FII
$30.92
Federated Investors
$.07
.23%
Earnings Details
3rd Quarter September 2017
Thursday, October 26, 2017 4:17:00 PM
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Summary

Federated Investors (FII) Recent Earnings

Federated Investors (FII) reported 3rd Quarter September 2017 earnings of $0.56 per share on revenue of $278.3 million. The consensus earnings estimate was $0.53 per share on revenue of $277.2 million. Revenue fell 5.5% 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
$0.56
Earnings Whisper
-
Consensus Estimate
$0.53
Reported Revenue
$278.3 Mil
Revenue Estimate
$277.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Federated Investors, Inc. Reports Third Quarter 2017 Earnings

Federated Investors, Inc. (FII), one of the nation’s largest investment managers, today reported earnings per diluted share (EPS) of $0.56 for Q3 2017, compared to $0.54 for the same quarter last year on net income of $56.4 million for Q3 2017, compared to $54.9 million for Q3 2016. Federated reported YTD 2017 EPS of $1.57, compared to $1.48 for the same period in 2016 on YTD 2017 net income of $159.5 million compared to $153.1 million for the same period last year.

Federated’s total managed assets were $363.7 billion at Sept. 30, 2017, down $0.6 billion from $364.3 billion at Sept. 30, 2016 and up $3.3 billion or 1 percent from $360.4 billion at June 30, 2017. Lower money market assets were partially offset by higher equity and fixed-income assets at the end of Q3 2017 compared to the end of Q3 2016. Average managed assets for Q3 2017 were $360.5 billion, down $4.9 billion or 1 percent from $365.4 billion reported for Q3 2016 and up $0.5 billion from $360.0 billion reported for Q2 2017.

"At the end of the third quarter, 85 percent of Federated’s rated domestic bond-fund assets had outperformed their category averages on a one-year basis," said J. Christopher Donahue, president and chief executive officer. "Federated continued to see positive flows in our flagship multisector bond fund, the $7.5 billion Federated Total Return Bond Fund, a strategy that incorporates our firm’s highest-conviction ideas about different fixed-income asset classes."

Federated’s board of directors declared a dividend of $0.25 per share. The dividend is payable on Nov. 15, 2017 to shareholders of record as of Nov. 8, 2017. During Q3 2017, Federated purchased 551,224 shares of Federated class B common stock for $14.1 million.

Federated’s equity assets were a record $67.1 billion at Sept. 30, 2017, up $3.0 billion or 5 percent from $64.1 billion at Sept. 30, 2016 and up $1.3 billion or 2 percent from $65.8 billion at June 30, 2017. Assets in Federated’s domestic and international Strategic Value Dividend strategies were a record $40.6 billion at Sept. 30, 2017, up $2.3 billion or 6 percent from $38.3 billion at Sept. 30, 2016 and up $0.6 billion or 2 percent from $40.0 billion at June 30, 2017. Top-selling equity funds during Q3 2017 on a net basis were led by Federated MDT Small Cap Core Fund, Federated MDT Small Cap Growth Fund, Federated International Leaders Fund and Federated Kaufmann Small Cap Fund.

Federated’s fixed-income assets were $52.8 billion at Sept. 30, 2017, up $1.0 billion or 2 percent from $51.8 billion at Sept. 30, 2016 and up $0.3 billion or 1 percent from $52.5 billion at June 30, 2017. Top-selling fixed-income funds during Q3 2017 on a net basis included Federated Total Return Bond Fund, Federated Institutional High Yield Bond Fund and various short-duration strategies.

Money market assets were $243.8 billion at Sept. 30, 2017, down $4.6 billion or 2 percent from $248.4 billion at Sept. 30, 2016 and up $1.7 billion or 1 percent from $242.1 billion at June 30, 2017. Money market fund assets were $177.9 billion at Sept. 30, 2017, down $31.5 billion or 15 percent from $209.4 billion at Sept. 30, 2016 and up $4.6 billion or 3 percent from $173.3 billion at June 30, 2017. Since Sept. 30, 2016, approximately $21 billion in money market assets have transitioned from Federated funds to Federated separate accounts. Federated’s money market separate account assets were $66.0 billion at Sept. 30, 2017, up $27.0 billion or 69 percent from $39.0 billion at Sept. 30, 2016 and down $2.8 billion or 4 percent from $68.8 billion at June 30, 2017.

Financial Summary

Q3 2017 vs. Q3 2016

Revenue decreased by $16.3 million or 6 percent primarily due to lower average money market assets and a decrease in revenue resulting from a change in a customer relationship. The decrease in revenue 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) and an increase in revenue from higher average equity and fixed-income assets.

During Q3 2017, 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 $16.4 million or 8 percent primarily due to a decrease in distribution expenses related to lower average money market fund assets and a change in a customer relationship, partially offset by an increase in distribution expenses related to a decrease in voluntary yield-related fee waivers. The decrease in operating expenses is also attributable to a decrease in compensation and related expenses resulting from lower incentive compensation.

Q3 2017 vs. Q2 2017

Revenue increased $5.5 million or 2 percent primarily due to having one more day in Q3 2017 vs. Q2 2017 and an increase in revenue from higher average equity assets.

YTD 2017 vs. YTD 2016

Revenue decreased by $28.9 million or 3 percent primarily due to a decrease in revenue from lower average money market assets and a decrease in revenue resulting from a change in a customer relationship. The decrease in revenue was partially offset by a decrease in voluntary yield-related fee waivers and an increase in revenue from higher average equity and fixed-income assets.

For the first nine months of 2017, Federated derived 59 percent of its revenue from equity and fixed-income assets (42 percent from equity assets and 17 percent from fixed-income assets) and 41 percent from money market assets.

Operating expenses decreased by $28.7 million or 5 percent primarily due to a decrease in distribution expenses related to lower average money market fund assets and a change in a customer relationship, partially offset by an increase in distribution expenses related to a decrease in voluntary yield-related fee waivers. The decrease in operating expenses is also attributable to a decrease in compensation and related expenses resulting from lower incentive compensation.

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 Oct. 27, 2017. 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 Oct. 27, 2017 until Nov. 3, 2017 by calling 877-481-4010 (domestic) or 919-882-2331 (international) and entering access code 20651. 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 $363.7 billion in assets as of Sept. 30, 2017. With 119 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 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 11 percent of fixed-income fund managers1. Federated also ranks as the fifth-largest SMA manager2. For more information, visit FederatedInvestors.com.

###

1) Strategic Insight, Sept. 30, 2017. Based on assets under management in open-end funds. 2) Money Management Institute/Dover Financial Research, Q2 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, fee arrangements with customers 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
Quarter Ended % Change
Q3 2016 to
Q2 2017 to
Q3 2017
Q3 2017
Sept. 30, 2017Sept. 30, 2016
June 30, 2017
Revenue
Investment advisory fees, net
$
184,886
$
197,253
(6)
%
$
179,322
3
%
Administrative service fees, net--affiliates
47,461
53,577
(11)
45,601
4
Other service fees, net
45,560
42,734
7
47,442
(4)
Other, net
408
1,056
(61)
431
(5)
Total Revenue
278,315
294,620
(6)
272,796
2
Operating Expenses
Distribution
84,838
98,740
(14)
87,174
(3)
Compensation and related
72,454
75,731
(4)
71,370
2
Systems and communications
7,992
7,763
3
8,041
(1)
Office and occupancy
7,293
6,660
10
7,161
2
Professional service fees
6,563
7,360
(11)
5,728
15
Travel and related
3,258
3,165
3
2,958
10
Advertising and promotional
2,345
3,371
(30)
3,095
(24)
Other
4,882
3,194
53
3,058
60
Total Operating Expenses
189,625
205,984
(8)
188,585
1
Operating Income
88,690
88,636
0
84,211
5
Nonoperating Income (Expenses)
Investment income, net
3,556
3,889
(9)
3,937
(10)
Debt expense
(1,250)
(1,039)
20
(1,182)
6
Other, net
1
19
(95)
(33)
103
Total Nonoperating Income, net
2,307
2,869
(20)
2,722
(15)
Income before income taxes
90,997
91,505
(1)
86,933
5
Income tax provision
33,756
32,597
4
32,274
5
Net income including the noncontrolling interests in subsidiaries
57,241
58,908
(3)
54,659
5
Less: Net income attributable to the noncontrolling interests in subsidiaries 802
3,983
(80)
1,208
(34)
Net Income
$
56,439
$
54,925
3
%
$
53,451
6
%
Amounts Attributable to Federated Investors, Inc.
Earnings Per Share1
Basic and diluted
$
0.56
$
0.54
4
%
$
0.53
6
%
Weighted-average shares outstanding
Basic
97,128
98,805
97,581
Diluted
97,129
98,806
97,582
Dividends declared per share
$
0.25
$
0.25
$
0.25
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 earnings per share under the "two-class method." As such, total net income of $2.2 million, $2.0 million and $2.2 million available to unvested restricted shareholders for the quarterly periods ended Sept. 30, 2017, Sept. 30, 2016 and June 30, 2017, respectively, was excluded from the computation of earnings per share.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Nine Months Ended
Sept. 30, 2017 Sept. 30, 2016 % Change
Revenue
Investment advisory fees, net
$
545,525
$
571,762
(5)
%
Administrative service fees, net--affiliates
139,763
160,181
(13)
Other service fees, net
138,054
118,575
16
Other, net
1,270
2,949
(57)
Total Revenue
824,612
853,467
(3)
Operating Expenses
Distribution
262,371
281,862
(7)
Compensation and related
217,226
227,726
(5)
Systems and communications
24,258
23,395
4
Office and occupancy
21,805
20,223
8
Professional service fees
18,971
19,886
(5)
Travel and related
9,150
9,727
(6)
Advertising and promotional
8,396
10,751
(22)
Other
11,761
9,036
30
Total Operating Expenses
573,938
602,606
(5)
Operating Income
250,674
250,861
0
Nonoperating Income (Expenses)
Investment income, net
11,707
7,657
53
Debt expense
(3,534)
(3,118)
13
Other, net
(32)
13
(346)
Total Nonoperating Income, net
8,141
4,552
79
Income before income taxes
258,815
255,413
1
Income tax provision
95,888
91,128
5
Net income including the noncontrolling interests in subsidiaries
162,927
164,285
(1)
Less: Net income attributable to the noncontrolling interests in subsidiaries 3,396
11,208
(70)
Net Income
$
159,531
$
153,077
4
%
Amounts Attributable to Federated Investors, Inc.
Earnings Per Share1
Basic and diluted
$
1.57
$
1.48
6
%
Weighted-average shares outstanding
Basic
97,521
99,397
Diluted
97,522
99,398
Dividends declared per share
$
0.75
$
0.75
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 earnings per share under the "two-class method." As such, total net income of $6.3 million and $6.0 million available to unvested restricted shareholders for the nine months ended Sept. 30, 2017 and Sept. 30, 2016, respectively, was excluded from the computation of earnings per share.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
Sept. 30, 2017
Dec. 31, 2016
Assets
Cash and other investments
$
328,271
$
301,149
Other current assets
57,418
58,611
Intangible assets, net, including goodwill
737,059
733,137
Other long-term assets
58,760
62,210
Total Assets
$
1,181,508
$
1,155,107
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities
$
115,814
$
162,538
Long-term debt
175,000
165,750
Other long-term liabilities
207,906
199,673
Redeemable noncontrolling interests
28,991
31,362
Equity excluding treasury stock
937,279
851,166
Treasury stock
(283,482)
(255,382)
Total Liabilities, Redeemable Noncontrolling Interests and Equity $
1,181,508
$
1,155,107
Unaudited Changes in Equity and Fixed-Income Fund and Separate Account Assets
(in millions)
Quarter Ended
Nine Months Ended
Sept. 30, 2017 June 30, 2017Sept. 30, 2016
Sept. 30, 2017 Sept. 30, 2016
Equity funds
Beginning assets
$
37,225
$
37,159
$
37,076
$
36,231
$
34,125
Sales
1,275
1,411
3,011
4,389
9,567
Redemptions
(2,058)
(2,394)
(2,883)
(7,499)
(7,697)
Net (redemptions) sales
(783)
(983)
128
(3,110)
1,870
Net exchanges
(58)
(74)
(26)
(72)
(79)
Acquisition-related
0
0
0
287
0
Market gains and losses1
1,357
1,123
599
4,405
1,861
Ending assets
$
37,741
$
37,225
$
37,777
$
37,741
$
37,777
Equity separate accounts2
Beginning assets
$
28,562
$
27,611
$
24,785
$
26,150
$
19,431
Sales3
1,426
1,852
2,968
5,190
8,474
Redemptions3
(1,343)
(1,835)
(1,262)
(5,172)
(3,644)
Net sales3
83
17
1,706
18
4,830
Net exchanges
0
0
1
0
1
Market gains and losses1
669
934
(155)
3,146
2,075
Ending assets
$
29,314
$
28,562
$
26,337
$
29,314
$
26,337
Total equity2
Beginning assets
$
65,787
$
64,770
$
61,861
$
62,381
$
53,556
Sales3
2,701
3,263
5,979
9,579
18,041
Redemptions3
(3,401)
(4,229)
(4,145)
(12,671)
(11,341)
Net (redemptions) sales3
(700)
(966)
1,834
(3,092)
6,700
Net exchanges
(58)
(74)
(25)
(72)
(78)
Acquisition-related
0
0
0
287
0
Market gains and losses1
2,026
2,057
444
7,551
3,936
Ending assets
$
67,055
$
65,787
$
64,114
$
67,055
$
64,114
Fixed-income funds
Beginning assets
$
40,880
$
40,239
$
38,611
$
39,434
$
37,989
Sales
3,424
3,729
3,641
11,139
10,442
Redemptions
(3,508)
(3,591)
(2,971)
(10,930)
(10,415)
Net (redemptions) sales
(84)
138
670
209
27
Net exchanges
53
10
19
39
(12)
Acquisition-related
0
0
0
148
0
Market gains and losses1
365
493
496
1,384
1,792
Ending assets
$
41,214
$
40,880
$
39,796
$
41,214
$
39,796
Fixed-income separate accounts2
Beginning assets
$
11,627
$
11,541
$
11,714
$
11,880
$
13,130
Sales3
163
277
360
654
704
Redemptions3
(389)
(401)
(284)
(1,485)
(2,717)
Net (redemptions) sales3
(226)
(124)
76
(831)
(2,013)
Net exchanges
0
0
0
(56)
0
Market gains and losses1
157
210
258
565
931
Ending assets
$
11,558
$
11,627
$
12,048
$
11,558
$
12,048
Total fixed income2
Beginning assets
$
52,507
$
51,780
$
50,325
$
51,314
$
51,119
Sales3
3,587
4,006
4,001
11,793
11,146
Redemptions3
(3,897)
(3,992)
(3,255)
(12,415)
(13,132)
Net (redemptions) sales3
(310)
14
746
(622)
(1,986)
Net exchanges
53
10
19
(17)
(12)
Acquisition-related
0
0
0
148
0
Market gains and losses1
522
703
754
1,949
2,723
Ending assets
$
52,772
$
52,507
$
51,844
$
52,772
$
51,844
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
Nine Months Ended
Sept. 30, 2017June 30, 2017 Sept. 30, 2016 Sept. 30, 2017Sept. 30, 2016
Funds
Beginning assets
$
78,105
$
77,398
$
75,687
$
75,665
$
72,114
Sales
4,699
5,140
6,652
15,528
20,009
Redemptions
(5,566)
(5,985)
(5,854)
(18,429)
(18,112)
Net (redemptions) sales
(867)
(845)
798
(2,901)
1,897
Net exchanges
(5)
(64)
(7)
(33)
(91)
Acquisition-related
0
0
0
435
0
Market gains and losses1 1,722
1,616
1,095
5,789
3,653
Ending assets
$
78,955
$
78,105
$
77,573
$
78,955
$
77,573
Separate accounts2
Beginning assets
$
40,189
$
39,152
$
36,499
$
38,030
$
32,561
Sales3
1,589
2,129
3,328
5,844
9,178
Redemptions3
(1,732)
(2,236)
(1,546)
(6,657)
(6,361)
Net (redemptions) sales3 (143)
(107)
1,782
(813)
2,817
Net exchanges
0
0
1
(56)
1
Market gains and losses1 826
1,144
103
3,711
3,006
Ending assets
$
40,872
$
40,189
$
38,385
$
40,872
$
38,385
Total assets2
Beginning assets
$
118,294
$
116,550
$
112,186
$
113,695
$
104,675
Sales3
6,288
7,269
9,980
21,372
29,187
Redemptions3
(7,298)
(8,221)
(7,400)
(25,086)
(24,473)
Net (redemptions) sales3 (1,010)
(952)
2,580
(3,714)
4,714
Net exchanges
(5)
(64)
(6)
(89)
(90)
Acquisition-related
0
0
0
435
0
Market gains and losses1 2,548
2,760
1,198
9,500
6,659
Ending assets
$
119,827
$
118,294
$
115,958
$
119,827
$
115,958
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
Sept. 30, 2017June 30, 2017 March 31, 2017Dec. 31, 2016 Sept. 30, 2016
(in millions)
By Asset Class
Equity
$
67,055
$
65,787
$
64,770
$
62,381
$
64,114
Fixed-income
52,772
52,507
51,780
51,314
51,844
Money market
243,840
242,096
245,198
252,213
248,366
Total Managed Assets
$
363,667
$
360,390
$
361,748
$
365,908
$
364,324
By Product Type
Funds:
Equity
$
37,741
$
37,225
$
37,159
$
36,231
$
37,777
Fixed-income
41,214
40,880
40,239
39,434
39,796
Money market
177,865
173,338
175,232
206,411
209,382
Total Fund Assets
$
256,820
$
251,443
$
252,630
$
282,076
$
286,955
Separate Accounts:
Equity
$
29,314
$
28,562
$
27,611
$
26,150
$
26,337
Fixed-income
11,558
11,627
11,541
11,880
12,048
Money market
65,975
68,758
69,966
45,802
38,984
Total Separate Account Assets
$
106,847
$
108,947
$
109,118
$
83,832
$
77,369
Total Managed Assets
$
363,667
$
360,390
$
361,748
$
365,908
$
364,324
Unaudited Average Managed Assets
Quarter Ended
(in millions)
Sept. 30, 2017June 30, 2017 March 31, 2017Dec. 31, 2016 Sept. 30, 2016
By Asset Class
Equity
$
66,127
$
65,399
$
63,780
$
62,575
$
63,682
Fixed-income
52,631
52,291
51,802
51,526
51,446
Money market
241,749
242,298
247,591
244,197
250,292
Total Avg. Managed Assets
$
360,507
$
359,988
$
363,173
$
358,298
$
365,420
By Product Type
Funds:
Equity
$
37,301
$
37,325
$
36,957
$
36,667
$
37,902
Fixed-income
40,967
40,670
40,086
39,571
39,527
Money market
174,358
172,626
182,418
203,474
213,078
Total Avg. Fund Assets
$
252,626
$
250,621
$
259,461
$
279,712
$
290,507
Separate Accounts:
Equity
$
28,826
$
28,074
$
26,823
$
25,908
$
25,780
Fixed-income
11,664
11,621
11,716
11,955
11,919
Money market
67,391
69,672
65,173
40,723
37,214
Total Avg. Separate Account Assets $
107,881
$
109,367
$
103,712
$
78,586
$
74,913
Total Avg. Managed Assets
$
360,507
$
359,988
$
363,173
$
358,298
$
365,420
Unaudited Average Managed Assets
Nine Months Ended
(in millions)
Sept. 30, 2017 Sept. 30, 2016
By Asset Class
Equity
$
65,102
$
58,383
Fixed-income
52,242
51,039
Money market
243,879
255,063
Total Avg. Managed Assets
$
361,223
$
364,485
By Product Type
Funds:
Equity
$
37,194
$
35,572
Fixed-income
40,575
38,505
Money market
176,467
217,384
Total Avg. Fund Assets
$
254,236
$
291,461
Separate Accounts:
Equity
$
27,908
$
22,811
Fixed-income
11,667
12,534
Money market
67,412
37,679
Total Avg. Separate Account Assets
$
106,987
$
73,024
Total Avg. Managed Assets
$
361,223
$
364,485

View original content:http://www.prnewswire.com/news-releases/federated-investors-inc-reports-third-quarter-2017-earnings-300544445.html

SOURCE Federated Investors, Inc.

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