filings.toolsInvesco 10-Q 2024-09-30
Filed 2024-10-29. 8 sections, 272K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-13908
Invesco Ltd.
(Exact Name of Registrant as Specified in Its Charter)
| Bermuda | 98-0557567 | ||||||||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
| 1331 Spring Street, | Suite 2500, | Atlanta, | GA | 30309 | |||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) |
(404) 892-0896
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common stock, $0.20 par value | IVZ | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☑
As of September 30, 2024, the most recent practicable date, the number of Common Shares outstanding was 449,439,952.
TABLE OF CONTENTS
We include cross references to captions elsewhere in this Quarterly Report on Form 10-Q, which we refer to as this “Report,” where you can find related additional information. The following table of contents tells you where to find these captions.
GLOSSARY OF DEFINED TERMS
| APAC | — | Asia-Pacific | ||||||
| AUM | — | Assets under management | ||||||
| bps | — | Basis points | ||||||
| CIP | — | Consolidated investment products | ||||||
| CLOs | — | Collateralized loan obligations | ||||||
| Covenant Adjusted EBITDA | — | A financial measure set forth in covenants in our credit agreement, which is defined to be earnings before income tax, depreciation, amortization, interest expense, common share-based compensation expense, unrealized (gains)/losses from investments, net, and unusual or otherwise non-recurring gains and losses | ||||||
| EMEA | — | Europe, Middle East and Africa | ||||||
| EPS | — | Earnings per common share | ||||||
| ETFs | — | Exchange-traded funds | ||||||
| IGW or Invesco Great Wall | — | Invesco Great Wall Fund Management Company Limited | ||||||
| Long-term awards | — | Common share-based awards and other long-term awards | ||||||
| MassMutual | — | Massachusetts Mutual Life Insurance Company | ||||||
| NAV | — | Net asset value | ||||||
| Report | — | this Form 10-Q | ||||||
| S&P | — | Standard & Poor's | ||||||
| SEC | — | U.S. Securities and Exchange Commission | ||||||
| the company | — | Invesco Ltd. and its consolidated entities | ||||||
| the Parent | — | Invesco Ltd. | ||||||
| TRS | — | Total return swap | ||||||
| UITs | — | Unit investment trusts | ||||||
| U.K. | — | United Kingdom | ||||||
| U.S. | — | United States | ||||||
| U.S. GAAP | — | Accounting principles generally accepted in the United States | ||||||
| VIEs | — | Variable interest entities |
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Invesco Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
| As of | |||||||||||
| (in millions, except per share data) | September 30, 2024 | December 31, 2023 | |||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 1,044.9 | $ | 1,469.2 | |||||||
| Accounts receivable | 710.8 | 701.5 | |||||||||
| Investments | 1,128.9 | 919.1 | |||||||||
| Assets of consolidated investment products (CIP): | |||||||||||
| Cash and cash equivalents of CIP | 594.5 | 462.4 | |||||||||
| Accounts receivable and other assets of CIP | 312.8 | 250.1 | |||||||||
| Investments of CIP | 7,699.3 | 8,765.9 | |||||||||
| Assets held for policyholders | — | 393.9 | |||||||||
| Other assets | 884.0 | 832.6 | |||||||||
| Property, equipment and software, net | 580.3 | 599.5 | |||||||||
| Intangible assets, net | 5,816.7 | 5,848.1 | |||||||||
| Goodwill | 8,730.4 | 8,691.5 | |||||||||
| Total assets | $ | 27,502.6 | $ | 28,933.8 | |||||||
| LIABILITIES | |||||||||||
| Accrued compensation and benefits | $ | 886.5 | $ | 900.4 | |||||||
| Accounts payable and accrued expenses | 1,455.6 | 1,294.4 | |||||||||
| Liabilities of CIP: | |||||||||||
| Debt of CIP | 6,562.6 | 7,121.8 | |||||||||
| Other liabilities of CIP | 484.1 | 492.1 | |||||||||
| Policyholder payables | — | 393.9 | |||||||||
| Debt | 890.3 | 1,489.5 | |||||||||
| Deferred tax liabilities, net | 1,316.9 | 1,325.7 | |||||||||
| Total liabilities | 11,596.0 | 13,017.8 | |||||||||
| Commitments and contingencies (See Note 10) | |||||||||||
| TEMPORARY EQUITY | |||||||||||
| Redeemable noncontrolling interests in consolidated entities | 580.5 | 745.7 | |||||||||
| PERMANENT EQUITY | |||||||||||
| Equity attributable to Invesco Ltd.: | |||||||||||
| Preferred shares ($0.20 par value; $1,000 liquidation preference; 4.0 million authorized, issued and outstanding as of September 30, 2024 and December 31, 2023) | 4,010.5 | 4,010.5 | |||||||||
| Common shares ($0.20 par value; 1,050.0 million authorized; 566.1 million shares issued as of September 30, 2024 and December 31, 2023) | 113.2 | 113.2 | |||||||||
| Additional paid-in-capital | 7,325.2 | 7,451.6 | |||||||||
| Treasury shares | (2,832.0) | (3,002.6) | |||||||||
| Retained earnings | 6,874.0 | 6,826.7 | |||||||||
| Accumulated other comprehensive income/(loss), net of tax | (736.6) | (801.8) | |||||||||
| Total equity attributable to Invesco Ltd. | 14,754.3 | 14,597.6 | |||||||||
| Equity attributable to nonredeemable noncontrolling interests in consolidated entities | 571.8 | 572.7 | |||||||||
| Total permanent equity | 15,326.1 | 15,170.3 | |||||||||
| Total liabilities, temporary and permanent equity | $ | 27,502.6 | $ | 28,933.8 |
See accompanying notes.
Invesco Ltd.
Condensed Consolidated Statements of Income
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (in millions, except per common share data) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Investment management fees | $ | 1,100.5 | $ | 1,041.3 | $ | 3,215.0 | $ | 3,102.7 | |||||||||||||||
| Service and distribution fees | 360.3 | 353.5 | 1,098.9 | 1,030.0 | |||||||||||||||||||
| Performance fees | 2.8 | 2.0 | 12.3 | 27.2 | |||||||||||||||||||
| Other | 51.8 | 45.2 | 147.8 | 143.1 | |||||||||||||||||||
| Total operating revenues | 1,515.4 | 1,442.0 | 4,474.0 | 4,303.0 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Third-party distribution, service and advisory | 499.6 | 448.2 | 1,499.0 | 1,365.8 | |||||||||||||||||||
| Employee compensation | 625.4 | 478.5 | 1,550.4 | 1,417.0 | |||||||||||||||||||
| Marketing | 18.9 | 19.2 | 57.6 | 61.9 | |||||||||||||||||||
| Property, office and technology | 119.0 | 111.1 | 353.0 | 334.3 | |||||||||||||||||||
| General and administrative | 140.8 | 146.0 | 459.7 | 402.9 | |||||||||||||||||||
| Transaction, integration and restructuring | — | — | — | 41.6 | |||||||||||||||||||
| Amortization of intangible assets | 11.2 | 11.3 | 33.9 | 38.5 | |||||||||||||||||||
| Total operating expenses | 1,414.9 | 1,214.3 | 3,953.6 | 3,662.0 | |||||||||||||||||||
| Operating income | 100.5 | 227.7 | 520.4 | 641.0 | |||||||||||||||||||
| Other income/(expense): | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | 2.1 | 16.9 | 22.9 | 62.2 | |||||||||||||||||||
| Interest and dividend income | 10.9 | 10.8 | 34.3 | 26.5 | |||||||||||||||||||
| Interest expense | (13.4) | (17.3) | (45.6) | (53.7) | |||||||||||||||||||
| Other gains/(losses), net | 28.3 | (23.3) | 67.8 | 25.0 | |||||||||||||||||||
| Other income/(expense) of CIP, net | 16.7 | 15.2 | 88.1 | (5.4) | |||||||||||||||||||
| Income before income taxes | 145.1 | 230.0 | 687.9 | 695.6 | |||||||||||||||||||
| Income tax provision | (41.5) | (61.3) | (174.2) | (196.7) | |||||||||||||||||||
| Net income | 103.6 | 168.7 | 513.7 | 498.9 | |||||||||||||||||||
| Net (income)/loss attributable to noncontrolling interests in consolidated entities | 10.6 | 21.9 | (7.4) | 87.3 | |||||||||||||||||||
| Dividends declared on preferred shares | (59.2) | (59.2) | (177.6) | (177.6) | |||||||||||||||||||
| Net income attributable to Invesco Ltd. | $ | 55.0 | $ | 131.4 | $ | 328.7 | $ | 408.6 | |||||||||||||||
| Earnings per common share: |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto, which appear elsewhere in this Report. Except for the historical financial information, this Report may include statements that constitute “forward-looking statements” under the U.S. securities laws. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow, capital expenditures, and AUM which could differ materially from actual results 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, the prospects for certain legal contingencies, and other aspects of our business or general economic conditions. In addition, when used in this Report or such other documents or statements, 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 involve risks, uncertainties and assumptions. 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 them to carefully consider the risks described in this Report and our most recent Form 10-K and Forms 10-Q filed with the SEC.
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.
References
In this Report, unless otherwise specified, the terms “we,” “our,” “us,” “company,” “firm,” and “Invesco” refer to Invesco Ltd., a company incorporated in Bermuda, and its consolidated entities.
Executive Overview
The following executive overview summarizes the significant trends affecting our results of operations and financial condition for the periods presented. This overview and the remainder of this management’s discussion and analysis and supplements should be read in conjunction with the Condensed Consolidated Financial Statements of Invesco Ltd. and the notes thereto contained elsewhere in this Report.
The company is an independent investment management firm dedicated to delivering a superior investment experience. Our comprehensive range of active, passive and alternative investment capabilities has been constructed over many years to help clients achieve their investment objectives. We draw on this comprehensive range of capabilities to provide solutions designed to deliver key outcomes aligned to client needs. One of Invesco's core strengths, and a key differentiator for the company within the industry, is our diversification across investment capabilities, distribution channels and geographies. This broad diversification helps to mitigate some of the impact of different market cycles on Invesco and enables the company to take advantage of growth opportunities in various markets and channels.
The table below summarizes returns based on price appreciation/(depreciation) of several major market indices for the three and nine months ended September 30, 2024 and 2023:
| Index expressed in currency | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||
| Equity Index | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| S&P 500 | U.S. Dollar | 5.5 | % | (3.7) | % | 20.8 | % | 11.7 | % | |||||||||||||||||
| FTSE 100 | British Pound | 0.9 | % | 1.0 | % | 6.5 | % | 2.1 | % | |||||||||||||||||
| FTSE 100 | U.S. Dollar | 7.0 | % | (3.0) | % | 11.9 | % | 3.0 | % | |||||||||||||||||
| S&P/TSX 60 Index | Canadian Dollar | 10.3 | % | (3.5) | % | 13.8 | % | 0.3 | % | |||||||||||||||||
| S&P/TSX 60 Index | U.S. Dollar | 11.6 | % | (5.7) | % | 11.2 | % | 0.2 | % | |||||||||||||||||
| MSCI Emerging Markets | U.S. Dollar | 7.8 | % | (3.7) | % | 14.4 | % | (0.4) | % | |||||||||||||||||
| Bond Index | ||||||||||||||||||||||||||
| Barclays U.S. Aggregate Bond | U.S. Dollar | 5.2 | % | (3.2) | % | 4.5 | % | (1.2) | % |
We had $16.5 billion of net long-term inflows for the quarter, primarily driven by Exchange-traded funds (ETFs) and Index, Fundamental Fixed Income, and Multi-Asset/Other, driving total AUM to a record $1.8 trillion, an increase of 4.7% from the prior quarter.
We remain highly focused on our capital priorities, investing in our key capabilities, efficiently allocating resources, and simplifying and streamlining the organization to better position the company for greater scale, performance and improved profitability. We are delivering on our commitment to improve our leverage profile and maintain a strong balance sheet. We ended the quarter with cash and cash equivalents of over $1 billion and a zero balance on our credit agreement. We believe the progress we have made to build financial flexibility has Invesco well-positioned to navigate various market conditions and deliver long-term growth. We remain committed to returning capital to shareholders longer term through a combination of modestly increasing dividends and share repurchases. During the third quarter of 2024, the company repurchased 1.5 million common shares for $25.0 million in the open market, and we plan to continue common share repurchases in the fourth quarter.
Presentation of Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of Consolidated Investment Products
The company provides investment management services to, and has transactions with, investment products sponsored by the company in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets of the products. Investment products that are consolidated are referred to in this Report as CIP. The company’s economic risk with respect to each investment in CIP is limited to its equity ownership, unfunded equity commitments and any uncollected management and performance fees. See also Note 11, "Consolidated Investment Products," for additional information regarding the impact of the consolidation of managed funds.
The majority of the company’s CIP balances are related to collateralized loan obligations (CLOs). The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s direct investments in, and management and performance fees ge
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of its business, the company is primarily exposed to market risk in the form of AUM market price risk, securities market risk, interest rate risk and foreign exchange rate risk. There have not been any material changes to the company’s exposures to market risks during the period ended September 30, 2024 that would require an update to the disclosures provided in the most recent Form 10-K.
AUM Market Price Risk
The company’s investment management revenues are comprised of fees based on the value of AUM. Declines in the market prices of equity and fixed income securities, commodities and derivatives, or other similar financial instruments held in client portfolios could cause revenues to decline because of lower investment management fees by:
-
Causing the value of AUM to decrease.
-
Causing the returns realized on AUM to decrease (impacting performance fees).
-
Causing clients to withdraw funds in favor of investments in markets that they perceive to offer greater opportunity and that the company does not serve.
-
Causing clients to rebalance assets away from investments that the company manages into investments that the company does not manage.
-
Causing clients to reallocate assets away from products that earn higher revenues into products that earn lower revenues.
Underperformance of client accounts relative to competing products could exacerbate these factors.
Assuming the revenue yield on AUM for the year remains unchanged, a decline in the average AUM for the year would result in a corresponding decline in revenue. Certain expenses, including distribution and compensation expenses, may not vary in proportion with the changes in the market value of AUM. As such, the impact on operating margin or net income of a decline in the market values of AUM may be greater than the percentage decline in the market value of AUM.
Securities Market Risk
The company has investments in managed investment products that invest in a variety of asset classes. Investments are generally made to establish a track record for a new fund or investment vehicle or to hedge economically exposure to certain deferred compensation plans. The company’s exposure to market risk from financial instruments measured at fair value arises from its investments.
Interest Rate Risk
Interest rate risk relates to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company is exposed to interest rate risk primarily through its external debt and cash and cash equivalent investments. See Part I, Item 1, Financial Statements - Note 4, “Debt,” for details of the company’s debt arrangements. As of September 30, 2024, the interest rates on 100.0% of the company’s borrowings were fixed for a weighted average period of 9.15 years, and the company had a zero balance on its floating rate credit agreement.
Foreign Exchange Rate Risk
The net assets and financial results of the company’s foreign operations are exposed to foreign currency translation risk when translated into U.S. Dollars upon consolidation into Invesco.
The company is also exposed to foreign translation risk on monetary assets and liabilities that are held by subsidiaries in different functional currencies than the subsidiaries’ functional currencies. Net foreign exchange revaluation losses were $3.1 million during the nine months ended September 30, 2024 (nine months ended September 30, 2023: $1.9 million gains) and are included in General and administrative expenses and Other gains/ (losses), net on the Condensed Consolidated Statements of Income.
Item 4. Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information the company is required to disclose in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in the reports that the company files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
We have evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2024. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
We have evaluated any change in our internal control over financial reporting that occurred during the nine months ended September 30, 2024 and have concluded that there was no change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Financial Statements - Note 10, “Commitments and Contingencies - Legal Contingencies,” for information regarding legal proceedings.
Item 1A. Risk Factors
The company has had no significant changes in its risk factors from those previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Equity Securities
The following table sets forth information regarding purchases of our common shares by us and any affiliated purchases during the three months ended September 30, 2024:
| Month | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number at end of period (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) (millions) | |||||||||||||||||||
| July 1-31, 2024 | 443,943 | $ | 16.51 | 155,367 | $ | 379.6 | |||||||||||||||||
| August 1-31, 2024 | 761,295 | $ | 16.50 | 706,389 | $ | 368.0 | |||||||||||||||||
| September 1-30, 2024 | 644,331 | $ | 16.66 | 643,342 | $ | 357.2 | |||||||||||||||||
| Total | 1,849,569 | 1,505,098 |
(1) An aggregate of 344,471 shares were surrendered to us by Invesco employees to satisfy tax withholding obligations in connection with the vesting of equity awards.
(2) At September 30, 2024, a balance of $357.2 million remains available under the share repurchase authorization approved by the Board on July 22, 2016.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INVESCO LTD. | |||||
| October 29, 2024 | /s/ ANDREW R. SCHLOSSBERG | ||||
| Andrew R. Schlossberg | |||||
| President and Chief Executive Officer | |||||
| October 29, 2024 | /s/ L. ALLISON DUKES | ||||
| L. Allison Dukes | |||||
| Senior Managing Director and Chief Financial Officer |