Federated Hermes, Inc. reports first quarter 2022 earnings

• Q1 2022 earnings per diluted share of $0.61
• Board declares $0.27 per share quarterly dividend

PITTSBURGH, April 28, 2022 /PRNewswire/ -- Federated Hermes, Inc. (NYSE: FHI), a global leader in active, responsible investing, today reported earnings per diluted share (EPS) of $0.61 for Q1 2022, compared to $0.75 for the same quarter last year, on net income of $55.9 million for Q1 2022, compared to $74.5 million for Q1 2021.

Federated Hermes' total managed assets were $631.1 billion at March 31, 2022, up $6.1 billion or 1% from $625.0 billion at March 31, 2021 and down $37.8 billion or 6% from $668.9 billion at Dec. 31, 2021. Total average managed assets for Q1 2022 were $647.2 billion, up $29.1 billion or 5% from $618.1 billion reported for Q1 2021 and up $6.8 billion or 1% from $640.4 billion for Q4 2021.

"As markets faced volatility, a slowing economy and higher interest rates in the first quarter, investors sought haven in a variety of our equity products, including the Federated Hermes Strategic Value Dividend strategy, which seeks to provide income by investing in companies that have a history of sustaining and growing dividends," said J. Christopher Donahue, president and chief executive officer. "Other strategies in demand included high-yield and our Strategic Income bond strategies, which illustrate the case for active management, as the portfolio management teams seek attractive opportunities across sectors while managing risk to navigate challenging market conditions."

Federated Hermes' board of directors declared a dividend of $0.27 per share. The dividend is payable on May 13, 2022 to shareholders of record as of May 6, 2022. During Q1 2022, Federated Hermes purchased 3,039,917 shares of Federated Hermes class B common stock for $102.5 million.

Equity assets were $91.7 billion at March 31, 2022, down $4.5 billion or 5% from $96.2 billion at March 31, 2021 and down $5.0 billion or 5% from $96.7 billion at Dec. 31, 2021. Top-selling equity funds during Q1 2022 on a net basis were Federated Hermes Strategic Value Dividend Fund, Federated Hermes Asia ex-Japan Equity Fund, Federated Hermes SDG Engagement Equity Fund (UCITS), Federated Hermes MDT Small Cap Core Fund and Federated Hermes International Equity Fund.

Fixed-income assets were $92.1 billion at March 31, 2022, up $5.6 billion or 7% from $86.5 billion at March 31, 2021 and down $5.5 billion or 6% from $97.6 billion at Dec. 31, 2021. Top-selling fixed-income funds during Q1 2022 on a net basis were Federated Hermes Floating Rate Strategic Income Fund, Federated Hermes SDG Engagement High Yield Credit Fund (UCITS), Federated Hermes Climate Change High Yield Credit Fund, Federated Hermes Strategic Income Fund and Federated Hermes Inflation Protected Securities Fund.

Alternative/private market assets were a record $23.1 billion at March 31, 2022, up $3.8 billion or 20% from $19.3 billion at March 31, 2021 and up $0.2 billion or 1% from $22.9 billion at Dec. 31, 2021.

Money market assets were $420.6 billion at March 31, 2022, up $1.5 billion or less than 1% from $419.1 billion at March 31, 2021 and down $27.3 billion or 6% from $447.9 billion at Dec. 31, 2021. Money market fund assets were $279.5 billion at March 31, 2022, down $17.7 billion or 6% from $297.2 billion at March 31, 2021 and down $33.3 billion or 11% from $312.8 billion at Dec. 31, 2021.

Financial Summary

Q1 2022 vs. Q1 2021

Revenue decreased $16.4 million or 5% primarily due to a decrease in revenue due to lower average equity assets. This decrease was partially offset by a decrease in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers).

During Q1 2022, Federated Hermes derived 72% of its revenue from long-term assets (45% from equity, 18% from fixed-income and 9% from alternative/private markets and multi-asset), 27% from money market assets, and 1% from sources other than managed assets.

Operating expenses decreased $2.9 million or 1% primarily due to decreased compensation and related expense offset by an increase in distribution expense primarily due to an increase in third-party distribution-related expenses and lower voluntary yield-related fee waivers.

Nonoperating income (expenses), net decreased $13.6 million primarily due to a decrease in the market value of investments in Q1 2022 as compared to an increase in the market value of investments in Q1 2021.

Q1 2022 vs. Q4 2021

Revenue increased $3.1 million or 1% primarily due to a decrease in voluntary yield-related fee waivers. This increase was partially offset by a decrease in revenue due to lower average equity assets and two fewer days in Q1 2022.

Operating expenses increased $7.8 million or 3% resulting from increased compensation and related expense due primarily to higher incentive compensation as well as increased distribution expense primarily due to lower voluntary yield-related fee waivers. These increases were partially offset by lower advertising costs. 

Nonoperating income (expenses), net decreased $14.8 million due primarily to a decrease in the market value of investments in Q1 2022 as compared to an increase in the market value of investments in Q4 2021.

Impact of voluntary yield-related fee waivers

During the three months ended March 31, 2022, voluntary yield-related fee waivers totaled $75.8 million. These fee waivers were partially offset by related reductions in distribution expenses of $57.5 million such that the net negative pre-tax impact to Federated Hermes was $18.3 million for the three months ended March 31, 2022. During the three months ended March 31, 2021, voluntary yield-related fee waivers totaled $83.1 million. These fee waivers were partially offset by related reductions in distribution expenses of $61.4 million such that the net negative pre-tax impact to Federated Hermes was $21.7 million for the three months ended March 31, 2021.

Short-term interest rates remained near historic lows during most of Q1 2022 as technical factors at the front end of the yield curve kept yields on short-term government securities—including repurchase agreements and Treasury bills—just above zero. Following the central bank's 0.25% interest rate increase in March 2022, market expectations are that the central bank will continue to raise interest rates multiple times throughout the remainder of 2022. The net negative impact on pre-tax income from voluntary yield-related fee waivers on money market mutual funds and certain separate accounts may be approximately $1 million during Q2 2022. The amount of voluntary yield-related fee waivers can vary based on a number of factors, including, among others, interest rates, yields, asset levels, asset flows and the ability of distributors to share in waivers. Any change in these factors can impact the amount and level of voluntary yield-related fee waivers, including in a material way.

Federated Hermes' level of business activity and financial results are dependent upon many factors, including market conditions, investment performance and investor behavior. These factors and others, including asset levels and mix, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and regulatory changes, can significantly impact Federated Hermes' business activity levels and financial results. Risk factors and uncertainties that can influence Federated Hermes' financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated Hermes will host an earnings conference call at 9 a.m. Eastern on April 29, 2022. Investors are invited to listen to the earnings teleconference by calling 877-545-0523 (domestic) or 973-528-0016 (international) prior to the 9 a.m. start time. To listen online, go to the Investor Relations section and the Analyst Information tab of FederatedHermes.com at least 15 minutes prior to register and join the call. A replay will be available at approximately 12:30 p.m. Eastern on April 29, 2022. To access the telephone replay, dial 877-481-4010 (domestic) or 919-882-2331 (international) and enter access code 45193. The online replay will be available via FederatedHermes.com for one year.

Federated Hermes, Inc. is a global leader in active, responsible investment management, with $631.1 billion in assets under management¹. We deliver investment solutions that help investors target a broad range of outcomes and provide equity, fixed-income, alternative/private markets, multi-asset and liquidity management strategies to more than 11,000 institutions and intermediaries worldwide. Our clients include corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Headquartered in Pittsburgh, Federated Hermes has nearly 2,000 employees in London, New York, Boston and offices worldwide.

Federated Hermes ranks in the top 7% of equity fund managers in the industry, the top 10% of fixed-income fund managers and the top 11% of money market fund managers². Federated Hermes also ranks as the 10th-largest manager of model-delivered SMAs³. For more information, including an analyst presentation, visit FederatedHermes.com.

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1) As of March 31, 2022

2) ISS Market Intelligence (SIMFUND), March 31, 2022. Based on assets under management in open-end funds.

3) Money Management Institute/Cerulli,Q4 2021.

Federated Securities Corp. is distributor of the Federated Hermes funds.

Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Fund Managers Ireland Limited, Hermes Investment Management Limited, and Hermes GPE LLP, each a registered investment advisor in one or more of the U.S., U.K. or Ireland.

Certain statements in this press release, such as those related to performance, investor preferences and demand, asset flows, asset mix, interest rates, and fee waivers constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, predict whether performance fees or carried interest will be earned and retained, and sustain product demand, asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company's annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future.

SOURCE Federated Hermes, Inc.