Q3 2026 Franklin Resources Inc Earnings Call Transcript
Key Points
- Franklin Resources Inc (BEN) delivered another quarter of positive long-term net inflows, with $18.4 billion in the quarter and $63.3 billion fiscal year-to-date, marking positive flows across every asset class and geography.
- Assets under management reached a record $1.8 trillion, with record AUM in key growth areas including alternatives ($294 billion), ETFs ($75.6 billion), retail SMAs ($187.6 billion), and Canvas ($30.3 billion).
- Private markets fundraising exceeded the full-year target early, reaching $33 billion year-to-date, with expectations to end the year at about $40 billion, driven by diversified strategies across all private market managers.
- The institutional pipeline of unfunded mandates hit a record $28.6 billion, increasing by more than $8 billion from the prior quarter, reflecting strong demand for integrated solutions across public and private markets.
- Adjusted operating income increased 7% sequentially and 35% year-over-year to $508.9 million, with margin expansion ahead of plan, expected to reach close to 30% in the fiscal fourth quarter.
- The company returned $521.5 million to shareholders in the quarter, including $348.1 million in share repurchases, and announced a corporate name change to Franklin Templeton, Inc. to align with its global brand.
- Western Asset Management continued to stabilize but did not contribute to positive flows, with the fixed income platform excluding Western delivering positive flows for the tenth consecutive quarter.
- The effective fee rate is expected to remain stable in the mid- to high 37s, indicating limited pricing power despite asset growth.
- Expenses are expected to increase by 3% to 3.5% for fiscal 2026, driven by higher markets, sales, and fundraising, with continued investments in AI and digital assets adding to costs.
- The company faces ongoing pressure from distribution fee increases, such as recent announcements from Merrill Lynch and Schwab, which could impact net revenues.
- The margin expansion to 30% is still a target, with the company expecting to reach it only by fiscal fourth quarter 2026, and full-year margins in the mid-27s, indicating the pace of improvement is gradual.
- The company's balance sheet remains leveraged with outstanding revolver debt, and it plans to access long-term debt markets to refinance, which could increase interest costs.
Welcome to Franklin Resources earnings conference call for the quarter ending June 30, 2026. Hello. My name is Maria, and I'll be your call operator today. As a reminder, this conference is being recorded. (Operator Instructions)
I would now like to turn the conference over to your host, Selene Oh, Head of Investor Relations for Franklin Resources. You may begin.
Good morning, and thank you for joining us today to discuss our quarterly results. Statements made on this conference call regarding Franklin Resources, Inc., which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.
These and other risks, uncertainties and other important factors are just
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