Financial Data and Key Metrics Changes - The company ended 2025 with record assets under management (AUM) of $903 billion, an increase driven by gains in money market and equity strategies [3] - Total revenue for Q4 increased by $13.4 million, or 3%, primarily due to higher money market assets contributing $8 million and higher equity assets adding $5.5 million [14] - The effective tax rate was reported at 24.4%, with an estimated range of 25%-28% for 2026 [15] Business Line Data and Key Metrics Changes - Equity assets increased by $3.2 billion or 3% from the prior quarter, with Q4 net equity sales of $1.5 billion, a significant improvement from net redemptions of $10.7 billion in 2004 [3] - Fixed income assets decreased by $1.7 billion to $100 billion, with Q4 net redemptions of $2.8 billion, largely due to two large public entities [5][6] - Money market assets reached a record high of $683 billion, with money market fund assets increasing by $16 billion or 3% in Q4 [10] Market Data and Key Metrics Changes - The company reported a 7% market share in money market funds at the end of 2025, down from 7.1% at the end of Q3 [10] - The company anticipates approximately $2.7 billion in net institutional mandates yet to fund into both funds and separate accounts, with expected additions across various strategies [9] Company Strategy and Development Direction - The company plans to open a Hong Kong office to capitalize on the growing wealth market in the Asia Pacific region, complementing existing offices in Singapore, Tokyo, and Sydney [9] - The company is advancing digital asset initiatives, including partnerships for tokenized money market funds, aiming to enhance liquidity and investor protections [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the succession planning for retiring portfolio managers, indicating no expected disruption in investment management techniques [21] - The outlook for 2026 includes expectations of a single rate cut by the Federal Reserve, with a terminal rate above 3%, which is anticipated to support continued growth in money market funds [36] Other Important Information - The company is progressing towards the acquisition of FCP, expected to close in the first half of 2026, which will enhance its real estate capabilities [8] - The company reported a robust pipeline of tokenization projects, indicating a strategic focus on integrating blockchain technology into its offerings [13] Q&A Session Summary Question: Distribution costs have increased significantly; what is the reason? - Management explained that the increase in distribution costs was due to a significant amount of assets coming into share classes with higher distribution expenses, impacting the overall distribution expense [20] Question: What is the transition plan for retiring portfolio managers? - Management indicated that succession planning has been in place for many years, with experienced replacements expected to maintain performance and investment management techniques [21] Question: What is the demand for tokenization from clients? - Management noted that while there is interest in tokenization, actual demand is not as robust as anticipated, with clients currently satisfied with existing products [25] Question: What is the outlook for money market fund flows in the first half of the year? - Management indicated that January typically sees outflows due to tax season, but the second half of the year generally experiences growth in money market fund AUM [51] Question: What is the potential for money market roll-ups? - Management stated that the potential for roll-ups depends on the owners of other money funds, with increased regulation leading to fewer opportunities [91]

Financial Data and Key Metrics Changes - The company ended 2025 with record assets under management (AUM) of $903 billion, driven by gains in money market and equity strategies [3] - Total revenue for Q4 increased by $13.4 million, or 3%, primarily due to higher money market assets contributing $8 million and higher equity assets adding $5.5 million [14] - Operating expenses in Q4 rose by $7.3 million, or 2%, mainly due to increased distribution expenses [15] Business Line Data and Key Metrics Changes - Equity assets increased by $3.2 billion or 3% from the prior quarter, with Q4 net equity sales of $1.5 billion, a significant improvement from net redemptions of $10.7 billion in 2024 [3][5] - Fixed income assets decreased by $1.7 billion to $100 billion, with Q4 net redemptions of $2.8 billion [5][6] - Money market assets reached a record high of $683 billion, with a $30 billion increase in 2025 [11] Market Data and Key Metrics Changes - The company's money market fund market share was approximately 7% at the end of 2025, down from 7.1% at the end of Q3 [11] - The company reported strong demand for its MDT equity strategies, with record gross sales of $31 billion in 2025 [3][4] Company Strategy and Development Direction - The company plans to open a Hong Kong office to capitalize on the growing wealth market in the Asia Pacific region, complementing existing offices in Singapore, Tokyo, and Sydney [9][10] - The company is advancing digital asset initiatives, including partnerships for tokenized money market funds, aiming to enhance liquidity and investor protections [12][13] Management's Comments on Operating Environment and Future Outlook - Management expects a positive environment for money market funds, driven by favorable market conditions and anticipated Fed rate cuts [41][44] - The company does not foresee capacity constraints in its MDT strategies and expects continued demand from both retail and institutional investors [35][36] Other Important Information - The company is progressing towards the acquisition of FCP, which will enhance its real estate capabilities [9][16] - The effective tax rate was reported at 24.4%, with an estimated range of 25%-28% for 2026 [16] Q&A Session Summary Question: Distribution costs have increased significantly; what is the reason? - Management explained that the increase in distribution costs was due to a significant amount of assets coming into share classes with higher distribution expenses [20][21] Question: What is the transition plan for retiring portfolio managers? - Management indicated that succession planning has been in place for years, with experienced replacements expected to maintain investment performance [23][24] Question: What is the demand for tokenization from clients? - Management noted that while there is interest, actual demand is not as robust as anticipated, with clients currently satisfied with existing products [28][29] Question: What is the outlook for money market fund flows in the first half of the year? - Management indicated that January is typically a weak month for inflows, with expectations for growth in the second half of the year [56][57] Question: What is the potential for money market roll-ups? - Management stated that the potential for roll-ups depends on the owners of other money funds and the regulatory environment [94][95]

Analyst Update Data as of December 31, 2025 Federated Hermes, Inc. 1 25-30006 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 busine ...

Core Viewpoint - Federated Hermes reported quarterly earnings of $1.39 per share, exceeding the Zacks Consensus Estimate of $1.20 per share, and showing an increase from $1.04 per share a year ago [1] Earnings Performance - The earnings surprise for the quarter was +15.66%, with the company previously expected to post earnings of $1.11 per share but actually reporting $1.34, resulting in a surprise of +20.72% [2] - Over the last four quarters, Federated Hermes has consistently surpassed consensus EPS estimates [2] Revenue Performance - The company reported revenues of $482.83 million for the quarter, surpassing the Zacks Consensus Estimate by 2.72%, and an increase from $424.68 million year-over-year [3] - Federated Hermes has also topped consensus revenue estimates in each of the last four quarters [3] Stock Performance and Outlook - Since the beginning of the year, Federated Hermes shares have increased by approximately 1.6%, compared to the S&P 500's gain of 1.9% [4] - The future performance of the stock will depend on management's commentary during the earnings call and the earnings outlook [4][5] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.18 on revenues of $468.95 million, and for the current fiscal year, it is $5.02 on revenues of $1.94 billion [8] Industry Context - The Financial - Investment Management industry, to which Federated Hermes belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, indicating potential challenges ahead [9]

Earnings Performance - Q4 2025 earnings per diluted share (EPS) was $1.39, up from $1.04 in Q4 2024; full-year 2025 EPS was $5.13, compared to $3.23 in 2024[6] - Operating income for Q4 2025 was $135,574,000, up 23% from $110,427,000 in Q4 2024[24] - Net income for the year ended December 31, 2025, was $403,299,000, a 50% increase compared to $268,314,000 in 2024[25] - Basic and diluted earnings per share for Q4 2025 were $1.39, a 34% increase from $1.04 in Q4 2024[24] Assets Under Management - Total assets under management (AUM) reached a record $902.6 billion, an increase of $73.0 billion or 9% from $829.6 billion at the end of 2024[6] - Money market AUM was a record $682.6 billion, up $52.3 billion or 8% from $630.3 billion at the end of 2024[8] - Equity assets increased to $97.9 billion, up $18.5 billion or 23% from $79.4 billion at the end of 2024[4] - Fixed-income assets were $100.1 billion, up $2.0 billion or 2% from $98.1 billion at the end of 2024[5] - Total managed assets reached $902,584 million as of December 31, 2025, an increase from $871,200 million in the previous quarter[36] - Total long-term assets increased to $219,980 million, up from $218,433 million in the prior quarter[36] - Average Managed Assets in the Equity asset class rose to $96,404 million, a 17% increase from $82,247 million in December 2024[37] - Fixed-Income assets grew to $100,855 million, reflecting an increase of 2% from $98,254 million year-over-year[37] - Money Market assets reached $654,635 million, up 8.9% from $601,169 million in the previous year[37] - Total Long-Term Assets amounted to $219,066 million, a 7.8% increase compared to $203,189 million in December 2024[37] - Separate Account assets totaled $264,425 million, slightly up from $252,847 million, indicating a growth of 4.6%[37] - The company reported a decline in Alternative / Private Markets assets to $18,971 million, down 4% from $19,754 million in December 2024[37] - The Multi-Asset category saw a slight decrease to $2,836 million from $2,934 million, a decline of 3.3% year-over-year[37] Revenue and Sales - Revenue for Q4 2025 increased by $58.2 million or 14%, primarily due to higher average money market and equity assets[9] - Total revenue for Q4 2025 reached $482,833,000, a 14% increase from $424,683,000 in Q4 2024[24] - Investment advisory fees for the year ended December 31, 2025, were $1,199,236,000, reflecting a 9% growth from $1,097,866,000 in 2024[25] - The company reported a net sales of $1,518,000,000 in Q4 2025, reversing a net redemption of $2,520,000,000 in Q4 2024[27] - Sales for the quarter amounted to $10,419 million, a rise from $9,018 million in the previous quarter[34] - The company reported a net exchange of $33 million for the quarter, compared to $17 million in the previous quarter[34] Operating Expenses - Operating expenses increased by $33.0 million or 11%, mainly due to higher distribution expenses related to increased money market fund assets[10] - Total operating expenses for the year ended December 31, 2025, were $1,286,781,000, a slight increase of 1% from $1,270,626,000 in 2024[25] Dividends - The board declared a quarterly dividend of $0.34 per share, payable on February 13, 2026[3] - The company declared dividends of $0.34 per share for Q4 2025, compared to $0.31 in Q4 2024[24] Market Trends and Outlook - Federated Hermes derived 53% of its revenue from money market assets in 2025, with 45% from long-term assets[14] - The company anticipates continued growth in managed assets driven by strategic market expansions and new product offerings[38]

Core Insights - Federated Hermes, Inc. reported a significant increase in earnings per diluted share (EPS) for Q4 2025, reaching $1.39, up from $1.04 in Q4 2024, with net income of $107.0 million compared to $84.7 million in the previous year [1][10] - The total managed assets reached a record $902.6 billion as of December 31, 2025, marking a 9% increase from $829.6 billion at the end of 2024 [2][10] - The company declared a quarterly dividend of $0.34 per share, payable on February 13, 2026 [3][10] Financial Performance - Q4 2025 revenue increased by $58.2 million or 14%, primarily due to higher average money market and equity assets [8] - Operating expenses rose by $33.0 million or 11%, mainly driven by increased distribution expenses and higher compensation costs [9] - For the full year 2025, total revenue was $1.800 billion, a 10% increase from $1.632 billion in 2024 [13][24] Asset Management - The average managed assets for Q4 2025 were $873.7 billion, up 9% from $804.4 billion in Q4 2024 [2] - Money market assets reached a record $682.6 billion, up 8% from $630.3 billion at the end of 2024 [7] - Equity assets increased by 23% to $97.9 billion, while fixed-income assets rose by 2% to $100.1 billion [4][5] Investment Strategies - The growth in managed assets was attributed to increased investor interest in liquidity products and a diverse range of investment solutions, including ETFs and separately managed accounts (SMAs) [3] - The top-selling equity funds in Q4 2025 included the Federated Hermes MDT Mid Cap Growth Fund and the Federated Hermes MDT Large Cap Growth Fund [4] - The company’s revenue composition for 2025 showed that 53% came from money market assets and 45% from long-term assets [14]

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Core Viewpoint - Federated Hermes is expected to report quarterly earnings of $1.20 per share, a 15.4% increase year-over-year, with revenues projected at $471.09 million, reflecting a 10.9% increase compared to the same period last year [1]. Earnings Estimates - The consensus EPS estimate has been revised 0.2% lower over the last 30 days, indicating a reevaluation by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Key Metrics Projections - Analysts estimate 'Asset Class - Managed Assets - Long-term assets - Alternative/private markets' to reach $20.08 billion, up from $18.86 billion a year ago [5]. - The 'Asset Class - Managed Assets - Long-term assets - Multi-asset' is projected at $2.92 billion, slightly up from $2.88 billion year-over-year [5]. - 'Asset Class - Managed Assets - Money market' is expected to reach $670.23 billion, compared to $630.35 billion in the same quarter last year [6]. - 'Product Type - Fund Assets - Funds - Long-term assets - Alternative/private markets' is forecasted at $12.41 billion, up from $11.50 billion year-over-year [6]. - 'Product Type - Fund Assets - Funds - long-term assets - Multi-asset' is estimated at $2.79 billion, compared to $2.76 billion last year [7]. - 'Asset Class - Managed Assets - Long-term assets - Fixed-income' is projected at $103.50 billion, up from $98.06 billion a year ago [7]. - 'Product Type - Separate Accounts - Long-term assets - Alternative/private markets' is expected to reach $7.67 billion, compared to $7.36 billion last year [8]. - The estimate for 'Product Type - Separate Accounts - Long-term assets - Multi-asset' stands at $130.66 million, up from $119.00 million year-over-year [8]. - 'Product Type - Separate Accounts - Money market' is projected at $169.93 billion, compared to $168.63 billion last year [9]. - 'Asset Class - Managed Assets - Total Managed Assets' is expected to reach $444.06 billion, compared to $829.58 million in the same quarter of the previous year [9]. - 'Asset Class - Managed Assets - Long-term assets - Equity' is likely to reach $92.67 billion, up from $79.42 billion last year [10]. - 'Product Type - Fund Assets - Funds - Money market' is projected at $500.29 billion, compared to $461.72 billion year-over-year [10]. Stock Performance - Shares of Federated Hermes have shown a return of -1% over the past month, while the Zacks S&P 500 composite has increased by +0.8% [11].

Core Viewpoint - Aberdeen City Council is suing Federated Hermes over allegations of substantial losses from a £40 million investment in Swedish onshore wind farms, which was claimed to be a conservative investment but was structured in a risky manner [2][3]. Investment Details - The investment involved a portfolio of five onshore wind farms in Sweden, with Federated Hermes managing the funds on behalf of Aberdeen's pension scheme [2][4]. - Aberdeen's pension fund contributed £39 million, while Federated Hermes invested approximately £104 million for a 20% stake in the project [8]. Financial Impact - Aberdeen claims total losses of nearly £34 million, along with nearly £1 million in management fees and expenses related to the investment [3]. - The current estimated value of the investment is around £6.5 million, down from an initial valuation of £104 million [8][9]. Operational Risks - Four of the five wind farms were contracted to sell fixed quantities of power at fixed prices, but low wind conditions could lead to purchasing power at high market prices, exacerbating financial losses [5][6]. - The council alleges that a combination of low power generation and high electricity prices could be "disastrous," with the wind farms also carrying significant debt, increasing the investment's risk [7].

Core Viewpoint - Federated Hermes announces leadership changes in its global fixed income division, with R.J. Gallo succeeding Robert Ostrowski as CIO and Ann Ferentino becoming the sole head of the Municipal Bond Group, effective May 1, 2026, as part of a long-term succession plan [1][5][6]. Leadership Changes - R.J. Gallo, currently the deputy CIO and co-head of the Municipal Bond Group, will take over as CIO for global fixed income, overseeing $101.8 billion in assets as of September 30, 2025 [2][5]. - Ann Ferentino will assume full oversight of the Municipal Bond Group, which manages $7.1 billion in municipal assets as of September 30, 2025 [5][6]. Experience and Background - Gallo has 31 years of investment experience, having joined Federated Hermes in 2000, and previously worked as a financial analyst and trader at the Federal Reserve Bank of New York [4]. - Ferentino has been with Federated Hermes for 30 years and continues to manage multiple mutual funds and client portfolios [5][6]. Growth and Performance - Under Ostrowski's leadership since April 2004, Federated Hermes' fixed-income assets under management grew from $29.5 billion to $101.8 billion, an increase of $72.3 billion [6]. - The global fixed-income team consists of 107 professionals with an average of 19 years of industry experience, while the municipal fixed-income team averages 18 years [7][8]. Company Overview - Federated Hermes, Inc. is a global leader in active investment management with $871.2 billion in assets under management as of September 30, 2025, providing a range of investment solutions to over 10,000 institutions and intermediaries worldwide [9].