FII
$24.11
Federated Investors
$.25
1.05%
Earnings Details
1st Quarter March 2018
Thursday, April 26, 2018 4:17:00 PM
Tweet Share Watch
Summary

Federated Investors (FII) Recent Earnings

Federated Investors (FII) reported 1st Quarter March 2018 earnings of $0.60 per share on revenue of $263.9 million. The consensus earnings estimate was $0.65 per share on revenue of $279.9 million. Revenue fell 3.5% compared to the same quarter a year ago.

Federated Investors, Inc., together with its subsidiaries is a provider of investment management products and related financial services. It offers various products, including short-term money market, equity and fixed-income investments.

Results
Reported Earnings
$0.60
Earnings Whisper
-
Consensus Estimate
$0.65
Reported Revenue
$263.9 Mil
Revenue Estimate
$279.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Federated Investors, Inc. Reports First Quarter 2018 Earnings

PITTSBURGH, April 26, 2018 /PRNewswire/ -- Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.60 for Q1 2018, up 22 percent from $0.49 for the same quarter last year on net income of $60.3 million for Q1 2018, compared to $49.6 million for Q1 2017.

Federated's total managed assets were $392.2 billion at March 31, 2018, up $30.5 billion or 8 percent from $361.7 billion at March 31, 2017 and down $5.4 billion or 1 percent from $397.6 billion at Dec. 31, 2017.  Total average managed assets for Q1 2018 were $398.0 billion, up $34.8 billion or 10 percent from $363.2 billion reported for Q1 2017 and up $16.0 billion or 4 percent from $382.0 billion reported for Q4 2017.

"In the first quarter, Federated saw interest in our MDT strategies, which are quantitatively driven equity portfolios designed to be well-diversified while aiming for high alpha and lower volatility compared to the broader market," said J. Christopher Donahue, president and chief executive officer.  "In fixed-income, investors sought a variety of investment solutions that ranged from our stalwart Total Return Bond Fund to shorter-duration strategies, in which investments' interest rates can reset as benchmark rates continue to rise."

Federated's board of directors declared a dividend of $0.27 per share, an 8 percent increase from Q4 2017.  The dividend is payable on May 15, 2018 to shareholders of record as of May 8, 2018.  During Q1 2018, Federated purchased 118,645 shares of Federated class B common stock for $3.9 million.

Federated's equity assets were $64.0 billion at March 31, 2018, down $0.8 billion or 1 percent from $64.8 billion at March 31, 2017 and down $4.1 billion or 6 percent from $68.1 billion at Dec. 31, 2017. Top-selling equity funds during Q1 2018 on a net basis were Federated MDT Small Cap Core Fund, Federated Kaufmann Small Cap Fund, Federated MDT Small Cap Growth Fund, Federated Muni and Stock Advantage Fund and Federated MDT Mid Cap Growth Fund.

Federated's fixed-income assets were $62.3 billion at March 31, 2018, up $10.5 billion or 20 percent from $51.8 billion at March 31, 2017 and down $1.9 billion or 3 percent from $64.2 billion at Dec. 31, 2017.  Top-selling fixed-income funds during Q1 2018 on a net basis included Federated Ultrashort Bond Fund, Federated Total Return Bond Fund, Federated Short-Term Income Fund, Federated Floating Rate Strategic Income Fund and Federated U.S. Government Securities Fund: 1-3 Years.

Money market assets were $265.9 billion at March 31, 2018, up $20.7 billion or 8 percent from $245.2 billion at March 31, 2017 and up $0.7 billion from $265.2 billion at Dec. 31, 2017.  Money market fund assets were $182.4 billion at March 31, 2018, up $7.2 billion or 4 percent from $175.2 billion at March 31, 2017 and down $3.1 billion or 2 percent from $185.5 billion at Dec. 31, 2017.  Federated's money market separate account assets were $83.5 billion at March 31, 2018, up $13.5 billion or 19 percent from $70.0 billion at March 31, 2017 and up $3.8 billion or 5 percent from $79.7 billion at Dec. 31, 2017.

Financial Summary

Q1 2018 revenues and expenses were impacted by Federated's adoption of the new revenue recognition accounting principle (Topic 606), effective Jan. 1, 2018. The primary impact of adoption is that reimbursements or assumptions of fund-related expenses (Consideration Payable to Customers) are now recorded as a reduction of revenue (investment advisory fees, net). Prior to adoption these amounts were recorded in either distribution expense or other expense. Therefore, there was no change to operating income or net income.

The impact of Consideration Payable to Customers on various components of Federated's Consolidated Statements of Income was as follows for the periods presented:

(in millions)

Q1 2018

Q1 2017

Q4 2017

Investment advisory fees, net1

$

(8.6)


$

0.0


$

0.0


Distribution expense

0.0


7.7


6.8


Other expense

0.0


1.0


2.2


Operating Income

$

(8.6)


$

(8.7)


$

(9.0)




1)

Prior to adoption of Topic 606, this amount would have been recorded as distribution expense of $6.7 million and other expense of $1.9 million.

Q1 2018 vs. Q1 2017

Revenue decreased by $9.6 million or 4 percent primarily due to an $8.6 million reduction of revenue for Q1 2018 Consideration Payable to Customers activity as a result of the adoption of the new revenue recognition accounting principle.  Under legacy guidance this amount would have been recorded as $6.7 million of distribution expense and $1.9 million of other expense, as noted above.

During Q1 2018, Federated derived 60 percent of its revenue from equity and fixed-income assets (43 percent from equity assets and 17 percent from fixed-income assets) and 40 percent from money market assets.

Operating expenses decreased by $11.5 million or 6 percent primarily due to an $8.7 million reduction of expenses, as Q1 2017 Consideration Payable to Customers activity was recorded as distribution expense and other expense, while Q1 2018 activity of $8.6 million is recorded as a reduction of revenue as noted above.  Distribution expense was also reduced due to a change in the mix of average money market fund assets and a January 2017 change in a customer relationship.  These decreases were partially offset by higher distribution expense from lower voluntary yield-related fee waivers and an increase in compensation and related expense due primarily to higher incentive compensation expenses.

The income tax provision decreased $10.9 million primarily due to the change in the effective tax rate as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Act).

Q1 2018 vs. Q4 2017

Revenue decreased $14.5 million or 5 percent primarily due to an $8.6 million reduction of revenue for Q1 2018  Consideration Payable to Customers activity as a result of the adoption of the new revenue recognition accounting principle as noted above, as well as there being two fewer days in the quarter.

Operating expenses decreased by $3.3 million or 2 percent primarily due to a $9.0 million reduction of expenses, as Q4 2017 Consideration Payable to Customers activity was recorded as distribution expense and other expense, while Q1 2018 activity of $8.6 million is recorded as a reduction of revenue as noted above.  The remaining decrease in distribution expense is primarily due to there being two fewer days in the quarter.  These decreases were partially offset by an increase in compensation and related expense due primarily to higher incentive compensation expenses and seasonality in payroll taxes.

Federated's 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's business activity levels and financial results.  Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission (SEC).

Federated will host an earnings conference call at 9 a.m. Eastern on April 27, 2018.  Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time.  The call may also be accessed online in real time via the About Federated section of FederatedInvestors.com.  A replay will be available from approximately 12:30 p.m. Eastern April 27, 2018 until May 4, 2018 by calling 877-481-4010 (domestic) or 919-882-2331 (international) and entering access code 27609.  An online replay will be available via FederatedInvestors.com for one year.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $392.2 billion in assets as of March 31, 2018.  With 108 funds and a variety of separately managed account options, Federated provides comprehensive investment management to more than 8,500 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers.  Federated ranks in the top 6 percent of equity fund managers in the industry, the top 8 percent of money market fund managers and the top 10 percent of fixed-income fund managers1.  Federated also ranks as the fifth-largest SMA manager2.  For more information, visit FederatedInvestors.com.

###

1) Strategic Insight, March 31, 2018.  Based on assets under management in open-end funds.
2) Money Management Institute/Dover Financial Research, Q4 2017.
Federated Securities Corp. is distributor of the Federated funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling and Federated MDTA LLC, each a registered investment adviser.

Certain statements in this press release, such as those related to the level of fee waivers and expenses incurred by the company, performance, investor preferences and demand, asset flows and mix, customer relationships and expenses 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, sustain product demand, and 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 of such statements in the future.

 

 

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)








Quarter Ended

% Change
Q1 2017 to
Q1 2018


Quarter Ended

% Change
Q4 2017 to
Q1 2018


March 31, 2018

March 31, 2017


Dec. 31, 2017

Revenue







Investment advisory fees, net

$

174,266


$

181,318


(4)

%


$

186,145


(6)

%

Administrative service fees, net—affiliates

49,023


46,701


5



49,051


0


Other service fees, net

40,563


45,482


(11)



43,116


(6)


     Total Revenue

263,852


273,501


(4)



278,312


(5)









Operating Expenses







Compensation and related

78,374


73,402


7



71,990


9


Distribution

72,498


90,359


(20)



80,408


(10)


Professional service fees

9,631


7,078


36



8,922


8


Systems and communications

8,433


8,225


3



7,713


9


Office and occupancy

7,541


7,352


3



7,453


1


Advertising and promotional

3,228


2,955


9



2,771


16


Travel and related

2,821


2,934


(4)



3,496


(19)


Other

1,655


3,423


(52)



4,725


(65)


     Total Operating Expenses

184,181


195,728


(6)



187,478


(2)


Operating Income

79,671


77,773


2



90,834


(12)









Nonoperating Income (Expenses)







Investment income, net

718


4,214


(83)



3,601


(80)


Debt expense

(1,330)


(1,102)


21



(1,239)


7


Other, net

(143)


0


NM



(9)


NM


Total Nonoperating (Expenses) Income, net

(755)


3,112


(124)



2,353


(132)


Income before income taxes

78,916


80,885


(2)



93,187


(15)


Income tax provision (benefit)1,2

18,910


29,858


(37)



(38,787)


149


Net income including the noncontrolling interests in subsidiaries

60,006


51,027


18



131,974


(55)


     Less: Net (loss) income attributable to the noncontrolling      
     interests in subsidiaries

(325)


1,386


(123)



164


(298)


Net Income

$

60,331


$

49,641


22

%


$

131,810


(54)

%








Amounts Attributable to Federated Investors, Inc.







     Earnings Per Share3,4







          Basic and diluted

$

0.60


$

0.49


22

%


$

1.31


(54)

%

Weighted-average shares outstanding







     Basic

97,187


97,863




97,084



     Diluted

97,189


97,864




97,086



Dividends declared per share

$

0.25


$

0.25




$

0.25





1)

Dec. 31, 2017 includes a reduction of $70.4 million resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.

2)

March 31, 2018 reflects a lower effective tax rate due to the enactment of the Tax Act.

3)

Dec. 31, 2017 includes an increase of $0.70 per share resulting from the revaluation of the net deferred tax liability due to the enactment of the Tax Act.

4)

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $2.4 million, $2.0 million and $5.0 million available to unvested restricted shareholders for the quarterly periods ended March 31, 2018, March 31, 2017 and Dec. 31, 2017, respectively, was excluded from the computation of earnings per share.

 

 

Unaudited Condensed Consolidated Balance Sheets



(in thousands)

March 31, 2018

Dec. 31, 2017

Assets



  Cash and other investments

$

377,556


$

369,538


  Other current assets

63,457


67,736


  Intangible assets, net, including goodwill

736,772


736,915


  Other long-term assets

57,542


57,221


  Total Assets

$

1,235,327


$

1,231,410





Liabilities, Redeemable Noncontrolling Interests and Equity



  Current liabilities

$

99,635


$

128,849


  Long-term debt

165,000


170,000


  Other long-term liabilities

142,418


141,183


  Redeemable noncontrolling interests

28,654


30,163


  Equity excluding treasury stock

1,071,406


1,039,947


  Treasury stock

(271,786)


(278,732)


  Total Liabilities, Redeemable Noncontrolling Interests and Equity

$

1,235,327


$

1,231,410


 

 

Unaudited Changes in Equity and Fixed-Income Fund and Separate Account Assets

(in millions)



Quarter Ended


March 31, 2018

Dec. 31, 2017

March 31, 2017

Equity funds




Beginning assets

$

38,101


$

37,741


$

36,231


     Sales

1,849


1,375


1,703


     Redemptions

(3,059)


(2,090)


(3,047)


     Net redemptions

(1,210)


(715)


(1,344)


     Net exchanges

(128)


34


60


     Acquisition-related

0


0


287


     Market gains and losses1

(342)


1,041


1,925


Ending assets

$

36,421


$

38,101


$

37,159






Equity separate accounts2




Beginning assets

$

30,038


$

29,314


$

26,150


     Sales3

1,514


1,257


1,912


     Redemptions3

(2,493)


(1,445)


(1,994)


     Net redemptions3

(979)


(188)


(82)


     Net exchanges

3


0


0


     Market gains and losses1

(1,516)


912


1,543


Ending assets

$

27,546


$

30,038


$

27,611






Total equity2




Beginning assets

$

68,139


$

67,055


$

62,381


     Sales3

3,363


2,632


3,615


     Redemptions3

(5,552)


(3,535)


(5,041)


     Net redemptions3

(2,189)


(903)


(1,426)


     Net exchanges

(125)


34


60


     Acquisition-related

0


0


287


     Market gains and losses1

(1,858)


1,953


3,468


Ending assets

$

63,967


$

68,139


$

64,770






Fixed-income funds




Beginning assets

$

41,200


$

41,214


$

39,434


     Sales

4,107


3,675


3,986


     Redemptions

(4,575)


(3,740)


(3,831)


     Net (redemptions) sales

(468)


(65)


155


     Net exchanges

127


(50)


(24)


     Acquisition-related

0


0


148


     Market gains and losses1

(281)


101


526


Ending assets

$

40,578


$

41,200


$

40,239






Fixed-income separate accounts2




Beginning assets

$

23,017


$

11,558


$

11,880


     Sales3

800


12,096


214


     Redemptions3

(2,027)


(892)


(695)


     Net (redemptions) sales3

(1,227)


11,204


(481)


     Net exchanges

0


0


(56)


     Market gains and losses1

(114)


255


198


Ending assets

$

21,676


$

23,017


$

11,541






Total fixed income2




Beginning assets

$

64,217


$

52,772


$

51,314


     Sales3

4,907


15,771


4,200


     Redemptions3

(6,602)


(4,632)


(4,526)


     Net (redemptions) sales3

(1,695)


11,139


(326)


     Net exchanges

127


(50)


(80)


     Acquisition-related

0


0


148


     Market gains and losses1

(395)


356


724


Ending assets

$

62,254


$

64,217


$

51,780




1)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.

2)

Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.

3)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

 

 

Unaudited Total Changes in Equity and Fixed-Income Assets

(in millions)



Quarter Ended


March 31, 2018

Dec. 31, 2017

March 31, 2017





Funds




Beginning assets

$

79,301


$

78,955


$

75,665


     Sales

5,956


5,050


5,689


     Redemptions

(7,634)


(5,830)


(6,878)


     Net redemptions

(1,678)


(780)


(1,189)


     Net exchanges

(1)


(16)


36


     Acquisition-related

0


0


435


     Market gains and losses1

(623)


1,142


2,451


Ending assets

$

76,999


$

79,301


$

77,398






Separate accounts2




Beginning assets

$

53,055


$

40,872


$

38,030


     Sales3

2,314


13,353


2,126


     Redemptions3

(4,520)


(2,337)


(2,689)


     Net (redemptions) sales3

(2,206)


11,016


(563)


     Net exchanges

3


0


(56)


     Market gains and losses1

(1,630)


1,167


1,741


Ending assets

$

49,222


$

53,055


$

39,152






Total assets2




Beginning assets

$

132,356


$

119,827


$

113,695


     Sales3

8,270


18,403


7,815


     Redemptions3

(12,154)


(8,167)


(9,567)


     Net (redemptions) sales3

(3,884)


10,236


(1,752)


     Net exchanges

2


(16)


(20)


     Acquisition-related

0


0


435


     Market gains and losses1

(2,253)


2,309


4,192


Ending assets

$

126,221


$

132,356


$

116,550




1)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.

2)

Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.

3)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

 

 

Unaudited Managed Assets

(in millions)

March 31, 2018

Dec. 31, 2017

Sept. 30, 2017

June 30, 2017

March 31, 2017

By Asset Class






Equity

$

63,967


$

68,139


$

67,055


$

65,787


$

64,770


Fixed-income

62,254


64,217


52,772


52,507


51,780


Money market

265,944


265,214


243,840


242,096


245,198


Total Managed Assets

$

392,165


$

397,570


$

363,667


$

360,390


$

361,748


By Product Type






Funds:






Equity

$

36,421


$

38,101


$

37,741


$

37,225


$

37,159


Fixed-income

40,578


41,200


41,214


40,880


40,239


Money market

182,437


185,536


177,865


173,338


175,232


Total Fund Assets

$

259,436


$

264,837


$

256,820


$

251,443


$

252,630


Separate Accounts:






Equity

$

27,546


$

30,038


$

29,314


$

28,562


$

27,611


Fixed-income

21,676


23,017


11,558


11,627


11,541


Money market

83,507


79,678


65,975


68,758


69,966


Total Separate Account Assets

$

132,729


$

132,733


$

106,847


$

108,947


$

109,118


Total Managed Assets

$

392,165


$

397,570


$

363,667


$

360,390


$

361,748



Unaudited Average Managed Assets

Quarter Ended

(in millions)

March 31, 2018

Dec. 31, 2017

Sept. 30, 2017

June 30, 2017

March 31, 2017

By Asset Class






Equity

$

66,833


$

67,466


$

66,127


$

65,399


$

63,780


Fixed-income

63,594


64,351


52,631


52,291


51,802


Money market

267,546


250,197


241,749


242,298


247,591


Total Avg. Managed Assets

$

397,973


$

382,014


$

360,507


$

359,988


$

363,173


By Product Type






Funds:






Equity

$

37,728


$

37,926


$

37,301


$

37,325


$

36,957


Fixed-income

41,078


41,240


40,967


40,670


40,086


Money market

181,856


176,918


174,358


172,626


182,418


Total Avg. Fund Assets

$

260,662


$

256,084


$

252,626


$

250,621


$

259,461


Separate Accounts:






Equity

$

29,105


$

29,540


$

28,826


$

28,074


$

26,823


Fixed-income

22,516


23,111


11,664


11,621


11,716


Money market

85,690


73,279


67,391


69,672


65,173


Total Avg. Separate Account Assets

$

137,311


$

125,930


$

107,881


$

109,367


$

103,712


Total Avg. Managed Assets

$

397,973


$

382,014


$

360,507


$

359,988


$

363,173


 

 

Cision View original content:http://www.prnewswire.com/news-releases/federated-investors-inc-reports-first-quarter-2018-earnings-300637653.html

SOURCE Federated Investors, Inc.