Welcome to Franklin Resources earnings conference call for the quarter ended December 31st, 2025. Hello, my name is Rob, and I'll be your call operator today. As a reminder, this conference is being recorded, and at this time, all participants are in a listen-only mode. 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 or 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 described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and the MD&A sections of Franklin's most recent Form 10-K and 10-Q filings. Now, I'd like to turn the call over to Jenny Johnson, our Chief Executive Officer. Thank you, Selene. Welcome, everyone, and thank you for joining us today as we review Franklin Templeton's first fiscal quarter results. I'm joined today by Matthew Nicholls, our Co-President and CFO, and Daniel Gamba, our Co-President and Chief Commercial Officer. We'll answer your questions momentarily, but before we do that, I'd like to review some key themes. We are operating in a period of continued transition for investors, marked by significant market turbulence globally, resulting from heightened geopolitical trade policy and consequently, economic uncertainty. Markets are adjusting to a more persistently volatile environment, shifting capital flows and a growing need for resilience in portfolios. Across regions and client segments, investors are focused on the same fundamental questions: how to generate durable returns, how to manage risk through uncertainty, and how to position portfolios for long-term outcomes rather than short-term noise. That environment is reshaping what clients expect from asset managers. Over the past few months, I've traveled overseas across Europe, the Middle East, and Asia, and in my conversations with clients, it's clear they are no longer looking for individual products in isolation. They're looking for partners who can help them construct portfolios across public and private markets, deliver personalization at scale, and navigate complexity with discipline and insight. Franklin Templeton is well-positioned for this moment. Over years of deliberate planning, combined with the strength of a global brand, we have earned the trust of investors around the world. At Franklin Templeton, we bring together specialized investment expertise across public markets, private markets, and digital assets, supported by a global platform with reach in more than 150 countries. Clients are increasingly engaging with us across multiple asset classes, reflecting a shift toward integrated solutions and long-term strategic relationships. This alignment between client needs and our capabilities is driving growth. Our diversified platform, continued innovation, and focus on scale and efficiency position us to capture opportunities across market cycles and deliver long-term value for our clients and shareholders. Now, turning to our results for the quarter, which marked another important step forward with tangible progress across the firm. We continue to deepen client partnerships, broaden our investment and solutions capabilities, and strengthen our global platform, key priorities that remain central to our strategy. Our first fiscal quarter continued the momentum we built last year with strong client activity across Franklin Templeton's diversified global platform, with positive net flows in both public and private markets. We had record long-term inflows of $118.6 billion, up 40% from the prior quarter and 22% from the prior year quarter. Long-term net inflows were $28 billion, with record AUM and positive net flows across equity, multi-asset, and alternative strategies, as well as ETFs, retail SMAs, and Canvas. Excluding Western Asset Management's long-term net inflows totaled $34.6 billion, nearly double the prior year quarter, extending our track record to a ninth consecutive quarter of positive flows on a comparable basis. Assets under management ended the quarter at $1.68 trillion. AUM increased from the prior quarter due to long-term net inflows and the acquisition of Apera, partially offset by the impact of net market change, distributions, and other. Excluding Western Asset, long-term net inflows were $34.6 billion, compared to $17.9 billion in the prior year quarter, with nine consecutive quarters of positive net flows. We continue to see strong momentum across our platform, with record AUM in three of our four asset classes. Public markets remain a key strength and an important source of growth. Equity, multi-asset, and alternatives generated positive net flows totaling $30.4 billion for the quarter, and excluding Western Asset, Fixed Income delivered its eighth consecutive quarter of positive net flows. Equity net inflows were $19.8 billion for the quarter, including reinvested distributions of $24.6 billion. We saw positive net flows across large cap value and core, all cap growth and value sector, international equity, equity income, and infrastructure strategies. Fixed income net outflows were $2.4 billion, excluding Western Asset. Fixed income net inflows were $2.6 billion, driven by Franklin Templeton Fixed Income. Positive momentum continued in multi-sector, municipal, highly customized, stable value, government, and emerging market strategies. Our institutional pipeline of long, but unfunded mandates remains strong at $20.4 billion, underscoring sustained demand for our investment capabilities. The pipeline remains diversified by asset class and across our specialist investment teams. Turning to private markets, Franklin Templeton is a leading manager of alternative assets with $274 billion in alternative AUM. Alternatives fundraising has been a key contributor to our growth, with $10.8 billion raised during the quarter, including $9.5 billion in private market assets. Fundraising was diversified across our alternative specialist investment managers and reflected client demand in secondary private equity, alternative credit, real estate, and venture capital from institutions as well as from the wealth channel. Aggregate realizations and distributions were $4.8 billion. Lexington Co-Investment Partners VI, one of the largest dedicated global co-investment funds, closed in October with $4.6 billion in committed capital. Today, Lexington's AUM stands at $83 billion, up 46% since its acquisition in 2022. In addition, we continue to expand our private credit platform with the October first closing of the Apera Asset Management acquisition. This strategic acquisition enhances our direct lending capabilities in Europe, growing lower middle market. In January, BSP Real Estate Opportunistic Debt Fund II closed with $10 billion of investable capital, including related vehicles and anticipated leverage across $3 billion of equity commitments. Franklin Templeton's U.S. and European alternative credit businesses are now aligned under an updated Benefit Street Partners brand with $95 billion in private credit AUM at quarter end. Clarion Partners continues to be well-positioned with a large, diversified portfolio and positive returns, despite a challenging capital-raising environment. Capital flows remain well below historic averages, largely due to clients seeking more liquidity in private equity overall. Recent M&A activity in the industry underscores the importance of alternative assets, reinforcing the strategic rationale behind our acquisitions and investments, and further highlights our ability to grow our alternative asset platform at scale. Franklin Templeton Private Markets, our alternatives wealth management offering, continues to gain traction and generated over $1 billion in sales for the quarter, underscoring the strength of our global distribution partnerships and client reach. Lexington Partners, Benefit Street Partners, and Clarion Partners each have scaled perpetual funds totaling $6.7 billion in AUM. These are semi-liquid, perpetual vehicles open to ongoing subscriptions, giving investors efficient access to long-term private market exposure. Taken together, these capabilities are driving increased client adoption and strengthening our position as demand for private market solutions continues to grow globally. As investors continue to seek enhanced diversification and differentiated sources of return, private assets have taken on a more prominent role within traditional mutual fund structures. We've been incorporating private assets into traditional mutual funds for over a decade. Today, we manage approximately 60 products, representing about $160 billion in traditional mutual fund assets that have exposure to private markets. Liquidity is closely and continuously monitored to ensure these products remain aligned with their traditional fund objectives. Multi-asset AUM is nearly $200 billion and had net inflows of $4 billion during quarter, the 18th consecutive quarter of positive net flows led by Franklin Income Investors, Franklin Templeton Investment Solutions, and Canvas. These flows underscore clients' increasing preference for outcome-oriented, diversified solutions across public and private asset classes, an area that Franklin Templeton continues to focus on and evolve through innovation. Clients are increasingly turning to Franklin Templeton for a broad and differentiated set of investment vehicles, and we're seeing that demand translate into sustained growth across our platform with record AUM across ETFs, retail SMAs, Canvas, and investment solutions. Our ETF platform continues to grow at a faster rate than the industry, and reached a new high with $58 billion in AUM, and generated $7.5 billion in net flows, marking its 17th consecutive positive quarter. The net flows were inclusive of $3.5 billion in mutual fund conversions. Our focus on active ETFs produced strong results this quarter. Active ETF net flows were $5.5 billion, or approximately 70% of total net flows. Today, we have 15 ETFs that exceed $1 billion in AUM. The industry conversation continues to shift toward delivering personalization at scale, and we see this as a durable long-term opportunity. Advancements in technology are allowing features of separately managed accounts, such as tax loss harvesting, which were historically underutilized, to be implemented efficiently and consistently across a broad client base. We are well-positioned in retail SMAs with our breadth of capabilities, along with our custom indexing technology, Canvas. As a leader in retail SMAs, AUM increased to $171 billion, with $2.4 billion in net inflows driven by Putnam, Franklin Fixed Income, and Canvas. Canvas generated $1.4 billion in net flows and reached $18 billion in AUM, reflecting strong client interest in personalization and tax efficiency. Canvas has been net flow positive since its acquisition in 2022. We are also seeing increased demand for multi-asset model solutions, including portfolios that combine both public and private asset classes. This trend is extending into retirement channels, where investors are increasingly seeking diversification, income, and risk management through more holistic portfolio construction. Investment Solutions leverage our capabilities across public and private asset classes to pursue strategic partnerships. This quarter, Investment Solutions' enterprise AUM surpassed $100 billion. Digital assets also continue to play an important role in modernizing financial infrastructure, and Franklin Templeton remains at the forefront. Earlier this month, the state of Wyoming debuted the nation's first state-issued stable token with Franklin Templeton-managed reserves, further demonstrating our leadership in blockchain-enabled investment solutions. Our digital asset AUM is $1.8 billion, inclusive of approximately $900 million in tokenized funds and approximately $800 million in crypto ETFs. Turning to artificial intelligence, we've made significant progress in advancing our AI efforts. Yesterday, we announced the launch of Intelligence Hub, a modular AI-driven distribution platform powered by Microsoft Azure. Building on the advanced financial AI initiatives announced in April 2024, Intelligence Hub delivers our vision for U.S. distribution by modernizing core activities, improving sales effectiveness, and enhancing the client experience. One of Franklin Templeton's strengths is our global presence, and international markets are an integral part of our growth strategy. We currently operate in over 30 countries, and our international business continues to expand with positive net flows for the quarter, with strength in EMEA. Now, in terms of investment performance, over half of our mutual fund and ETF AUM is outperforming its peer median across the three, five, and 10-year periods. Similarly, over half of strategy composite AUM is outperforming its benchmarks over the same time periods. Compared to the prior quarter, mutual fund investment performance increased in the 5- and 10-year periods and declined modestly in the 1- and 3-year periods due to select U.S. equity strategies. On the strategy composite side, investment performance improved in the 10-year period, was stable in the 3-year period, and declined in the 1- and 5-year periods. The 1-year decline was primarily driven by the liquidity strategies. Overall, long-term performance remains competitive and continues to support both organic growth and client retention. Turning briefly to financial results, Adjusted Operating Income was $437.3 million, reflecting lower performance fees in the annual deferred compensation acceleration for retirement-eligible employees, partially offset by the impact of higher average AUM and realization of cost savings initiatives. We remain disciplined in managing expenses while continuing to invest strategically in areas of growth and innovation for the benefit of all stakeholders. We are confident that our diversified business model, global scale, and client-first culture positions us well to capture the long-term trends, reshaping our industry across public and private markets. Finally, in December, Franklin Templeton was once again recognized by Pensions & Investments as one of the best places to work in money management. I'm proud to lead such a talented and dedicated team, and I want to thank our employees for their continued hard work and commitment to serving our clients. Now, let's open up the call to your questions. Operator? Thank you. If you'd like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. If anyone should require operator assistance, please press star zero. We request that you limit yourself to one question to allow as many additional participants on the call as possible. Thank you. And the first question is coming from the line of Bill Katz with TD Cowen. Please proceed. Okay, thank you very much for taking the question and all the, the update. Thank you for the extra disclosure in the supplement around expenses. I think that was, quite welcomed, for sure. Maybe on that, just a two-part question. To the extent that the markets were to be bit under pressure as the year goes by... How much flex do you have to sort of bring that number down? And then secondarily, I think in there, you sort of affirmed you're going to get to $200 million of cost savings. Could you speak to maybe the residual amount yet to, be realized and the timeline against that? Thank you. Yeah. Hi, Bill. Good morning. It's Matt. So as outlined on that page, thanks for highlighting it, in the investor deck. At flat markets, as we mentioned, the assumptions and excluding performance fee comp, we do expect expenses to be in line with 2025. This is inclusive, again, as we also outlined on that slide, of our key investments that are essentially offset by the expense savings. From a modeling perspective, if you take the guidance which I can give on the second quarter, and then you add that to the first quarter, take that sort of combined number for expenses, and then take the last two quarters and divide it roughly evenly between the last two, that'll get you where we believe we'll be at this point in time. It may be that the expense savings shift a little bit between the third and the fourth quarters, but that's how we expect things to play out in terms of our cost savings. And that is, of course, as I've mentioned in the past, in conjunction with, margin expansion, in particular, going into the third and fourth quarters. So I think for the second quarter, you won't see much of the margin expansion. You'll see that going into the third and fourth quarters, where we expect to be, again, given current markets, given current AUM levels, we expect our margin to be, getting into the high twenties at that point from where we are, today. Thank you. The next question is from the line of Craig Siegenthaler with Bank of America. Please proceed with your question. Thank you. Good morning, everyone. My first question is on the recent M&A activity. I know you've been very active, and I wanted to see if you had an update on potential contingent consideration liabilities, because I see there's only about $20 million in the new 10-Q that you put out today, but I actually thought it was larger than that. So is that really it? Or could there be more, especially with the deal you just closed last quarter? No, that's the, that's the contingent consideration around specific transactions that we've done, so it's really virtually nothing at this stage. What that doesn't include is some compensation related to, transactions, but that's all in our compensation line and all included in our guidance. So, but and some of that you can see in the GAAP versus non-GAAP disclosures, for specifics. But for transaction-related consideration, it's a very low number that's left, and that's probability weighted, Craig. So, yeah. Got it. Nothing, nothing additional to report there. Okay. Thanks, Matthew. And it, it's just one question, right? Yeah. Well, I think you had... You want to ask something else about M&A? I think, Jenny, do you want to cover the, the M&A question? Yeah. M&A would be great. Yeah. Do you want to just, sorry, Craig, are you asking about what kind of our view is on M&A, or what, what's your question on that? Actually, I did in the first part, but, you know, if you want to kind of update us on your M&A priorities, product gaps, kind of where you're looking, where you see- Sure. kind of strategic benefits, that'd be helpful, too. Yeah, sure. So it hasn't really changed. I mean, you know, what we've always said is we do M&A for strategic purposes, and they're usually around whether we need to fill out an obvious product gap. Today, honestly, we are pretty full. I mean, the one area that we had said was infrastructure. You need a lot of scale for infrastructure, and we feel like we've filled that, at least for now, with the partnerships that we've done with the three infrastructure managers. And, you know, we're focused on the wealth channel there. Any kind of M&A we do going forward is going to really be in three areas. It will be like what we did with Apera, which is to fill in a specific bolt-on area, either geographically or capabilities to our alternatives manager. So in that case, they gave us European direct lending, which we were able to combine, you know, with our Alcentra Direct Lending Group, and I think we're now at $10 billion in European direct lending there. So that's kind of a bolt-on, both geographically and capability. And then the second area would be if it somehow furthers distribution. So we've done either investments or actual M&A that help us, like a Putnam deal, where we also brought with it some sort of distribution capability. And then the third area is really in high net worth. We've said we want to grow, we want to double the size of Fiduciary in our five-year plan, and that can be both, that'll be both organic as well as inorganic. So those are the kind of three areas that we're focused on. And I'll just add, I'll just add something to this, Craig, that, you know, it's almost reiterating what we've said in the past. But look, what we've done in M&A as a company has transformed the business. It's almost 60% of our operating income that's been added over the last several years through M&A. And I think the, you know, we're a bit of a modest company at the end of the day, but the timing of our private markets acquisitions was quite good, and as you know, we've been growing the multiple down very substantially in terms of those transactions. So we're very comfortable with M&A, and as Jenny mentioned, we've got some things that we're reviewing. We're kind of in the strategic flow... would probably be an understatement. But right now, you know, the return on M&A is very important to us. We have high bars, and obviously, given where our equity is trading, you know, the bar is even higher for M&A. So the first thing we look at is, you know, what's the return on buying back our shares relative to what we could get from M&A or providing more seed capital and these other things around capital management? Thank you. The next question is from the line of Brennan Hawken with BMO Capital Markets. Please proceed with your question. Good morning. Thanks for taking my question. Matt, I don't think I heard it in the prepared remarks, so I figured I'd drill in. Would you have any expectations for EFR either in both in the coming quarter, and then if you have a view, maybe for the balance of the year? I know you've got Lexington, the Lexington flagship is expected to start. I'm guessing that'll help. Yeah, I'd say that for the next quarter, we expect EFR to be stable where it is today. And then in the following two quarters, there could be some, you know, upside to that based on fundraising around alternative assets, as you've just highlighted. Great. Thanks for taking my question. Thank you. The next question is from the line of Alex Blostein with Goldman Sachs. Please proceed with your question. Hey, good morning, everyone. Thank you for the questions as well. Matt, I was hoping you could expand the margin discussion a little bit longer term. Franklin's done a really nice job integrating a number of assets over the years. Good to see the expense flex come through. But when you think about the operating margins for the firm as a whole, kind of running in the mid-20s, to your point, maybe entering high 20s towards the end of the year, where do you see the profitability over time? Many of your peers are well in the 30s, kind of mid-30s% range. So, knowing what you know about the business, knowing what else might be on the come with respect to integration of some of your managers, how should the street think about profitability over kind of a multi-year basis, and what's kind of the goalpost there? And maybe just a clarification. I know you said high-20s margin exiting 2026. Is that with market or is that also assuming flat markets? Thank you. The latter one is flat markets, so it's, it's, it's part of our guidance from where we are today. In terms of the first question, you know, we put out there a 5-year plan, where... We've got 4 years, well, 3.75 years to go of that plan. And we said we'd be in excess of 30% by the time that's finished. The, the reality is, we are well on our way to the 30% margin, all else remaining equal, going into 2027, let's say, fiscal 2027. So at some time in 2027, we'll be there. And then if all else remains equal around the market, as we've said, you know, there isn't any other reason why we couldn't be somewhere between 30%-35% if we achieve all the goals that we put into our strategic plan that we've highlighted to the to all of you, and as we highlighted where we're at against that at the end of last year. So, yeah, that's where we're at on the margin. As I mentioned, where we should end this year, all else remaining equal, in the high 20s, going into 2027 fiscal, at some point we'll be 30%. And then if the market stays where it is today, we should go in excess of that in future years, where we thought we'd be more like 30%. So we have some upside there. Remember as well, we do have the highly episodic situation around Western, where we've been providing support to the Western expense structure, since August 2024, which has had an impact on our overall margins of probably several points. So we'd already be in the high 20s or 30% now, excluding that, but we've done the right thing, in our opinion, by providing that support. And it, by definition, also supports future growth opportunities that we've highlighted in our five-year plan. Yeah, all makes sense. Thanks so much. Thank you. Our next question is from the line of Glenn Schorr with Evercore. Please proceed with your question. Thank you very much. Jenny, I felt like you had strong conviction in how you talked about... you said something like, "No longer, people, clients are no longer looking for products in isolation." Curious how much you were leaning towards the institutional versus the wealth side, and more importantly, how are you organizing around that? How do you deliver it? Is it your own models, is it getting on other people's models? And is it also bigger strategic, broader relationships with LPs? I'm just curious to flesh that out a little bit. Thank you. Yeah. No, great question. So that comment is both a wealth client comment as well as an institutional client comment. So you talk to any of the big wealth platforms, and what they're basically saying is, there's more demand from their clients to offer truly what used to be just available to high net worth people. So it's financial planning, tax efficiency, education of the heirs. And so what their message is: "Look, we're gonna consolidate to fewer managers, so we're gonna look at the ones that have scale, that have breadth of capabilities, and can offer these additional services to us." And part of that, so I'm talking first on the wealth side, and part of that on the wealth side is if you have traditional and privates, show me that you can support us on the education of the sale of our privates. That's why we have 100 people whose sole job is to support our market leaders out there as they meet financial advisor by financial advisor from an education standpoint. And so really focusing on streamlining on the wealth channel. We're having the same discussions on the institutional side, where the conversations are around, "Okay, show me your broad breadth of capabilities. I wanna be able to second some of my more junior folks. Show me how you can build a program around that, that goes cross-market. So fixed income, equity, secondaries, private credit. Like, we want that education across, and that you will support those types of programs." And again, they're consolidating the number of managers. And you have to remember, you know, you don't blow up with one manager, it taints your firm's reputation. There's as much due diligence on a multi-trillion-dollar manager as there is on a single, you know, $20 billion manager. And so the amount of time that they have to do in doing due diligence on the manager is making them want to wanna consolidate, just use larger managers and expect more from the manager. So that's both, like I said, institutional retail. We've seen it on the insurance side, whereas they're looking... You know, you have this trend towards leveraging sub-advisers. They want broad breadth of capabilities there. So, you know, we're seeing it on, as you talk to retirement managers, "Show me the breadth of capabilities that you have and show me how you can help support the business." So I would say this trend has been going on for the last few years, and it continues, it continues. We feel really well positioned for it. Thanks so much, Jenny. Hey, Jenny, I wanted to add a comment into Glenn's comment on actually our success, especially on the wealth space, which you mentioned, we have over 100 alt specialists that complement the field and the wealth people on the ground. And the success that we've seen, actually, over the past year alone, we've increased substantially the amount of AUM that we fundraise in the wealth space. And we expect that that's gonna be, you know, between 15% and 20% in 2026. But also importantly, 40% is coming outside the U.S. So it's also growing outside the U.S., both in Europe and Asia. The other part that is important is, over the past 2 years alone, we built 7 perpetual funds that are close to $5 billion in fundraising, and the fundraising is just going up every quarter. So this quarter is 50% higher than the quarter before, and the momentum continues because we continue to sign up new wealth groups. And to your question, Glenn, we're also starting to build those model portfolios of a perpetual funds that will continue to accelerate the growth on the wealth. So that's an area of focus, and I think that's an area of a lot of success from Franklin. So I just wanted to add that to the conversation. Well, and you just reminded me, Daniel. Glenn, you asked a question about, do we also try to get in other people's models? Yes, the answer is we do. You know, if other people have both CIO and they're open architecture, and we are, in that case, in other people's models. So our goal is to meet the client, however, however we can meet the client, whether it's whatever vehicle, we're vehicle agnostic. You know, I think that you would see that all of our flagship products are being sold in multiple vehicles. So some form of ETF, mutual funds, CIT, SMA, we're adding, you know, tax efficiency to our active SMAs. And so having that flexibility is really important as they select you as one of their core providers. Our next question comes from the line of Dan Fannon with Jefferies. Please proceed with your question. Thanks. Good morning. So Matt, wanted to follow up on some of your comments around long-term margins and the expenses. So just thinking about expense growth beyond this year, are you—can you give us a sense of how you're thinking about that? And do you anticipate in those longer-term targets for margins, additional cost savings and/or cost programs that will help you get there? I mean, it's possible. We're deep in on AI. We're deep in on how to maximize our presence that we have in India and Poland, for example, where we've got very large operational capabilities and great talent in these places. We're working on meaningful, you know, integration across the firm to maximize and capitalize on what we've got here. Every time we progress down one of those paths, we find other places that can, frankly, absorb areas that we need to invest, at least absorb. What we're demonstrating this year is a meaningful increase in margin, all else remaining equal, and an acceleration of our plan to get to 30%+. And, you know, we're doing that through very disciplined expense management while continuing to invest in the business at the same time as the market going up. So we've got meaningful investments for growth, we've got the market that's meaningfully up, yet our expenses are staying flat to last year. I think going into 2027, obviously, look, we're not, we're only a quarter through 2026 fiscal, but, I feel confident that going into 2027, that, a lot of the other initiatives we have going on will help to continue to absorb, the additional expenses that are required to grow, and invest in, in our business. But obviously, we can't comment on, you know, reliably on fiscal 2027 when we're not even through 2026. But I hope through these comments, when you look at how we've performed from an expense perspective, 2025 versus 2024, and now what we're guiding in 2026 versus 2025, that, you know, we've mostly achieved what we said we're going to achieve, even with upward momentum in the market. So I do think we've got some room in the numbers, in terms of further cost saves going into fiscal 2027, based on everything that we know. But right now, we're focused on delivering on fiscal 2026, as we've highlighted. Yeah, and I'm just going to add, Matt, like, when we think about where is there upside opportunity and margin, I'm gonna throw it into kind of 3 categories, in the shorter term, but sort of a 2027 on. One is streamlining the products. We've done a lot around. I think almost a third of our products we've looked at and either repositioned, merged, a few cases closed, and, in some, when I think about repositioning, it's like turning them into ETFs. We did big ETF conversion, where we think they'll get more upside potential. So as we determine that, there's opportunity there. The second is, it always takes a lot longer, and you think about all the acquisitions that we've done. We kind of say, I think 11 acquisitions in the last 5 or 6 years, but the reality of, like, Mason was like an acquisition of 5 companies or 6 companies, not one company, because they were all on their own systems. They had their own versions of CRM, different CRM systems. That is still ongoing, and those, and some of that's built into the projections that we have, but some of it, you continue to uncover more opportunities there as you integrate, and it takes a lot, it takes multiple years to do the full integration, and so that's still working. And then finally, like AI and technology, I think we think blockchain is gonna be a great efficiency adder as it, as, it's adopted out there. But like AI, just you may have seen that we announced this Intelligence Hub. It's one area that we're working on AI to make our distribution people more effective. You know, what we saw is the time to finalize call lists dropped 90% when we rolled this out. Now, what is that? It's, you know, it went from 3-4 hours to 15 minutes, and the prepping for meetings dropped, you know, from 6 hours to 2 hours or something per week. But those are small, little incremental cost savings, or hopefully, more importantly, what it's done is actually added 9%-10% increase in the number of meetings that our distribution team has. So hopefully, that translates into more sales. But think about that as you're rolling it out. We've already talked in the past about AI and the improvement in our RFPs. We're doing a lot of work on our investment side. It will either translate into growth opportunities or it'll try translate into cost savings. But honestly, it's a bit hard today to you know build that into direct cost savings opportunities that expand into margin. But those are big opportunities, we think, going forward, and we are very focused. We think on the AI side, we're actually leaders in that space. So I just want to add that to kind of Matt's comments. Finally, Jenny, thank you for that. Finally, most of the stated growth areas that you can see, as demonstrated by our positive flows in them, are scaling. They're scaling, they're scaling up. And in particular, ETFs, Canvas, and Solutions, for example, each of those three areas for us are obviously they're lower fee, and when they're smaller AUM, when you're growing, overall as a business, you have a lower margin as a result of that, of that investing to grow the business to a scaled position. What's happening now in terms of ETFs, Canvas, and Solutions in particular, notwithstanding the lower fee rate associated with those vehicles, those businesses, let's call them, they're getting to the point now where the size of them, and certainly going into later into 2026, 2027, all else remaining equal, we expect the scaling of those businesses to create higher margins overall. So you have a lower fee rate. I know everybody's very focused on the fee rate, but at a certain point, when you get above a certain AUM, expenses are very managed, and you, because you've done all the investments, you've got the team you need, and then you could be two, three times the size of AUM, and therefore have a much higher margin. Similarly, in our alts area, as we continue to grow significantly across all three of our... Three, four of our primary alternative assets businesses, we're getting more margin from, from that. I mean, the $10 billion that Jenny talked about earlier on, the $9.5 billion of, of, fundraising, doesn't include, for example, Lexington Fund XI. So it's important to, to, to note that. Our next question comes from the line of Ken Worthington with J.P. Morgan. Please proceed with your question. Hi, good afternoon, good morning, and thanks for taking the question. I guess pressing AI further, Jenny, you've been in the press talking about the impact that AI has on asset management, suggesting that it could drive, if not accelerate, more consolidation in the asset management industry. So maybe, one, how does AI drive consolidation? And then, two, from Franklin's perspective, how would AI sort of alter, you know, you know, your ability and willingness to do the M&A transactions and fill in the gaps that you mentioned sort of earlier in the call? Yeah, so a couple things. So one, my comments on M&A consolidation has been really what I've said is, "Look, if you're a traditional manager and you haven't already purchased scale in alternative managers, it is gonna be really difficult to compete going forward." Especially because, one, that comment on distributors trying to consolidate, so they're demanding more from you. Two is, as Matt pointed out, we were fortunate in that we were very early in these acquisitions. Traditional alternatives managers have gotten incredibly expensive since we did our acquisition of BSP and Clarion, and it will be very, very difficult to be able for a traditional manager to be able to go out and acquire. Number two, this c- con... This convergence, particularly in fixed income, you're gonna see, but across the board with products that contain both private and public in them, if you don't have that under the same roof, we don't think you're gonna get the same kind of just synergies that you get from learning and managing and research. We have over 50 products between Western, ClearBridge, and Western and Franklin. Franklin's been doing private markets in their traditional mutual funds for over a decade, so over 50 products actually have privates in them today. So we already have that in our mutual funds. So one is in the alternative space. The second is AI. AI, the amount of data required to truly train a model is really significant, and if you're a smaller manager, you won't be able to buy, you won't be able to buy the kind of data. We spend $hundreds of millions on data, and so to be able to scale that data, plus the data you generate internally across all of your different capabilities, is really important in training models. And it's just gonna be hard to compete on training those models if you don't have a scale. So that's where, you know, why my comment was, I think that's gonna drive some consolidation because I think over time, we're already seeing it. Now, look, anytime you have technology breakthroughs, first thing people do is just make more efficient what they do today. That's why we give you quotes like, "Hey, we're more efficient on calls." Because it's hard to measure the actual value-added output, 'cause that doesn't happen right away. It doesn't happen until you start to put in the hands of your people so that they can build those ideas. I like to say it's like, you know, when the iPhone came out, we all looked at it as, this is a pretty cool camera, and, you know, and flashlight and whatever. It was unleashing the hands of the public that came up with all these creative applications. As you start to train your workforce on how to leverage agentic AI, which we were very early adopters of broadly rolling out ChatGPT, and we do trainings on how to create agentic AI. We do hackathons with our investment teams, and it's a cross-functional hackathon, so we put people together that are across various SMAs to say, "Go build Agentic AI." And they're doing things that are built one on top of the other, and then we take them, and we test them across others. So to me, the ability to do that and compete is gonna be very difficult if you are small, and in particular, if you are singly focused on, you know, kind of one area of the capital stack. Got it. Okay, thank you. That's very helpful. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Please proceed with your question. Morning. Thanks for taking the question. Just wanted to come back to some of your commentary, Jenny, on blockchain and tokenization. Just curious if you could talk about your strategic objectives for that over the next couple of years. What steps are you looking to take here in 2026 to enhance your positioning, to help improve adoption, for example, of your existing tokenized funds? And then to your point on efficiency, I guess, how do you see blockchain contributing to improved efficiency at Franklin? How much lower cost is it to operate tokenized funds versus your traditional funds and rails funds? Sure. So I'll tell you, like, this is just an incredibly efficient technology, and the best example to give you an idea of how I think it's, from a cost-saving standpoint, how significant it is. I'll start there, and then kind of what the opportunities and the hurdles are to more broad adoption. So the first thing is, when the SEC approved our money market fund, they had this parallel process. It was something like we did over a 6-month period between our old transfer agency system and our blockchain system, and we were one of the few firms that were still running the transfer agency systems in-house, so we got to see that comparison. And we did about 50,000 transactions. It cost us about $1.50 per transaction. Cost us $1.13 to run it total, to run those 50,000 transactions on the Stellar blockchain. We picked the right chain. There's a lot that goes into that, but it showed us the dramatic difference in cost. Today, if you open an old money market fund, you need $500 to open up, because below that, we'd probably lose money, and the other shareholders subsidize you. In the case of blockchain, you could open a Benji. If you downloaded the Benji app and opened a money market fund, you would only need $20, and we could probably go less than that. So it's cost savings. The second thing is, there's a huge amount of cost in financial services that's just reconciling data between your own systems and then reconciling with your counterparty. All that goes away when you have a single source of truth... that is updated immediately. So those- that's where you're gonna have cost savings, which is why I believe it will fundamentally replace all of the rails. There's a lot of toll takers in the system today that will slow that down as much as they can because it threatens their business model. But, you know, water runs downhill, no matter how many obstacles you put in it, it will, it will become very significant. So why the, the slow adoption? You cannot hold a tokenized product without having what's called a wallet, okay? Now, it's a blockchain wallet. It's merely an encryption key that's your own personal one, but you can't hold any of those. In the U.S., in particular, where you didn't have regulatory clarity until the Genius Act came in, there was no point in any of these big wealth advisors on the traditional side to even think about it, because it was kind of like the third rail from a regulatory. I can tell you this year, I feel like is completely changed. You now have the large crypto exchanges interested in trying to offer traditional types of funds, ETFs and others, that would be tokenized. And you have the big traditional managers who are saying, "Can you please educate us on how we access this space? How do we build a wallet? What's required there?" And so I think you're going to start to see much greater convergence between TradFi and DeFi. We, you know, our tokenized money market fund, what we see is if anybody's been involved in securities lending, you know that people will move where they-- they'll borrow, where they can get the highest, collateral return, even if it's a basis point. Why would you keep there's $300 billion in stable coins, why would you park your money in a stable coin that doesn't give you yield, when you could move into a Benji money market fund, earn that yield, and when you want to do a payment transactions, convert into a stable coin? We think by the end of March, we will have the ability for somebody who has a stable coin, where Benji has been integrated with multiple different stable coins, where on these crypto platforms, we announced a partnership with Binance. We have with OKX and, Kraken and others, where you'll be able to convert from your stablecoin into our money market fund, and on a Saturday, convert out if you want to leverage it for payment and earn that yield. And again, because it's on blockchain, we actually pay you that yield in your account every day. If you're a corporate treasurer, and you can get use of those funds every day versus accruing and waiting for that capital to be paid to you at the end of the month on a money market fund, that's going to be a benefit. and so that's where we think there's an opportunity, but Benji is just the beginning of where we think this goes. Great. Thanks so much. Our next question is from the line of Patrick Davitt with Autonomous Research. Please proceed with your question. Hi, good morning, everyone. Following up on the expense guide, I don't think you've ever talked about the scale of this third-party performance-related expenses you're excluding. So could you give how much that runs each year? And then I think, Matt, you hinted you have a detailed rundown of next quarter expenses you can give. Thank you. Thanks, Patrick. That should be, the third-party piece should be relatively small. I'll check with the team quickly- Okay. Just in case. But that was that larger performance fee that we had to run through G&A last quarter was associated with a large performance fee we got from BSP, and it was for previous employees. So but I'll get what that number could be going forward. In terms of... But it'll definitely be smaller. Yeah. In terms of the third quarter, or sorry, second quarter guide, I already mentioned, AFR, we expect it to be in line with this, with this quarter. And as I mentioned, the last two quarters, we have some upside potential in AFR related to potential fundraisings in alternative assets. Comp and benefits, we expect to be around $860 million. This includes $30 million of calendar year resets, you know, for the 401(k) payroll, salary increases, and so on. It also assumes $50 million of performance fees and a 55% performance fee compensation ratio on that. IS&T, we expect to be $155 million, consistent with last quarter. Occupancy, $70 million, again, consistent with last quarter, and as we've guided in the past. G&A, $190 million-$195 million, again, in line with the previous quarter. This assumes a little bit higher fundraising expenses and a little bit higher professional fees. And then the tax rate, we guided last time for the year, 26%-28%. We're keeping that guide, but we're now on the lower end of the guide or low to mid, let's say, in that guide. So we're bringing the guide down on taxes for the year from the higher end, which I think I said last quarter, to the lower to mid part of that guide. And then really importantly, I just want to reiterate for 26, because I know you'll be calculating back what should, how do we get to the flat expense guide all remaining equal and excluding performance fees and the other assumptions we put in the deck, how do we get to that guide? I would add the quarter I just gave you to the first quarter and then look at the last two quarters. ... and just spread the expense savings over those two quarters. We recognized about 20% of the $200 in the first quarter. And we expect to spread the rest of it out over the next three, but there'd be larger amounts of it in the last two quarters. And again, we expect to end the year in a very similar expense position as we were to 2025, and notwithstanding all the investments that we've talked about making in the company and at a higher margin, as I mentioned when I answered Alex's question. Thank you. Our next question comes from the line of Ben Budish with Barclays. Please just proceed with your question. Hi, good morning, and thank you for taking the question. I was wondering if you could maybe talk a little bit about the equity flows in the quarter. I know, you know, calendar Q4 is typically seasonally stronger, and obviously there's been a trend of improvement over the last couple of years, but this quarter looked particularly strong. Anything unusual or one-time to call out, or was it more, you know, broad-based? And, you know, I know it's still a bit earlier in the fiscal year, but, you know, any thoughts on how the rest of the year may shake out would be helpful. Thank you. I'll start, and then I know Daniel will wanna jump in. I mean, you know, obviously, it's a quarter that you have strong reinvested dividends, so that is part of the flows, which is important. But I have to tell you, I mean, Putnam, Putnam continues to have excellent performance and continues to have very, very strong flows. And honestly, that has even continued into January. I don't wanna steal the thunder here, but January hasn't closed yet, but we actually are looking like we will be positive net flows, inclusive of Western, which has been a long time since that in January. Now, again, I caveat that since it hasn't actually closed today, but part of that has just been the strength of Putnam. Daniel, you wanna add? I think you got it. I will say it's a combination of Putnam, clearly on large cap value, on research. Also, on emerging markets, we got some institutional flows from our Templeton Emerging Markets capability, which is very, very encouraging. And I will also say, our ETF franchise had excellent results, especially on the active ETFs, which is also a combination of the results from our Boston affiliate, but also a couple of ClearBridge funds did also very well on that. And the momentum continues to be with us on ETFs, we had a great quarter. 75% of the quarter was on active ETFs. It's continued to actually show that that's where the industry is going, and we have a very ambitious plan to continue that growth. All right. Thank you very much. Thank you. Our next question is from the line of Bill Katz with TD Cowen. Please proceed with your question. Great. Thanks for taking the extra question. Just a couple of cleanups for me. One, can you just remind us what the variable expense is against net asset value? We're, we're happy about the incremental margin on market action. Number two, maybe just on the WAMCO side, I haven't asked about this in a while, but it seems like volumes there are stabilizing. How are conversations progressing with the investment community, given that some, but not all, of the overhang with the regulatory investigation is sort of winding down? And then, finally, I was wondering if you could talk a little bit about broadly, you mentioned that Lexington was not in this most recent quarter. How do we think about maybe the pace of opportunity on Lexington and maybe broadly, where you see the big opportunities for growth in fiscal 2026? Thank you. Great. So I'll take the Western alts, and then I'll turn it back to Matt on the, on the variable expense there. So just one on Western. I mean, it, it helped a lot, obviously. You know, the DOJ came out and said that they're not gonna pursue criminal charges, and it'll be, resolved through a disposition and acknowledged, I think this was also important, that the additional time needed was not, due to Western. So, I think that gave clients a little bit of a breather of an uncertainty. And, you know, you have the benefit, the, the investment team is incredibly stable. They have very, very good performance. We've been integrating the, the corporate functions. We've been integrating the institutional sales and the client service. That's going very well. And so I think that, with clients, that is, that essentially has calmed them a bit. I mean, we did, while there's still outflows, they did have, I think it was $6.6 billion in gross sales in the last quarter. So there's obviously clients that are still allocating to Western. With respect to alts, you know, as Matt said, so we had a very strong quarter. You know, our target for the year is 25-30. We're gonna, it's, you know, still early, so we're gonna maintain that target. But obviously, $9.5 billion coming into the private markets, and that is across all private credit, secondaries, real estate, and venture, so it's nice and diverse. A little over half of it is in the private credit area. None of it was Lexington's flagship fund Eleven. Lexington did have, you know, it was a combination of BSP, Vest, Flex, Middle Market. There were over 33 vehicles that had inflows in our private markets this quarter. So, you know, it tells you it's really broadly distributed, which for us is exciting. Lex Flagship Fund 10, they're active, or 11, they're actively fundraising in the market right now. You know, their target is to be about where they were on their last fund. They would expect to first close this year, but, you know, it'll depend. The depend. The secondaries continues to be just a great space to be. Last year was a record number in secondaries transactions. Lexington is considered one of the trusted and long-term partners with experience, and they're not affiliated to any single PE firm, so that also gives them an advantage. So they're having very good, strong conversations. But we're pleased to see the extent of inflows and growth, even without the Lexington flagship fund. So, Matt, and I'll turn it over to you again for the last part of that. Sure. Thanks. Thanks, Jenny. So Bill, on the variable question, between 35%-40% of our expenses are variable. And I'm sorry, I didn't address the... I remembered you asked that, this question at the end of your previous question, where you said, "If the market goes down, do we have flexibility in our expense base?" The answer is yes. We always have variability in our expense base in the event the market goes down. So that's the answer to that. And then to answer another expense question that Patrick had, Patrick, just to make sure I fully answer your question, as it relates to the geography of performance fee-related compensation, first of all, we would always guide to apply 55% to the number of performance fee overall. So 55% is the correct application, whether it's in our compensation line or the G&A line. And we do, as I mentioned, in the answer to the question initially, we expect that number to be quite low in the G&A segment. The G&A segment is just literally for former employees that, where we have to—where we're paying you know, a portion of the compensation out that they owned. But that's de minimis at this point. It was just large of that one quarter. I think it was $24 million, to be specific, last quarter. And that was because it was a large older fund that had a number of folks that are no longer at... They're retired from the company that had interest in the performance fees. Thank you. This concludes today's Q&A session. I'd now like to hand the call back over to Jenny Johnson, Franklin's President and CEO, for final comments. Great. Well, I'd like to thank everybody for participating in today's call, and more importantly, once again, we'd like to thank our employees for their hard work and dedication to delivering this strong quarter. We look forward to speaking with all of you again next quarter. Thanks, everybody. Thank you. This concludes today's conference call. You may now disconnect.