Franklin Resources, Inc. (BEN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a negative sentiment due to declining financial metrics such as operating income, margins, and EPS. Although there are optimistic elements like infrastructure investment and AI/tokenization efforts, the Q&A reveals unclear responses and challenges in fundraising. The company's expenses have increased, and while there is a cost-saving plan, it may not offset the negative financial performance. Overall, the negative aspects outweigh the positives, suggesting a likely stock price decline in the near term.
Key Financial Performance
Ending AUM $1.66 trillion, reflecting an increase of 3.1% from the prior quarter. The increase was due to elevated performance fees and higher average AUM.
Average AUM $1.63 trillion, a 4.4% increase from the prior quarter. This was driven by strong public equity gains and easing monetary policy.
Adjusted Operating Revenues $1.82 billion, a 13.9% increase from the prior quarter. This was due to elevated performance fees and higher average AUM.
Adjusted Performance Fees $177.9 million compared to $58.5 million in the prior quarter, reflecting strong investment performance.
Adjusted Operating Expenses $1.34 billion, an increase of 10.5% from the prior quarter. This was primarily due to higher incentive compensation on higher revenues and performance fee-related expenses.
Adjusted Operating Income $472.4 million, a 25% increase from the prior quarter. This was driven by higher revenues and cost-saving initiatives.
Adjusted Operating Margin 26%, up from 23.7% in the prior quarter, reflecting improved efficiency and higher revenues.
Adjusted Net Income $357.5 million, a 35.7% increase from the prior quarter. This was due to higher adjusted operating income and a lower tax rate.
Adjusted Diluted Earnings Per Share $0.67, a 36.7% increase from the prior quarter, driven by higher adjusted operating income and a lower tax rate.
Fiscal Year Ending AUM $1.66 trillion, a decrease of 1% from the prior year, attributed to Western outflows.
Fiscal Year Average AUM $1.61 trillion, a 2.6% increase from the prior year, driven by higher average AUM and elevated performance fees.
Fiscal Year Adjusted Operating Revenues $6.7 billion, a 2.1% increase from the prior year, due to higher average AUM and elevated performance fees.
Fiscal Year Adjusted Performance Fees $364.6 million, an increase from $293.4 million in the prior year, reflecting strong investment performance.
Fiscal Year Adjusted Operating Expenses $5.06 billion, a 4.3% increase from the prior year, due to higher incentive compensation and strategic investments.
Fiscal Year Adjusted Operating Income $1.64 billion, a 4.3% decrease from the prior year, reflecting higher expenses and Western outflows.
Fiscal Year Adjusted Operating Margin 24.5%, down from 26.1% in the prior year, due to higher expenses and Western outflows.
Fiscal Year Adjusted Net Income $1.2 billion, a 6.3% decrease from the prior year, due to lower adjusted operating income and lower adjusted other income.
Fiscal Year Adjusted Diluted Earnings Per Share $2.22, a 7.5% decrease from the prior year, reflecting lower adjusted operating income and lower adjusted other income.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Tokenized and Digital AUM: Expanded product lineup with tokenized and digital AUM reaching $1.7 billion, up 75% from the beginning of the year.
Infrastructure Partnership: Announced partnerships with Actis, DigitalBridge, and Copenhagen Infrastructure Partners to develop diversified perpetual infrastructure solutions.
Private Market Fundraising: Raised $22.9 billion in private markets, ahead of the 5-year $100 billion fundraising goal.
New Tokenized Funds: Launched new tokenized funds in UCITS, VCC, and private fund wrappers.
Global Client Reach: Expanded client base to over 150 countries, with strong growth in retail SMAs, ETFs, and Canvas.
European Market Expansion: Acquired Apera Asset Management, enhancing private credit AUM to $95 billion and expanding reach in European markets.
Uzbekistan National Investment Fund: Appointed trustee and manager of the $1.68 billion National Investment Fund of the Republic of Uzbekistan.
AI Integration: Scaled AI initiatives across investment management, operations, sales, and marketing, driving measurable results.
Expense Management: Achieved $200 million in gross expense efficiencies for fiscal 2026, funding ongoing investments and acquisitions.
Investment Management Structure: Simplified structure to enhance talent development and collaboration across public markets.
Retirement Market Expansion: Partnered with Empower to include private market investments in defined contribution plans, targeting a $3 trillion addressable market.
Digital Asset Innovation: Developed blockchain-based tokenization and transfer agent platform, offering unique features like intraday yield calculation.
OCIO Business Expansion: Hired Rich Nuzum to lead the expansion of the OCIO business, focusing on strategic advice for asset owners.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Market Volatility: The company acknowledges that volatility in fixed income markets and policy uncertainty, such as government shutdowns and shifting rate expectations, could impact performance and returns.
Western Asset Management Challenges: Western Asset Management has faced significant challenges, including long-term net outflows and a $200 million noncash impairment charge related to mutual fund contracts. These issues have affected the company's overall financial performance.
Expense Management: The company is focused on expense discipline and operational integration to manage costs. However, higher incentive compensation and professional fees have increased expenses, which could pressure margins.
Regulatory and Tax Risks: The company anticipates a higher tax rate of 26%-28% in fiscal 2026 due to increased global tax rates and a high proportion of U.S. income, which could impact net income.
Private Markets Fundraising: While private markets fundraising has been strong, the company acknowledges that activity has been selective, and market conditions could impact future fundraising efforts.
Integration and Operational Risks: The integration of functions across specialist investment managers and the unification of investment management technology pose operational risks and could lead to disruptions if not executed effectively.
Geopolitical and Macroeconomic Risks: The company notes a complex geopolitical and macroeconomic backdrop, including geopolitical tensions and inflation, which could impact market performance and client demand.
Client Retention and Flows: Despite positive net flows in some areas, challenges in retaining clients and managing outflows, particularly in Western Asset Management, remain a concern.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Private Market Fundraising: In fiscal 2026, private market fundraising is anticipated to increase to between $25 billion and $30 billion.
Private Market Wealth Management Contribution: Private market wealth management is expected to grow its contribution to private market fundraising from 20% to between 25% and 30% in the next few years.
Infrastructure Investment Opportunity: The company is developing a diversified perpetual infrastructure solution for the wealth channel, targeting the $94 trillion global funding need by 2040.
Retail Alternatives Market Growth: The retail alternatives market is projected to expand from $1 trillion to $5 trillion by 2029, with Franklin Templeton positioned to capture growth.
Defined Contribution Plans and Alternatives: Allocations to alternatives in U.S. defined contribution plans are projected to create a $3 trillion addressable market over the next decade.
ETF Business Growth: The ETF business has grown at a 75% compound annual rate since 2023, with a goal to achieve $100 billion in ETF AUM within 5 years.
Retail SMA Market Growth: Retail SMAs, currently about $4 trillion, are expected to double by 2030, with Franklin Templeton positioned to capture this growth.
Tokenized Real-World Assets: The market for tokenized real-world assets is projected to grow from $600 billion today to nearly $19 trillion by 2033, with Franklin Templeton leading in tokenized fund offerings.
AI and Technology Integration: The company is advancing AI integration across investment management, operations, sales, and marketing, with measurable results tied to business outcomes.
Fiscal 2026 Expense Management: The company expects to achieve $200 million in gross expense efficiencies for fiscal 2026, funding ongoing investments and maintaining or reducing adjusted expenses compared to fiscal 2025.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividend Growth: The company has increased its dividend every year since 1981, with a compound annual growth rate of approximately 4%.
Share Repurchases: The company returned $930 million to shareholders through dividends and share repurchases in fiscal year 2025.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What is the fundraising target for fiscal 2026, and how does it break down across different areas?
A:The 2026 fundraising target is between $25 billion and $30 billion. Lexington could contribute half of that, with significant contributions from Clarion (real estate), BSP, Alcentra, and Venture. The target reflects a well-rounded contribution from all alternative managers.
Q:What is the expense outlook for fiscal 2026, and how will it evolve throughout the year?
A:The company targets $200 million in cost savings for 2026, spread throughout the year. They expect to end the year with expenses at least in line with 2025 levels, excluding performance fees. Margins are expected to increase progressively from Q2 to Q4, aiming for a 30% target margin.
Q:What are the ambitions and pipeline for infrastructure investments?
A:The company sees infrastructure as a massive category and has partnerships with DigitalBridge, Copenhagen Infrastructure Partners, and Actis. They plan to build a fund to distribute in the wealth channel, focusing on income-generating, long-term projects.
Q:What is the company's approach to AI and tokenization, and what opportunities do they see?
A:The company has developed a wallet-based system and tokenized money market fund, offering lower costs and new capabilities like real-time yield calculation. They are partnering with exchanges like Binance to tokenize traditional products, opening new distribution channels. They believe all mutual funds and ETFs will eventually be tokenized.
Q:What are the expectations for the latest Lexington flagship fund?
A:The target for the Lexington flagship fund is $25 billion, with the first close expected in the first half of calendar 2026. Fundraising is challenging due to market conditions, but Lexington's scale provides an advantage in the secondary space.
Q:What is the impact of Schwab's platform fee on ETFs, and how does it affect the company?
A:The company has limited ETF exposure with Schwab, so the immediate impact is minimal. However, as they grow in ETFs, they will need to address revenue share programs. Active ETFs, which make up 43% of their ETF offerings, may be better positioned to handle platform fees.
Q:What is the outlook for tax-efficient investment products and direct indexing?
A:The company sees continued growth in tax-efficient products like munis, SMAs, and direct indexing through Canvas. They are expanding platform availability and believe combining these capabilities will drive further growth.
Q:What is the view on credit quality in direct lending and growth opportunities in Europe?
A:The company sees no significant deterioration in credit quality and remains optimistic about the economy. The Apera acquisition enhances their direct lending capabilities in Europe, particularly in the lower middle market, which is less crowded.
Q:Why is the fee rate not expected to increase significantly despite growth in alternatives?
A:While alternative assets with higher fees are growing, the overall fee rate is offset by growth in lower-fee categories like ETFs, Canvas, and multi-asset solutions. The fee rate is expected to remain stable with temporary increases during flagship fundraisings.
Q:What caused the jump in shareholder servicing fees in the fiscal fourth quarter?
A:The increase is due to higher transaction fees and some trust and estate planning fees, which are seasonal.
Q:What is the purpose of the Wand AI partnership, and what has been learned from it?
A:The Wand AI partnership focuses on integrating multiple agents for tasks like ESG scoring. The partnership provides free resources and allows customization across investment teams. Wand is backed by leading AI venture firms and has been a valuable partner.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific reasons for the delay in the first close of the Lexington flagship fund, only stating that it was always a stretch and citing general market challenges. Additionally, the response to the impact of Schwab's platform fee on ETFs was vague, with no detailed data or analysis provided.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Boston Consulting
Canvas platform
Co President
Consulting Group
ETF AUM
Infrastructure
Investment
President CFO
Private Markets
Slide
Today
Trust International
access
achievement
adoption
alternative ETFs
benchmark period
chain fund
collaboration
compound rate
contribution plan
democratization
driver
effort
focus
foundation
fund tokenization
funding
inflow flow
investing
investment capability
investment solution
manager chain
outcome
position
product lineup
reach
step
strength
trust
world asset
BEN Transcript
Franklin Resources, Inc. (BEN) Q2 2026 Earnings Call Transcript
Unknown4-28
The earnings call summary reveals mixed financial performance. While revenue and AUM have increased, net income and EPS have declined, and operating margin has decreased. The lack of strategic initiatives and operational updates, along with unclear management responses in the Q&A, suggests uncertainty. These factors balance each other out, resulting in a neutral sentiment.
Franklin Resources, Inc. (BEN) Q1 2026 Earnings Call Transcript
Positive1-30
The earnings call reflects positive sentiment with strong equity flows, strategic M&A focus, and promising growth in alternative assets. The company’s emphasis on AI and blockchain for cost efficiency, alongside stable EFR and improving margins, indicates a solid financial strategy. Despite some lack of clarity in management responses, the optimistic guidance and strategic initiatives suggest a positive stock price movement over the next two weeks.
Franklin Resources, Inc. (BEN) Q4 2025 Earnings Call Transcript
Unknown11-7
The earnings call reflects a negative sentiment due to declining financial metrics such as operating income, margins, and EPS. Although there are optimistic elements like infrastructure investment and AI/tokenization efforts, the Q&A reveals unclear responses and challenges in fundraising. The company's expenses have increased, and while there is a cost-saving plan, it may not offset the negative financial performance. Overall, the negative aspects outweigh the positives, suggesting a likely stock price decline in the near term.
Franklin Resources, Inc. (BEN) Q3 2025 Earnings Call Transcript
Positive8-1
The earnings call summary indicates positive growth in various segments such as alternative asset fundraising, ETF platform net flows, and retail SMAs AUM. Despite flat adjusted operating income, the company shows resilience in integrating acquisitions and leveraging blockchain technology, which is positively viewed by analysts. The Q&A section reveals management's strategic focus on private markets and blockchain, although some uncertainty remains regarding the financial settlement with WAM. Overall, the company's strong market strategy, product development, and shareholder return plans contribute to a positive outlook for the stock price.
BEN Slides
BEN Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
