Federated Hermes Q3 Net Income Jumps 19% on Strong Fee Growth

TL;DR

**FHI is crushing it, buy the dip if you can find one, because these numbers are screaming growth.**

AI Summary

Federated Hermes, Inc. (FHI) reported a significant increase in net income for the three and nine months ended September 30, 2025. Net income for the three-month period rose to $104.126 million, up 19% from $87.538 million in the prior year. For the nine-month period, net income surged to $296.260 million, a substantial 61% increase from $183.598 million in the same period of 2024. Total revenue for the three months ended September 30, 2025, increased by 14.9% to $469.446 million from $408.456 million, driven by higher Investment Advisory Fees and Administrative Service Fees. Operating expenses also increased, with Compensation and Related expenses rising to $144.563 million from $136.027 million, and Distribution expenses increasing to $113.569 million from $95.859 million for the three-month period. A key change was the absence of an 'Impairment of Intangible Asset' expense in 2025, which was $66.331 million in 2024, significantly boosting operating income. The company also saw an increase in cash dividends per share to $0.34 for the three months ended September 30, 2025, from $0.31 in the prior year, and basic and diluted earnings per common share increased to $1.34 from $1.06. Strategic outlook appears positive, with increased revenue across advisory and administrative services, and a notable reduction in impairment charges.

Why It Matters

This strong performance by Federated Hermes, with a 19% increase in Q3 net income and a 61% jump year-to-date, signals robust health in the asset management sector, particularly for firms with diverse advisory and administrative service offerings. For investors, this indicates FHI's ability to generate significant earnings and potentially sustain dividend growth, as evidenced by the increased cash dividends per share. Employees may see enhanced job security and potential for performance-based incentives. Customers benefit from a stable and growing asset manager. In a competitive landscape, FHI's revenue growth, especially in investment advisory fees, suggests it is effectively attracting and retaining assets, potentially outperforming peers and solidifying its market position.

Risk Assessment

Risk Level: low — The risk level is low due to strong financial performance, including a 19% increase in net income for the three months ended September 30, 2025, and a 61% increase for the nine-month period. The absence of a significant 'Impairment of Intangible Asset' expense, which was $66.331 million in the prior year, also reduces financial uncertainty.

Analyst Insight

Investors should consider FHI a strong contender for a long-term portfolio, given its consistent revenue growth and significant net income increase. The rising dividends per share also make it attractive for income-focused investors. Monitor future asset under management (AUM) trends and interest rate environments, as these directly impact advisory fees.

Financial Highlights

debt To Equity

0.78

revenue

$1.318B

total Assets

$2.182B

total Debt

$348.3M

net Income

$296.3M

eps

$3.75

cash Position

$506.3M

revenue Growth

+9.2%

Revenue Breakdown

Key Numbers

• $104.1M — Net Income (Q3 2025) (Increased 19% from $87.5M in Q3 2024)
• $296.3M — Net Income (YTD 2025) (Increased 61% from $183.6M in YTD 2024)
• $469.4M — Total Revenue (Q3 2025) (Increased 14.9% from $408.5M in Q3 2024)
• $1.34 — EPS (Q3 2025) (Increased from $1.06 in Q3 2024)
• $3.75 — EPS (YTD 2025) (Increased from $2.20 in YTD 2024)
• $0.34 — Cash Dividends Per Share (Q3 2025) (Increased from $0.31 in Q3 2024)
• $66.3M — Intangible Asset Impairment (YTD 2024) (Zero in YTD 2025, contributing to higher net income)
• $144.6M — Compensation and Related Expenses (Q3 2025) (Increased from $136.0M in Q3 2024)
• $113.6M — Distribution Expenses (Q3 2025) (Increased from $95.9M in Q3 2024)
• $1.318B — Total Revenue (YTD 2025) (Increased from $1.207B in YTD 2024)

Key Players & Entities

• FEDERATED HERMES, INC. (company) — Registrant in the 10-Q filing
• New York Stock Exchange (regulator) — Exchange where Class B common stock is registered
• $104.126 million (dollar_amount) — Net Income for three months ended September 30, 2025
• $87.538 million (dollar_amount) — Net Income for three months ended September 30, 2024
• $296.260 million (dollar_amount) — Net Income for nine months ended September 30, 2025
• $183.598 million (dollar_amount) — Net Income for nine months ended September 30, 2024
• $469.446 million (dollar_amount) — Total Revenue for three months ended September 30, 2025
• $408.456 million (dollar_amount) — Total Revenue for three months ended September 30, 2024
• $66.331 million (dollar_amount) — Impairment of Intangible Asset in 2024
• $0.34 (dollar_amount) — Cash Dividends Per Share for three months ended September 30, 2025

FAQ

Risk Factors

• Market Volatility and Economic Conditions [high — market]: The company's financial performance is highly sensitive to fluctuations in global financial markets and overall economic conditions. Downturns can lead to reduced asset values, impacting advisory fees and potentially increasing client redemptions. For the nine months ended September 30, 2025, total revenue was $1.318 billion, an increase from $1.207 billion in the prior year, indicating revenue growth despite potential market headwinds.
• Cybersecurity and Data Breaches [high — operational]: As a financial services firm, FHI is a target for cyberattacks. A breach could compromise sensitive client data, leading to significant financial losses, reputational damage, and regulatory penalties. The company's reliance on technology for operations makes this a persistent concern.
• Regulatory Changes and Compliance [medium — regulatory]: The financial services industry is subject to extensive and evolving regulations. Changes in regulations, particularly those related to investment management, fiduciary duties, and data privacy, could increase compliance costs and impact business operations. The company must continually adapt to maintain compliance.
• Interest Rate Fluctuations [medium — financial]: Changes in interest rates can affect investment strategies and the attractiveness of certain asset classes, indirectly impacting asset under management and revenue. While not directly detailed in this excerpt, interest rate sensitivity is a common risk for asset managers.
• Competition and Talent Acquisition [medium — operational]: The asset management industry is highly competitive, with pressure on fees and the need to attract and retain top talent. Failure to innovate or maintain a competitive edge in investment strategies and client service could lead to market share erosion.
• Goodwill and Intangible Asset Impairment [medium — financial]: The company holds significant goodwill ($860.950 million as of September 30, 2025) and intangible assets ($335.042 million). Adverse changes in business conditions or future impairment testing could result in substantial write-downs, negatively impacting earnings. Notably, an impairment of intangible assets of $66.331 million occurred in YTD 2024, which was absent in 2025, boosting operating income.

Industry Context

Federated Hermes operates in the highly competitive asset management industry, facing pressure from both traditional firms and newer, technology-driven players. Key trends include increasing demand for passive and alternative investment strategies, a focus on ESG (Environmental, Social, and Governance) factors, and ongoing consolidation. Fee compression remains a significant challenge, requiring firms to focus on scale, efficiency, and differentiated product offerings.

Regulatory Implications

The company must navigate a complex and evolving regulatory landscape, including SEC rules, FINRA regulations, and international compliance standards. Increased scrutiny on fiduciary duties, fee transparency, and data security could lead to higher compliance costs and potential penalties for non-compliance. The absence of impairment charges in 2025, compared to $66.3 million in 2024, highlights the impact of accounting treatments on reported earnings.

What Investors Should Do

1. Monitor revenue growth drivers, particularly the performance of Investment Advisory Fees and Administrative Service Fees, to assess continued top-line expansion.
2. Analyze the trend in operating expenses, specifically Compensation and Distribution costs, in relation to revenue growth.
3. Evaluate the impact of the absence of intangible asset impairment charges on profitability compared to the prior year.
4. Assess the company's capital allocation strategy, including dividend payouts and share repurchases, given the increase in cash dividends per share to $0.34.

Glossary

Investment Advisory Fees, net

Fees earned by the company for managing investment portfolios on behalf of clients, net of any related expenses or reimbursements. (This is a primary revenue stream for Federated Hermes, directly tied to the assets they manage.)

Administrative Service Fees, net

Fees charged for providing administrative services to clients or affiliates, such as fund accounting, transfer agency, or compliance services, net of related costs. (Represents a significant secondary revenue source, indicating diversification beyond pure investment management.)

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (A substantial asset on FHI's balance sheet ($860.950 million as of Sep 30, 2025), indicating past acquisitions and potential for future impairment charges.)

Intangible Assets, net

Assets that lack physical substance but are identifiable and controllable, such as patents, trademarks, and customer lists. In this context, it likely includes acquired intangible assets from business combinations, net of accumulated amortization. (Represents a significant portion of FHI's long-term assets ($335.042 million as of Sep 30, 2025) and is subject to amortization and potential impairment.)

Accumulated Other Comprehensive Income (Loss)

A component of shareholders' equity that includes unrealized gains and losses on certain investments, foreign currency translation adjustments, and pension plan adjustments that have not been recognized in net income. (Shows a shift from a net loss of ($32.083 million) at Dec 31, 2024, to a net gain of $5.413 million at Sep 30, 2025, impacting total equity.)

Redeemable Noncontrolling Interests in Subsidiaries

Represents the equity interests in subsidiaries held by parties other than the parent company, which have redemption features that allow the holders to require the company to repurchase their interests. (This liability ($63.515 million as of Sep 30, 2025) represents obligations to external stakeholders in consolidated entities.)

Year-Over-Year Comparison

Federated Hermes, Inc. has demonstrated robust performance compared to the prior year. Total revenue for the three months ended September 30, 2025, increased by 14.9% to $469.4 million, and net income surged by 19% to $104.1 million. This growth was significantly bolstered by the absence of a $66.3 million intangible asset impairment charge that occurred in the prior year, leading to a substantial 61% increase in year-to-date net income to $296.3 million. While operating expenses, particularly compensation and distribution costs, have also risen, the overall financial picture is bullish, supported by increased earnings per share and dividends.

Filing Documents

• fhi-20250930.htm (10-Q) — 1971KB
• exhibit311-2025q3.htm (EX-31.1) — 11KB
• exhibit312-2025q3.htm (EX-31.2) — 11KB
• exhibit32-2025q3.htm (EX-32) — 9KB
• 0001056288-25-000030.txt ( ) — 8694KB
• fhi-20250930.xsd (EX-101.SCH) — 47KB
• fhi-20250930_cal.xml (EX-101.CAL) — 75KB
• fhi-20250930_def.xml (EX-101.DEF) — 333KB
• fhi-20250930_lab.xml (EX-101.LAB) — 632KB
• fhi-20250930_pre.xml (EX-101.PRE) — 484KB
• fhi-20250930_htm.xml (XML) — 1177KB

Financial Information

Part I. Financial Information

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets 4 Consolidated Statements of Income 5 Consolidated Statements of Comprehensive Income 6 Consolidated Statements of Changes in Equity 7 Consolidated Statements of Cash Flows 8 Notes to the Consolidated Financial Statements 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 46

Controls and Procedures

Item 4. Controls and Procedures 46

Other Information

Part II. Other Information

Legal Proceedings

Item 1. Legal Proceedings 46

Risk Factors

Item 1A. Risk Factors 46

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47

Other Information 47

Item 5. Other Information 47

Exhibits

Item 6. Exhibits 47

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Certain statements in this report on Form 10-Q constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that can cause the actual results, levels of activity, performance or achievements of Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes), 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. Forward-looking statements are typically identified by words or phrases such as "forecast," "project," "predict," "trend," "approximate," "potential," "opportunity," "believe," "expect," "anticipate," "current," "intention," "estimate," "position," "projection," "plan," "assume," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "can," "may," and similar expressions. Among other forward-looking statements, such statements include certain statements relating to, or, as applicable, statements concerning management's assessments, beliefs, expectations, assumptions, judgments, projections or estimates regarding: asset flows, levels, values and mix and their impact; the possibility and potential impact of impairments; business mix; the level, timing, degree and impact of changes in interest rates or gross or net yields; money market funds' potential yield advantage in a falling interest rate environment; fee rates and recognition; sources, levels and recognition of revenues, expenses, gains, losses, income and earnings; the level and impact of reimbursements, rebates or assumptions of fund-related expenses and fee waivers for competitive reasons such as to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers), to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual req

Financial Information

Part I. Financial Information

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets (dollars in thousands) (unaudited) September 30, 2025 December 31, 2024 ASSETS Current Assets Cash and Cash Equivalents $ 506,279 $ 504,441 Investments—Consolidated Investment Companies 72,252 82,441 Investments—Affiliates and Other 68,860 54,160 Receivables, net of reserve of $ 21 and $ 21 , respectively 59,975 69,903 Receivables—Affiliates 42,445 36,317 Prepaid Expenses 41,035 29,294 Other Current Assets 11,490 4,796 Total Current Assets 802,336 781,352 Long-Term Assets Goodwill 860,950 804,818 Intangible Assets, net of accumulated amortization of $ 91,653 and $ 75,787 , respectively 335,042 327,881 Property and Equipment, net of accumulated depreciation of $ 101,676 and $ 118,103 , respectively 27,441 25,565 Right-of-Use Assets, net 101,598 104,710 Other Long-Term Assets 54,903 40,358 Total Long-Term Assets 1,379,934 1,303,332 Total Assets $ 2,182,270 $ 2,084,684 LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses $ 91,415 $ 100,012 Accrued Compensation and Benefits 136,334 157,068 Lease Liabilities 18,157 16,695 Other Current Liabilities 10,494 15,418 Total Current Liabilities 256,400 289,193 Long-Term Liabilities Long-Term Debt 348,303 348,106 Long-Term Deferred Tax Liability, net 192,671 170,957 Long-Term Lease Liabilities 94,392 97,166 Other Long-Term Liabilities 39,703 28,542 Total Long-Term Liabilities 675,069 644,771 Total Liabilities 931,469 933,964 Commitments and Contingencies (Note (18)) TEMPORARY EQUITY Redeemable Noncontrolling Interests in Subsidiaries 63,515 55,514 PERMANENT EQUITY Federated Hermes, Inc. Shareholders' Equity Common Stock: Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding 189 189 Class B, No Par Value, 900,000,000 Shares Authorized, 99,505,456 Shares Issued 526,485 503,335 Additional Paid-In Capital from Treasury Stock Transactions 6 0 Retained Earnings 1,461,790 1,256,6

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