Invesco Ltd. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. Invesco is a global investment manager. Amounts are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Operating revenue (GAAP) | $1,629.4 | $1,659.7 |
| Operating income (GAAP) / margin | $377.7 / 23.2% | $344.3 / 20.7% |
| Net income attributable to Invesco | $197.7 | $267.8 |
| Diluted EPS | $0.43 | $0.58 |
| Adjusted operating income / margin (non-GAAP) | $494.6 / 39.5% | $503.0 / 40.2% |
| Adjusted net income / diluted EPS (non-GAAP) | $259.3 / $0.56 | $316.6 / $0.68 |
| Net revenues (non-GAAP) | $1,252.4 | $1,251.0 |
| Ending AUM / average AUM | $1,555.9 billion / $1,545.1 billion | $1,404.1 billion / $1,395.1 billion |
| Cash and cash equivalents | $1,309.6 | $1,896.4 at Dec. 31, 2021 |
| Company debt | $2,085.7 | $2,085.1 at Dec. 31, 2021 |
Cash flow: GAAP operating cash used was $375.4 million, investing cash used was $79.1 million, and financing cash used was $55.3 million. Excluding consolidated investment products (CIP), operating cash used was $119.4 million, versus $74.7 million provided in Q1 2021. The filing attributes the period’s operating outflow partly to timing changes in receivables and payables. CIP cash is not available for Invesco’s use.
Liquidity and leverage: The $1.5 billion revolving credit facility was undrawn. The company reported compliance with debt covenants; its leverage ratio was 0.82:1.00 against a maximum of 3.25:1.00, and interest coverage was 24.55:1.00 against a minimum of 4.00:1.00. Credit ratings were BBB+/Stable from S&P, A3/Stable from Moody’s, and A/Stable from Fitch.
Material changes versus Q1 2021
- Revenue declined 1.8%; average AUM increased 10.8%, but market conditions and a shift toward lower-fee passive products weighed on revenue yield. Net revenue yield, excluding performance fees and QQQ, decreased to 36.6 basis points from 40.1.
- Operating expenses fell 4.8% to $1,251.7 million, including lower employee compensation and restructuring costs. GAAP operating income and operating margin consequently improved.
- Net income attributable to Invesco and diluted EPS declined. Other gains/(losses) shifted to a $45.5 million loss from a $34.1 million gain; CIP other income/(expense) shifted to a $23.3 million expense from $94.7 million of income. Management said much of the CIP valuation impact is offset by noncontrolling interests and does not represent performance of aggregate AUM.
- Total net flows were positive $29.0 billion, but net long-term flows eased to $17.2 billion from $24.5 billion. Market losses of $80.9 billion drove ending AUM below year-end 2021 levels.
- Common shares repurchased totaled $200 million (8.9 million shares) in Q1 2022; none were repurchased in Q1 2021.
Outlook, management commentary, and risks
- Management targets $200 million of permanent annual net operating expense savings. It reported $193 million, or 96%, realized on an annualized basis through Q1 2022 and expected the balance by year-end. It estimated up to $35 million of additional restructuring costs through 2022.
- The company said it would redeem $600 million of 3.125% senior notes due November 2022 on May 6, 2022. It also announced a 10% increase in the quarterly common dividend to $0.1875 per share beginning with the Q2 2022 payment.
- Management described Russian securities exposure as limited and did not expect a material financial impact from the Russia/Ukraine conflict. It noted ongoing market disruption and volatility.
- Key exposures include market declines and client outflows that reduce AUM and fee revenue; fee and product mix shifts; foreign-exchange movements; inflation and rising interest rates; and potential liquidity or market-value effects from the LIBOR transition. Management also noted that restricted subsidiary capital can limit transfers of cash between jurisdictions.
- Undrawn co-investment commitments were $426.1 million. Maximum future payments under certain investment-product equity commitments were $355.8 million, with guarantees up to $30 million; management considered the likelihood of funding remote. The company reported adequate accruals for estimable probable legal losses and did not expect pending claims to materially affect its business, financial position, results, or liquidity.
- Management reported effective disclosure controls and no significant change in risk factors from its 2021 Form 10-K.
Most important facts for investors to verify
- Whether AUM inflows persist and offset market-driven declines, and whether fee yield continues to compress.
- How much of the reported earnings decline reflects recurring operating trends versus investment, deferred-compensation, and CIP valuation movements; review non-GAAP reconciliations alongside GAAP results.
- Cash generation excluding CIP, the timing of working-capital movements, and the company’s ability to fund capital returns and debt obligations.
- Completion and funding of the announced $600 million note redemption, and progress toward the remaining cost-savings target and associated restructuring expense.
- Developments in regulatory or legal matters, capital-transfer restrictions, market exposure, and LIBOR transition risks.