The Value Pendulum is an Asian equity market specialist with over a decade of experience on both the buy and sell sides.He is the author of the investing group Asia Value & Moat Stocks, providing ideas for value investors seeking investment opportunities listed in Asia, with a particular focus on the Hong Kong market. He hunts for deep value balance sheet bargains and wide moat stocks and provides a range of watch lists with monthly updates within his investing group.Analyst’s Disclosure:I/we have no stock, ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________________________________________________ FORM 10-Q ______________________________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

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Financial Data and Key Metrics Changes - The company ended Q3 2025 with record assets under management of $871 billion, an increase driven by gains from money market and equity strategies [4] - Total revenue for Q3 increased by $44.6 million or 10% compared to the prior quarter, with contributions from higher money market assets and equity assets [15] - Operating expenses rose by $32.2 million or 10% from the prior quarter, primarily due to higher distribution expenses [15] Business Line Data and Key Metrics Changes - Equity assets increased by $5.7 billion, or 6%, from the prior quarter, despite slightly negative net sales of $130 million [4] - Fixed income assets reached a record high of $101.8 billion, with total net sales improving by $4.1 billion in Q3 [7] - Alternative private markets saw a decrease of about $1.7 billion in assets, mainly due to real estate fund transactions [8] Market Data and Key Metrics Changes - Money market assets increased by $18 billion to reach $653 billion, with money market fund assets rising by 5% to $492.7 billion [12] - The company's estimate of money market mutual fund market share remained at about 7.11% at the end of Q3 [15] Company Strategy and Development Direction - The company is actively developing MDT distribution opportunities outside of the U.S., with strong interest from institutions and intermediaries [5] - The acquisition of FCP, a U.S.-based real estate investment manager, is expected to facilitate entry into the U.S. real estate market [10] - The company is committed to digital asset initiatives, including tokenized money market funds and participation in blockchain technology projects [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the MDT franchise, highlighting a strong pipeline of new RFPs and growing momentum [19] - The institutional pipeline is described as very strong, with over $2 billion expected to fund in the near term [22] - Management anticipates that expenses will rise in line with revenue growth, particularly due to the FCP acquisition and ongoing investments in digital assets [21] Other Important Information - The company paused its open market share repurchase during negotiations with FCP but plans to resume in Q4 [17] - Cash and investments at the end of Q3 were $647 million, with expectations to use a portion for the FCP acquisition [16] Q&A Session Summary Question: MDT franchise growth potential - Management indicated enthusiasm and optimism regarding the MDT franchise, with net sales of about $660 million through October 24 and a strong global pipeline [18][19] Question: Expense trajectory over the next year - Management expects expenses to rise due to the FCP acquisition and ongoing initiatives, but anticipates that these will be accompanied by revenue growth [20][21] Question: Institutional investor allocations and opportunities - The institutional pipeline is strong, with various mandates won across different countries, and about two-thirds expected to fund in Q4 [22][23]

Analyst Update Data as of September 30, 2025 Federated Hermes, Inc. 1 25-30084 Forward-looking information This presentation is provided as of the date on the cover and contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking, including those related to product performance, the potential for busin ...

Core Insights - Federated Hermes reported quarterly earnings of $1.34 per share, exceeding the Zacks Consensus Estimate of $1.11 per share, and up from $1.06 per share a year ago [1] - The earnings surprise was +20.72%, with the company having surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter reached $469.45 million, surpassing the Zacks Consensus Estimate by 6.17% and increasing from $408.46 million year-over-year [3] Earnings Performance - The company has consistently outperformed consensus estimates, achieving this in both earnings and revenue over the last four quarters [2][3] - The current consensus EPS estimate for the upcoming quarter is $1.12, with expected revenues of $453.32 million, while the fiscal year estimate is $4.65 on $1.74 billion in revenues [8] Market Position - Federated Hermes shares have increased approximately 16% year-to-date, slightly underperforming the S&P 500's gain of 17.2% [4] - The company holds a Zacks Rank 1 (Strong Buy), indicating expectations for the stock to outperform the market in the near future [7] Industry Context - The Financial - Investment Management industry, to which Federated Hermes belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9] - Another company in the same industry, Affiliated Managers Group, is expected to report earnings soon, with a consensus EPS estimate of $5.83, reflecting a year-over-year increase of +21% [10]

Financial Performance - Federated Hermes reported Q3 2025 earnings per diluted share (EPS) of $1.34, up 26.4% from $1.06 in Q3 2024, with net income of $104.1 million compared to $87.5 million last year[1][2]. - Revenue for Q3 2025 increased by $61.0 million or 15%, primarily due to higher average money market and equity assets[9][12]. - Total revenue for Q3 2025 reached $469,446,000, a 15% increase from $408,456,000 in Q3 2024[24]. - Net income for Q3 2025 was $104,126,000, reflecting a 19% growth compared to $87,538,000 in Q3 2024[24]. - Investment advisory fees, net, increased by 13% to $310,366,000 in Q3 2025 from $274,621,000 in Q3 2024[24]. - For the nine months ended September 30, 2025, total revenue was $1,317,830,000, a 9% increase from $1,207,410,000 in the same period of 2024[25]. - Net income for the nine months ended September 30, 2025, was $296,260,000, a 61% increase from $183,598,000 in the prior year[25]. Assets Under Management - Total assets under management reached a record $871.2 billion as of September 30, 2025, an increase of $70.7 billion or 9% from $800.5 billion a year earlier[2][7]. - Money market assets were a record $652.8 billion, up $59.8 billion or 10% from $593.0 billion at the same time last year[8][9]. - Fixed-income assets also reached a record $101.8 billion, increasing by $1.6 billion or 2% from $100.2 billion at September 30, 2024[5][7]. - Equity assets totaled $94.7 billion, up $11.1 billion or 13% from $83.6 billion a year ago[4][7]. - Alternative/private markets assets decreased to $19.0 billion, down $1.7 billion or 8% from the previous year[6][7]. - Total Managed Assets increased to $871,200 million as of September 30, 2025, up from $800,451 million a year earlier, representing a growth of 8.8%[34]. - Total long-term assets reached $218,433 million, an increase of 5.4% from $207,421 million in the same quarter last year[34]. Expenses - Operating expenses rose by $43.3 million or 15%, mainly due to increased distribution expenses and fluctuations in foreign currency exchange rates[10][12]. - Total operating expenses for Q3 2025 were $339,994,000, up 15% from $296,714,000 in Q3 2024[24]. Dividends - The company declared a dividend of $0.34 per share, payable on November 14, 2025[3][7]. Market Activity - Total sales for the quarter amounted to $15,105 million, compared to $14,054 million in the previous quarter, showing an increase of 7.5%[27]. - Total redemptions for the quarter were $15,245 million, slightly higher than $14,520 million in the previous quarter, reflecting an increase of 5.0%[27]. - Market gains for the quarter were $7,729 million, compared to $6,657 million in the previous quarter, representing a growth of 16.1%[27]. - Net sales (redemptions) for the quarter were a loss of $140 million, compared to a loss of $466 million in the previous quarter, indicating an improvement[27]. - The company reported a total of $43,663 million in sales for the nine months ended September 30, 2025, significantly up from $32,613 million in the same period last year, reflecting a year-over-year increase of 33.5%[27]. Equity and Liabilities - Total assets as of September 30, 2025, amounted to $2,182,270,000, compared to $2,084,684,000 at the end of 2024[26]. - Current liabilities decreased to $256,400,000 as of September 30, 2025, from $289,193,000 at the end of 2024[26]. - Equity excluding treasury stock increased to $1,993,883,000 as of September 30, 2025, from $1,728,044,000 at the end of 2024[26].

Financial Performance - Federated Hermes reported earnings per diluted share (EPS) of $1.34 for Q3 2025, an increase from $1.06 in Q3 2024, with net income rising to $104.1 million from $87.5 million year-over-year [1][21]. - Revenue for Q3 2025 increased by $61.0 million or 15% compared to Q3 2024, primarily due to higher average money market and equity assets [8][11]. - Operating expenses rose by $43.3 million or 15% in Q3 2025, driven by increased distribution expenses and fluctuations in foreign currency exchange rates [9][11]. Asset Management - Total managed assets reached a record $871.2 billion as of September 30, 2025, up $70.7 billion or 9% from $800.5 billion a year earlier [2][16]. - Money market assets also hit a record of $652.8 billion, increasing by $59.8 billion or 10% from $593.0 billion year-over-year [7][16]. - Equity assets grew to $94.7 billion, up $11.1 billion or 13% from the previous year, while fixed-income assets reached a record $101.8 billion, up $1.6 billion or 2% [4][5][16]. Fund Performance - The company experienced record net sales of equity funds in Q3 2025, with strong interest in its MDT equity and alternative quantitative investment offerings [3][16]. - Top-selling equity funds included the Federated Hermes MDT Mid Cap Growth Fund and the Federated Hermes MDT Large Cap Growth Fund [4]. - Fixed-income funds that performed well included the Federated Hermes Ultrashort Bond Fund and the Federated Hermes Sustainable Global Investment Grade Credit Fund [5]. Dividends and Shareholder Returns - The board of directors declared a dividend of $0.34 per share, payable on November 14, 2025, to shareholders of record as of November 7, 2025 [3][21]. - The company repurchased 20,808 shares of its class B common stock during Q3 2025 due to employee restricted stock forfeitures [3].

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Viewpoint - The article compares Federated Hermes (FHI) and SEI Investments (SEIC) to determine which stock is more attractive to value investors [1] Group 1: Zacks Rank and Earnings Outlook - FHI has a Zacks Rank of 1 (Strong Buy), while SEIC has a Zacks Rank of 3 (Hold), indicating a stronger earnings outlook for FHI [3] - The Zacks Rank emphasizes stocks with positive revisions to earnings estimates, suggesting an improving earnings outlook for FHI [3] Group 2: Valuation Metrics - FHI has a forward P/E ratio of 10.35, compared to SEIC's forward P/E of 14.82, indicating that FHI may be undervalued [5] - FHI's PEG ratio is 0.53, while SEIC's PEG ratio is 1.23, further suggesting that FHI is a better value option when considering expected earnings growth [5] - FHI's P/B ratio is 3.35, whereas SEIC's P/B ratio is 4.22, reinforcing the notion that FHI is more attractively priced [6] Group 3: Value Grades - FHI has earned a Value grade of B, while SEIC has a Value grade of C, indicating that FHI is viewed as a superior value investment based on various valuation metrics [6]