Invesco Reports Results for the Three Months Ended June 30, 2024
Invesco Announces Second Quarter Diluted EPS of $0.29; Adjusted Diluted EPS(1) of $0.43
ATLANTA, July 23, 2024 /PRNewswire/ -- Invesco Ltd. (NYSE: IVZ) today reported financial results for the three months ended June 30, 2024.
- $16.7 billion of net long-term inflows for the quarter, primarily driven by ETFs and Index, APAC Managed, Private Markets, and Fundamental Fixed Income
- Ending AUM grew 12% year-over-year to a record high of $1.7 trillion; an increase of 3.2% from the prior quarter
- 13.9% operating margin; 30.9% adjusted operating margin(1)
- Net debt(2) of $11.6 million, a zero balance on our credit facility, and cash and cash equivalents of $878.5 million
Update from Andrew Schlossberg, President and CEO
"Outsized annualized organic growth of nearly 6% was led by our global ETF platform, strong net long-term inflows in Asia Pacific and further inflows to our Private Markets and Fundamental Fixed Income capabilities this quarter, driving total assets under management to a record $1.7 trillion. We are seeing more success as we execute on our strategic priorities and focus on significant market opportunities that leverage our distinctive global position as a diversified, scaled, client-centric asset manager. We will continue to innovate and leverage the full suite of Invesco products and investment capabilities to expand our current relationships and win new ones, which we expect will enable us to generate profitable growth and gain market share."
"We continue to simplify Invesco to improve both efficiency and agility in our operations and maintain financial discipline. We have strengthened the balance sheet through deleveraging, are close to operating with zero net debt, and plan to execute share buybacks beginning in the third quarter."
(1) | Represents non-GAAP financial measure. See the information on pages 7 through 10 for a reconciliation to the most directly comparable U.S. GAAP measure. | |
(2) | Net debt: Debt less Cash and cash equivalents | |
Net Flows:
Net long-term inflows were $16.7 billion for the second quarter of 2024 as compared to $6.3 billion of net long-term inflows in the first quarter.
Retail and Institutional net long-term inflows were $12.1 billion and $4.6 billion, respectively. Net long-term flows by investment capability include net long-term inflows from ETFs and Index of $12.8 billion, APAC Managed of $6.7 billion, Private Markets of $2.6 billion and Fundamental Fixed Income of $1.6 billion, partially offset by net long-term outflows from Fundamental Equities of $6.3 billion and Multi-Asset/Other of $0.7 billion. On a geographic basis, the Asia Pacific, EMEA and Americas regions achieved net long-term inflows of $10.2 billion, $3.9 billion, and $2.6 billion, respectively.
Net market gains increased AUM in the second quarter by $27.4 billion while foreign exchange rate movements decreased AUM by $3.9 billion. We had inflows of $6.6 billion from non-management fee earning products and $4.9 billion from money market funds. Ending AUM increased 3.2% and average AUM increased 3.5% during the second quarter.
Summary of net flows (in billions) | Q2-24 | Q1-24 | Q2-23 | |||
Active | $2.3 | $(7.1) | $(8.4) | |||
Passive | 14.4 | 13.4 | 6.4 | |||
Net long-term flows | 16.7 | 6.3 | (2.0) | |||
Non-management fee earning AUM | 6.6 | 9.5 | 1.1 | |||
Money market | 4.9 | 0.7 | 15.4 | |||
Total net flows | $28.2 | 16.5 | 14.5 | |||
Annualized long-term organic growth rate (1) | 5.6 % | 2.2 % | (0.7) % | |||
(1) | Annualized long-term organic growth rate is calculated using net long-term flows (annualized) divided by average long-term AUM for the period. Long-term AUM excludes money market and non-management fee earning AUM. |
Second Quarter Highlights:
Financial Results | Q2-24 | Q1-24 | Q2-24 vs. | Q2-23 | Q2-24 vs. | ||||
U.S. GAAP Financial Measures | |||||||||
Operating revenues | $1,483.3m | $1,475.3m | 0.5 % | $1,442.8m | 2.8 % | ||||
Operating income | $206.8m | $213.1m | (3.0) % | $203.8m | 1.5 % | ||||
Operating margin | 13.9 % | 14.4 % | 14.1 % | ||||||
Net income attributable to Invesco Ltd. | $132.2m | $141.5m | (6.6) % | $132.2m | — % | ||||
Diluted EPS | $0.29 | $0.31 | (6.5) % | $0.29 | — % | ||||
Adjusted Financial Measures (1) | |||||||||
Net revenues | $1,085.8m | $1,053.2m | 3.1 % | $1,090.7m | (0.4) % | ||||
Adjusted operating income | $335.3m | $296.5m | 13.1 % | $302.0m | 11.0 % | ||||
Adjusted operating margin | 30.9 % | 28.2 % | 27.7 % | ||||||
Adjusted net income attributable to Invesco Ltd. | $196.2m | $148.4m | 32.2 % | $144.4m | 35.9 % | ||||
Adjusted diluted EPS | $0.43 | $0.33 | 30.3 % | $0.31 | 38.7 % | ||||
Assets Under Management | |||||||||
Ending AUM | $1,715.8bn | $1,662.7bn | 3.2 % | $1,538.2bn | 11.5 % | ||||
Average AUM | $1,669.3bn | $1,613.0bn | 3.5 % | $1,494.9bn | 11.7 % | ||||
Headcount | 8,536 | 8,527 | 0.1 % | 8,621 | (1.0) % |
(1) | Represents non-GAAP financial measure. See the information on pages 7 through 10 for a reconciliation to the most directly comparable U.S. GAAP measure. |
U.S. GAAP Operating Results:
Second Quarter 2024 compared to First Quarter 2024
Operating revenues and expenses: Operating revenues increased $8.0 million in the second quarter of 2024 compared to the first quarter. Investment management fees increased $17.1 million as a result of higher average AUM partially offset by the shift in AUM toward lower yield products. Service and distribution fees decreased $15.4 million due to lower fund-related service fees compared to the first quarter partially offset by an increase in fees due to higher average AUM. Performance fees were $8.7 million for the quarter and were earned primarily from private markets real estate products. Other revenues decreased $1.6 million.
Operating expenses increased $14.3 million in the second quarter of 2024 compared to the first quarter. Third-party distribution, service and advisory costs decreased $8.6 million due to a decrease in pass-through fund-related Service and distribution costs partially offset by an increase in costs due to higher AUM. Employee compensation expense decreased $20.4 million primarily due to a decrease in expense related to the mark-to-market on deferred compensation liabilities and lower seasonal payroll taxes partially offset by higher variable compensation costs. General and administrative expenses increased $41.9 million primarily due to the accrual of a $50.0 million liability in the second quarter in connection with a previously disclosed investigation by the U.S. Securities and Exchange Commission (SEC) into compliance with electronic business communications recordkeeping requirements and a separate regulatory matter, neither of which is expected to have a material impact on the company. This expense was partially offset by lower professional fees.
Non-operating income and expenses: Equity in earnings of unconsolidated affiliates was $13.9 million, earned primarily from our China joint venture. Other gains and losses were a net gain of $3.6 million, driven by market value changes on deferred compensation investments. Other income/(expense) of consolidated investment products (CIP) was a gain of $40.9 million, primarily driven by market gains on the underlying investments held by the funds.
The effective tax rate was 24.6% in the second quarter of 2024 as compared to 24.3% in the first quarter.
Diluted earnings per common share: Diluted earnings per common share was $0.29 for the second quarter of 2024.
Second Quarter 2024 compared to Second Quarter 2023
Operating revenues and expenses: Operating revenues increased $40.5 million compared to the second quarter of 2023. Investment management fees increased $32.3 million as a result of higher average AUM partially offset by the shift in AUM toward lower yield products. Service and distribution fees increased $19.3 million due to higher average AUM. Performance fees decreased $10.9 million.
Operating expenses increased $37.5 million in the second quarter of 2024 compared to the second quarter of 2023. Third-party distribution, service and advisory costs increased $32.9 million due to higher AUM. Employee compensation expense decreased $23.4 million primarily due to lower costs related to executive retirements and organizational changes. General and administrative expenses increased $28.5 million primarily due to the accrual of a $50.0 million liability in the second quarter in connection with a previously disclosed investigation by the SEC into compliance with electronic business communications recordkeeping requirements and a separate regulatory matter, neither of which is expected to have a material impact on the company. This expense was partially offset by lower professional fees.
The effective tax rate was 24.6% in the second quarter of 2024 as compared to 28.5% in the second quarter of 2023. The decrease in the effective tax rate in the second quarter of 2024 was primarily due to the favorable impact of the increase in net income attributable to non-controlling interests in consolidated entities.
Adjusted(1) Operating Results:
Second Quarter 2024 compared to First Quarter 2024
Net revenues and adjusted operating expenses: Net revenues increased $32.6 million compared to the first quarter primarily due to higher average AUM and higher performance fees which were partially offset by the shift in AUM toward lower yield products.
Adjusted operating expenses decreased $6.2 million compared to the first quarter primarily due to lower General and administrative expenses related to professional fees.
Adjusted operating income increased $38.8 million compared to the first quarter. Adjusted operating margin increased to 30.9% from 28.2%.
Non-operating income and expenses: Equity in earnings of unconsolidated affiliates was a gain of $24.1 million earned primarily from our legacy private equity investments. Interest and dividend income was $13.4 million. Other gains and losses were a net loss of $4.3 million.
The effective tax rate on adjusted net income was 22.1% in the second quarter as compared to 24.6% in the first quarter. The decrease in the effective tax rate was primarily due to unfavorable discrete tax items in the first quarter related to share-based compensation and an increase in the valuation allowance for certain deferred tax assets.
Adjusted diluted earnings per common share was $0.43 for the second quarter.
Second Quarter 2024 compared to Second Quarter 2023
Net revenues and adjusted operating expenses: After allowing for foreign exchange rate changes, Net revenues in the second quarter of 2024 increased $1.5 million compared to the second quarter of 2023, primarily driven by higher average AUM offset by the shift in AUM toward lower yield products.
Adjusted operating expenses decreased $38.2 million compared to the second quarter of 2023. Employee compensation expense decreased $24.1 million primarily due to lower costs related to executive retirements and organizational changes. General and administrative expenses decreased $15.6 million primarily due to lower professional fees.
Adjusted operating income increased $33.3 million compared to the second quarter of 2023. Adjusted operating margin increased to 30.9% from 27.7% for the second quarter of 2023.
The effective tax rate on adjusted net income was 22.1% in the second quarter of 2024 as compared to 24.7% in the second quarter of 2023. The decrease in the effective tax rate was primarily due to a decrease in the reserve for uncertain tax positions in the second quarter of 2024 and the favorable impact of the change in the mix of income across tax jurisdictions.
(1) | Represents non-GAAP financial measure. See the information on pages 7 through 10 for a reconciliation to the most directly comparable U.S. GAAP measure. | |
Capital Management:
Cash and cash equivalents: $878.5 million at June 30, 2024 ($895.7 million as of March 31, 2024).
Debt: $890.1 million at June 30, 2024 ($1,257.5 million at March 31, 2024). The credit facility balance was zero as of June 30, 2024.
Net Debt(2): $11.6 million at June 30, 2024 ($361.8 million at March 31, 2024).
(2) | Net debt: Debt less Cash and cash equivalents | |
Common shares outstanding (end of period): 450.0 million
Diluted common shares outstanding (end of period): 456.5 million
Dividends paid: $93.2 million (common); $59.2 million (preferred)
Common dividends declared: The company is declaring a second quarter cash dividend of $0.205 per share to holders of common shares. The dividend is payable on September 4, 2024, to common shareholders of record at the close of business on August 16, 2024, with an ex-dividend date of August 16, 2024.
Preferred dividends declared: The company is declaring a preferred cash dividend of $14.75 per share representing the period from June 1, 2024 through August 31, 2024. The preferred dividend is payable on September 3, 2024.
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. Our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco managed $1.7 trillion in assets on behalf of clients worldwide as of June 30, 2024. For more information, visit invesco.com/corporate.
Members of the investment community and general public are invited to listen to the conference call today, July 23, 2024, 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, August 8, 2024 by calling 1-800-839-1248 for U.S. and Canadian callers or 1-203-369-3356 for international callers. A presentation highlighting the company's performance will be available during a live Webcast and on Invesco's Website at invesco.com/corporate.
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, capital expenditures, and assets under management and could differ materially from events that actually occur in the future due to known and unknown risks and other important factors, including, but not limited to, industry or market conditions, geopolitical events and pandemics or health crises and their respective 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. None of this information should be considered in isolation from, or as a substitute for, historical financial 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.
Investor Relations Contacts: | Greg Ketron | 404-724-4299 | |
Jennifer Church | 404-439-3428 | ||
Media Relations Contact: | Andrea Raphael | 212-323-4202 |
Invesco Ltd. | |||||||||
U.S. GAAP Condensed Consolidated Income Statements | |||||||||
(Unaudited, in millions, other than per share amounts) | |||||||||
Q2-24 | Q1-24 | % Change | Q2-23 | % Change | |||||
Operating revenues: | |||||||||
Investment management fees | $ 1,065.8 | $ 1,048.7 | 1.6 % | $ 1,033.5 | 3.1 % | ||||
Service and distribution fees | 361.6 | 377.0 | (4.1) % | 342.3 | 5.6 % | ||||
Performance fees | 8.7 | 0.8 | 987.5 % | 19.6 | (55.6) % | ||||
Other | 47.2 | 48.8 | (3.3) % | 47.4 | (0.4) % | ||||
Total operating revenues | 1,483.3 | 1,475.3 | 0.5 % | 1,442.8 | 2.8 % | ||||
Operating expenses: | |||||||||
Third-party distribution, service and advisory | 495.4 | 504.0 | (1.7) % | 462.5 | 7.1 % | ||||
Employee compensation | 452.3 | 472.7 | (4.3) % | 475.7 | (4.9) % | ||||
Marketing (1) | 20.6 | 18.1 | 13.8 % | 23.1 | (10.8) % | ||||
Property, office and technology (1) | 116.4 | 117.6 | (1.0) % | 112.7 | 3.3 % | ||||
General and administrative (1) | 180.4 | 138.5 | 30.3 % | 151.9 | 18.8 % | ||||
Amortization of intangible assets | 11.4 | 11.3 | 0.9 % | 13.1 |
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