Franklin Resources, Inc. Q2 FY2026 earnings call

• Key results: $16.9 billion long-term net inflows, record gross sales, positive flows in every region. • Growth drivers: private markets, retail SMAs and Canvas, ETFs, solutions contributed. • Structural shift in client allocation: increased demand for active ETFs, customization, tax-managed solutions. • Execution as one Franklin Templeton: simplifying go-to-market approach. • Investment performance: over half of mutual fund and ETF AUM outperforming peer median in various periods, municipal strategies strong.

This quarter, Franklin Resources had $16.9 billion in long-term net inflows. Public markets had $9.5 billion positive net flows in multi-asset, equities had net outflows of $4.7 billion but some positive flows in certain areas, fixed income had net outflows of approximately $300 million but excluding Western was positive $3.6 billion. Alternative AUM was $283 billion, raised $14.3 billion in alternatives including $13.2 billion in private market assets. ETF AUM reached $61.6 billion with $4.5 billion net inflows. Retail SMAs managed $168.3 billion with $2.7 billion net inflows, Canvas AUM was $22.9 billion with $5.3 billion net inflows. Internationally, had positive long-term net flows of $5.5 billion in aggregate.

• Full-year guidance: assumes flat markets, excluding performance fees, expects investment management fee revenue to increase at 4x expense increase rate, margin expansion ahead of plan, fiscal fourth quarter margin in high 29s and full year in 27s. • Private markets fundraising target revised upward to $25 billion to $30 billion, expecting to be above $30 billion.

• Q: Question on private markets growth and Lexington.

A: Private markets target revised up, Lexington was meaningful contributor with various products contributing. • Q: Question on Canvas and tax optimization.

A: Canvas differentiated by technology, has various features and has grown with momentum. • Q: Question on guidance and voluntary retirements.

A: Voluntary buyout included in projection, quarter guidance on fee rate, compensation, IS&T, occupancy, G&A. • Q: Question on secondaries PE and tax scrutiny.

A: Traditionally discount-to-par markup is key, most appreciation from asset itself. • Q: Question on AI use.

A: AI used in growth and efficiency, early signs of sales and administrative gains. • Q: Question on tax rule and Lexington XI.

A: No reason Lexington XI won't be similar size, tax rule discussion on mutual funds vs ETFs. • Q: Question on alts fundraising and G&A.

A: Alts fundraising diversified, G&A includes one-time elevated expenses. • Q: Question on ETFs and distribution fees.

A: ETFs growing with various drivers, discussing distribution fees with partners. • Q: Question on FranklinCrypto and tokenization.

A: FranklinCrypto targeting crypto exchanges, tokenized products with traction but takes time.