EX-99.1 2 a991-2023q1earningspressre.htm EX-99.1 Document

Exhibit 99.1
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Federated Hermes, Inc. reports first quarter 2023 earnings
•Q1 2023 earnings per diluted share of $0.78
•Total assets under management reach all-time high $701.0 billion
•Money market assets reach record $505.8 billion
•Board declares $0.28 per share dividend, a 4% increase from Q4 2022
(PITTSBURGH, Pa., April 27, 2023) — Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.78 for Q1 2023, compared to $0.61 for the same quarter last year, on net income of $69.6 million for Q1 2023, compared to $55.9 million for Q1 2022.
Federated Hermes' total managed assets were a record $701.0 billion at March 31, 2023, up $69.9 billion or 11% from $631.1 billion at March 31, 2022 and up $32.1 billion or 5% from $668.9 billion at Dec. 31, 2022. Total average managed assets for Q1 2023 were $679.4 billion, up $32.2 billion or 5% from $647.2 billion reported for Q1 2022 and up $45.8 billion or 7% from $633.6 billion for Q4 2022.
"Federated Hermes' record assets under management were driven by money market asset increases accompanied by further increases across nearly all other long-term asset classes from the previous quarter, demonstrating once again the value of our diversified business mix," said J. Christopher Donahue, president and chief executive officer. "As interest rates continued their rise and as investors considered regional banking issues, many withdrew deposits from small and medium-sized banks and continued to embrace the benefits of money market funds—high credit quality, short duration, diversification, transparency, daily liquidity and market yields. Federated Hermes had positive net flows into a range of our money market products—from government to prime. Additionally, in fixed income, we saw more than $1 billion of flows into our Total Return Bond Fund, which seeks attractive opportunities by allocating across sectors—investment-grade corporate, high yield, structured products, municipals and international—in an effort to take advantage of changing markets while managing risk."
Federated Hermes' board of directors declared a dividend of $0.28 per share, a 4% increase from Q4 2022. The dividend is payable on May 15, 2023 to shareholders of record as of May 8, 2023. During Q1 2023, Federated Hermes purchased 132,592 shares of Federated Hermes class B common stock for $4.7 million.
Equity assets were $83.6 billion at March 31, 2023, down $8.1 billion or 9% from $91.7 billion at March 31, 2022 and up $2.1 billion or 3% from $81.5 billion at Dec. 31, 2022. Top-selling equity funds during Q1 2023 on a net basis were Federated Hermes Global Emerging Markets Equity Fund, Federated Hermes International Leaders Fund, Federated Hermes Asia ex-Japan Equity Fund, Federated Hermes MDT Large Cap Growth Fund and Federated Hermes MDT Mid Cap Growth Fund.
Fixed-income assets were $87.5 billion at March 31, 2023, down $4.6 billion or 5% from $92.1 billion at March 31, 2022 and up $0.8 billion or 1% from $86.7 billion at Dec. 31, 2022. Top-selling fixed-income funds during Q1 2023 on a net basis were Federated Hermes Total Return Bond Fund, Federated Hermes SDG Engagement High Yield Credit Fund (UCITS), Federated Hermes Sustainable IG Credit Fund, Federated Hermes Corporate Bond Fund and Federated Hermes Intermediate Corporate Bond Fund.
MEDIA:MEDIA:ANALYSTS:
Ed Costello 412-288-7538Meghan McAndrew 412-288-8103Ray Hanley 412-288-1920
    
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Alternative/private markets assets were $21.2 billion at March 31, 2023, down $1.9 billion or 8% from $23.1 billion at March 31, 2022 and up $0.4 billion or 2% from $20.8 billion at Dec. 31, 2022.
Money market assets were a record $505.8 billion at March 31, 2023, up $85.2 billion or 20% from $420.6 billion at March 31, 2022 and up $29.0 billion or 6% from $476.8 billion at Dec. 31, 2022. Money market fund assets were $357.3 billion at March 31, 2023, up $77.8 billion or 28% from $279.5 billion at March 31, 2022 and up $21.4 billion or 6% from $335.9 billion at Dec. 31, 2022.
Financial Summary
Q1 2023 vs. Q1 2022
Revenue increased $57.4 million or 18% primarily due to a decrease in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers) and an increase in revenue due to higher average money market assets. For further information on the waivers, see “Impact of voluntary yield-related fee waivers” below. These increases were partially offset by a decrease in revenue due to lower average long-term assets.
During Q1 2023, Federated Hermes derived 52% of its revenue from long-term assets (33% from equity, 13% from fixed-income and 6% from alternative/private markets and multi-asset), 47% from money market assets, and 1% from sources other than managed assets.
Operating expenses increased $56.2 million or 23% due to increased distribution expenses resulting primarily from lower voluntary yield-related fee waivers.
Nonoperating income (expenses), net increased $19.1 million primarily due to an increase in the market value of investments in Q1 2023 as compared to a decrease in the market value of investments in Q1 2022.
Q1 2023 vs. Q4 2022
Revenue increased $8.3 million or 2% primarily due to an increase in revenue from higher average money market and equity assets. These increases were partially offset by a decrease in revenue due to two fewer days in Q1 2023.
Operating expenses decreased $13.1 million or 4% due to a prior quarter impairment charge, partially offset by an increase in compensation expense.
Nonoperating income (expenses), net decreased $4.1 million or 36% primarily due to a smaller increase in the market value of investments in Q1 2023 as compared to Q4 2022.
Impact of voluntary yield-related fee waivers
There were no voluntary yield-related fee waivers during the quarter ended March 31, 2023. During the quarter ended March 31, 2022, voluntary yield-related fee waivers totaled $75.8 million. These fee waivers were partially offset by related reductions in distribution expenses of $57.5 million, such that the net negative pre-tax impact to Federated Hermes was $18.3 million for the quarter ended March 31, 2022.
Federated Hermes' level of business activity and financial results are dependent upon many factors, including market conditions, investment performance and investor behavior. These factors and others, including asset levels and mix, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and regulatory changes, can significantly impact Federated Hermes' business activity levels and financial results. Risk factors and uncertainties that can

    
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influence Federated Hermes' financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).
Federated Hermes will host an earnings conference call at 9 a.m. Eastern on April 28, 2023. Investors are invited to listen to the earnings teleconference by calling 888-506-0062 (domestic) or 973-528-0011 (international) prior to the 9 a.m. start time. To listen online, go to the About section of FederatedInvestors.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on April 28, 2023. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 48120. The online replay will be available via FederatedInvestors.com for one year.
Federated Hermes, Inc. is a global leader in active, responsible investment management, with $701.0 billion in assets under management1. We deliver investment solutions that help investors target a broad range of outcomes and provide equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies to more than 11,000 institutions and intermediaries worldwide. Our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated Hermes has more than 2,000 employees in London, New York and offices worldwide.
Federated Hermes ranks in the top 7% of equity fund managers in the industry, the top 11% of fixed-income fund managers and the top 12% of money market fund managers2. Federated Hermes also ranks as the 4th-largest manager of model-delivered SMAs3. For more information, including an analyst presentation, which is updated periodically, visit FederatedHermes.com.
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1) As of March 31, 2023.
2) ISS Market Intelligence (SIMFUND), March 31, 2023. Based on assets under management in open-end funds.
3) Money Management Institute/Cerulli,Q4 2022.
Federated Securities Corp. is distributor of the Federated Hermes funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.
Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows, asset mix, interest rates and fee waivers constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements can include statements that do not relate strictly to historical or current facts and are typically identified by words or phrases such as “trend,” “forecast,” “project,” “predict,” “potential,” “approximate,” “opportunity,” “believe,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “projection,” “plan,” “assume,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “can,” “may” and similar expressions. Any forward-looking statement is inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond Federated Hermes’ control. Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, predict whether performance fees or carried interest will be earned and retained, and sustain product demand, asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company's annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future.


    
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Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Quarter Ended% Change Q1 2022 to Q1 2023Quarter Ended% Change Q4 2022 to Q1 2023
March 31, 2023March 31, 2022Dec. 31, 2022
Revenue
Investment advisory fees, net$263,982 $232,994 13 %$256,949 3  %
Administrative service fees, net—affiliates79,180 73,507 8 75,847 4 
Other service fees, net39,027 18,263 114 41,103 (5)
Total Revenue382,189 324,764 18 373,899 2 
Operating Expenses
Compensation and related136,878 133,965 2 123,994 10 
Distribution93,333 48,562 92 90,718 3 
Systems and communications19,972 19,494 2 20,549 (3)
Professional service fees16,220 13,468 20 16,100 1 
Office and occupancy12,874 11,322 14 10,905 18 
Advertising and promotional4,342 2,732 59 6,967 (38)
Intangible asset related3,326 3,334 0 34,746 (90)
Travel and related3,231 1,795 80 3,913 (17)
Other6,847 6,143 11 2,258 203 
Total Operating Expenses297,023 240,815 23 310,150 (4)
Operating Income85,166 83,949 1 63,749 34 
Nonoperating Income (Expenses)
Investment income (loss), net10,312 (10,602)197 14,413 (28)
Debt expense(3,125)(1,222)156 (3,200)(2)
Other, net122 83 47 191 (36)
Total Nonoperating Income (Expenses), net7,309 (11,741)162 11,404 (36)
Income before income taxes92,475 72,208 28 75,153 23 
Income tax provision21,009 17,611 19 13,518 55 
Net income including the noncontrolling interests in subsidiaries71,466 54,597 31 61,635 16 
Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries1,865 (1,266)247 5,138 (64)
Net Income$69,601 $55,863 25 %$56,497 23  %
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Share1
Basic and diluted$0.78 $0.61 28 %$0.63 24  %
Weighted-Average Shares Outstanding
Basic84,875 88,270 84,731 
Diluted84,875 88,270 84,743 
Dividends Declared Per Share$0.27 $0.27 $0.27 
1) Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $3.5 million, $2.4 million and $2.8 million available to unvested restricted Federated Hermes shareholders for the quarterly periods ended March 31, 2023, March 31, 2022 and Dec. 31, 2022, respectively, was excluded from the computation of earnings per share.

    
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Unaudited Condensed Consolidated Balance Sheets
(in thousands)March 31, 2023Dec. 31, 2022
Assets
  Cash and other investments$487,989 $521,754 
  Other current assets148,263 129,277 
  Intangible assets, net, including goodwill1,213,922 1,209,574 
  Other long-term assets148,805 159,874 
  Total Assets$1,998,979 $2,020,479 
Liabilities, Redeemable Noncontrolling Interests and Equity
  Current liabilities$212,190 $257,413 
  Long-term debt347,645 347,581 
  Other long-term liabilities292,933 307,972 
  Redeemable noncontrolling interests39,508 61,821 
Equity excluding treasury stock1,466,858 1,411,055 
Treasury stock(360,155)(365,363)
  Total Liabilities, Redeemable Noncontrolling Interests and Equity$1,998,979 $2,020,479 



    
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Unaudited Changes in Long-Term Assets - By Asset Class
(in millions)Quarter Ended
March 31, 2023Dec. 31, 2022March 31, 2022
Equity
Beginning assets$81,523 $74,684 $96,716 
Sales1
5,631 5,265 6,992 
Redemptions1
(4,736)(6,015)(7,070)
Net sales (redemptions)1
895 (750)(78)
Net exchanges103 86 (174)
Impact of foreign exchange2
108 1,219 (454)
Market gains and (losses)3
1,000 6,284 (4,334)
Ending assets$83,629 $81,523 $91,676 
Fixed Income
Beginning assets$86,743 $85,365 $97,550 
Sales1
6,047 5,920 7,424 
Redemptions1
(7,127)(9,755)(9,437)
Net sales (redemptions)1
(1,080)(3,835)(2,013)
Net exchanges(101)(142)146 
Acquisitions/(dispositions)0 3,524 0 
Impact of foreign exchange2
38 239 (104)
Market gains and (losses)3
1,861 1,592 (3,433)
Ending assets$87,461 $86,743 $92,146 
Alternative/Private Markets
Beginning assets$20,802 $20,182 $22,920 
Sales1
1,265 1,127 644 
Redemptions1
(792)(1,190)(505)
Net sales (redemptions)1
473 (63)139 
Net exchanges1 (6)0 
Impact of foreign exchange2
368 1,513 (637)
Market gains and (losses)3
(470)(824)687 
Ending assets$21,174 $20,802 $23,109 
Multi-asset
Beginning assets$2,989 $2,902 $3,780 
Sales1
47 72 74 
Redemptions1
(144)(165)(132)
Net sales (redemptions)1
(97)(93)(58)
Net exchanges2 2 5 
Market gains and (losses)3
79 178 (172)
Ending assets$2,973 $2,989 $3,555 
Total Long-term Assets
Beginning assets$192,057 $183,133 $220,966 
Sales1
12,990 12,384 15,134 
Redemptions1
(12,799)(17,125)(17,144)
Net sales (redemptions)1
191 (4,741)(2,010)
Net exchanges5 (60)(23)
Acquisitions/(dispositions)0 3,524 0 
Impact of foreign exchange2
514 2,971 (1,195)
Market gains and (losses)3
2,470 7,230 (7,252)
Ending assets$195,237 $192,057 $210,486 
1) For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3) Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.




    
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Unaudited Changes in Long-Term Assets - By Asset Class and Product Type
(in millions)
Quarter Ended
March 31, 2023
EquityFixed IncomeAlternative / Private MarketsMulti-assetTotal
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds.
Separate Accounts1
Beginning assets$43,342 $38,181 $43,180 $43,563 $13,050 $7,752 $2,851 $138 $102,423 $89,634 
Sales3,171 2,460 4,255 1,792 844 421 47 0 8,317 4,673 
Redemptions(2,996)(1,740)(4,699)(2,428)(657)(135)(139)(5)(8,491)(4,308)
Net sales (redemptions)175 720 (444)(636)187 286 (92)(5)(174)365 
Net exchanges90 13 (101)0 24 (23)2 0 15 (10)
Impact of foreign exchange2
85 23 25 13 224 144 0 0 334 180 
Market gains and (losses)3
1,040 (40)956 905 (445)(25)71 8 1,622 848 
Ending assets$44,732 $38,897 $43,616 $43,845 $13,040 $8,134 $2,832 $141 $104,220 $91,017 
1)    Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3)    Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.









    
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Unaudited Changes in Long-Term Assets - By Product Type
(in millions)
Quarter Ended
March 31, 2023Dec. 31, 2022March 31, 2022
Total Fund Assets
Beginning assets$102,423 $100,993 $135,294 
Sales8,317 8,274 9,857 
Redemptions(8,491)(12,559)(13,104)
Net sales (redemptions)(174)(4,285)(3,247)
Net exchanges15 (32)(21)
Impact of foreign exchange1
334 1,810 (766)
Market gains and (losses)2
1,622 3,937 (6,292)
Ending assets$104,220 $102,423 $124,968 
Total Separate Account Assets3
Beginning assets$89,634 $82,140 $85,672 
Sales4
4,673 4,110 5,277 
Redemptions4
(4,308)(4,566)(4,040)
Net sales (redemptions)4
365 (456)1,237 
Net exchanges(10)(28)(2)
Acquisitions/(dispositions)0 3,524 0 
Impact of foreign exchange1
180 1,161 (429)
Market gains and (losses)2
848 3,293 (960)
Ending assets$91,017 $89,634 $85,518 
Total Long-term Assets3
Beginning assets$192,057 $183,133 $220,966 
Sales4
12,990 12,384 15,134 
Redemptions4
(12,799)(17,125)(17,144)
Net sales (redemptions)4
191 (4,741)(2,010)
Net exchanges5 (60)(23)
Acquisitions/(dispositions)0 3,524 0 
Impact of foreign exchange1
514 2,971 (1,195)
Market gains and (losses)2
2,470 7,230 (7,252)
Ending assets$195,237 $192,057 $210,486 
1) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
2) Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3) Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products.
4)    For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.




















    
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Unaudited Managed Assets

(in millions)
March 31, 2023Dec. 31, 2022Sept. 30, 2022June 30, 2022March 31, 2022
By Asset Class
Equity$83,629 $81,523 $74,684 $80,988 $91,676 
Fixed-income87,461 86,743 85,365 86,253 92,146 
Alternative / private markets21,174 20,802 20,182 21,785 23,109 
Multi-asset2,973 2,989 2,902 3,135 3,555 
Total long-term assets195,237 192,057 183,133 192,161 210,486 
Money market505,800 476,844 441,294 439,697 420,596 
Total Managed Assets$701,037 $668,901 $624,427 $631,858 $631,082 
By Product Type
Funds:
Equity$44,732 $43,342 $40,633 $44,207 $51,890 
Fixed-income43,616 43,180 44,896 48,215 54,830 
Alternative / private markets13,040 13,050 12,680 13,911 14,847 
Multi-asset2,832 2,851 2,784 3,001 3,401 
Total long-term assets104,220 102,423 100,993 109,334 124,968 
Money market357,346 335,937 309,859 298,031 279,514 
Total Fund Assets$461,566 $438,360 $410,852 $407,365 $404,482 
Separate Accounts:
Equity$38,897 $38,181 $34,051 $36,781 $39,786 
Fixed-income43,845 43,563 40,469 38,038 37,316 
Alternative / private markets8,134 7,752 7,502 7,874 8,262 
Multi-asset141 138 118 134 154 
Total long-term assets91,017 89,634 82,140 82,827 85,518 
Money market148,454 140,907 131,435 141,666 141,082 
Total Separate Account Assets$239,471 $230,541 $213,575 $224,493 $226,600 
Total Managed Assets$701,037 $668,901 $624,427 $631,858 $631,082 

    
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Unaudited Average Managed AssetsQuarter Ended
(in millions)
March 31, 2023Dec. 31, 2022Sept. 30, 2022June 30, 2022March 31, 2022
By Asset Class
Equity$84,155 $79,544 $81,809 $85,785 $92,034 
Fixed-income88,209 87,849 87,042 88,740 95,475 
Alternative / private markets20,938 20,926 21,193 22,230 22,848 
Multi-asset3,012 2,988 3,144 3,337 3,621 
Total long-term assets196,314 191,307 193,188 200,092 213,978 
Money market483,083 442,334 438,601 417,778 433,254 
Total Avg. Managed Assets$679,397 $633,641 $631,789 $617,870 $647,232 
By Product Type
Funds:
Equity$45,055 $43,131 $45,135 $47,504 $52,419 
Fixed-income43,961 44,099 47,489 51,173 57,413 
Alternative / private markets13,062 13,140 13,432 14,297 14,746 
Multi-asset2,869 2,855 3,012 3,193 3,460 
Total long-term assets104,947 103,225 109,068 116,167 128,038 
Money market333,358 309,232 301,940 275,631 291,157 
Total Avg. Fund Assets$438,305 $412,457 $411,008 $391,798 $419,195 
Separate Accounts:
Equity$39,100 $36,413 $36,674 $38,281 $39,615 
Fixed-income44,248 43,750 39,553 37,567 38,062 
Alternative / private markets7,876 7,786 7,761 7,933 8,102 
Multi-asset143 133 132 144 161 
Total long-term assets91,367 88,082 84,120 83,925 85,940 
Money market149,725 133,102 136,661 142,147 142,097 
Total Avg. Separate Account Assets$241,092 $221,184 $220,781 $226,072 $228,037 
Total Avg. Managed Assets$679,397 $633,641 $631,789 $617,870 $647,232