Federated(US:FHI)2025-10-31 20:19Financial Performance - As of September 30, 2025, Federated Hermes reported a net income attributable to the company of $104.1 million, compared to $87.5 million for the same period in 2024, representing an increase of 19%[83]. - Basic earnings per share for the nine months ended September 30, 2025, was $3.75, up from $2.20 for the same period in 2024, reflecting a 70% increase[83]. - Federated Hermes reported total revenue of $469.4 million for the three months ended September 30, 2025, an increase of 14.9% compared to $408.5 million for the same period in 2024[96]. - The company’s net income for the three months ended September 30, 2025, was $1.969 million, compared to a net loss of $23,000 for the same period in 2024[92]. - For the nine-month period ended September 30, 2025, the income tax provision was $100.5 million, compared to $84.7 million for the same period in 2024[93]. - The effective tax rate for the three-month period ended September 30, 2025, was 24.4%, down from 26.3% for the same period in 2024, primarily due to research and development credits[92]. - Net income increased by $16.6 million for the three-month period and by $112.7 million for the nine-month period ended September 30, 2025, driven by changes in revenues, expenses, and nonoperating income[186][187]. - The effective tax rate decreased to 24.4% for the three-month period and to 24.7% for the nine-month period ended September 30, 2025, compared to 26.3% and 31.5% in the same periods of 2024, respectively[181][182]. Share Repurchase and Dividends - The company repurchased approximately 4.6 million shares of its Class B common stock for $184.7 million during the nine months ended September 30, 2025, with around 6.1 million shares remaining available for repurchase[79]. - The company’s share repurchase programs have no stated expiration date, with the latest authorization allowing for the repurchase of up to 5.0 million shares of Class B common stock[79]. - The board of directors declared a dividend of $0.34 per share to shareholders, payable on November 14, 2025[100]. - The board of directors declared a dividend of $0.34 per share for Class A and Class B common stock shareholders, payable on November 14, 2025[198]. Assets and Investments - As of September 30, 2025, Federated Hermes managed assets totaled $871.2 billion, reflecting its position as a global leader in active investing[102]. - Total managed assets increased by 9% to $871.2 billion as of September 30, 2025, compared to $800.5 billion in 2024[158]. - Long-term assets rose by 5% to $218.4 billion, with equity assets growing by 13% to $94.7 billion and fixed-income assets increasing by 2% to $101.8 billion[158]. - Money market assets grew by 10% to $652.8 billion, up from $593.0 billion in the previous year[158]. - Total fund assets increased by 11% to $607.9 billion, with equity fund assets rising by 19% to $54.1 billion[158]. - Separate account assets rose by 4% to $263.3 billion, with fixed-income separate accounts increasing by 2% to $55.3 billion[158]. - The alternative/private markets segment saw a decline of 8% in long-term assets, dropping to $19.0 billion[158]. - Total Average Managed Assets increased by 8% to $859,491 million for the three months ended September 30, 2025, compared to $793,452 million in 2024[159]. - Average Managed Equity Assets rose by 15% to $92,436 million in Q3 2025 from $80,220 million in Q3 2024[159]. - Fixed-Income Average Managed Assets increased by 2% to $99,206 million for the three months ended September 30, 2025, compared to $97,563 million in 2024[159]. - Total Average Fund Assets grew by 10% to $594,925 million for the three months ended September 30, 2025, compared to $540,253 million in 2024[159]. Regulatory Environment - The SEC's Spring 2025 Regulatory Flexibility Agenda includes 23 short-term agenda items, focusing on deregulation and simplification of disclosure requirements[113]. - There has been a 40% reduction in SEC enforcement actions during the first six months of the new Presidential Administration, with only 56 actions initiated[113]. - The SEC extended the compliance date for amendments to Rule 605 of Regulation NMS from December 14, 2025, to August 1, 2026[114]. - The SEC issued a concept release on potential changes to rules governing Residential Mortgage-Backed Securities (RMBS) to facilitate more public offerings[115]. - The SEC approved proposed rule changes for generic listing standards for exchange-traded products (ETPs) that hold spot commodities, including digital assets[117]. - The SEC's Investment Advisory Committee supports expanded retail access to private markets while emphasizing the need for enhanced investor protections[121]. - Federated Hermes continues to engage with regulators, including meetings with the SEC Chairperson and staff to discuss various regulatory topics[110]. - The company is actively monitoring regulatory developments that may impact its business and financial condition[153]. - Federated Hermes is evaluating the impact of various regulatory changes, including the U.K. Consumer Duty and the EU's T+1 settlement cycle[144][145]. - The company anticipates that compliance with new regulatory requirements may materially affect its expenses and financial condition[154]. Market Performance - Net Sales for Equity Funds reached $1,411 million in Q3 2025, a significant increase from a net redemption of $613 million in Q3 2024[161]. - Fixed-Income Funds experienced net sales of $466 million in Q3 2025, compared to net sales of $305 million in Q3 2024[163]. - Total Long-Term Fund Assets increased to $115,215 million as of September 30, 2025, up from $106,799 million in the same period of 2024, reflecting a growth of approximately 7.5%[170]. - The company reported market gains of $4,414 million for Total Long-Term Fund Assets during the three months ended September 30, 2025, compared to $5,066 million in the same period of 2024[170]. - The impact of foreign exchange on Equity Funds was a loss of $82 million in Q3 2025, contrasting with a gain of $397 million in Q3 2024[161]. - The company recorded net redemptions of $1,166 million in Alternative / Private Markets Funds for the three months ended September 30, 2025, compared to net redemptions of $223 million in the same period of 2024[165]. Operational Metrics - The interest on borrowings from the revolving credit facility is calculated using the Secured Overnight Financing Rate (SOFR), which replaced LIBOR effective July 1, 2023[72]. - The company had no outstanding borrowings under its $350 million revolving credit facility as of September 30, 2025, with an additional $200 million available via an optional increase[74]. - Federated Hermes was in compliance with all financial covenants during the nine-month period ended September 30, 2025[75]. - The interest coverage ratio was 47 to 1 as of September 30, 2025, significantly above the required minimum of 4 to 1[195]. - Cash provided by operating activities totaled $136.1 million for the nine months ended September 30, 2025, a decrease from $219.9 million in the same period of 2024[190]. - Cash used by financing activities was $139.4 million during the nine-month period ended September 30, 2025, primarily due to treasury stock purchases and dividends paid[192]. - Federated Hermes expects to invest approximately $253 million over the next three years for technology-driven initiatives, including $188 million in existing technology-related overhead and $65 million in external spending[197].