The Johnsons Hint at Franklin's M&A Progress
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Friday, November 01, 2019

The Johnsons Hint at Franklin's M&A Progress

Greg Johnson and Jenny Johnson recently offered some hints on their acquisition strategy.

Jennifer M. Johnson
Franklin Resources, Inc.
President, Chief Operating Officer
In a recent earnings call (transcribed by Seeking Alpha, Greg Johnson, chairman and CEO of Franklin Resources (dba Franklin Templeton [profile]) characterizes the "progress in terms of M&A and acquisitions targets as quite good" after Franklin's recent acquisition of New York City-based Benefit Street Partners.

Although management at Franklin Templeton "value [their] cash and conservative balance sheet," Greg Johnson states that they are willing to use cash to make further acquisitions to enhance the growth of the company. Jenny Johnson, president and COO of Franklin, reiterated that any further acquisitions would have to fill "product gaps," improve "distribution capability," or serve "a geography" currently outside Franklin's scope. (Jenny Johnson shared that insight in response to a question from Mike Carrier, a managing director from Bank of America.)

The team at Franklin released their fiscal Q4 2019 results a week ago. As of September 30, 2019, Franklin Templeton has $692.6 billion in AUM, a decrease of 3 percent during the quarter due to $9.8 billion in net market loss and $12.8 billion in net outflows, despite a 12 percent increase in U.S. retail sales for the fiscal year and an increase of 13 percent over the same quarter a year ago. Franklin Templeton's year-over-year AUM also declined 3 percent due to $31.8 billion in net outflows and $19.1 billion in net market loss. On the call, Greg Johnson attributes the decline of investment performance to "global events that negatively impacted certain strategies."

The firm's GAAP earnings per share of $0.61 missed the target EPS by $0.03 compared with an EPS of $0.96 as of September 30, 2018.

Operating revenues for fiscal Q4 2019 were $1.452 billion, down 1.6 percent from $1.476 billion in fiscal Q3 2019 and down 5 percent from $1.527 billion in fiscal Q4 2018.

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