Federated Hermes (FHI) Q2 2024 earnings summary

Executive summary

• Assets under management reached a record $782.7 billion as of June 30, 2024, up 11% year-over-year, led by strong money market inflows and market appreciation in fixed income.

• Q2 2024 revenue was $402.6 million, down 7% year-over-year but up 2% sequentially, with a diversified business mix across equity, fixed income, alternatives, and liquidity.

• Net income for Q2 2024 was $16.3 million, a 76% decrease from Q2 2023, primarily due to a $66.3 million non-cash impairment charge related to the 2018 Hermes acquisition.

• Diluted EPS for Q2 2024 was $0.20, down from $0.81 in Q2 2023, including a ($0.76) per share impairment charge.

• Board declared a $0.31 per share dividend payable August 15, 2024, and repurchased 1.56 million shares for $47.5 million in Q2 2024.

Financial highlights

• Total revenue for the six months ended June 30, 2024 was $799.0 million, down 2% year-over-year.

• Operating income for Q2 2024 was $40.7 million, down 59% year-over-year, reflecting the impairment charge.

• Net income for the first half of 2024 was $96.1 million, down 32% from the prior year.

• Effective tax rate for Q2 2024 was 54.9%, up from 27.4% in Q2 2023, due to a valuation allowance on foreign deferred tax assets and the impairment.

• Cash and investments at June 30, 2024, were $453 million; long-term debt was $348 million.

Outlook and guidance

• Management expects continued strong demand for money market and liquidity products, with a diversified institutional pipeline and ongoing interest in quantitative equity and dynamic fixed-income strategies.

• Regulatory developments in the U.S. and Europe are expected to increase compliance costs and may materially impact financial condition.

• Anticipate higher compensation expenses and increased advertising in H2 2024; tax rate expected to be 27%-29% for the remainder of 2024.

• Forward-looking statements caution on risks related to market conditions, asset flows, and fee waivers.

• Principal uses of cash will include acquisitions, global expansion, compensation, dividends, debt service, and technology investments.