Federated(US:FHI)2022-10-31 16:00Financial Performance - Federated Hermes reported a net income attributable to the company of $69.5 million for the three months ended September 30, 2022, compared to $71.4 million for the same period in 2021, representing a decrease of 2.5%[95]. - The total net income attributable to Federated Hermes common stock on a diluted basis was $65.8 million for the three months ended September 30, 2022, compared to $67.9 million for the same period in 2021[95]. - Net income (loss) was $(1,266) thousand for the period ending March 31, 2022[98]. - For the quarter ending June 30, 2022, net income (loss) was $(1,905) thousand, reflecting a decrease from the previous quarter[98]. - Net income attributable to Federated Hermes decreased by $18.7 million for the nine-month period ended September 30, 2022, compared to the same period in 2021[267]. - Diluted earnings per share for the nine-month period ended September 30, 2022 decreased by $0.02, primarily due to decreased net income[267]. Shareholder Returns - The company declared a dividend of $0.27 per share to shareholders, payable on November 15, 2022[106]. - During the nine months ended September 30, 2022, Federated Hermes repurchased approximately 6.1 million shares of its Class B common stock for $199 million[90]. - The company awarded 509,043 shares of restricted Class B common stock during the nine months ended September 30, 2022, primarily as part of a bonus program for key employees[88]. Debt and Liquidity - As of September 30, 2022, the outstanding amount under the revolving credit facility was $50 million, down from $223.4 million as of December 31, 2021, indicating a significant reduction in debt[84]. - The company has $300 million available for borrowings under the revolving credit facility and an additional $200 million via an optional accordion feature as of September 30, 2022[84]. - The interest rate on borrowings from the revolving credit facility was 1.354% as of September 30, 2022, compared to 1.161% as of December 31, 2021[84]. - Liquid assets totaled $508.2 million as of September 30, 2022, an increase from $492.7 million at December 31, 2021[268]. - Net cash provided by operating activities was $191.5 million for the nine months ended September 30, 2022, compared to $101.0 million for the same period in 2021[270]. - Cash used by financing activities was $90.0 million during the nine-month period ended September 30, 2022, primarily due to $311.7 million of debt payments and $211.2 million of treasury stock purchases[273]. - Federated Hermes issued unsecured senior Notes totaling $350.0 million at a fixed interest rate of 3.29% per annum, with the entire principal amount due on March 17, 2032[274]. - As of September 30, 2022, Federated Hermes' interest coverage ratio was 57 to 1, significantly above the required minimum of 4 to 1[276]. Asset Management - As of September 30, 2022, Federated Hermes managed assets totaling $624.4 billion[109]. - Total managed assets decreased by 2% to $624,427 million from $634,120 million year-over-year[233]. - Long-term assets declined by 17% to $183,133 million compared to $220,407 million in the previous year[233]. - Equity fund assets fell by 30% to $40,633 million from $58,218 million year-over-year[237]. - Fixed-income fund assets decreased by 25% to $44,896 million compared to $60,262 million in the previous year[237]. - Money market assets increased by 7% to $441,294 million from $413,713 million year-over-year[233]. - Total fund assets decreased by 4% to $410,852 million compared to $428,608 million in the previous year[235]. - Separate account assets increased by 4% to $213,575 million from $205,512 million year-over-year[233]. - Fixed-Income Funds experienced a net outflow of $2,102 million in the three months ended September 30, 2022, compared to a net inflow of $1,686 million in the same period of 2021[241]. - Alternative/Private Markets Funds reported a net outflow of $298 million for the three months ended September 30, 2022, compared to a net inflow of $646 million in the same period of 2021[245]. Regulatory Environment - The SEC plans to issue final rules on 16 proposed rules by October 2022, impacting the regulatory environment for Federated Hermes[122]. - The SEC's proposed money market fund reforms aim to enhance liquidity requirements and improve resilience against rapid redemptions[123]. - Federated Hermes submitted comment letters opposing several SEC proposals regarding money market fund reforms, emphasizing the importance of these funds for over 50 million retail investors[129]. - The ongoing regulatory developments are expected to continue impacting Federated Hermes' business and financial condition[121]. - The SEC adopted a final rule requiring open-end management investment companies to transmit concise annual and semi-annual reports directly to shareholders, effective from October 26, 2022[151]. - The SEC's "pay versus performance" requirement mandates registrants to disclose how executive compensation relates to financial performance for fiscal years ending on or after December 16, 2022[157]. - The DOL's new fiduciary rule will clarify the evaluation of ESG factors in investment decisions, focusing on material risk-return factors[148]. - The SEC has begun enforcement actions based on ESG disclosures not aligning with actual investment processes, highlighting increased scrutiny on compliance in this area[165]. - The FCA confirmed new rules to enhance oversight of authorized representatives, requiring improved risk assessment and monitoring[201]. - The FCA's new "Consumer Duty" aims to set higher standards for consumer protection, with implementation deadlines extending to July 31, 2024[208]. Market Conditions - The Dow Jones Industrial Average returned -6.7% for the third quarter, while the S&P returned -5.3% and the Nasdaq Composite returned -4.1%[255]. - The impact of the Pandemic and geopolitical events, such as Russia's invasion of Ukraine, is being closely monitored for their effects on asset flows and financial conditions[226]. - The federal funds target rate was raised to a range of 3.00% - 3.25% as of September 2022, eliminating the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers[117]. - The Pandemic has not materially affected Federated Hermes' Financial Condition, except for the impact of near-zero interest rates leading to fee waivers[116]. - Federated Hermes believes money market funds have demonstrated resiliency during the Pandemic, indicating their robustness as investment products[192].