BEN — Franklin Resources, Inc.

Franklin Resources (BEN) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Ending AUM: $1.66 trillion, a 3.1% increase from the prior quarter, but down 1% year-over-year.
• Average AUM: $1.63 trillion, up 4.4% from the prior quarter.
• Adjusted Operating Revenues: $1.82 billion, a 13.9% increase from the previous quarter.
• Adjusted Performance Fees: $177.9 million, significantly up from $58.5 million in the prior quarter.
• Adjusted Operating Income: $472.4 million, a 25% increase from the prior quarter.
• Adjusted Net Income: $357.5 million, up 35.7% quarter-over-quarter; adjusted diluted EPS at $0.67.
• Fiscal Year 2025 Adjusted Net Income: $1.2 billion, a decline of 6.3% year-over-year.

2. Strategic Updates and Business Highlights

• 5-Year Plan Progress: The first year of the plan showed strong momentum, particularly in alternatives, ETFs, and Canvas.
• Private Markets: AUM in alternatives reached $270 billion, with $22.9 billion raised in fiscal 2025, ahead of the $100 billion target for the 5-year plan.
• Acquisition of Apera Asset Management: Enhanced private credit capabilities, bringing total private credit AUM to $95 billion.
• ETF Growth: AUM grew at a 75% compound annual rate since 2023, with 16 consecutive quarters of net inflows.
• Digital Assets: Tokenized AUM reached $1.7 billion, up 75% year-over-year, with innovative features for money market funds.
• Partnerships: Collaborations with Empower for retirement services and Binance for crypto products.

3. Forward Guidance and Outlook

• Fiscal 2026 Fundraising Target: Expected to be between $25 billion and $30 billion, with significant contributions anticipated from Lexington and other alternative strategies.
• Expense Management: Guidance for fiscal 2026 suggests stable expenses with a potential for lower adjusted expenses compared to fiscal 2025, despite increased fundraising efforts.
• Tax Rate: Expected to be between 26% to 28% for fiscal 2026.

4. Bad News, Challenges, or Points of Concern

• Western Asset Management: Continued outflows, with $4 billion in long-term net outflows reported for October. The firm is integrating functions to improve efficiency.
• Declining Fee Rate: The adjusted effective fee rate decreased to 37.5 basis points from 38.3 basis points year-over-year, attributed to growth in lower-fee categories like ETFs and Canvas.
• Market Volatility: Concerns over geopolitical and macroeconomic factors affecting market performance, although the overall outlook remains positive.

5. Notable Q&A Insights

• Alternatives Fundraising: CEO Jennifer Johnson indicated that Lexington's flagship fund could contribute significantly to the fiscal 2026 target, with expectations for the first close in the first half of 2026.
• AI and Tokenization: The firm is leveraging AI partnerships to enhance operational efficiency and is positioned as a leader in tokenization, which is expected to redefine distribution opportunities.
• Credit Quality in Direct Lending: Johnson expressed confidence in credit quality, noting minimal exposure to problematic credits and optimism about the direct lending market, particularly in Europe following the Apera acquisition.
• Distribution Fees: Concerns were raised about rising platform fees from distribution partners like Schwab, but Franklin has not seen significant impact from this yet.

Overall, Franklin Resources demonstrated solid financial performance in Q4 2025, with strategic initiatives aimed at enhancing growth in private markets and digital assets, despite facing challenges with outflows in specific segments and a declining fee rate.