EX-99.1 2 a991-2022q1earningspressre.htm EX-99.1 Document

Exhibit 99.1
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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, Pa., April 28, 2022) — 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
MEDIA:MEDIA:ANALYSTS:
Ed Costello 412-288-7538Meghan McAndrew 412-288-8103Ray Hanley 412-288-1920
    
Federated Hermes reports Q1 2022 earnings
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$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,

    
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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.


    
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Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Quarter Ended% Change Q1 2021 to Q1 2022Quarter Ended% Change Q4 2021 to Q1 2022
March 31, 2022March 31, 2021Dec. 31, 2021
Revenue
Investment advisory fees, net$232,994 $247,689 (6)%$223,796 4  %
Administrative service fees, net—affiliates73,507 74,302 (1)77,734 (5)
Other service fees, net18,263 19,182 (5)20,115 (9)
Total Revenue324,764 341,173 (5)321,645 1 
Operating Expenses
Compensation and related133,965 143,620 (7)124,107 8 
Distribution48,562 44,389 9 39,894 22 
Systems and communications19,494 18,594 5 19,343 1 
Professional service fees13,468 14,636 (8)16,279 (17)
Office and occupancy11,322 11,240 1 11,215 1 
Advertising and promotional2,732 2,824 (3)9,493 (71)
Travel and related1,795 296 NM2,499 (28)
Other9,477 8,096 17 10,232 (7)
Total Operating Expenses240,815 243,695 (1)233,062 3 
Operating Income83,949 97,478 (14)88,583 (5)
Nonoperating Income (Expenses)
Investment income (loss), net(10,602)2,011 NM3,257 (426)
Debt expense(1,222)(491)149 (472)159 
Other, net83 345 (76)258 (68)
Total Nonoperating Income (Expenses), net(11,741)1,865 NM3,043 (486)
Income before income taxes72,208 99,343 (27)91,626 (21)
Income tax provision17,611 24,997 (30)20,629 (15)
Net income including the noncontrolling interests in subsidiaries54,597 74,346 (27)70,997 (23)
Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries(1,266)(138)NM2,434 (152)
Net Income$55,863 $74,484 (25)%$68,563 (19) %
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Share1
Basic and Diluted$0.61 $0.75 (19)%$0.71 (14)%
Weighted-Average Shares Outstanding
Basic and Diluted88,050 95,218 91,924 
Dividends Declared Per Share$0.27 $0.27 $0.27 
1) Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of basic earnings per share under the "two-class method." As such, total net income of $2.6 million, $3.0 million and $2.9 million available to unvested restricted Federated Hermes shareholders for the quarterly periods ended March 31, 2022, March 31, 2021 and Dec. 31, 2021, respectively, was excluded from the computation of basic earnings per share. In addition to the amounts excluded from the basic earnings per share calculation, the computation of diluted earnings per share for the quarterly periods ended March 31, 2021 and Dec. 31, 2021 excludes net income available to unvested shareholders of a nonpublic consolidated subsidiary.

    
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Unaudited Condensed Consolidated Balance Sheets
(in thousands)March 31, 2022Dec. 31, 2021
Assets
  Cash and other investments$457,480 $426,674 
  Other current assets124,365 132,773 
  Intangible assets, net, including goodwill1,253,451 1,270,080 
  Other long-term assets183,226 188,660 
  Total Assets$2,018,522 $2,018,187 
Liabilities, Redeemable Noncontrolling Interests and Equity
  Current liabilities$180,973 $270,707 
  Long-term debt397,383 223,350 
  Other long-term liabilities333,676 346,911 
  Redeemable noncontrolling interests48,569 63,202 
  Equity excluding treasury stock1,652,727 1,652,481 
  Treasury stock(594,806)(538,464)
  Total Liabilities, Redeemable Noncontrolling Interests and Equity$2,018,522 $2,018,187 

    
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Unaudited Changes in Long-Term Assets - By Asset Class
(in millions)Quarter Ended
March 31, 2022Dec. 31, 2021March 31, 2021
Equity
Beginning assets$96,716 $97,425 $91,788 
Sales1
6,992 4,371 7,760 
Redemptions1
(7,070)(7,106)(7,164)
Net sales (redemptions)1
(78)(2,735)596 
Net exchanges(174)(2)32 
Impact of foreign exchange2
(454)(162)(595)
Market gains and (losses)3
(4,334)2,190 4,349 
Ending assets$91,676 $96,716 $96,170 
Fixed Income
Beginning assets$97,550 $97,226 $84,277 
Sales1
7,424 7,920 11,187 
Redemptions1
(9,437)(7,438)(8,284)
Net sales (redemptions)1
(2,013)482 2,903 
Net exchanges146 (23)(44)
Impact of foreign exchange2
(104)(9)(60)
Market gains and (losses)3
(3,433)(126)(612)
Ending assets$92,146 $97,550 $86,464 
Alternative/Private Markets
Beginning assets$22,920 $22,064 $19,084 
Sales1
644 1,696 478 
Redemptions1
(505)(1,460)(631)
Net sales (redemptions)1
139 236 (153)
Net exchanges0 0 (1)
Impact of foreign exchange2
(637)107 139 
Market gains and (losses)3
687 513 232 
Ending assets$23,109 $22,920 $19,301 
Multi-asset
Beginning assets$3,780 $3,692 $3,948 
Sales1
74 75 67 
Redemptions1
(132)(119)(170)
Net sales (redemptions)1
(58)(44)(103)
Net exchanges5 14 5 
Impact of foreign exchange2
0 0 (1)
Market gains and (losses)3
(172)118 132 
Ending assets$3,555 $3,780 $3,981 
Total Long-term Assets
Beginning assets$220,966 $220,407 $199,097 
Sales1
15,134 14,062 19,492 
Redemptions1
(17,144)(16,123)(16,249)
Net sales (redemptions)1
(2,010)(2,061)3,243 
Net exchanges(23)(11)(8)
Impact of foreign exchange2
(1,195)(64)(517)
Market gains and (losses)3
(7,252)2,695 4,101 
Ending assets$210,486 $220,966 $205,916 
1) For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3) Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.




    
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Unaudited Changes in Long-Term Assets - By Asset Class and Product Type
(in millions)
Quarter Ended
March 31, 2022
EquityFixed IncomeAlternative / Private MarketsMulti-assetTotal
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds
Separate Accounts1
Funds.
Separate Accounts1
Beginning assets$57,036 $39,680 $59,862 $37,688 $14,788 $8,132 $3,608 $172 $135,294 $85,672 
Sales3,960 3,032 5,429 1,995 395 249 73 1 9,857 5,277 
Redemptions(4,118)(2,952)(8,422)(1,015)(436)(69)(128)(4)(13,104)(4,040)
Net sales (redemptions)(158)80 (2,993)980 (41)180 (55)(3)(3,247)1,237 
Net exchanges(174)0 148 (2)0 0 5 0 (21)(2)
Impact of foreign exchange2
(290)(164)(79)(25)(397)(240)0 0 (766)(429)
Market gains and (losses)3
(4,524)190 (2,108)(1,325)497 190 (157)(15)(6,292)(960)
Ending assets$51,890 $39,786 $54,830 $37,316 $14,847 $8,262 $3,401 $154 $124,968 $85,518 
1)    Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
2) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
3)    Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.









    
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Unaudited Changes in Long-Term Assets - By Product Type
(in millions)
Quarter Ended
March 31, 2022Dec. 31, 2021March 31, 2021
Total Fund Assets
Beginning assets$135,294 $136,297 $123,713 
Sales9,857 10,094 15,253 
Redemptions(13,104)(11,955)(11,775)
Net sales (redemptions)(3,247)(1,861)3,478 
Net exchanges(21)(11)(412)
Impact of foreign exchange1
(766)4 (217)
Market gains and (losses)2
(6,292)865 1,814 
Ending assets$124,968 $135,294 $128,376 
Total Separate Account Assets3
Beginning assets$85,672 $84,110 $75,384 
Sales4
5,277 3,968 4,239 
Redemptions4
(4,040)(4,168)(4,474)
Net sales (redemptions)4
1,237 (200)(235)
Net exchanges(2)0 404 
Impact of foreign exchange1
(429)(68)(300)
Market gains and (losses)2
(960)1,830 2,287 
Ending assets$85,518 $85,672 $77,540 
Total Long-term Assets3
Beginning assets$220,966 $220,407 $199,097 
Sales4
15,134 14,062 19,492 
Redemptions4
(17,144)(16,123)(16,249)
Net sales (redemptions)4
(2,010)(2,061)3,243 
Net exchanges(23)(11)(8)
Impact of foreign exchange1
(1,195)(64)(517)
Market gains and (losses)2
(7,252)2,695 4,101 
Ending assets$210,486 $220,966 $205,916 
1) Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
2) Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
3) Includes separately managed accounts, institutional accounts, certain sub-advised funds and other managed products.
4)    For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.




















    
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Unaudited Managed Assets

(in millions)
March 31, 2022Dec. 31, 2021Sept. 30, 2021June 30, 2021March 31, 2021
By Asset Class
Equity$91,676 $96,716 $97,425 $100,506 $96,170 
Fixed-income92,146 97,550 97,226 90,801 86,464 
Alternative / private markets23,109 22,920 22,064 20,962 19,301 
Multi-asset3,555 3,780 3,692 3,699 3,981 
Total long-term assets210,486 220,966 220,407 215,968 205,916 
Money market420,596 447,907 413,713 429,804 419,080 
Total Managed Assets$631,082 $668,873 $634,120 $645,772 $624,996 
By Product Type
Funds:
Equity$51,890 $57,036 $58,218 $59,933 $56,767 
Fixed-income54,830 59,862 60,262 58,486 55,581 
Alternative / private markets14,847 14,788 14,299 13,225 12,231 
Multi-asset3,401 3,608 3,518 3,517 3,797 
Total long-term assets124,968 135,294 136,297 135,161 128,376 
Money market279,514 312,834 292,311 301,971 297,182 
Total Fund Assets$404,482 $448,128 $428,608 $437,132 $425,558 
Separate Accounts:
Equity$39,786 $39,680 $39,207 $40,573 $39,403 
Fixed-income37,316 37,688 36,964 32,315 30,883 
Alternative / private markets8,262 8,132 7,765 7,737 7,070 
Multi-asset154 172 174 182 184 
Total long-term assets85,518 85,672 84,110 80,807 77,540 
Money market141,082 135,073 121,402 127,833 121,898 
Total Separate Account Assets$226,600 $220,745 $205,512 $208,640 $199,438 
Total Managed Assets$631,082 $668,873 $634,120 $645,772 $624,996 

    
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Unaudited Average Managed AssetsQuarter Ended
(in millions)
March 31, 2022Dec. 31, 2021Sept. 30, 2021June 30, 2021March 31, 2021
By Asset Class
Equity$92,034 $97,751 $100,076 $99,165 $95,167 
Fixed-income95,475 97,229 93,685 88,405 86,939 
Alternative / private markets22,848 22,243 21,446 20,047 19,278 
Multi-asset3,621 3,763 3,713 4,067 3,974 
Total long-term assets213,978 220,986 218,920 211,684 205,358 
Money market433,254 419,392 414,141 427,993 412,720 
Total Avg. Managed Assets$647,232 $640,378 $633,061 $639,677 $618,078 
By Product Type
Funds:
Equity$52,419 $58,290 $59,918 $58,662 $56,832 
Fixed-income57,413 60,339 59,618 57,006 55,416 
Alternative / private markets14,746 14,419 13,704 12,703 12,239 
Multi-asset3,460 3,590 3,533 3,880 3,783 
Total long-term assets128,038 136,638 136,773 132,251 128,270 
Money market291,157 294,618 289,566 301,990 288,403 
Total Avg. Fund Assets$419,195 $431,256 $426,339 $434,241 $416,673 
Separate Accounts:
Equity$39,615 $39,461 $40,158 $40,503 $38,335 
Fixed-income38,062 36,890 34,067 31,399 31,523 
Alternative / private markets8,102 7,824 7,742 7,344 7,039 
Multi-asset161 173 180 187 191 
Total long-term assets85,940 84,348 82,147 79,433 77,088 
Money market142,097 124,774 124,575 126,003 124,317 
Total Avg. Separate Account Assets$228,037 $209,122 $206,722 $205,436 $201,405 
Total Avg. Managed Assets$647,232 $640,378 $633,061 $639,677 $618,078