Legg Mason Inc. (NYSE:LM) Q4 2019 Earnings Conference Call Transcript

May 13, 2019 • 05:00 pm ET


Legg Mason Inc. (NYSE:LM) Q4 2019 Earnings Conference Call Transcript


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Joseph A. Sullivan

net flows in April, which is our third straight month of inflows. Legg Mason's global retail distribution platform was a solid performer in the quarter, generating positive net sales to result both higher sales and lower redemptions.

Our AUM ended the quarter at $758 billion, up from $727 billion at December 31. We also refined our plans during the quarter for our global business platform, as part of a broader strategic restructuring program that will position the Company to drive improving overall margins and profitability. And we continue to thoughtfully allocate our capital in a number of ways, most notably with our Board approving a double-digit increase in our quarterly dividend as we prepared to delever by repaying $250 million of our public debt in July.

We are building a better Legg Mason for our many constituencies by executing against four key drivers of value creation, specifically, further leveraging centralized retail distribution to grow, developing the potential of our investments and M&A agenda to provide investors with greater choice, more effectively managing costs to improve profitability, and prudently managing the Company's balance sheet, while thoughtfully returning capital to shareholders.

So, let's start now with where I know you have particular interest, improving profitability by more effectively managing costs. In our third quarter earnings call, we announced a plan to create a global business platform, inclusive of shared services at corporate and certain of our affiliates. We originally projected that plan could deliver $90 million to $110 million of annual run rate savings by the end of calendar year 2022 or just over three years. Since that announcement, our plans have evolved to focus primarily on our corporate operating platform as part of a broader corporate restructuring. Simply stated, our focus is on making our existing corporate global business platform more efficient and effective. And while we no longer plan to combine affiliate operations into the global business platform, our affiliates will have the opportunity to benefit from leveraging Legg Mason's resources, capabilities and streamlined operating platform to the extent it makes sense for them to do so.

We have also expanded the areas included in our cost savings from our global business platform to include broader Legg Mason corporate and distribution functions as well as efficiency initiatives at certain smaller affiliates that operate outside of revenue sharing arrangements. While there is much work to be done, we now have increased visibility into and have gained even greater confidence in our ability to deliver $100 million or more of annual savings now within two years. And we have moved from planning to implementation, and are showing immediate progress.

Specifically, we expect to have achieved 35% of targeted savings on a run rate basis by the end of this quarter and 75% or more of targeted run rate savings by this fiscal year-end. Pete will walk you through more detail of our progress on this restructuring momentarily. But while operating with a high degree of efficiency is essential, our value creation strategy