Franklin Templeton Inc 10-Q for FY2023 Q3

Franklin Templeton Inc (BEN)

10-Q 2023-07-28 For: 2023-06-30

Added on April 07, 2026

About this 10-Q

Franklin Templeton Inc filed this 10-Q on July 28, 2023, covering the quarter ended June 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.97B; down 3.1% from $2.03B a year earlier
Net income: $227.5M; down 11.3% from net income of $256.4M a year earlier
Diluted EPS: $0.44; down 12.0% from $0.50 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Delaware			13-2670991
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	BEN	New York Stock Exchange


			Page
PART I		Financial Information
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Income	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Stockholders’ Equity	6
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 4.	Controls and Procedures	42

PART II		Other Information
	Item 1.	Legal Proceedings	43
	Item 1A.	Risk Factors	43
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
	Item 5.	Other Information	44
	Item 6.	Exhibits	44

Exhibit Index			45
Signatures			46


	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions, except per share data)	2023		2022		2023		2022
Operating Revenues
Investment management fees	$	1,613.4	$	1,636.1	$	4,818.5	$	5,045.8
Sales and distribution fees	304.0		335.6		897.3		1,104.0
Shareholder servicing fees	38.8		46.9		115.5		146.8
Other	12.8		12.7		32.0		39.7
Total operating revenues	1,969.0		2,031.3		5,863.3		6,336.3
Operating Expenses
Compensation and benefits	841.2		766.7		2,667.7		2,321.8
Sales, distribution and marketing	406.8		440.3		1,202.0		1,432.8
Information systems and technology	127.3		125.9		376.7		376.6
Occupancy	56.9		53.8		171.1		163.1
Amortization of intangible assets	85.4		81.8		254.6		200.5
General, administrative and other	136.5		158.1		427.2		416.1
Total operating expenses	1,654.1		1,626.6		5,099.3		4,910.9
Operating Income	314.9		404.7		764.0		1,425.4
Other Income (Expenses)
Investment and other income, net	51.2		13.0		267.9		97.7
Interest expense	(34.9)		(28.9)		(99.3)		(71.1)
Investment and other income (losses) of consolidated investment products, net	1.7		(74.4)		75.3		33.3
Expenses of consolidated investment products	(0.8)		(1.3)		(15.7)		(10.1)
Other income (expenses), net	17.2		(91.6)		228.2		49.8
Income before taxes	332.1		313.1		992.2		1,475.2
Taxes on income	84.1		89.5		237.3		347.7
Net income	248.0		223.6		754.9		1,127.5
Less: net income (loss) attributable to
Redeemable noncontrolling interests	26.8		(0.5)		108.5		(50.2)
Nonredeemable noncontrolling interests	(6.3)		(32.3)		59.1		118.5
Net Income Attributable to Franklin Resources, Inc.	$	227.5	$	256.4	$	587.3	$	1,059.2

Earnings per Share
Basic	$	0.44	$	0.50	$	1.14	$	2.07
Diluted	0.44		0.50		1.14		2.07


(in millions)	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
Net Income	$	248.0	$	223.6	$	754.9	$	1,127.5
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax	16.5		(100.6)		159.7		(123.8)
Net unrealized losses on defined benefit plans, net of tax	(0.6)		(2.4)		(1.4)		(2.2)
Net unrealized gains on investments, net of tax	—		—		0.2		—
Total other comprehensive income (loss)	15.9		(103.0)		158.5		(126.0)
Total comprehensive income	263.9		120.6		913.4		1,001.5
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests	26.8		(0.5)		108.5		(50.2)
Nonredeemable noncontrolling interests	(6.3)		(32.3)		59.1		118.5
Comprehensive Income Attributable to Franklin Resources, Inc.	$	243.4	$	153.4	$	745.8	$	933.2


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(in millions, except share and per share data)	June 30, 2023		September 30, 2022
Assets
Cash and cash equivalents	$	3,728.6	$	4,134.9
Receivables	1,341.9		1,264.8
Investments (including $867.3 and $613.5 at fair value at June 30, 2023 and September 30, 2022)	2,249.1		1,651.3
Assets of consolidated investment products
Cash and cash equivalents	659.0		647.6
Investments, at fair value	9,639.0		7,898.1
Property and equipment, net	806.1		743.3
Goodwill	6,012.3		5,778.6
Intangible assets, net	4,994.9		5,082.1
Operating lease right-of-use assets	431.0		464.5
Other	372.7		395.4
Total Assets	$	30,234.6	$	28,060.6

Liabilities
Compensation and benefits	$	1,461.2	$	1,464.4
Accounts payable and accrued expenses	563.5		466.2

Income taxes	448.6		523.1
Debt	3,358.7		3,376.4
Liabilities of consolidated investment products
Accounts payable and accrued expenses	565.4		646.9
Debt	7,988.7		5,457.7
Deferred tax liabilities	450.7		347.8
Operating lease liabilities	494.8		528.4
Other	1,313.7		1,425.0
Total liabilities	16,645.3		14,235.9
Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interests	1,050.1		1,525.8
Stockholders’ Equity
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued	—		—
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 499,012,841 and 499,575,175 shares issued and outstanding at June 30, 2023 and September 30, 2022	49.9		50.0
Retained earnings	12,360.7		12,045.6
Accumulated other comprehensive loss	(462.5)		(621.0)
Total Franklin Resources, Inc. stockholders’ equity	11,948.1		11,474.6
Nonredeemable noncontrolling interests	591.1		824.3
Total stockholders’ equity	12,539.2		12,298.9
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	30,234.6	$	28,060.6


	Franklin Resources, Inc.											Non- redeemable Non- controlling Interests		Total Stockholders’ Equity
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accum- ulated Other Compre- hensive Loss		Stockholders’ Equity
(in millions)
for the nine months ended June 30, 2023	Shares	Amount
Balance at October 1, 2022	499.6	$	50.0	$	—	$	12,045.6	$	(621.0)	$	11,474.6	$	824.3	$	12,298.9
Net income						165.6				165.6		4.7		170.3
Other comprehensive income								124.7		124.7				124.7
Dividends declared on common stock ($0.30 per share)						(153.6)				(153.6)				(153.6)
Repurchase of common stock	(0.5)	(0.1)		(69.1)		55.0				(14.2)				(14.2)
Issuance of common stock	1.2	0.1		33.5						33.6				33.6
Stock-based compensation				35.6						35.6				35.6
Net subscriptions and other												95.9		95.9
Net deconsolidation of investment products												(35.7)		(35.7)
Balance at December 31, 2022	500.3	$	50.0	$	—	$	12,112.6	$	(496.3)	$	11,666.3	$	889.2	$	12,555.5
Net income						194.2				194.2		60.7		254.9
Other comprehensive income								17.9		17.9				17.9
Dividends declared on common stock ($0.30 per share)						(153.8)				(153.8)				(153.8)
Repurchase of common stock	(0.1)	—		(66.0)		62.4				(3.6)				(3.6)
Issuance of common stock	0.7	0.1		25.2						25.3				25.3
Stock-based compensation				40.8						40.8				40.8
Net distributions and other												(14.9)		(14.9)
Net deconsolidation of investment products												(324.2)		(324.2)
Adjustment to fair value of redeemable noncontrolling interests						44.7				44.7				44.7
Balance at March 31, 2023	500.9	$	50.1	$	—	$	12,260.1	$	(478.4)	$	11,831.8	$	610.8	$	12,442.6
Net income (loss)						227.5				227.5		(6.3)		221.2
Other comprehensive income								15.9		15.9				15.9
Dividends declared on common stock ($0.30 per share)						(152.9)				(152.9)				(152.9)
Repurchase of common stock	(2.0)	(0.2)		(15.9)		(34.8)				(50.9)				(50.9)
Issuance of common stock	0.1	—		3.6						3.6				3.6
Stock-based compensation				12.3						12.3				12.3
Net distributions and other												(12.7)		(12.7)
Net deconsolidation of investment products												(0.7)		(0.7)

Adjustment to fair value of redeemable noncontrolling interests						60.8				60.8				60.8
Balance at June 30, 2023	499.0	$	49.9	$	—	$	12,360.7	$	(462.5)	$	11,948.1	$	591.1	$	12,539.2


(in millions)	Initial Estimated Fair Value		Adjustments		Revised Estimated Fair Value
as of November 1, 2022
Cash and cash equivalents	$	93.6	$	—	$	93.6
Receivables	57.2		(8.8)		48.4
Investments	285.3		1.6		286.9
Goodwill	152.6		52.7		205.3
Indefinite-lived intangible assets	89.9		—		89.9
Definite-lived intangible assets	55.7		—		55.7
Other assets	9.0		3.1		12.1
Deferred tax liabilities	—		(36.7)		(36.7)
Compensation and benefits and other liabilities	(71.0)		(3.5)		(74.5)
Total Identifiable Net Assets	$	672.3	$	8.4	$	680.7


(in millions)
for the fiscal years ending September 30,	Amount
2023 (remainder of year)	$	3.5
2024	14.0
2025	14.0
2026	3.9
2027	2.9
Thereafter	8.1
Total	$	46.4


(in millions)	United States		Luxembourg		Asia-Pacific		Americas Excluding United States		Europe, Middle East and Africa, Excluding Luxembourg		Total
for the three months ended June 30, 2023
Investment management fees	$	1,232.3	$	192.3	$	64.3	$	53.9	$	70.6	$	1,613.4
Sales and distribution fees	213.5		75.4		5.1		10.0		—		304.0
Shareholder servicing fees	30.3		8.0		0.5		—		—		38.8
Other	11.9		0.5		0.4		—		—		12.8
Total	$	1,488.0	$	276.2	$	70.3	$	63.9	$	70.6	$	1,969.0


(in millions)	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
as of June 30, 2023
Assets
Investments, at fair value
Sponsored funds and separate accounts	$	333.3	$	220.7	$	17.9	$	44.7	$	616.6
Investments related to long-term incentive plans	179.9		—		—		22.4		202.3
Other equity and debt investments	3.4		7.5		4.3		33.2		48.4
Contingent consideration asset	—		—		4.4		—		4.4
Total Assets Measured at Fair Value	$	516.6	$	228.2	$	26.6	$	100.3	$	871.7

Liabilities
Securities sold short	$	142.4	$	—	$	—	$	—	$	142.4
Contingent consideration liabilities	—		—		55.1		—		55.1
Total Liabilities Measured at Fair Value	$	142.4	$	—	$	55.1	$	—	$	197.5


(in millions)	Fair Value Level	June 30, 2023				September 30, 2022
		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets
Cash and cash equivalents	1	$	3,728.6	$	3,728.6	$	4,134.9	$	4,134.9
Other investments
Time deposits	2	10.1		10.1		9.4		9.4
Equity securities	3	253.2		253.2		256.9		256.9

Financial Liability
Debt	2	$	3,358.7	$	2,804.9	$	3,376.4	$	2,750.1


(in millions)	Equity and Debt Securities		Loans		Total Level 3 Assets
for the three months ended June 30, 2023
Balance at April 1, 2023	$	539.0	$	3.1	$	542.1
Gains (losses) included in investment and other income (losses) of consolidated investment products, net	(31.6)		0.1		(31.5)
Purchases	61.2		(0.2)		61.0
Sales and settlements	(0.1)		0.2		0.1
Transfers into Level 3	—		0.5		0.5
Transfers out of Level 3	(0.3)		—		(0.3)
Balance at June 30, 2023	$	568.2	$	3.7	$	571.9
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023	$	(32.0)	$	0.1	$	(31.9)


	Nine Months Ended June 30,
(in millions)	2023		2022

Net Income	$	754.9	$	1,127.5
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	137.9		160.9
Amortization of deferred sales commissions	37.2		49.6
Depreciation and other amortization	78.3		68.8
Amortization of intangible assets	254.6		200.5
Net (gains) losses on investments	(62.3)		32.9
Income from investments in equity method investees	(111.1)		(51.6)
Net losses on investments of consolidated investment products	116.0		22.0
Net purchase of investments by consolidated investment products	(833.2)		(312.2)
Deferred income taxes	50.8		55.9
Other	99.2		33.0
Changes in operating assets and liabilities:
Increase in receivables and other assets	(69.8)		(97.3)
Decrease (increase) in investments, net	6.4		(33.2)
Increase (decrease) in accrued compensation and benefits	(84.3)		45.1
Decrease in income taxes payable	(58.9)		(176.3)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	48.3		(9.1)
Increase (decrease) in accounts payable and accrued expenses of consolidated investment products	1.3		(26.2)
Net cash provided by operating activities	365.3		1,090.3
Purchase of investments	(665.1)		(676.5)
Liquidation of investments	551.3		872.0
Purchase of investments by consolidated collateralized loan obligations	(3,465.6)		(3,198.4)
Liquidation of investments by consolidated collateralized loan obligations	1,230.3		1,501.4
Additions of property and equipment, net	(121.5)		(55.6)
Acquisitions, net of cash acquired	(500.5)		(1,354.7)
Payments of contingent consideration asset	5.5		20.9
Payments of deferred consideration liability	(241.8)		—
Net (deconsolidation) consolidation of investment products	(43.8)		211.0
Net cash used in investing activities	(3,251.2)		(2,679.9)


(in millions)	June 30, 2023		September 30, 2022
Nonredeemable investments1
Investments with known liquidation periods	$	33.2	$	32.8
Investments with unknown liquidation periods	17.4		29.4

Redeemable investments2	49.7		23.8

Unfunded commitments	43.2		51.4


(in millions)	June 30, 2023		September 30, 2022
Unpaid principal balance	$	8,300.1	$	6,118.4
Difference between unpaid principal balance and fair value	(200.3)		(356.1)
Fair Value	$	8,099.8	$	5,762.3


(in millions)	Equity and Debt Securities		Real Estate		Loans		Total Level 3 Assets
for the nine months ended June 30, 2023
Balance at October 1, 2022	$	555.8	$	268.6	$	239.4	$	1,063.8
Gains (losses) included in investment and other income (losses) of consolidated investment products, net	(56.3)		(9.0)		0.2		(65.1)
Purchases	83.7		86.1		58.4		228.2
Sales and settlements	(25.1)		—		—		(25.1)
Net (deconsolidations) consolidations	10.4		(345.7)		(292.6)		(627.9)
Transfers into Level 3	—		—		3.6		3.6
Transfers out of Level 3	(0.3)		—		(5.3)		(5.6)
Balance at June 30, 2023	$	568.2	$	—	$	3.7	$	571.9
Change in unrealized gains (losses) included in net income relating to assets held at June 30, 2023	$	(55.0)	$	—	$	0.1	$	(54.9)


(shares in thousands)	Time-Based Shares	Performance- Based Shares	Total Shares	Weighted- Average Grant-Date Fair Value
for the nine months ended June 30, 2023
Nonvested balance at October 1, 2022	13,492	3,401	16,893	$	24.04
Granted	6,938	271	7,209	22.67
Vested	(1,799)	(138)	(1,937)	24.65
Forfeited/canceled	(357)	(177)	(534)	24.79
Nonvested Balance at June 30, 2023	18,274	3,357	21,631	$	23.51


	Three Months Ended June 30,						Percent Change		Nine Months Ended June 30,						Percent Change
(in millions, except per share data)	2023			2022					2023			2022
Operating revenues	$	1,969.0		$	2,031.3		(3	%)	$	5,863.3		$	6,336.3		(7	%)
Operating income	314.9			404.7			(22	%)	764.0			1,425.4			(46	%)
Operating margin1	16.0		%	19.9		%			13.0		%	22.5		%

Net income attributable to Franklin Resources, Inc.	$	227.5		$	256.4		(11	%)	$	587.3		$	1,059.2		(45	%)
Diluted earnings per share	0.44			0.50			(12	%)	1.14			2.07			(45	%)

As adjusted (non-GAAP):2
Adjusted operating income	$	476.8		$	566.9		(16	%)	$	1,312.1		$	1,829.4		(28	%)
Adjusted operating margin	30.5		%	35.3		%			29.0		%	37.0		%

Adjusted net income	$	326.1		$	416.0		(22	%)	$	905.2		$	1,461.2		(38	%)
Adjusted diluted earnings per share	0.63			0.82			(23	%)	1.76			2.86			(38	%)


(in billions)	June 30, 2023		June 30, 2022		Percent Change
Fixed Income	$	505.1	$	536.3	(6	%)
Equity	458.0		424.9		8	%
Alternative	257.2		224.8		14	%
Multi-Asset	148.3		136.2		9	%
Cash Management	62.9		57.6		9	%
Total	$	1,431.5	$	1,379.8	4	%


(in billions)	Average AUM				Percent Change		Mix of Average AUM
for the three months ended June 30,	2023		2022				2023		2022
Fixed Income	$	507.1	$	563.4	(10	%)	36	%	39	%
Equity	442.8		467.8		(5	%)	31	%	33	%
Alternative	257.5		205.4		25	%	18	%	14	%
Multi-Asset	146.3		144.4		1	%	10	%	10	%
Cash Management	65.9		58.8		12	%	5	%	4	%
Total	$	1,419.6	$	1,439.8	(1	%)	100	%	100	%


	Peer Group Comparison1								Benchmark Comparison2
	% of Mutual Fund AUM in Top Two Peer Group Quartiles								% of Strategy Composite AUM Exceeding Benchmark
as of June 30, 2023	1-Year		3-Year		5-Year		10-Year		1-Year		3-Year		5-Year		10-Year
Fixed Income	43	%	45	%	47	%	64	%	85	%	54	%	93	%	90	%
Equity	54	%	52	%	68	%	56	%	48	%	45	%	47	%	37	%
Total AUM3	44	%	58	%	66	%	51	%	63	%	53	%	67	%	63	%


	Accounting Classification1										Total
(in millions)	Cash and Cash Equivalents		Investments at Fair Value		Equity Method Investments		Other Investments		Direct Investments in CIPs
Cash and Cash Equivalents	$	3,728.6	$	—	$	—	$	—	$	—	$	3,728.6
Investments
Alternative	—		308.5		815.9		73.8		524.0		1,722.2
Equity	—		281.8		229.5		152.7		100.4		764.4
Fixed Income	—		170.9		61.1		36.8		281.8		550.6
Multi-Asset	—		106.1		12.0		—		61.7		179.8
Total investments	—		867.3		1,118.5		263.3		967.9		3,217.0
Total Cash and Cash Equivalents and Investments2, 3	$	3,728.6	$	867.3	$	1,118.5	$	263.3	$	967.9	$	6,945.6


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 2023	23,773	$	26.90	23,773	23,717,399
May 2023	9,143	24.58		9,143	23,708,256
June 2023	1,938,836	25.82		1,938,836	21,769,420
Total	1,971,752			1,971,752


Exhibit No.						Description

3.1						Certificate of Incorporation of Registrant, as filed November 28, 1969, incorporated by reference to Exhibit (3)(i) to our Annual Report on Form 10-K for the fiscal year ended September 30, 1994 (File No. 001-09318) (the “1994 Annual Report”)

3.2						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed March 1, 1985, incorporated by reference to Exhibit 3(ii) to the 1994 Annual Report

3.3						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed April 1, 1987, incorporated by reference to Exhibit 3(iii) to the 1994 Annual Report

3.4						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed February 2, 1994, incorporated by reference to Exhibit 3(iv) to the 1994 Annual Report

3.5						Certificate of Amendment of Certificate of Incorporation of Registrant, as filed February 4, 2005, incorporated by reference to Exhibit (3)(i)(e) to our Quarterly Report on Form 10-Q for the period ended December 31, 2004 (File No. 001-09318)

3.6						Amended and Restated Bylaws of Registrant (as adopted and effective June 29, 2021), incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on July 1, 2021 (File No. 001-09318)

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101						The following materials from Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes (filed herewith)

104						Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)


Date:	July 28, 2023	/s/ Jennifer M. Johnson
		Jennifer M. Johnson
		President and Chief Executive Officer


Date:	July 28, 2023	/s/ Matthew Nicholls
		Matthew Nicholls
		Executive Vice President, Chief Financial Officer and Chief Operating Officer