 | (3 | %) | ||||||||||||||
Operating Margin | 21.4 | % | 25.4 | % | 25.4 | % | 27.0 | % | ||||||||||||||
AUM (in billions) | ||||||||||||||||||||||
Ending | $ | 622.8 | $ | 715.2 | (13 | %) | $ | 622.8 | $ | 715.2 | (13 | %) | ||||||||||
Average | 605.0 | 710.8 | (15 | %) | 654.0 | 696.9 | (6 | %) | ||||||||||||||
Net flows | (11.3 | ) | (5.4 | ) | (49.0 | ) | (19.0 | ) |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME Unaudited | |||||||||||||||||||||||
(in millions, except per share data) | Three Months Ended | % Change | Three Months Ended | ||||||||||||||||||||
30-Jun-20 | 31-Mar-20 | 31-Dec-19 | 30-Sep-19 | 30-Jun-19 | |||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Investment management fees | $ | 809.2 | $ | 908.2 | (11 | %) | $ | 979.7 | $ | 1,001.6 | $ | 1,019.4 | |||||||||||
Sales and distribution fees | 302.1 | 341.7 | (12 | %) | 351.5 | 363.8 | 367.5 | ||||||||||||||||
Shareholder servicing fees | 44.6 | 54.8 | (19 | %) | 50.0 | 51.4 | 52.7 | ||||||||||||||||
Other | 32.2 | 33.6 | (4 | %) | 31.5 | 35.7 | 37.1 | ||||||||||||||||
Total operating revenues | 1,188.1 | 1,338.3 | (11 | %) | 1,412.7 | 1,452.5 | 1,476.7 | ||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Sales, distribution and marketing | 368.6 | 423.9 | (13 | %) | 443.9 | 463.3 | 462.4 | ||||||||||||||||
Compensation and benefits | 386.5 | 365.7 | 6 | % | 389.4 | 382.4 | 437.7 | ||||||||||||||||
Information systems and technology | 62.1 | 61.8 | 0 | % | 62.5 | 69.8 | 65.7 | ||||||||||||||||
Occupancy | 31.5 | 34.4 | (8 | %) | 34.5 | 38.8 | 32.2 | ||||||||||||||||
General, administrative and other | 85.7 | 96.4 | (11 | %) | 89.7 | 106.7 | 103.8 | ||||||||||||||||
Total operating expenses | 934.4 | 982.2 | (5 | %) | 1,020.0 | 1,061.0 | 1,101.8 | ||||||||||||||||
Operating Income | 253.7 | 356.1 | (29 | %) | 392.7 | 391.5 | 374.9 | ||||||||||||||||
Other Income (Expenses) | |||||||||||||||||||||||
Investment and other income (losses), net | 22.9 | (249.0 | ) | NM | 59.6 | 11.3 | 44.2 | ||||||||||||||||
Interest expense | (6.8 | ) | (4.2 | ) | 62 | % | (6.7 | ) | (7.0 | ) | (5.6 | ) | |||||||||||
Other income (expenses), net | 16.1 | (253.2 | ) | NM | 52.9 | 4.3 | 38.6 | ||||||||||||||||
Income before taxes | 269.8 | 102.9 | 162 | % | 445.6 | 395.8 | 413.5 | ||||||||||||||||
Taxes on income4 | 16.1 | 44.1 | (63 | %) | 97.5 | 86.5 | 158.9 | ||||||||||||||||
Net income | 253.7 | 58.8 | 331 | % | 348.1 | 309.3 | 254.6 | ||||||||||||||||
Less: net income (loss) attributable to | |||||||||||||||||||||||
Redeemable noncontrolling interests | 31.3 | (28.5 | ) | NM | 9.0 | — | 0.1 | ||||||||||||||||
Nonredeemable noncontrolling interests | (68.0 | ) | 8.2 | NM | (11.4 | ) | 2.9 | 8.6 | |||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 290.4 | $ | 79.1 | 267 | % | $ | 350.5 | $ | 306.4 | $ | 245.9 | |||||||||||
Earnings per Share | |||||||||||||||||||||||
Basic | $ | 0.58 | $ | 0.16 | 263 | % | $ | 0.70 | $ | 0.61 | $ | 0.48 | |||||||||||
Diluted | 0.58 | 0.16 | 263 | % | 0.70 | 0.61 | 0.48 | ||||||||||||||||
Dividends Declared per Share | $ | 0.27 | $ | 0.27 | 0% | $ | 0.27 | $ | 0.26 | $ | 0.26 | ||||||||||||
Average Shares Outstanding | |||||||||||||||||||||||
Basic | 490.4 | 491.5 | 0 | % | 494.7 | 497.9 | 501.6 | ||||||||||||||||
Diluted | 490.7 | 491.8 | 0 | % | 495.3 | 498.8 | 502.3 | ||||||||||||||||
Operating Margin | 21.4 | % | 26.6 | % | 27.8 | % | 27.0 | % | 25.4 | % |
(in billions) | Three Months Ended June 30, | % Change | Nine Months Ended June 30, | % Change | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Beginning AUM | $ | 580.3 | $ | 712.3 | (19 | %) | $ | 692.6 | $ | 717.1 | (3 | %) | ||||||||||
Long-term sales | 21.9 | 28.4 | (23 | %) | 72.3 | 77.1 | (6 | %) | ||||||||||||||
Long-term redemptions | (36.7 | ) | (38.2 | ) | (4 | %) | (136.7 | ) | (116.8 | ) | 17 | % | ||||||||||
Long-term net exchanges | — | — | NM | (1.6 | ) | (0.5 | ) | 220 | % | |||||||||||||
Long-term reinvested distributions | 3.5 | 4.4 | (20 | %) | 17.0 | 21.2 | (20 | %) | ||||||||||||||
Net flows | (11.3 | ) | (5.4 | ) | 109 | % | (49.0 | ) | (19.0 | ) | 158 | % | ||||||||||
Acquisitions | 3.5 | — | NM | 9.1 | 26.4 | (66 | %) | |||||||||||||||
Net market change, distributions and other5 | 50.3 | 8.3 | 506 | % | (29.9 | ) | (9.3 | ) | 222 | % | ||||||||||||
Ending AUM | $ | 622.8 | $ | 715.2 | (13 | %) | $ | 622.8 | $ | 715.2 | (13 | %) |
(in billions) | 30-Jun-20 | 31-Mar-20 | % Change | 31-Dec-19 | 30-Sep-19 | 30-Jun-19 | |||||||||||||||||
Equity | |||||||||||||||||||||||
Global/international | $ | 127.4 | $ | 114.7 | 11 | % | $ | 163.5 | $ | 158.4 | $ | 169.8 | |||||||||||
United States | 115.6 | 92.7 | 25 | % | 117.0 | 112.1 | 112.4 | ||||||||||||||||
Total equity | 243.0 | 207.4 | 17 | % | 280.5 | 270.5 | 282.2 | ||||||||||||||||
Multi-Asset/Balanced | 129.3 | 118.2 | 9 | % | 136.5 | 134.3 | 136.0 | ||||||||||||||||
Fixed Income | |||||||||||||||||||||||
Tax-free | 66.3 | 64.9 | 2 | % | 66.7 | 66.3 | 65.0 | ||||||||||||||||
Taxable | |||||||||||||||||||||||
Global/international | 106.6 | 113.3 | (6 | %) | 136.7 | 144.6 | 154.9 | ||||||||||||||||
United States | 67.2 | 65.8 | 2 | % | 67.5 | 67.4 | 67.9 | ||||||||||||||||
Total fixed income | 240.1 | 244.0 | (2 | %) | 270.9 | 278.3 | 287.8 | ||||||||||||||||
Cash Management | 10.4 | 10.7 | (3 | %) | 10.4 | 9.5 | 9.2 | ||||||||||||||||
Total AUM | $ | 622.8 | $ | 580.3 | 7 | % | $ | 698.3 | $ | 692.6 | $ | 715.2 | |||||||||||
Average AUM for the Three-Month Period | $ | 605.0 | $ | 655.8 | (8 | %) | $ | 693.8 | $ | 702.0 | $ | 710.8 |
As of and for the Three Months Ended | |||||||||||||||||||||
(in billions) | 30-Jun-20 | % of Total | 31-Mar-20 | % of Total | 30-Jun-19 | % of Total | |||||||||||||||
Long-Term Sales | |||||||||||||||||||||
United States | $ | 13.3 | 61 | % | $ | 15.9 | 57 | % | $ | 14.1 | 50 | % | |||||||||
International | 8.6 | 39 | % | 11.8 | 43 | % | 14.3 | 50 | % | ||||||||||||
Total long-term sales | $ | 21.9 | 100 | % | $ | 27.7 | 100 | % | $ | 28.4 | 100 | % | |||||||||
Long-Term Redemptions | |||||||||||||||||||||
United States | $ | (23.0 | ) | 63 | % | $ | (31.9 | ) | 59 | % | $ | (21.2 | ) | 55 | % | ||||||
International | (13.7 | ) | 37 | % | (22.4 | ) | 41 | % | (17.0 | ) | 45 | % | |||||||||
Total long-term redemptions | $ | (36.7 | ) | 100 | % | $ | (54.3 | ) | 100 | % | $ | (38.2 | ) | 100 | % | ||||||
AUM | |||||||||||||||||||||
United States | $ | 439.7 | 71 | % | $ | 408.3 | 70 | % | $ | 487.9 | 68 | % | |||||||||
International | 183.1 | 29 | % | 172.0 | 30 | % | 227.3 | 32 | % | ||||||||||||
Total AUM | $ | 622.8 | 100 | % | $ | 580.3 | 100 | % | $ | 715.2 | 100 | % |
(in billions) | Equity | Multi-Asset/ Balanced | Fixed Income | Cash Management | Total | |||||||||||||||||||||||||||
for the three months ended June 30, 2020 | Global/ International | United States | Tax-Free | Taxable Global/ International | Taxable United States | |||||||||||||||||||||||||||
AUM at April 1, 2020 | $ | 114.7 | $ | 92.7 | $ | 118.2 | $ | 64.9 | $ | 113.3 | $ | 65.8 | $ | 10.7 | $ | 580.3 | ||||||||||||||||
Long-term sales | 4.2 | 7.1 | 2.8 | 1.9 | 3.3 | 2.6 | — | 21.9 | ||||||||||||||||||||||||
Long-term redemptions | (8.5 | ) | (6.2 | ) | (5.1 | ) | (1.9 | ) | (12.5 | ) | (2.5 | ) | — | (36.7 | ) | |||||||||||||||||
Long-term net exchanges | (0.3 | ) | 0.6 | (0.2 | ) | — | (0.5 | ) | 0.4 | — | — | |||||||||||||||||||||
Long-term reinvested distributions | 0.1 | 0.4 | 1.7 | 0.4 | 0.7 | 0.2 | — | 3.5 | ||||||||||||||||||||||||
Net flows | (4.5 | ) | 1.9 | (0.8 | ) | 0.4 | (9.0 | ) | 0.7 | — | (11.3 | ) | ||||||||||||||||||||
Acquisition | — | — | 3.5 | — | — | — | — | 3.5 | ||||||||||||||||||||||||
Net market change, distributions and other5 | 17.2 | 21.0 | 8.4 | 1.0 | 2.3 | 0.7 | (0.3 | ) | 50.3 | |||||||||||||||||||||||
AUM at June 30, 2020 | $ | 127.4 | $ | 115.6 | $ | 129.3 | $ | 66.3 | $ | 106.6 | $ | 67.2 | $ | 10.4 | $ | 622.8 |
(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 June 30, 2019 | Global/ International | United States | Tax-Free | Taxable Global/ International | Taxable United States | |||||||||||||||||||||||||||
AUM at April 1, 2019 | $ | 174.4 | $ | 109.5 | $ | 134.7 | $ | 63.4 | $ | 152.5 | $ | 68.9 | $ | 8.9 | $ | 712.3 | ||||||||||||||||
Long-term sales | 4.4 | 4.3 | 3.7 | 2.1 | 12.1 | 1.8 | — | 28.4 | ||||||||||||||||||||||||
Long-term redemptions | (10.1 | ) | (5.4 | ) | (5.6 | ) | (1.9 | ) | (12.0 | ) | (3.2 | ) | — | (38.2 | ) | |||||||||||||||||
Long-term net exchanges | (0.9 | ) | (0.6 | ) | 1.4 | 0.1 | — | — | — | — | ||||||||||||||||||||||
Long-term reinvested distributions | 0.3 | 0.6 | 1.6 | 0.4 | 1.2 | 0.3 | — | 4.4 | ||||||||||||||||||||||||
Net flows | (6.3 | ) | (1.1 | ) | 1.1 | 0.7 | 1.3 | (1.1 | ) | — | (5.4 | ) | ||||||||||||||||||||
Net market change, distributions and other5 | 1.7 | 4.0 | 0.2 | 0.9 | 1.1 | 0.1 | 0.3 | 8.3 | ||||||||||||||||||||||||
AUM at June 30, 2019 | $ | 169.8 | $ | 112.4 | $ | 136.0 | $ | 65.0 | $ | 154.9 | $ | 67.9 | $ | 9.2 | $ | 715.2 |
• | Revenues and expenses of consolidated investment products, net of 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. |
• | Amortization and impairment of intangible assets. |
• | Special termination benefits related to workforce optimization initiatives related to the pending acquisition of Legg Mason, Inc. (“Legg Mason”) in the fiscal year ended September 30, 2020 (“fiscal year 2020”), and voluntary separation and workforce reduction initiatives of 4.5% of our global workforce in the fiscal year ended September 30, 2019 (“fiscal year 2019”). |
• | 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, net of revenues eliminated upon consolidation of investment products. |
• | 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 workforce optimization initiatives related to the pending acquisition of Legg Mason in fiscal year 2020, and 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. |
(in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||
30-Jun-20 | 31-Mar-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||||||
Operating income | $ | 253.7 | $ | 356.1 | $ | 374.9 | $ | 1,002.5 | $ | 1,165.9 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Operating income of consolidated investment products* | (16.2 | ) | (10.0 | ) | (18.8 | ) | (39.3 | ) | (40.4 | ) | ||||||||||
Acquisition-related retention | 15.5 | 27.2 | 21.5 | 64.0 | 43.0 | |||||||||||||||
Other acquisition-related expenses (gain) | 4.4 | 5.4 | (0.1 | ) | 9.6 | 9.3 | ||||||||||||||
Amortization of intangible assets | 4.7 | 4.4 | 5.1 | 13.9 | 9.7 | |||||||||||||||
Impairment of intangible assets | — | 2.8 | 9.3 | 2.8 | 9.3 | |||||||||||||||
Special termination benefits | 8.7 | — | 38.8 | 8.7 | 50.6 | |||||||||||||||
Adjusted operating income | $ | 270.8 | $ | 385.9 | $ | 430.7 | $ | 1,062.2 | $ | 1,247.4 | ||||||||||
Total operating revenues | $ | 1,188.1 | $ | 1,338.3 | $ | 1,476.7 | $ | 3,939.1 | $ | 4,322.0 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Sales and distribution fees | (302.1 | ) | (341.7 | ) | (367.5 | ) | (995.3 | ) | (1,080.8 | ) | ||||||||||
Allocation of investment management fees for sales, distribution and marketing expenses | (66.5 | ) | (82.2 | ) | (94.9 | ) | (241.1 | ) | (275.5 | ) | ||||||||||
Net revenues of consolidated investment products* | (22.0 | ) | (20.9 | ) | (21.4 | ) | (59.7 | ) | (51.7 | ) | ||||||||||
Adjusted operating revenues | $ | 797.5 | $ | 893.5 | $ | 992.9 | $ | 2,643.0 | $ | 2,914.0 | ||||||||||
Operating margin | 21.4 | % | 26.6 | % | 25.4 | % | 25.4 | % | 27.0 | % | ||||||||||
Adjusted operating margin | 34.0 | % | 43.2 | % | 43.4 | % | 40.2 | % | 42.8 | % |
(in millions, except per share data) | Three Months Ended | Nine Months Ended | ||||||||||||||||||
30-Jun-20 | 31-Mar-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||||||
Net income attributable to Franklin Resources, Inc. | $ | 290.4 | $ | 79.1 | $ | 245.9 | $ | 720.0 | $ | 889.3 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Net (income) loss of consolidated investment products* | 5.7 | (16.4 | ) | 0.4 | (6.1 | ) | 1.6 | |||||||||||||
Acquisition-related retention | 15.5 | 27.2 | 21.5 | 64.0 | 43.0 | |||||||||||||||
Other acquisition-related expenses (gain) | 2.7 | 5.4 | (0.1 | ) | 7.9 | 9.3 | ||||||||||||||
Amortization of intangible assets | 4.7 | 4.4 | 5.1 | 13.9 | 9.7 | |||||||||||||||
Impairment of intangible assets | — | 2.8 | 9.3 | 2.8 | 9.3 | |||||||||||||||
Special termination benefits | 8.7 | — | 38.8 | 8.7 | 50.6 | |||||||||||||||
Unrealized investment (gains) losses included in investment and other (income) losses, net | 26.7 | 257.6 | (24.9 | ) | 247.9 | (9.9 | ) | |||||||||||||
Net income tax benefit of adjustments | (5.5 | ) | (27.3 | ) | (14.5 | ) | (39.1 | ) | (30.0 | ) | ||||||||||
Adjusted net income | $ | 348.9 | $ | 332.8 | $ | 281.5 | $ | 1,020.0 | $ | 972.9 | ||||||||||
Diluted earnings per share | $ | 0.58 | $ | 0.16 | $ | 0.48 | $ | 1.44 | $ | 1.74 | ||||||||||
Adjusted diluted earnings per share | 0.70 | 0.66 | 0.55 | 2.04 | 1.90 |
* | The impact of consolidated investment products is summarized as follows: |
(in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||
30-Jun-20 | 31-Mar-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||||||
Revenues of consolidated investment products | $ | 27.0 | $ | 27.1 | $ | 28.3 | $ | 77.6 | $ | 75.4 | ||||||||||
Revenues eliminated upon consolidation of investment products | (5.0 | ) | (6.2 | ) | (6.9 | ) | (17.9 | ) | (23.7 | ) | ||||||||||
Net revenues of consolidated investment products | 22.0 | 20.9 | 21.4 | 59.7 | 51.7 | |||||||||||||||
Expenses of consolidated investment products | 5.8 | 10.9 | 2.6 | 20.4 | 11.3 | |||||||||||||||
Operating income of consolidated investment products | 16.2 | 10.0 | 18.8 | 39.3 | 40.4 | |||||||||||||||
Investment and other losses, net of consolidated investment products | (42.0 | ) | (16.9 | ) | (16.6 | ) | (78.9 | ) | (38.3 | ) | ||||||||||
Less: income (loss) attributable to noncontrolling interests of consolidated investment products | (20.1 | ) | (23.3 | ) | 2.6 | (45.7 | ) | 3.7 | ||||||||||||
Net income (loss) of consolidated investment products | $ | (5.7 | ) | $ | 16.4 | $ | (0.4 | ) | $ | 6.1 | $ | (1.6 | ) |
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, 2020 includes a $38.6 million tax benefit from capital losses subsequent to the change in corporate tax structure of a foreign holding company to a U.S. branch. 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. |
• | Our pending 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. |
• | Failure to establish adequate controls and risk management policies, or the circumvention of controls and policies, could have an adverse effect on our operations, reputation and financial position. |
• | Failure to protect our intellectual property may negatively impact our business. |
• | 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. |
• | 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. |
• | Our contractual obligations may subject us to indemnification costs and liability to third parties. |
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