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FRANKLIN RESOURCES INC (BEN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 adjusted diluted EPS was $0.49, a slight miss versus Wall Street consensus of ~$0.50*, and GAAP diluted EPS was $0.15; total operating revenues were $2.064B, modestly below consensus of ~$2.087B*, reflecting continued Western Asset outflows and lower average AUM .*
  • AUM rose 5% QoQ to $1.612T on $78.0B positive market impact and $2.7B cash management inflows, partially offset by $9.3B long‑term net outflows; excluding Western, long‑term net inflows were $7.8B, marking the seventh consecutive quarter of positive net flows ex‑Western .
  • Alternatives fundraising was $6.2B (private markets $5.3B), with pro forma private credit AUM nearing $90B following agreement to acquire a majority interest in Apera; ETF net flows were $4.3B, the 15th consecutive quarter, with ETF AUM reaching $44.1B .
  • Q4 FY25 guidance called for effective fee rate in the “high 37s” bps, performance fees of ~$100M (vs usual ~$50M prior), comp & benefits $860–$870M, IS&T ~$155M, G&A $190–$195M, tax rate at the high end of 25–27%; fiscal 2026 run‑rate cost saves of at least $200M (ex performance fee comp) expected .
  • Near‑term stock catalysts: moderation in Western outflows, alternatives fundraising trajectory toward ~$18.5B FY25, expense discipline and FY26 cost saves, plus tokenization innovations (Benji intraday yield) enhancing platform differentiation .

What Went Well and What Went Wrong

What Went Well

  • Diversified growth across vehicles and geographies: “Strong growth continued across investment vehicles... ETF platform achieved its 15th consecutive quarter of positive net flows, attracting $4.3B... Internationally, we had positive net flows... ending AUM of approximately $500B” .
  • Alternatives momentum: $6.2B fundraising in the quarter, private markets $5.3B; agreement to acquire majority interest in Apera, bringing pro forma private credit AUM to nearly $90B; alternatives AUM was $258B at quarter‑end .
  • Flow improvement ex‑Western: long‑term net outflows improved to $9.3B; excluding Western, long‑term net inflows were $7.8B, marking the seventh consecutive quarter of positive net flows ex‑Western .

What Went Wrong

  • Headline outflows and revenue softness: long‑term net outflows of $9.3B (including $17.1B at Western) pressured revenue to $2.064B, down 2% QoQ and 3% YoY .
  • EPS and revenue missed consensus: adjusted EPS $0.49 vs ~$0.50*, revenue $2.064B vs ~$2.087B*, and EBITDA ~$358.7M vs ~$435.6M*, reflecting mix and average AUM headwinds; GAAP EPS fell to $0.15 from $0.26 QoQ and $0.32 YoY .*
  • Western Asset regulatory overhang noted by analysts; management emphasized continued cooperation and highlighted moderation of outflows (June ~$4.1B; July expected ~$3B), but uncertainty persists .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Operating Revenues ($USD Billions)$2.252 $2.111 $2.064
Operating Income ($USD Millions)$219.0 $145.6 $154.1
Operating Margin (%)9.7% 6.9% 7.5%
Net Income Attributable to BEN ($USD Millions)$163.6 $151.4 $92.3
Diluted EPS (GAAP) ($USD)$0.29 $0.26 $0.15
Adjusted Operating Income ($USD Millions)$412.8 $377.2 $377.8
Adjusted Operating Margin (%)24.5% 23.4% 23.7%
Adjusted Net Income ($USD Millions)$320.5 $254.4 $263.4
Adjusted Diluted EPS ($USD)$0.59 $0.47 $0.49

YoY snapshot (Q3 2024 vs Q3 2025):

MetricQ3 2024Q3 2025
Total Operating Revenues ($USD Billions)$2.123 $2.064
Operating Income ($USD Millions)$222.5 $154.1
Operating Margin (%)10.5% 7.5%
Diluted EPS (GAAP) ($USD)$0.32 $0.15
Adjusted Diluted EPS ($USD)$0.60 $0.49

Estimates comparison (S&P Global; oldest → newest):

MetricQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 Actual
Adjusted/Primary EPS ($USD)$0.529*$0.59 $0.473*$0.47 $0.502*$0.49
Revenue ($USD Billions)$2.490*$2.252 $2.441*$2.111 $2.087*$2.064
EBITDA ($USD Millions)$463.9*$467.1*$416.1*$353.7*$435.6*$358.7*

Values retrieved from S&P Global.*

Segment/AUM mix (end of period):

Asset Class AUM ($USD Billions)Q1 2025Q2 2025Q3 2025
Equity$598.1 $598.1 $656.6
Fixed Income$446.0 $446.0 $441.7
Alternatives$251.8 $251.8 $258.4
Multi‑Asset$175.8 $175.8 $183.2
Cash Mgmt$68.9 $68.9 $71.9
Total AUM$1,540.6 $1,540.6 $1,611.8

Key KPIs:

KPIQ1 2025Q2 2025Q3 2025
Ending AUM ($USD Trillions)$1.576 $1.541 $1.612
Long‑Term Net Flows ($USD Billions)(50.0) (26.2) (9.3)
Ex‑Western Long‑Term Net Flows ($USD Billions)$18.0 $7.4 $7.8
Cash Mgmt Net Flows ($USD Billions)—$2.7 $2.7
ETF Net Flows ($USD Billions)—$4.1 $4.3
Alternatives Fundraising ($USD Billions)$6.0 $6.8 $6.2
Institutional Pipeline (Won‑But‑Unfunded, $USD Billions)$18.1 $20.4 $24.4
Share Repurchases (Shares; $USD Millions)0.3M; $5.8 0.5M; $10.0 7.3M; $157.4
Cash & Investments ($USD Billions)$6.3 incl. CIPs $6.1 incl. CIPs $6.8 incl. CIPs

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Fee Rate (bps)Q4 FY25~low 37s (prior quarter outcome ‘snapped’ lower by ~0.5 bps due to daily avg calc) “High 37s” Maintained/clarified upward snapback
Performance Fees ($USD Millions)Q4 FY25~$50 “usual guide” ~$100; payout ~60% vs 55% usual Raised
Compensation & Benefits ($USD Millions)Q4 FY25Prior run‑rate not specified$860–$870 (assumes ~$100M perf fees) Set
IS&T ($USD Millions)Q4 FY25Prior run‑rate not specified~$155 (Aladdin integration slightly accelerated) Set
Occupancy ($USD Millions)Q4 FY25Prior run‑rate not specified$69–$70 Set
G&A ($USD Millions)Q4 FY25Prior run‑rate not specified$190–$195 (higher professional fees) Set
Tax Rate (%)Q4 FY2525–27%High end of 25–27% Maintained at high end
FY26 Run‑Rate Cost Savings ($USD Millions)FY26—≥$200 (ex perf fee comp); Apera adds ~$30M expense New savings outlook
Dividend per Share ($USD)Q4 FY25$0.32 (prior quarter) $0.32 (Oct 10 payable) Maintained
Alternatives Fundraising ($USD Billions)FY25$13–$20 (range; higher end depended on Lexington first close) ~ $18.5 expected; Lexington timing shifted to late CY25/early 2026 Nudged toward upper half

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑1 and Q‑2)Current Period (Q3 2025)Trend
Alternatives fundraising & wealth channelQ1: $6.0B alt fundraising; launched evergreen secondaries; ex‑Western inflows $18B . Q2: $6.8B fundraising; $2B raised in perpetual secondaries; pipeline $20.4B .$6.2B fundraising; private markets $5.3B; pro forma private credit near $90B with Apera; perpetual funds ≥$1B AUM each; wealth channel ~25% of YTD alt raises; targeting 20–30% of alt AUM over time .Positive momentum, scaling and distributor build‑out
Western Asset flows/regulatoryQ1: Western long‑term outflows $67.9B in Q1 description . Q2: Western outflows $33.6B in quarter .Outflows moderated (June ~$4.1B; July expected ~$3B); regulatory discussions ongoing; no reserves update; ex‑Western flows positive .Stabilizing outflows, overhang persists
ETF/SMAs/CanvasQ2: ETF net flows $4.1B; record ETF AUM . Q1: strong demand across ETFs, Canvas, SMAs .ETF net flows $4.3B; ETF AUM $44.1B; Canvas AUM $13.7B (+20% QoQ); retail SMAs at $156.3B (+8%) .Strong, consistent growth
International & non‑U.S. allocationsQ1: non‑U.S. positive net flows in EMEA/Americas; international AUM ~473B . Q2: non‑U.S. business positive .Positive net flows; ending AUM ≈$500B; clients shifting to non‑U.S. equity/fixed income amid macro/tariff backdrop .Improving
Tokenization/technology (Benji)— (outside earnings releases)Launched intraday yield on Benji tokenized MMF; management sees blockchain disintermediating toll‑takers and lowering costs; wallet patent and cross‑chain capability; stablecoin reserve mandates .Strategic innovation accelerating
Expense discipline & fee rateQ2: adjusted OpEx discipline; EFR variability explanation .Q4 guide for EFR “high 37s”; detailed Q4 expense lines; FY26 ≥$200M savings .Clearer trajectory, cost actions in focus

Management Commentary

  • “Long‑term net outflows were $9.3 billion, a significant improvement from last quarter, and excluding Western Asset Management, long‑term net inflows were $7.8 billion... Our institutional pipeline... rose by net $4 billion to a record $24.4 billion” — Jenny Johnson, President & CEO .
  • “Fundraising in alternatives generated $6.2 billion for the quarter... we announced an agreement to acquire a majority interest in Apera... bringing our pro forma private credit AUM to nearly $90 billion” .
  • “Our ETF platform achieved its 15th consecutive quarter of positive net flows, attracting $4.3 billion... and reached a new high of $44.1 billion in AUM... Canvas’ AUM of $13.7 billion, increasing 20% from the prior quarter” .
  • CFO guidance: “We expect [Q4] effective fee rate to be in the high 37s... comp and benefits $860–$870 million (assumes ~$100 million of performance fees)... IS&T ~$155 million... G&A $190–$195 million... tax rate at the high end of 25–27%” .
  • On tokenization: “We just launched Intraday Yield on Benji... blockchain is so efficient that it enables those enhanced services... it will fundamentally change the rails of the financial system” .

Q&A Highlights

  • Integration of Apera and private credit platform: Management aims to operate as “one private credit group” across BSP, Alcentra, and Apera to globalize expertise in direct lending, asset‑backed and real estate credit .
  • Tokenization economics: Benji intraday yield and on‑chain operations reduce transaction costs; management envisions blockchain disintermediating financial “toll‑takers”, improving efficiency and client experience; white‑label wallet under discussion with distributors .
  • Western Asset regulatory overhang: Management is cooperating; outflows moderating (June ~$4.1B; July expected ~$3B); no reserves update; Western ~<6% of revenues .
  • Expense and fee rate clarity: Q4 EFR “high 37s”; detailed expense lines and higher performance fees; FY26 ≥$200M run‑rate cost saves; Apyra adds ~$30M expense .
  • DC/401k private markets: Target date (~$19B) scaling post‑Putnam; partnerships (e.g., Apollo) and managed accounts; plans to launch target dates with private markets by 1H26, noting litigation risk slows uptake .

Estimates Context

  • Q3 FY25: Adjusted/Primary EPS $0.49 vs consensus ~$0.50* (slight miss); revenue $2.064B vs consensus ~$2.087B* (slight miss); EBITDA ~$358.7M vs ~$435.6M* (miss). Drivers included Western outflows and lower average AUM; adjusted margin held at 23.7% .*
  • Prior quarters: Q2 FY25 EPS in line ($0.47 vs ~$0.47*), but revenue missed ($2.111B vs ~$2.441B*); Q1 FY25 EPS beat ($0.59 vs ~$0.53*), while revenue missed ($2.252B vs ~$2.490B*) .*
  • FY context: Street sees FY25 normalized EPS ~2.12* (actual to date ~2.22), FY26 ~2.54*, with revenue ~8.58B* in FY25 and ~8.80B* in FY26; consensus target price ~$24.82* [GetEstimates].*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix shift and flow improvements are real: Equity and multi‑asset AUM rose QoQ with ex‑Western inflows turning positive for seven straight quarters; sustained ETF/Canvas momentum supports fee stability despite headline outflows .
  • Alternatives are a structural growth driver: $6.2B quarterly fundraising and pro forma private credit near $90B post‑Apera build a durable earnings base, with wealth channel penetration rising and perpetual vehicles scaling .
  • Expense discipline is credible: Detailed Q4 expense guide and FY26 ≥$200M run‑rate savings set a clearer margin path; watch Q4 performance fees ($~100M) and EFR “high 37s” execution .
  • Western overhang moderating but unresolved: Outflows are declining (June/July cadence), yet regulatory uncertainty remains a stock narrative risk; ex‑Western flows mitigate headline pressure .
  • Tokenization leadership is differentiated: Benji intraday yield and wallet/IP position BEN to lower costs and win stablecoin/fintech partnerships; monitor commercialization/white‑label traction .
  • Capital return intact: Dividend maintained at $0.32/share; opportunistic buybacks evidenced by 7.3M shares repurchased in Q3; balance sheet flexibility supports both growth and returns .
  • Near‑term focus: Validate Q4 fee rate and performance fee guidance, track Western monthly flows, and watch alt fundraising trajectory (~$18.5B FY25 expected) alongside Lexington timing .