Invesco Reports Results for the Three Months Ended March 31, 2020

ATLANTA, April 23, 2020 /PRNewswire/ -- Invesco Ltd. (NYSE: IVZ) today reported financial results for the three months ended March 31, 2020.

Update from Marty Flanagan, President and CEO

"The spread of the coronavirus is presenting unprecedented challenges to our industry and the markets. At Invesco, we are intensely focused on protecting our employees, while continuing to robustly engage with and serve our clients and running a disciplined business in a turbulent operating environment.

"The resilience of our employees, the strength of our client relationships and the breadth of our capabilities were reflected in stable total flows during the quarter, with net outflows of $2.1 billion. Despite the extreme market volatility, total gross long-term inflows increased nearly 40% versus the prior quarter to a record $84.7 billion, resulting in strong net flows into a number of diverse areas, including institutional, our China JV, money market funds, EMEA ETFs and global fixed income. Long-term investment performance during the quarter remained very strong in capabilities with high demand, including international equities, emerging market equities and a broad range of fixed income.

"Our key priority in the current turbulent operating environment is supporting the long-term financial strength of the firm to ensure we can continue to deliver for our employees, clients and shareholders.  We are leveraging our experience in capturing expense savings to create further operating flexibility and build our liquidity. This will help us navigate the uncertain environment ahead while positioning us for long-term growth as the current crisis eases and markets begin to normalize.

"In addition to tightly managing expenses and taking steps to further strengthen our balance sheet, we are reducing our quarterly common dividend from $0.31 to $0.155 per share, beginning with the dividend that will be paid in the second quarter.  We believe these steps will provide us with enhanced liquidity to manage through the uncertainty in the markets, ensure ongoing dividend stability, help strengthen our balance sheet over time and preserve optionality for investing in future growth."

Managing our business and meeting client needs through COVID-19

Invesco is committed to helping our employees, our clients and our communities navigate the challenges presented by the spread of COVID-19. The primary focus of our efforts is to ensure the health and safety of our employees while preserving our ability to serve clients and manage assets in a highly dynamic market environment.

As always, we are committed to helping our clients achieve their investment objectives through disciplined long-term investing. To this end, we have intensified our efforts to support clients by proactively engaging with them and providing thought leadership and other value-added services to help them navigate the volatile markets. We believe our client-centric approach in this time of stress will have a lasting impact and allow us and our clients to emerge from this crisis stronger.

As a global firm, we've been responding to the coronavirus since December, when it was first reported in Asia Pacific. Our response in the region included the relocation of a regional trading center, restrictions on employee travel and remote working for the vast majority of our Asia-Pac based employees.

As the virus spread to other parts of the globe, cross-functional teams in each region (Americas, Asia Pacific and EMEA) have monitored the situation closely, leveraging our early experience in Asia Pacific to enhance our business continuity planning and execution. These teams - which include representatives from Distribution, Portfolio Management, Trading, Technology, Operations, Human Resources, Business Continuity, Compliance and other areas - with guidance from the Centers for Disease Control, World Health Organization and local health officials - have been taking the necessary steps to ensure our preparedness during a highly fluid situation.

We understand the importance of managing our clients' assets, particularly during times of market volatility. To help ensure we can continue to meet client needs, nearly all our global employees are working remotely, with small select teams working at alternate sites or operating in split shifts to mitigate the risks associated with the virus. Our portfolio managers, research analysts and traders are successfully working remotely or in secure locations with access to all systems necessary to do their jobs and an ability to connect with their teams in managing client assets. Additionally, the client reporting and operational teams that provide information on client portfolios are operating effectively in a work from home status, as are other necessary control and support groups, including our compliance teams. Our teams are in constant communication to ensure timely coordination and early identification of issues. This thoughtful, coordinated approach helps ensure our ability to continue meeting client needs and running our business.

As a result of the recent market reaction to the COVID-19 crisis, AUM declined during the first quarter, but remain above $1 trillion. The decline in AUM adversely impacted our revenues in the first quarter, and we expect it will continue pressuring revenues in the near term.

During this period of market turbulence and uncertainty, we believe it is imperative to maintain financial flexibility. We continue to manage our expense base to align with the current lower revenue environment through reduced variable compensation and discretionary spend. We also plan to redeem up to $200 million of seed capital investments where appropriate from certain of our investment products in the near term. And we will reduce our common dividend to $0.155 per common share beginning with the dividend that will be paid in the second quarter. These actions, and others focused on preservation of capital, seek to help us build liquidity through the present uncertain environment.  Combined, these steps will enable us to further strengthen our balance sheet while preserving our ability to invest in future growth for the benefit of our business and our shareholders.

Net flows: Total net outflows were $2.1 billion and long-term net outflows were $19.1 billion for the first quarter. Long-term net outflows of $30.3 billion in retail AUM were partially offset by inflows of $11.2 billion in institutional AUM. We saw positive flows of $26.3 billion into institutional money market funds during the quarter as investors shifted into lower risk assets, which has contributed to a shift in the mix of our AUM and negatively impacted our net revenue yield for the quarter. Net market losses and foreign exchange rate movements led to decreases of $162.7 billion and $9.1 billion in AUM during the first quarter, respectively.  Average AUM decreased 2.0% during the first quarter to $1,176.3 billion, compared to $1,200.6 billion for the fourth quarter, as a result of the market volatility in March 2020 related to the COVID-19 pandemic.

First Quarter Highlights:

Operating revenues and expenses: Operating revenues and expenses decreased as a result of lower average AUM due to market declines and volatility experienced in March 2020 related to the COVID-19 pandemic.

Revenues were lower by $143.9 million, which includes a decrease of $85.9 million in investment management fees and a decrease of $45.0 million in performance fees. The decline in investment management fees was driven by lower average AUM.  Performance fees, primarily from real estate products, were $4.8 million in the first quarter.

Expenses decreased $146.3 million, including a reduction of $61.0 million in transaction, integration and restructuring expenses related to decreased integration activities related to the OppenheimerFunds acquisition. Employee compensation expense was also down $38.2 million due primarily to fair value decreases on deferred compensation liabilities, partially offset by a seasonal increase in payroll tax and employee benefit costs. General and administrative costs have declined in the first quarter by $15.4 million, which includes decreased consulting and professional services costs and reduced travel expense linked to the COVID-19 pandemic.

Non-operating income and expenses:  Equity in earnings of unconsolidated affiliates was $16.9 million, earned primarily from our joint venture in China. Other gains and losses, net was a loss of $106.5 million, which includes $67.7 million of losses related to market value changes on deferred compensation investments and $45.6 million in net investment losses on seed investments. Other income/(expense) of CIP, net was a loss of $20.1 million comprised of market-driven net losses of investments held by consolidated investment products (CIP) and net interest income of CIP.

Diluted earnings per common share:  Diluted earnings per common share decreased 53.8% to $0.18.

Update on OppenheimerFunds acquisition-related matter: In the first quarter, Invesco recorded a liability of $387.8 million related to the previously disclosed Invesco Oppenheimer SteelPath MLP Funds matter. The pre-acquisition portion of the liability was estimated to be $380.5 million, which has been recorded as an adjustment to goodwill and deferred tax assets on the company's balance sheet as of March 31. The post-acquisition portion of the liability and related costs was $7.3 million and was included in transaction, integration and restructuring expenses. While not included in the estimates above, we believe a significant amount of any costs incurred related to this matter could ultimately be covered by applicable insurance and indemnification. The company intends to pursue all reasonable measures to mitigate its potential exposure for such losses. The estimate excludes other costs related to the matter, such as the costs of remediation or the costs of communicating with fund shareholders, which have not yet been determined.

Capital Management:

Cash and cash equivalents:  $940.5 million ($1,049.0 million at December 31, 2019).

Long-term debt:  $2,588.8 million including the credit facility balance of $508.0 million as of March 31, 2020 (zero at December 31, 2019), which reflects the seasonal cash requirements of annual compensation payments.

Common share repurchases:  During the first quarter of 2020, the company did not purchase any of its shares in the open market. The company withheld 2.3 million shares ($31.5 million) related to employee share vestings. In regard to its previously completed forward contracts, the company prepaid $190.6 million against the forward payable, resulting in a remaining forward contract liability of $307.8 million as of March 31, 2020. The net collateral paid balance at March 31, 2020 was $87.9 million.

Diluted common shares outstanding (end of period):  463.1 million

Dividends paid:  $140.9 million (common); $59.2 million (preferred)

Common dividends declared: During this period of market turbulence and uncertainty, we believe it is imperative to maintain financial flexibility.  We therefore will reduce our common dividend to $0.155 per common share beginning with the dividend that will be paid in the second quarter. This action, and others focused on preservation of capital, seek to help us build liquidity through the present uncertain environment.  Longer term, the reduction in common dividends will enable us to further strengthen our balance sheet for the benefit or our business and our shareholders.

The dividend is payable on June 3, 2020, to common shareholders of record at the close of business on May 11, 2020, with an ex-dividend date of May 8, 2020.

Preferred dividends declared:  The company is announcing a preferred cash dividend of $14.75 per share representing the period from March 1, 2020 through May 31, 2020.  The preferred dividend is payable on June 1, 2020 to preferred shareholders of record at close of business on May 15, 2020.

About Invesco Ltd.

Invesco is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. With offices in 25 countries, our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities.

For more information, visit http://www.invesco.com.

Members of the investment community and general public are invited to listen to the conference call today, April 23, 2020, at 9:00 a.m. ET by dialing one of the following numbers: 1-866-803-2143 for U.S. and Canadian callers or 1-210-795-1098 for international callers, using the Passcode: Invesco. An audio replay of the conference call will be available until Thursday, May 7, 2020 at 5:00 p.m. ET by calling 1-800-337-6551 for U.S. and Canadian callers or 1-402-220-9659 for international callers. A presentation highlighting the company's performance will be available during a live Webcast and on Invesco's Website at www.invesco.com.

This release, and comments made in the associated conference call today, may include "forward-looking statements." Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, assets under management, geopolitical events and their potential impact on the company, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would" as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions.  Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission. You may obtain these reports from the SEC's website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Invesco Ltd.

Non-GAAP Information and Reconciliations

We utilize the following non-GAAP performance measures: net revenues (and by calculation, net revenue yield on AUM), adjusted operating income, adjusted operating margin, adjusted net income attributable to Invesco Ltd., and adjusted diluted EPS. We believe the adjusted measures provide valuable insight into our ongoing operational performance and assist in comparisons to our competitors. These measures also assist management with the establishment of operational budgets and forecasts and assist the Board of Directors and management in determining incentive compensation decisions. The most directly comparable U.S. GAAP measures are operating revenues (and by calculation, gross revenue yield on AUM), operating income, operating margin, net income attributable to Invesco Ltd., and diluted EPS.

The following are reconciliations of operating revenues, operating income (and by calculation, operating margin), and net income attributable to Invesco Ltd. (and by calculation, diluted EPS) on a U.S. GAAP basis to a non-GAAP basis of net revenues, adjusted operating income (and by calculation, adjusted operating margin), and adjusted net income attributable to Invesco Ltd. (and by calculation, adjusted diluted EPS). In addition, a reconciliation of adjusted operating expenses is provided below, together with reconciliations of the U.S. GAAP operating expense lines to provide further analysis of the non-GAAP adjustments. These non-GAAP measures should not be considered as substitutes for any U.S. GAAP measures and may not be comparable to other similarly titled measures of other companies. The tax effect of the reconciling items is based on the tax jurisdiction attributable to the transactions. These measures are described more fully in the company's Forms 10-K and 10-Q. Refer to these public filings for additional information about the company's non-GAAP performance measures.

Reconciliation of Operating revenues to Net revenues:

Reconciliation of Operating income to Adjusted operating income:

Reconciliation of Net income attributable to Invesco Ltd. to Adjusted net income attributable to Invesco Ltd.

Reconciliation of Operating expenses to Adjusted operating expenses:

           

           

Invesco Ltd.

Footnotes to the Assets Under Management Tables

SOURCE Invesco Ltd.

Related Links

http://www.invesco.com