Franklin Resources (BEN) Q2 2025 earnings summary

Executive summary

• Assets under management (AUM) ended at $1.54 trillion, down 2% sequentially and 6% year-over-year, mainly due to net outflows at Western Asset Management and negative market impacts.

• Net income for Q2 2025 was $151.4 million, up 22% year-over-year but down 7% sequentially; adjusted net income was $254.4 million, down 17% year-over-year and 21% sequentially, impacted by a $41.4 million loss on a renewable energy seed investment.

• Long-term net outflows were $26.2 billion, but excluding Western Asset, net inflows were $7.4 billion; positive net flows in multi-asset and alternatives totaled $9.7 billion.

• Institutional won-but-unfunded pipeline reached $20.4 billion, the highest since 2022.

• International presence remains strong, with $470 billion AUM sourced outside the U.S. and clients in over 150 countries.

Financial highlights

• Adjusted operating income was $377.2 million, down 8.6% from the prior quarter and 10% year-over-year, mainly due to compensation expenses and Western Asset impact.

• Adjusted operating margin was 23.4%, down from 24.5% in the prior quarter and 25.2% a year ago.

• Adjusted diluted EPS was $0.47, down from $0.59 last quarter and $0.56 a year ago.

• Adjusted effective fee rate increased to 38.3 bps from 37.2 bps in the prior quarter, primarily due to Western outflows.

• $41 million seed investment loss related to a renewable energy fund was recognized and the fund has been closed.

Outlook and guidance

• Fiscal 2025 expenses expected to be flat to 2024, with $200–$250 million in cost savings targeted for fiscal 2026.

• Management remains focused on investment performance, expense management, and strategic investments in technology, alternatives, ETFs, and digital assets.

• Effective fee rate expected to remain around 38 basis points for Q3, possibly rising in Q4.

• Market volatility and policy uncertainty expected to persist, but no U.S. recession is foreseen.

• Quarterly cash dividend increased by 3.2% year-over-year to $0.32 per share.