Federated(FHI) - 2024 Q1 - Quarterly Results

Q1 2024 Earnings Release Financial & Operational Highlights Federated Hermes reported strong Q1 2024 results with record managed assets and increased diluted EPS, alongside significant capital returns to shareholders | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Earnings Per Diluted Share (EPS) | $0.89 | $0.78 | +14% | | Net Income | $75.0 million | $69.6 million | +8% | - Total managed assets reached a record $778.7 billion at March 31, 2024, marking the sixth consecutive quarter of record assets under management[3][4] - The Board of Directors declared a total dividend of $1.31 per share, consisting of a $0.31 quarterly dividend (a 10.7% increase) and a $1.00 special dividend[2][4] - During Q1 2024, the company purchased 1,082,120 shares of its class B common stock for $37.0 million[4] - The CEO highlighted that growth was driven by attractive yields in liquidity products and investor demand for fixed-income products to add duration, particularly the Federated Hermes Total Return Bond Fund and ETF[4] Assets Under Management (AUM) Analysis Total AUM grew 11% YoY to a record $778.7 billion, driven by money market and fixed-income growth, despite declines in equity and alternative assets | AUM Category | March 31, 2024 | March 31, 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Managed Assets | $778.7 billion | $701.0 billion | +11% | | Money Market | $578.8 billion | $505.8 billion | +14% | | Fixed-Income | $96.3 billion | $87.5 billion | +10% | | Equity | $80.2 billion | $83.6 billion | -4% | | Alternative/Private Markets | $20.5 billion | $21.2 billion | -3% | AUM by Asset Class Money market assets were the primary growth driver, reaching a record $578.8 billion, while fixed-income grew, and equity and alternative assets declined - Money Market: Assets reached a record $578.8 billion, up 14% YoY, with money market fund assets also hitting a record $417.1 billion[10] - Fixed-Income: Assets grew 10% YoY to $96.3 billion, with top-selling products including the Federated Hermes Total Return Bond Fund and ETF, and ultrashort bond funds[8] - Equity: Assets decreased 4% YoY to $80.2 billion, despite positive net sales primarily from the Federated Hermes MDT strategy lineup, including Mid Cap Growth and Large Cap Growth funds[6] - Alternative/Private Markets: Assets declined 3% YoY to $20.5 billion[9] Long-Term Asset Flows Total long-term assets experienced $2.3 billion in net redemptions in Q1 2024, primarily due to equity outflows, partially offset by fixed-income inflows | Asset Class (Q1 2024) | Net Sales (Redemptions) | | :--- | :--- | | Equity | ($3,436 million) | | Fixed Income | $1,188 million | | Alternative/Private Markets | $21 million | | Multi-asset | ($68 million) | | Total Long-term Assets | ($2,295 million) | - By product type, Funds saw net redemptions of $1.1 billion, while Separate Accounts experienced net redemptions of $1.2 billion in long-term assets[27] Financial Performance Analysis Federated Hermes' Q1 2024 revenue increased 4% to $396.4 million, with operating income up 16% to $98.6 million and net income rising 8% to $75.0 million - Revenue increased 4% YoY, mainly from higher average money market assets, which was partially offset by lower average equity assets, with money market assets contributing 51% of total revenue[11] - Compared to Q4 2023, revenue increased 1% due to higher average assets, but this was partially offset by a $9.3 million decrease in carried interest and performance fees[13] - Operating expenses were nearly flat YoY but increased 3% QoQ due to higher incentive compensation and payroll taxes[12][14] Consolidated Statements of Income Q1 2024 income statement shows total revenue of $396.4 million, operating income of $98.6 million, and diluted EPS of $0.89 | (in thousands, except per share) | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Total Revenue | $396,371 | $382,189 | $391,497 | | Total Operating Expenses | $297,790 | $297,023 | $288,927 | | Operating Income | $98,581 | $85,166 | $102,570 | | Net Income | $75,033 | $69,601 | $82,178 | | Diluted EPS | $0.89 | $0.78 | $0.96 | Consolidated Balance Sheets As of March 31, 2024, total assets were $2.09 billion, with cash and investments at $558.5 million and long-term debt at $347.9 million | (in thousands) | March 31, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,086,972 | $2,101,844 | | Cash and other investments | $558,532 | $560,675 | | Total Liabilities | $866,415 | $947,747 | | Total Equity | $1,147,427 | $1,128,252 | Corporate Updates & Shareholder Information The company announced the election of a new independent director, expanding the board, and provided details for the Q1 2024 earnings conference call - At the annual shareholder meeting on April 25, 2024, Karen L. Hanlon was elected as a new independent director, expanding the board to seven members[5] - An earnings conference call was scheduled for 9 a.m. Eastern on Friday, April 26, 2024, with details provided for participation via phone or online[16]