Federated Hermes (FHI) Q3 2024 earnings summary

Executive summary

• Achieved record assets under management (AUM) of $800.5 billion at September 30, 2024, up 12% year-over-year, led by $593 billion in money market assets and $100.2 billion in fixed income assets.

• Q3 2024 diluted EPS was $1.06, up from $0.86 in Q3 2023; net income rose 17% to $87.5 million year-over-year.

• Board declared a $0.31 per share dividend and authorized a new 5 million share repurchase program in October 2024.

• Equity AUM rose to $83.6 billion, with positive net sales in 15 equity strategies and strong growth in MDT fundamental quant strategies.

• The company maintains a pure-play asset management model with financial strength and flexibility.

Financial highlights

• Q3 2024 revenue was $408.5 million, up 1% year-over-year, mainly from higher money market and fixed income asset revenues.

• Q3 2024 net income attributable to shareholders was $87.5 million, up from $75.0 million in Q3 2023.

• Operating expenses decreased 1% year-over-year and 18% sequentially, reflecting lower other expenses and the absence of a prior quarter impairment charge.

• Cash and investments at Q3 end were $565 million.

• Q3 2024 operating margin was approximately 27% and net margin about 21%.

Outlook and guidance

• Management expects continued strong flows into money market and fixed income products, with positive net flows in key equity funds.

• Q4 sub-advised account redemption expected to reduce annualized revenue by $6 million, with a $750,000 impact in Q4.

• Tax rate guidance for Q4 and 2025 is 26%-28%.

• Money market conditions expected to remain favorable into 2025, with attractive yields compared to direct market and bank deposits.

• Selective acquisitions and organic growth are expected to drive future expansion.