FRANKLIN RESOURCES INC
For the period ended Dec 31, 2024. Filed Jan 31, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Jan 31, 2025
BEN$33.73+4.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0000038777-24-000115
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-01-31.
0000038777-25-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 166 previous paragraphs and 159 current paragraphs.
101 unchanged; 50 reworded; 7 added; 15 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 23 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
The initiation or unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries, including the Western Asset Management (“WAM”) investigations described under the heading “Risk Factors” and in “Note 16 - Commitments and Contingencies” to our audited financial statements contained in our Annual Report on Form 10-K for fiscal year 2024, and in “Note 10 - Commitments and Contingencies” to our unaudited interim financial statements contained in this Form 10-Q, may result in additional costs, monetary judgments, settlements or other remedies, including fines, penalties, restitution and/or alterations in our business practices or those of our specialist investment managers. In addition, these matters may cause reputational harm to us or our specialist investment managers and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.
Current report
During our first fiscal quarter, global equity markets provided mixed results. U.S. equity markets provided positive returns, supported by the result of the presidential election and expectations of policies to improve economic growth and reduce taxes and regulation, while most international markets declined amid fears of economic contraction, increasing inflation and political instability. The S&P 500 Index increased 2.4%, while the MSCI World Index decreased by 0.1% for the quarter. The Bloomberg Global Aggregate Index decreased 5.1% during the quarter, reflecting geopolitical tensions and fluctuating inflation rates.
Current report
1 Average AUM is calculated as the average of the month-end AUM for the trailing four months.
Current report
Acquisition-related retention expenses decreased $23.3 million for the three months ended December 31, 2024, primarily due to lower compensation associated with performance-based and time-based awards, partially offset by an increase due to the acquisition of Putnam.
Current report
Amortization of intangible assets increased $26.8 million for the three months ended December 31, 2024, primarily due to a reduction in the remaining useful life of definite-lived intangible assets related to WAM.
Current report
Interest expense increased $4.3 million for the three months ended December 31, 2024 primarily due to an increase in interest recognized on tax reserves, partially offset by lower accretion on Lexington deferred purchase consideration and interest recognized in the prior year on the $250 million senior notes which were repaid in July 2024.
Current report
Our effective income tax rate was 25.9% and 22.6% for the three months ended December 31, 2024 and 2023. The rate increase was primarily due to tax expenses from stock-based compensation, as compared to a tax benefit in the prior year.
Removed paragraphs (15)
Previous report
During our third fiscal quarter, global equity markets provided positive returns, reflecting strong corporate earnings in certain sectors due to ongoing enthusiasm around artificial intelligence and expectations of an economic soft landing, although inflation remained a concern and expectations of interest rate reductions eased. The S&P 500 Index and MSCI World Index increased 4.3% and 2.8% for the quarter and 28.8% and 25.0% for the fiscal year to date. The Bloomberg Global Aggregate Index decreased 1.1% during the quarter, reflecting the shift in interest rate expectations, but increased 4.7% for the fiscal year to date, reflecting strong positive returns, in our first fiscal quarter.
Previous report
On January 1, 2024, we acquired Putnam Investments (“Putnam”), a global asset management firm, from Great-West Lifeco Inc. (“Great-West”).
Previous report
AUM increased $215.1 billion or 15%, as compared to the prior year period, primarily due to the acquisition of Putnam. Long-term inflows increased 23% to $82.7 billion, driven by higher inflows in fixed income institutional separate accounts and equity fund vehicles and institutional and retail separate accounts, partially offset by lower inflows in alternative private fund vehicles. Long-term outflows increased 28% to $85.9 billion driven by higher redemptions in fixed income and equity open end funds and institutional and retail separate accounts.
Previous report
AUM increased $9.4 billion or 1% during the three months ended June 30, 2023 due to the positive impact of $16.5 billion of net market change, distributions and other and $0.2 billion of long-term net inflows (which includes $3.5 billion of long-term reinvested distributions), partially offset by $7.3 billion of cash management net outflows. Long-term net inflows included $3.2 billion from a low-fee equity mandate. Net market change, distributions and other primarily consists of $24.4 billion of market appreciation and a $0.1 billion increase from foreign exchange revaluation, partially offset by $8.0 billion of long-term distributions. The market appreciation occurred in all asset classes with the exception of the alternative asset class, most significantly in the equity asset class, reflecting positive returns in the global equity markets.
Previous report
AUM increased $51.7 billion or 4%, as compared to the fiscal year 2022 period. Long-term inflows decreased 13% to $67.4 billion, driven by lower inflows in fixed income, equity, and multi-asset open end funds, fixed income institutional separate accounts, multi-asset sub-advised mutual funds, and equity retail separate accounts, partially offset by higher inflows for multi-asset institutional separate accounts, alternative private funds, and equity sub-advised mutual funds. Long-term outflows decreased 31% to $67.2 billion driven by lower redemptions in fixed income and equity open end funds, fixed income and equity institutional separate accounts, multi-asset sub-advised mutual funds, and equity and fixed income retail separate accounts, partially offset by higher redemptions for multi-asset institutional separate accounts.
Previous report
AUM increased $272.4 billion, or 20%, during the nine months ended June 30, 2024 due to $148.3 billion from the acquisition of Putnam, the positive impact of $122.5 billion of net market change, distributions and other and $2.9 billion of cash management net inflows, partially offset by $1.3 billion of long-term net outflows, which include $17.5 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $160.7 billion of market appreciation, partially offset by $36.9 billion of long-term distributions and a $1.3 billion decrease from foreign exchange revaluation. The market appreciation occurred in all asset classes, most significantly in the equity and fixed income asset classes and reflected positive returns in the global equity and fixed income markets.
Previous report
AUM increased $134.1 billion, or 10%, during the nine months ended June 30, 2023 due to the positive impact of $107.7 billion of net market change, distributions and other, $34.9 billion from an acquisition, and $5.9 billion of cash management net inflows, partially offset by $14.4 billion of long-term net outflows. Net market change, distributions and other primarily consists of $131.0 billion of market appreciation, a $9.8 billion increase from foreign exchange revaluation, partially offset by $33.1 billion of long-term distributions. The market appreciation occurred in all asset classes with the exception of the alternative asset class, most significantly in the equity and fixed income asset classes and reflected positive returns in the global equity and fixed income markets. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a weaker U.S. dollar compared to the Euro, Pound Sterling, Brazilian Real and Australian dollar.
Previous report
Long-term inflows decreased 23% to $199.7 billion, as compared to the fiscal year 2022 period, driven by lower inflows in equity and fixed income open end funds, fixed income institutional separate accounts, and equity retail separate accounts. Decreased inflows for open end mutual funds include the impact of lower reinvested distributions, which were $18.0 billion in the current year period, as compared to $29.5 billion in the prior year period. Long-term outflows decreased 20% to $214.1 billion due to lower outflows in fixed income and equity open end funds, multi-asset sub-advised mutual funds, fixed income and equity institutional separate accounts, and equity retail separate accounts.
Previous report
1 Effective October 1, 2023, India region is included in Europe, Middle East and Africa.
Previous report
Acquisition-related retention expenses increased $22.4 million and $109.2 million for the three and nine months ended June 30, 2024 primarily due to higher costs associated with recent acquisitions.
Previous report
Amortization of intangible assets decreased $1.4 million and $0.2 million for the three and nine months ended June 30, 2024, primarily due to the net effect of intangible assets which became fully amortized during the period, partially offset by the amortization of intangible assets recognized as part of the acquisition of Putnam and, for the nine month period, Alcentra.
Previous report
Investment and other income, net increased $24.7 million for the three months ended June 30, 2024, primarily due to income from equity method investees and net foreign currency gains as compared to losses in the prior year quarter, partially offset by losses on investments, as compared to gains in the prior year quarter. Investment and other income, net increased $99.9 million for the nine months ended June 30, 2024, primarily due to higher net income from equity method investees, lower net foreign currency exchange losses, and higher dividend and interest income, partially offset by lower gains on investments.
Previous report
Interest expense decreased $9.2 million and $27.1 million for the three and nine months ended June 30, 2024 primarily due to interest expense recognized in the prior year periods on our term loan that was terminated on July 25, 2023 and a decrease in interest recognized on tax reserves.
Previous report
Our effective income tax rate was 22.7% and 23.7% for the three and nine months ended June 30, 2024, as compared to 25.4% and 25.7% for the three and nine months ended June 30, 2023. The rate decrease for the three month period was primarily due to state tax provision to return adjustments in the prior year period and activity of CIPs for which there is no related tax impact, partially offset by benefits in the prior year from the release of valuation allowances for capital losses. The rate decrease for the nine month period was primarily due to state tax provision to return adjustments and tax benefits from stock-based compensation.
Previous report
◦Write off of noncontrolling interests related to the wind down of an acquired business.
Reworded paragraphs (50)
Previous wording
Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that may cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements, including pandemic-related risks, market and volatility risks, investment performance and reputational risks, global operational risks, competition and distribution risks, third-party risks, technology and security risks, human capital risks, cash management risks, and legal and regulatory risks. The forward-looking statements contained in this Form 10-Q or that are incorporated by reference herein are qualified in their entirety by reference to the risks and uncertainties disclosed in this Form 10-Q and/or discussed under the headings “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (“fiscal year 2023”).
Current wording
Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that may cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements, including market and volatility risks, investment performance and reputational risks, global operational risks, competition and distribution risks, third-party risks, technology and security risks, human capital risks, cash management risks, and legal and regulatory risks. The forward-looking statements contained in this Form 10-Q or that are incorporated by reference herein are qualified in their entirety by reference to the risks and uncertainties disclosed in this Form 10-Q and/or discussed under the headings “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (“fiscal year 2024”).
Previous wording
In this section, we discuss and analyze the results of operations and financial condition of Franklin Resources, Inc. (“Franklin”) and its subsidiaries (collectively, the “Company”). The following discussion should be read in conjunction with our Annual Report on Form 10-K for fiscal year 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”), and the consolidated financial statements and notes thereto included in subsequent filings on Form 10-Q and elsewhere in this Form 10-Q.
Current wording
In this section, we discuss and analyze the results of operations and financial condition of Franklin Resources, Inc. (“Franklin”) and its subsidiaries (collectively, the “Company”). The following discussion should be read in conjunction with our Annual Report on Form 10-K for fiscal year 2024 filed with the U.S. Securities and Exchange Commission (the “SEC”), and the consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Words such as “we,” “us,” “our” and similar terms refer to the Company.
Previous wording
Franklin is a holding company with subsidiaries operating under our Franklin Templeton® and/or subsidiary brand names. We are a global investment management organization that derives operating revenues and net income from providing investment management and related services to investors in jurisdictions worldwide. We deliver our investment capabilities through a variety of investment products, which include our sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products, and other investment vehicles. Related services include fund administration, sales and distribution, and shareholder servicing. We may perform services directly or through third parties. We offer our services and products under our various distinct brand names, including, but not limited to, Franklin®, Templeton®, Legg Mason®, Alcentra®, Benefit Street Partners®, Brandywine Global Investment Management®, Clarion Partners®, ClearBridge Investments®, Fiduciary Trust International™, Franklin Bissett®, Franklin Mutual Series®, K2®, Lexington Partners®, Martin Currie®, O’Shaughnessy®Asset Management, Putnam®, Royce® Investment Partners and Western Asset Management Company®. We offer a broad product mix of fixed income, equity, alternative, multi-asset and cash management asset classes and solutions that meet a wide variety of specific investment goals and needs for individual and institutional investors. We also provide sub-advisory services to certain investment products sponsored by other companies which may be sold to investors under the brand names of those other companies or on a co-branded basis.
Current wording
Franklin is a holding company with subsidiaries operating under our Franklin Templeton® and/or subsidiary brand names. We are a global investment management organization that derives operating revenues and net income from providing investment management and related services to investors in jurisdictions worldwide. We deliver our investment capabilities through a variety of investment products, which include our sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products and other investment vehicles. Related services include fund administration, sales and distribution, and shareholder servicing. We may perform services directly or through third parties. We offer our services and products under our various distinct brand names, including, but not limited to, Franklin®, Templeton®, Legg Mason®, Alcentra®, Benefit Street Partners®, Brandywine Global Investment Management®, Canvas®, Clarion Partners®, ClearBridge Investments®, Fiduciary Trust International™, Franklin Mutual Series®, K2®, Lexington Partners®, Martin Currie®, O’Shaughnessy®, Putnam®, Royce® and Western Asset Management Company®. We offer a broad product mix of equity, fixed income, alternative, multi-asset and cash management asset classes and solutions that meet a wide variety of specific investment goals and needs for individual and institutional investors. We also provide sub-advisory services to certain investment products sponsored by other companies which may be sold to investors under the brand names of those other companies or on a co-branded basis.
Previous wording
The level of our revenues depends largely on the level and relative mix of assets under management (“AUM”). As noted in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year 2023, the amount and mix of our AUM are subject to significant fluctuations that can negatively impact our revenues and income. The level of our revenues also depends on the fees charged for our services, which are based on contracts with our funds and customers, fund sales, and the number of shareholder transactions and accounts. These arrangements could change in the future.
Current wording
The level of our revenues depends largely on the level and relative mix of assets under management (“AUM”). As noted in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year 2024, the amount and mix of our AUM are subject to significant fluctuations, including as a result of reputational harm, that can negatively impact our revenues and income. The level of our revenues also depends on the fees charged for our services, which are based on contracts with our funds and customers, fund sales, and the number of shareholder transactions and accounts. These arrangements could change in the future.
Previous wording
Our total AUM at June 30, 2024 was $1,646.6 billion, 20% higher than at September 30, 2023 and 15% higher than at June 30, 2023. Monthly average AUM (“average AUM”) for the three and nine months ended June 30, 2024 increased 15% and 10% from the same periods in the prior fiscal year.
Current wording
Our total AUM at December 31, 2024 was $1,575.7 billion, 6% lower than at September 30, 2024 and 8% higher than at December 31, 2023. Monthly average AUM (“average AUM”) for the three months ended December 31, 2024 increased 17% from the same period in the prior fiscal year.
Previous wording
AUM increased $1.9 billion during the three months ended June 30, 2024 due to $3.0 billion of cash management net inflows and the positive impact of $2.1 billion of net market change, distributions and other, partially offset by $3.2 billion of long-term net outflows, which include $3.6 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $14.5 billion of market appreciation, partially offset by $9.7 billion of long-term distributions and a $2.7 billion decrease from foreign exchange revaluation. The market appreciation occurred in all asset classes, most significantly in the multi-asset and equity asset classes and reflected positive returns in the global equity markets. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a stronger U.S. dollar compared to the Japanese Yen, Brazilian Real, Euro and Canadian dollar, partially offset by a weaker U.S. dollar compared to the Australian dollar.
Current wording
AUM decreased $102.9 billion, or 6%, during the three months ended December 31, 2024 due to the negative impact of $52.9 billion of net market change, distributions and other and $50.0 billion of long-term net outflows, inclusive of $67.9 billion of long-term net outflows at WAM and $20.1 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $30.1 billion of distributions, primarily from the equity asset class, a $14.3 billion decrease from foreign exchange revaluation and $8.5 billion of market depreciation. The market depreciation occurred primarily in the fixed income and multi-asset classes. Foreign exchange revaluation from AUM in products that are not U.S. dollar denominated was primarily due to a stronger U.S. dollar compared to the Euro, Australian dollar, Japanese Yen and Canadian dollar.
Previous wording
Long-term inflows increased 18% to $236.5 billion, as compared to the prior year period, driven by higher inflows in equity and multi-asset open end funds and separately managed accounts, fixed income institutional separate accounts, investment trusts, and subadvised mutual funds, partially offset by lower inflows in alternative private fund vehicles. Long-term outflows increased 11% to $237.8 billion due to higher outflows in equity open end funds and fixed income institutional separate accounts and investment trusts.
Current wording
Long-term inflows increased 42% to $97.8 billion, as compared to the prior year period, driven by higher inflows in equity and multi-asset open end funds, equity sub-advised mutual funds, and equity retail separately managed accounts. Long-term outflows increased 100% to $147.8 billion, substantially due to higher outflows across multiple fixed income vehicles at WAM, and to a lesser extent, higher outflows from equity open end funds and retail separately managed accounts. WAM outflows have increased significantly following the investment performance issues and the announcement of ongoing regulatory investigations.
Previous wording
1 Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 38%, 37%, 37% and 35% of our total AUM as of June 30, 2024.
Current wording
1 Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 38%, 38%, 38% and 36% of our total AUM as of December 31, 2024.
Previous wording
2 Strategy composite performance measures the percent of composite AUM beating its benchmark. The benchmark comparisons are based on each account’s/composite’s (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to a market index that has been selected to be generally consistent with the asset class of the account/composite. Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 54%, 54%, 53% and 49% of our total AUM as of June 30, 2024.
Current wording
2 Strategy composite performance measures the percent of composite AUM beating its benchmark. The benchmark comparisons are based on each account’s/composite’s (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to a market index that has been selected to be generally consistent with the asset class of the account/composite. Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 54%, 54%, 54% and 48% of our total AUM as of December 31, 2024.
Previous wording
3 Total mutual fund AUM includes performance of our alternative and multi-asset funds, and total strategy composite AUM includes performance of our alternative composites. Alternative and multi-asset AUM represent 16% and 10% of our total AUM at June 30, 2024.
Current wording
3 Total mutual fund AUM includes performance of our alternative and multi-asset funds, and total strategy composite AUM includes performance of our alternative composites. Alternative and multi-asset AUM represent 16% and 11% of our total AUM at December 31, 2024.
Previous wording
Investment management fees increased $76.5 million and $237.5 million for the three and nine months ended June 30, 2024 primarily due to a 15% and 10% increase in average AUM, partially offset by a decrease in performance fees and lower catch-up fees recognized at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024. The increases in average AUM primarily occurred in the equity, fixed income and multi-asset asset classes, driven by the acquisition of Putnam.
Current wording
Investment management fees increased $147.1 million for the three months ended December 31, 2024 primarily due to a 17% increase in average AUM, partially offset by a decrease in performance fees and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024. The increases in average AUM primarily occurred in the equity and multi-asset asset classes, driven by the acquisition of Putnam on January 1, 2024 and net market appreciation, partially offset by a decrease in the alternative asset class.
Previous wording
Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 40.2 and 41.4 basis points for the three and nine months ended June 30, 2024, as compared to 42.0 and 41.9 basis points for the same periods in the prior fiscal year. The rate decreases were primarily due to lower catch-up fees recognized at the closing of fundraising rounds in a secondary private equity fund, which ended in January 2024, and increased AUM in lower fee products, including those from the acquisition of Putnam.
Current wording
Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) decreased to 40.2 basis points for the three months ended December 31, 2024, from 42.4 basis points for the same period in the prior fiscal year. The rate decrease was primarily due to increased AUM in lower fee products, including those from the acquisition of Putnam, and catch-up fees recognized in the prior year at the closing of fundraising rounds in a secondary private equity fund.
Previous wording
Performance fees were $56.6 million and $308.2 million for the three and nine months ended June 30, 2024, and $125.9 million and $446.1 million for the same periods in the prior fiscal year. The decrease for both periods was primarily due to lower performance fees earned by certain of our alternative specialist investment managers, and decreases of $11.6 million and $77.1 million in performance fees earned by Lexington Partners L.P. (“Lexington”), which were passed through as compensation expense per the terms of the acquisition agreement.
Current wording
Performance fees were $141.6 million and $166.4 million for the three months ended December 31, 2024 and 2023. The decrease was primarily due to lower performance fees earned by certain of our alternative specialist investment managers, and a decrease of $3.5 million in performance fees which were passed through as compensation expense per the terms of acquisition agreements.
Previous wording
Asset-based distribution fees increased $43.6 million and $88.4 million for the three and nine months ended June 30, 2024 primarily due to revenue earned by Putnam subsequent to the acquisition and increases of 4% and 3% in the related average AUM, excluding the impact of Putnam.
Current wording
Asset-based distribution fees increased $63.1 million for the three months ended December 31, 2024 primarily due to revenue earned from Putnam products subsequent to the acquisition and an increase of 10% in the related average AUM, excluding the impact of the Putnam products.
Previous wording
Sales-based fees increased $10.7 million and $27.3 million for the three and nine months ended June 30, 2024 primarily due to increases of 6% and 10% in commissionable sales and sales-based revenue earned by Putnam subsequent to the acquisition.
Current wording
Sales-based fees increased $16.0 million for the three months ended December 31, 2024 primarily due to an increase of 25% in commissionable sales and sales-based revenue earned from Putnam products subsequent to the acquisition.
Previous wording
Shareholder servicing fees increased $23.0 million and $46.8 million for the three and nine months ended June 30, 2024 primarily due to fees earned by Putnam subsequent to the acquisition, partially offset by the impact of a change in fee structure for certain U.S. sponsored funds.
Current wording
Shareholder servicing fees increased $31.0 million for the three months ended December 31, 2024 primarily due to fees earned by Putnam subsequent to the acquisition.
Previous wording
The Putnam acquisition had a significant impact on operating expenses in the three and nine months ended June 30, 2024; however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.
Current wording
The Putnam acquisition had a significant impact on operating expenses in the three months ended December 31, 2024, however, due to the ongoing integration of the combined businesses, it is not practicable to separately quantify the impact of the legacy Putnam business.
Previous wording
Salaries, wages and benefits increased $51.1 million and $118.1 million for the three and nine months ended June 30, 2024, primarily due to higher headcount as a result of the acquisition of Putnam and annual salary increases, partially offset by the impact of other headcount reductions.
Current wording
Salaries, wages and benefits increased $52.7 million for the three months ended December 31, 2024, primarily due to higher headcount as a result of the acquisition of Putnam and annual salary increases, partially offset by the impact of headcount reductions.
Previous wording
Incentive compensation remained flat for the three months ended June 30, 2024 and increased $55.0 million for the nine months ended June 30, 2024 primarily due to the acquisition of Putnam, an increase in expense for deferred compensation awards, and higher bonus expense based on expectations of our annual performance, partially offset by lower incentive compensation at specialist investment managers.
Current wording
Incentive compensation increased $21.1 million for the three months ended December 31, 2024, primarily due to the acquisition of Putnam and an increase in expense for deferred compensation awards, due in part to higher annual acceleration of expense related to retirement-eligible employees, partially offset by lower incentive compensation at certain specialist investment managers.
Previous wording
Acquisition-related performance fee pass through expenses decreased $11.6 million and $77.1 million for the three and nine months ended June 30, 2024, due to lower performance fees earned by Lexington.
Current wording
Acquisition-related performance fee pass through expenses decreased $3.5 million for the three months ended December 31, 2024, due to lower pass through performance fees.
Previous wording
Other compensation and benefits decreased $5.6 million for the three months ended June 30, 2024, primarily due to lower net market gains of deferred compensation plans, partially offset by an increase in special termination benefits; and increased $17.4 million for the nine months ended June 30, 2024, primarily due to an increase in special termination benefits and higher net market gains on investments related to our deferred compensation plans. Special termination benefits increased $4.5 million and $8.9 million for the three and nine months ended June 30, 2024 primarily due to the acquisition of Putnam, partially offset by costs associated with workforce optimization initiatives in the prior year. Compensation expense related to minority interests decreased $1.8 million for the three months ended June 30, 2024 and remained flat for the nine months ended June 30, 2024.
Current wording
Other compensation and benefits decreased $23.9 million for the three months ended December 31, 2024, primarily due to lower net market gains on investments related to our deferred compensation plans and a decrease in special termination benefits. Special termination benefits decreased $6.3 million for the three months ended December 31, 2024 primarily due to the costs associated with workforce optimization initiatives in the prior year.
Previous wording
We expect to incur additional acquisition-related retention expenses of approximately $60 million during the remainder of the current fiscal year, and annual amounts beginning at approximately $190 million in the fiscal year ending September 30, 2025 and decreasing over the following two fiscal years by approximately $20 million and $80 million. At June 30, 2024, our global workforce increased to approximately 10,300 employees from approximately 9,300 at June 30, 2023, primarily due to the acquisition of Putnam.
Current wording
At December 31, 2024, our global workforce increased to approximately 10,100 employees from approximately 9,100 at December 31, 2023, primarily due to the acquisition of Putnam.
Previous wording
Asset-based expenses increased $61.9 million and $133.2 million for the three and nine months ended June 30, 2024 primarily due to expenses incurred by Putnam subsequent to the acquisition, increases of 4% and 3% in the related average AUM, excluding the impact of Putnam, and higher marketing support fees. Distribution expenses are generally not directly correlated with distribution fee revenues due to certain fee structures that do not provide full recovery of distribution costs.
Current wording
Asset-based expenses increased $87.7 million for the three months ended December 31, 2024 primarily due to expenses related to Putnam products subsequent to the acquisition, an increase of 10% in the related average AUM, excluding the impact of the Putnam products, and higher marketing support fees. Distribution expenses are generally not directly correlated with distribution fee revenues due to certain fee structures that do not provide full recovery of distribution costs.
Previous wording
Sales-based expenses increased $9.6 million and $24.9 million for the three and nine months ended June 30, 2024 primarily due to increases of 6% and 10% in commissionable sales and sales-based expenses incurred by Putnam subsequent to the acquisition.
Current wording
Sales-based expenses increased $17.0 million for the three months ended December 31, 2024 primarily due to an increase of 25% in commissionable sales and sales-based expenses related to Putnam products subsequent to the acquisition.
Previous wording
Occupancy expenses increased $47.9 million and $76.6 million for the three and nine months ended June 30, 2024, driven by impairment of the right of use asset related to vacated office space and new leased office space located at One Madison Avenue, primarily associated with an initiative to consolidate our office space in New York City, and expenses incurred by Putnam subsequent to the acquisition.
Current wording
Occupancy expenses increased $8.4 million for the three months ended December 31, 2024, primarily due to expenses incurred by Putnam subsequent to the acquisition and leased office space located at One Madison Avenue, associated with an initiative to consolidate our office space in New York City.
Previous wording
Information systems and technology expenses increased $29.3 million and $66.0 million for the three and nine months ended June 30, 2024, primarily due to expenses incurred by Putnam subsequent to the acquisition, higher outsourced data services and software costs.
Current wording
Information systems and technology expenses increased $25.0 million for the three months ended December 31, 2024, primarily due to expenses incurred by Putnam subsequent to the acquisition, and higher technology consulting, software, and market data costs.
Previous wording
General, administrative and other operating expenses increased $43.6 million and $80.0 million for the three and nine months ended June 30, 2024, primarily due to the acquisition of Putnam, increases of $14.6 million and $31.3 million in professional fees, and increases of $5.7 million and $15.0 million in travel and entertainment expenses due to higher activity levels. These increases were partially offset by decreases of $4.4 million and $14.1 million in fund-related expenses.
Current wording
General, administrative and other operating expenses increased $53.2 million for the three months ended December 31, 2024, primarily due to the acquisition of Putnam, an increase of $18.5 million in legal and other professional fees, net of a $10.0 million insurance recovery, an increase of $3.7 million in advertising expenses and an increase of $2.4 million in travel and entertainment due to higher activity levels.
Previous wording
Dividend and interest income decreased $2.9 million for the three months ended June 30, 2024, primarily due to lower average balances, partially offset by higher yields. Dividend and interest income increased $21.1 million for the nine months ended June 30, 2024, primarily due to higher yields.
Current wording
Dividend and interest income decreased $11.7 million for the three months ended December 31, 2024, primarily due to lower average balances and lower yields.
Previous wording
Investments held by the Company generated net losses of $24.3 million and net gains of $17.3 million in the three and nine months ended June 30, 2024, as compared to net gains of $13.8 million and $62.3 million for the three and nine months ended June 30, 2023. The net losses in the three months ended June 30, 2024 were primarily from investments in nonconsolidated funds and separate accounts, and investments measured at cost adjusted for observable price changes, while the net gains in the prior year period were primarily from investments in nonconsolidated funds and separate accounts, and assets invested for deferred compensation plans. The net gains in the nine months ended June 30, 2024 were primarily from assets invested for deferred compensation plans, partially offset by losses on investments measured at cost adjusted for observable price changes, while the net gains in the prior year were primarily from investments in nonconsolidated funds and separate accounts, and assets invested for deferred compensation plans.
Current wording
Investments held by the Company generated net losses of $57.1 million in the three months ended December 31, 2024, as compared to net gains of $60.1 million for the three months ended December 31, 2023. The net losses in the current year and net gains in the prior year were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans.
Previous wording
Equity method investees generated income of $41.0 million and $122.3 million for the three and nine months ended June 30, 2024, as compared to losses of $9.1 million and income of $43.5 million in the prior year. The income for the three months ended June 30, 2024 was largely related to various global alternative funds, while the losses in the prior year period were primarily due to a $7.5 million other-than-temporary impairment of an equity method investment. The income in the nine months ended June 30, 2024 was largely related to various global alternative and equity funds, while the income in the prior year was largely related to various global alternative, equity and fixed income funds.
Current wording
Equity method investees generated losses of $7.6 million for the three months ended December 31, 2024, as compared to income of $56.9 million in the prior year, largely related to various global alternative and equity funds.
Previous wording
Net foreign currency exchange gains (losses), net were gains of $1.2 million for the three months ended June 30, 2024 and losses of $7.5 million for the nine months ended June 30, 2024, as compared to net losses of $6.6 million and $40.2 million for the three and nine months ended June 30, 2023. The U.S. dollar strengthened against the Euro and weakened less against the British Pound in the three months ended June 30, 2024, which resulted in net foreign exchange gains on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries, as compared to losses in the prior year period. The U.S. dollar weakened less in the nine month period against the Euro and British Pound, which resulted in lower foreign exchange losses on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries.
Current wording
Net foreign currency exchange gains were $14.5 million for the three months ended December 31, 2024, as compared to net losses of $7.4 million for the three months ended December 31, 2023. The U.S. dollar strengthened in the current year against the Euro and British Pound, which resulted in foreign exchange gains on cash and cash equivalents denominated in U.S. dollars held by our European subsidiaries, as compared to weakening against the same currencies, which resulted in foreign exchange losses, in the prior year.
Previous wording
Investments held by consolidated investment products (“CIPs”) generated investment gains and other income of $37.6 million and $103.7 million in the three and nine months ended June 30, 2024, largely related to gains on holdings of various funds. Investments held by CIPs generated investment gains and other income of $1.7 million and $75.3 million in the three and nine months ended June 30, 2023, largely related to gains on holdings of various equity and fixed income funds, substantially offset by losses on holdings of various alternative funds.
Current wording
Investments held by consolidated investment products (“CIPs”) generated investment gains and other income of $114.1 million in the three months ended December 31, 2024, largely related to gains on holdings of various alternative, equity, fixed income, and multi-asset funds. Investments held by CIPs generated losses of $23.8 million in the three months ended December 31, 2023, largely related to losses on holdings of various alternative and equity funds.
Previous wording
Expenses of CIPs increased $8.0 million and $4.9 million for the three and nine months ended June 30, 2024, due to activity of the funds.
Current wording
Expenses of CIPs increased $1.4 million for the three months ended December 31, 2024, due to activity of the funds.
Previous wording
2 Total cash and cash equivalents and investments includes $4,188.8 million maintained for operational activities, including investments in sponsored funds and other products, and $458.7 million necessary to comply with regulatory requirements.
Current wording
2 Total cash and cash equivalents and investments includes $4,508.2 million maintained for operational activities, including investments in sponsored funds and other products, and $434.3 million necessary to comply with regulatory requirements.
Previous wording
3 Total cash and cash equivalents and investments includes approximately $370 million attributable to employee-owned and other third-party investments made through partnerships which are offset in nonredeemable noncontrolling interests, $286.1 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and $440.3 million of cash and investments related to deferred compensation plans.
Current wording
3 Total cash and cash equivalents and investments includes approximately $356 million attributable to employee-owned and other third-party investments made through partnerships which are offset in noncontrolling interests, approximately $361 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $437 million of cash and investments related to deferred compensation plans.
Previous wording
•Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
Current wording
•Special termination benefits and other expenses related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
Previous wording
◦Interest expense for amortization of Legg Mason debt premium from acquisition-date fair value adjustment.
Current wording
◦Interest expense for amortization of debt premium from acquisition-date fair value adjustment.
Previous wording
•Special termination benefits related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
Current wording
•Special termination benefits and other expenses related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
Previous wording
Net cash provided by operating activities increased during the nine months ended June 30, 2024 primarily due to lower net purchases of investments by CIPs, partially offset by decreases in accounts payable and accrued expenses and income taxes payable. Net cash used in investing activities decreased primarily due to lower net purchases of investments by collateralized loan obligations (“CLOs”), lower cash paid for acquisitions in the current year as compared to the prior year and net liquidations of investments as compared to purchases in the prior year. Net cash provided by financing activities decreased primarily due to lower net proceeds on debt of CIPs, lower net subscriptions in CIPs by noncontrolling interests, and proceeds from repurchase agreements in the prior year.
Current wording
Net cash used by operating activities decreased during the three months ended December 31, 2024 primarily due higher net income adjusted for non-cash items and an increase in accounts payable and accrued expenses, partially offset by a larger decrease in accrued compensation and benefits. Net cash used in investing activities increased primarily due to net purchases of investments as compared to liquidations in the prior year and higher net purchases of investments by collateralized loan obligations (“CLOs”). Net cash provided by financing activities, as compared to net cash used in financing activities in the prior year, was primarily due to higher net proceeds on debt of CIPs and higher net subscriptions in CIPs by noncontrolling interests.
Previous wording
In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At June 30, 2024, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,600.0 million. The notes have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized discounts and debt issuance costs, of $1,586.5 million. At June 30, 2024, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,250.0 million. The notes have fixed interest rates from 3.950% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,448.5 million at June 30, 2024. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. On July 15, 2024, we repaid all of the outstanding $250.0 million 3.950% senior notes due July 2024 issued by Legg Mason at the principal amount plus accrued and unpaid interest of $4.9 million.
Current wording
In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At December 31, 2024, Franklin’s outstanding senior notes had an aggregate principal amount due of $1,600.0 million. The notes have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized discounts and debt issuance costs, of $1,587.4 million. At December 31, 2024, Legg Mason’s outstanding senior notes had an aggregate principal amount due of $1,000.0 million. The notes have fixed interest rates from 4.750% to 5.625% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized premium, of $1,188.4 million at December 31, 2024. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. We intend to repay the $400 million 2.850% senior notes due March 2025 from existing cash or other sources of liquidity.
Showing the first 40 of 50 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We were in compliance with all debt covenants at December 31, 2024.