INVESCO LTD. 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" underthe United States securities laws. 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 (AUM), geopolitical events and the COVID-19 pandemic 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, 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. 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 this Report and our most recent Form 10-K and Forms 10-Q filed with theSEC . You may obtain these reports from theSEC'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," "Invesco," and "
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 supplements and should be read in conjunction with the Condensed Consolidated Financial Statements ofInvesco Ltd. and the notes thereto contained elsewhere in this Report. The company is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. 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 customized solutions designed to deliver key outcomes aligned to client needs. Invesco benefits from our long-term efforts to ensure a diversified base of AUM. One of Invesco's core strengths, and a key differentiator for the company within the industry, is our broad diversification across client domiciles, asset classes and distribution channels. Our geographic diversification recognizes growth opportunities in different parts of the world. This broad diversification mitigates the impact on Invesco of different market cycles and enables the company to take advantage of growth opportunities in various markets and channels. 15 -------------------------------------------------------------------------------- Table of Contents Most major financial markets gained ground during the early part of 2023, partially offsetting significant declines experienced last year. However, a heightened level of volatility persists and financial markets reacted with caution in March in response to several regional bank failures. Investors once again sought safety in risk-off assets, and net flows across our industry were pressured further. The table below summarizes returns based on price appreciation/(depreciation) of several major market indices for the three months endedMarch 31, 2023 and 2022: Index expressed in Three months ended March 31, Equity Index currency 2023 2022 S&P 500 U.S. Dollar 7.0 % (5.0) % FTSE 100 British Pound 2.4 % 1.8 % FTSE 100 U.S. Dollar 4.5 % (1.2) % S&P/TSX 60 Index Canadian Dollar 3.2 % 2.8 % S&P/TSX 60 Index U.S. Dollar 3.3 % 4.2 % MSCI Emerging Markets U.S. Dollar 3.5 % (7.3) % Bond Index Barclays U.S. Aggregate Bond U.S. Dollar 3.0 % (5.9) %
Despite the volatile markets in early 2023, our diversified product lineup maintained net long-term inflows in certain key capabilities, notably Fixed Income, the Institutional Channel and exchange-traded funds (ETFs).
We remain highly focused on our capital priorities, investing in our key capabilities, and efficiently allocating our resources. Consistent with our commitment to improve our leverage profile, we continue to manage our debt to lower levels. We ended the quarter with no balance on our credit facility and continued to maintain debt below$1.5 billion , the lowest level in over a decade. To increase balance sheet flexibility, we amended and restated the$1.5 billion floating rate credit facility, increasing facility capacity to$2.0 billion and extending the expiration date fromApril 26, 2026 toApril 26, 2028 . As a result of our continued progress to build financial flexibility, and in accordance with our commitment to return capital to shareholders, the Board approved a 7% increase in our quarterly dividend to$0.20 per share beginning with the dividend that will be paid to holders of common shares in the second quarter of 2023. As previously disclosed, onFebruary 8, 2023 we announced thatMartin L. Flanagan will retire as President and Chief Executive Officer (CEO) of the company and as a member of the Board of Directors effectiveJune 30, 2023 .Andrew R. Schlossberg will succeedMr. Flanagan as President and CEO and as a member of the Board of Directors effectiveJune 30, 2023 .Mr. Schlossberg is currently Senior Managing Director and Head ofAmericas and has served in multiple leadership roles across the company's businesses and locations since joining the company in 2001. CommencingJune 30, 2023 ,Mr. Flanagan will serve as Chairman Emeritus for the company and, in this new role, will provide advice, guidance and support to the company throughDecember 31, 2024 .
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, various retail mutual funds and similar entities, private equity, real
estate, fund-of-funds, collateralized loan obligations (CLOs) and other
investment entities sponsored by the company for the investment of client assets
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 Form 10-Q
(Report) as CIP. The company's economic risk with respect to each investment in
CIP is limited to its equity ownership and any uncollected management and
performance fees. See also Note 12, "Consolidated Investment Products," for
additional information regarding the impact of the consolidation of managed
funds.
The majority of the company's CIP balances are CLO-related. 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 generated from, the CLOs. If
the company were to liquidate, the collateral assets would not be available to
the general creditors of the company, and as a result, the company does not
consider them to be company assets. Likewise, the investors in the CLOs have no
recourse to the general credit of the company for the notes issued by the CLOs.
The company therefore does not consider this debt to be a company liability.
16
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Due to the significant impact that CIP has on the presentation of the company's
Consolidated Financial Statements, the company has elected to deconsolidate
these products in its non-GAAP disclosures (among other adjustments). See
"Schedule of Non-GAAP Information" for additional information regarding these
adjustments. The following discussion therefore combines the results presented
under U.S. GAAP with the company's non-GAAP presentation.
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains four distinct sections, which follow the AUM discussion:
•Results of Operations (three months ended
•Schedule of Non-GAAP Information;
•Balance Sheet Discussion; and
•Liquidity and Capital Resources.
17
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Summary Operating Information
Wherever a non-GAAP measure is referenced, a disclosure will follow in the
narrative or in the note referring the reader to the Schedule of Non-GAAP
Information, where additional details regarding the use of the non-GAAP measure
by the company are disclosed, along with reconciliations of the most directly
comparable U.S. GAAP measures to the non-GAAP measures. To further enhance the
readability of the Results of Operations section, separate tables for each of
the revenue, expense and other income and expenses (non-operating
income/expense) sections of the income statement introduce the narrative that
follows, providing a section-by-section review of the company's income
statements for the periods presented.
Summary operating information is presented in the table below:
$ in millions, other than per common share amounts, operating margins and AUM
Three months ended March 31,
U.S. GAAP Financial Measures Summary 2023 2022
Operating revenues 1,418.2 1,629.4
Operating income 209.5 377.7
Operating margin 14.8 % 23.2 %
Net income attributable to Invesco Ltd. 145.0 197.7
Diluted EPS 0.32 0.43
Non-GAAP Financial Measures Summary(1)
Net revenues 1,075.9 1,252.4
Adjusted operating income 326.9 494.6
Adjusted operating margin 30.4 % 39.5 %
Adjusted net income attributable to Invesco Ltd. 173.4 259.3
Adjusted diluted EPS 0.38 0.56
Assets Under Management
Ending AUM (billions) 1,483.0 1,555.9
Average AUM (billions) 1,463.0 1,545.1
_________
(1)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) are non-GAAP financial measures, based on
methodologies other than U.S. GAAP. See "Schedule of Non-GAAP Information" for a
reconciliation of the most directly comparable U.S. GAAP measures to the
non-GAAP measures.
18
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Investment Capabilities Performance Overview
Invesco's first strategic objective is to achieve strong investment performance
over the long-term for our clients. The table below presents the one-, three-,
five-, and ten-year performance of our actively managed investment products
measured by the percentage of AUM in the top half of benchmark and in the top
half of peer group.(1)
Benchmark Comparison Peer Group Comparison
% of AUM In Top Half of Benchmark % of AUM in Top Half of Peer Group
1yr 3yr 5yr 10yr 1yr 3yr 5yr 10yr
Equities (2)
U.S. Core (4%) 52 % 41 % 31 % 16 % 27 % 27 % 15 % - %
U.S. Growth (5%) - % 27 % 45 % 45 % - % - % 30 % 30 %
U.S. Value (6%) 79 % 61 % 78 % 54 % 80 % 61 % 48 % 48 %
Sector (1%) 8 % 8 % 25 % 55 % 8 % 26 % 33 % 56 %
U.K. (1%) 55 % 39 % 33 % 46 % 85 % 32 % 45 % 40 %
Canadian (<1%) 87 % 100 % 66 % 45 % 63 % 100 % 42 % - %
Asian (4%) 63 % 79 % 85 % 91 % 60 % 39 % 48 % 81 % Continental European (2%)
80 % 75 % 11 % 92 % 84 % 79 % 24 % 75 % Global (5%)
35 % 26 % 10 % 84 % 65 % 23 % 4 % 16 %
Global Ex U.S. and Emerging Markets
(8%) 90 % 34 % 97 % 99 % 99 % 16 % 15 % 66 %
Fixed Income (2)
Money Market (29%) 92 % 95 % 98 % 100 % 86 % 86 % 86 % 99 %
U.S. Fixed Income (10%) 32 % 94 % 77 % 97 % 45 % 84 % 64 % 92 %
Global Fixed Income (6%) 50 % 91 % 90 % 97 % 66 % 70 % 68 % 92 %
Stable Value (5%) - % 100 % 100 % 100 % 97 % 97 % 97 % 100 %
Other (2)
Alternatives (5%) 54 % 39 % 69 % 75 % 42 % 49 % 39 % 48 %
Balanced (7%) 89 % 68 % 64 % 62 % 89 % 84 % 83 % 94 %
_________
(1) Excludes passive products, closed-end funds, private equity limited
partnerships, non-discretionary funds, unit investment trusts (UITs), fund of
funds with component funds managed by Invesco, stable value building block funds
and collateralized debt obligations. Certain funds and products were excluded
from the analysis because of limited benchmark or peer group data. Had these
been available, results may have been different. These results are preliminary
and subject to revision.
Data as of March 31, 2023 . AUM measured in the one, three, five and ten year
quartile rankings represents 46%, 46%, 46% and 41% of total Invesco AUM,
respectively, and AUM measured versus benchmark on a one, three, five and ten
year basis represents 60%, 57%, 56% and 51% of total Invesco AUM. Peer group
rankings are sourced from a widely-used third party ranking agency in each
fund's market (e.g., Morningstar, IA, Lipper, eVestment, Mercer, Galaxy, SITCA,
Value Research ) and asset-weighted in USD. Rankings are as of prior quarter-end
for most institutional products and prior month-end for Australian retail funds
due to their late release by third parties. Rankings are calculated against all
funds in each peer group. Rankings for the primary share class of the most
representative fund in each composite are applied to all products within each
composite. Performance assumes the reinvestment of dividends. Past performance
is not indicative of future results and may not reflect an investor's
experience.
(2) Numbers in parenthesis reflect AUM for each investment product (see Note
above for exclusions) as a percentage of the total AUM for the five-year peer
group ($680.9 billion ).
19-------------------------------------------------------------------------------- Table of Contents Assets Under Management The following presentation and discussion of AUM includes Passive and Active AUM. Passive AUM includes index-based ETFs, UITs, non-management fee earning AUM and other passive mandates. Active AUM is total AUM less Passive AUM. Non-management fee earning AUM includes non-management fee earning ETFs, UITs and product leverage. The net flows in non-management fee earning AUM can be relatively short-term in nature and, due to the relatively low revenue yield, these can have a significant impact on overall net revenue yield. The AUM tables and the discussion below refer to certain AUM as long-term. Long-term inflows and the underlying reasons for the movements in this line item include investments from new clients, existing clients adding new accounts/funds or contributions/subscriptions into existing accounts/funds. Long-term outflows reflect client redemptions from accounts/funds and include the return of invested capital on the maturity. We present net flows into money market funds separately because shareholders of those funds typically use them as short-term funding vehicles and because their flows are particularly sensitive to short-term interest rate movements.
Changes in AUM were as follows:
For the three months ended
2023 2022
$ in billions Total AUM Active Passive Total AUM Active Passive
December 31 1,409.2 976.2 433.0 1,610.9 1,082.5 528.4
Long-term inflows 79.4 46.9 32.5 106.3 61.7 44.6
Long-term outflows (76.5) (49.4) (27.1) (89.1) (60.9) (28.2)
Net long-term flows 2.9 (2.5) 5.4 17.2 0.8 16.4
Net flows in non-management fee earning
AUM (1.6) - (1.6) (1.0) - (1.0)
Net flows in money market funds 7.7 7.7 - 12.8 12.8 -
Total net flows 9.0 5.2 3.8 29.0 13.6 15.4
Reinvested distributions 1.0 1.0 - 0.8 0.8 -
Market gains and losses 61.9 20.9 41.0 (80.9) (50.0) (30.9)
Foreign currency translation 1.9 1.9 - (3.9) (4.2) 0.3
March 31 1,483.0 1,005.2 477.8 1,555.9 1,042.7 513.2
Average AUM
Average long-term AUM 1,083.2 788.5 294.7 1,187.7 895.6 292.1
Average AUM 1,463.0 1,002.0 461.0 1,545.1 1,050.0 495.1
Average QQQ AUM 156.1 N/A 156.1 189.0 N/A 189.0
For the three months ended
2023 2022
Revenue yield (bps) (1)
U.S. GAAP Gross revenue yield 41.3 45.1
Net revenue yield ex performance fees ex QQQ (2) 32.7 36.6
Active net revenue yield ex performance fees 37.6 41.9
Passive net revenue yield ex QQQ (2) 16.7 18.4
___________
(1) U.S. GAAP gross revenue yield is not considered a meaningful effective fee
rate measure. Gross revenue yield on AUM is equal to U.S. GAAP annualized total
operating revenues divided by average AUM, excluding Invesco Great Wall Fund
Management Company Limited (IGW) AUM. It is appropriate to exclude the average
AUM of IGW as the revenues resulting from these AUM are not presented in U.S.
GAAP operating revenues. The average AUM for IGW in the three months ended
March 31, 2023 was $91.0 billion (three months ended March 31, 2022 : $99.3
billion ). Additionally, the U.S. GAAP gross revenue yield is not a good measure
because the numerator of the U.S. GAAP gross revenue yield excludes the
management fees earned from CIP; however, the denominator of the measure
includes the AUM of these investment products. Net revenue yield metrics include
the net revenues and average AUM of IGW and CIP. See "Schedule of Non-GAAP
Information" for a reconciliation of operating revenues to net revenues.
(2) Performance fees are earned when certain performance metrics are achieved
and QQQ ETFs do not earn net revenues. Therefore, net revenue yield is
calculated excluding performance fees and QQQ AUM. Passive net revenue yield is
calculated excluding QQQ AUM.
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Flows
There are numerous drivers of AUM inflows and outflows, including individual investor decisions to change investment preferences, fiduciaries and other gatekeepers making broad asset allocation decisions on behalf of their clients and reallocation of investments within portfolios. We are not a party to these asset allocation decisions, as the company does not generally have access to the underlying investor's decision-making process, including their risk appetite or liquidity needs. Market Returns Market gains and losses include the net change in AUM resulting from changes in market values of the underlying securities from period to period. The table in the "Executive Overview" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations summarizes returns based on price appreciation/(depreciation) of several major market indices for the three months endedMarch 31, 2023 and 2022.
Foreign Exchange Rates
During the three months endedMarch 31, 2023 , we experienced an increase in AUM of$1.9 billion due to changes in foreign exchange rates. In the three months endedMarch 31, 2022 , AUM decreased by$3.9 billion due to foreign exchange rate changes. 21
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Total AUM by Channel (1)
As of and for the Three Months Ended
$ in billions Total Retail Institutional December 31, 2022 1,409.2 872.3 536.9 Long-term inflows 79.4 54.8 24.6 Long-term outflows (76.5) (58.5) (18.0) Net long-term flows 2.9 (3.7) 6.6 Net flows in non-management fee earning AUM (1.6) (2.7) 1.1 Net flows in money market funds 7.7 1.2 6.5 Total net flows 9.0 (5.2) 14.2 Reinvested distributions 1.0 0.9 0.1 Market gains and losses 61.9 55.7 6.2 Foreign currency translation 1.9 1.2 0.7 March 31, 2023 1,483.0 924.9 558.1 December 31, 2021 1,610.9 1,106.5 504.4 Long-term inflows 106.3 81.1 25.2 Long-term outflows (89.1) (70.7) (18.4) Net long-term flows 17.2 10.4 6.8 Net flows in non-management fee earning AUM (1.0) 0.4 (1.4) Net flows in money market funds 12.8 2.1 10.7 Total net flows 29.0 12.9 16.1 Reinvested distributions 0.8 0.7 0.1 Market gains and losses (80.9) (74.3) (6.6) Foreign currency translation (3.9) (1.1) (2.8) March 31, 2022 1,555.9 1,044.7 511.2 ________
See accompanying notes immediately following these AUM tables.
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Active AUM by Channel (1)
As of and for the Three Months Ended
$ in billions Total Retail Institutional December 31, 2022 976.2 482.1 494.1 Long-term inflows 46.9 26.3 20.6 Long-term outflows (49.4) (33.0) (16.4) Net long-term flows (2.5) (6.7) 4.2 Net flows in money market funds 7.7 1.2 6.5 Total net flows 5.2 (5.5) 10.7 Reinvested distributions 1.0 0.9 0.1 Market gains and losses 20.9 17.1 3.8 Foreign currency translation 1.9 1.0 0.9 March 31, 2023 1,005.2 495.6 509.6 December 31, 2021 1,082.5 631.7 450.8 Long-term inflows 61.7 37.1 24.6 Long-term outflows (60.9) (43.4) (17.5) Net long-term flows 0.8 (6.3) 7.1 Net flows in money market funds 12.8 2.1 10.7 Total net flows 13.6 (4.2) 17.8 Reinvested distributions 0.8 0.7 0.1 Market gains and losses (50.0) (45.4) (4.6) Foreign currency translation (4.2) (0.9) (3.3) March 31, 2022 1,042.7 581.9 460.8 ________
See accompanying notes immediately following these AUM tables.
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Passive AUM by Channel (1)
As of and for the Three Months Ended
$ in billions Total Retail Institutional December 31, 2022 433.0 390.2 42.8 Long-term inflows 32.5 28.5 4.0 Long-term outflows (27.1) (25.5) (1.6) Net long-term flows 5.4 3.0 2.4
Net flows in non-management fee earning AUM (1.6) (2.7)
1.1
Total net flows 3.8 0.3 3.5
Market gains and losses 41.0 38.6 2.4
Foreign currency translation - 0.2 (0.2)
March 31, 2023 477.8 429.3 48.5
December 31, 2021 528.4 474.8 53.6
Long-term inflows 44.6 44.0 0.6
Long-term outflows (28.2) (27.3) (0.9)
Net long-term flows 16.4 16.7 (0.3)Net flows in non-management fee earning AUM (1.0) 0.4
(1.4)
Total net flows 15.4 17.1 (1.7)
Market gains and losses (30.9) (28.9) (2.0)
Foreign currency translation 0.3 (0.2) 0.5
March 31, 2022 513.2 462.8 50.4
____________
See accompanying notes immediately following these AUM tables.
24-------------------------------------------------------------------------------- Table of Contents AUM by Asset Class (2)
As of and for the Three Months Ended
$ in billions Total Equity Fixed Income Balanced Money Market Alternatives December 31, 2022 1,409.2 637.0 313.7 67.1 203.5 187.9 Long-term inflows 79.4 39.4 28.6 3.3 - 8.1 Long-term outflows (76.5) (34.6) (26.1) (4.7) - (11.1) Net long-term flows 2.9 4.8 2.5 (1.4) - (3.0) Net flows in non-management fee earning AUM (1.6) (2.7) 1.1 - - - Net flows in money market funds 7.7 - - - 7.7 - Total net flows 9.0 2.1 3.6 (1.4) 7.7 (3.0) Reinvested distributions 1.0 0.2 0.4 0.2 - 0.2 Market gains and losses 61.9 55.6 3.9 1.7 0.1 0.6 Foreign currency translation 1.9 0.8 0.2 0.3 0.2 0.4 March 31, 2023 1,483.0 695.7 321.8 67.9 211.5 186.1 Average AUM 1,463.0 674.0 318.1 68.8 213.6 188.5 % of total average AUM 100.0 % 46.1 % 21.7 % 4.7 % 14.6 % 12.9 % December 31, 2021 1,610.9 841.6 334.8 88.6 148.8 197.1 Long-term inflows 106.3 50.6 29.4 5.5 - 20.8 Long-term outflows (89.1) (45.0) (24.6) (6.3) - (13.2) Net long-term flows 17.2 5.6 4.8 (0.8) - 7.6 Net flows in non-management fee earning AUM (1.0) 0.4 (1.4) - - - Net flows in money market funds 12.8 - - - 12.8 - Total net flows 29.0 6.0 3.4 (0.8) 12.8 7.6 Reinvested distributions 0.8 0.2 0.3 0.1 - 0.2 Market gains and losses (80.9) (66.5) (12.7) (8.3) 0.4 6.2 Foreign currency translation (3.9) (1.3) (1.9) (0.1) - (0.6) March 31, 2022 1,555.9 780.0 323.9 79.5 162.0 210.5 Average AUM 1,545.1 776.6 327.8 83.6 154.5 202.6 % of total average AUM 100.0 % 50.3 % 21.2 % 5.4 % 10.0 % 13.1 % ________
See accompanying notes immediately following these AUM tables.
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Active AUM by Asset Class (2)
As of and for the Three Months Ended
$ in billions Total Equity Fixed Income Balanced Money Market Alternatives December 31, 2022 976.2 277.5 273.0 66.3 203.5 155.9 Long-term inflows 46.9 15.0 23.2 3.3 - 5.4 Long-term outflows (49.4) (15.4) (23.5) (4.7) - (5.8) Net long-term flows (2.5) (0.4) (0.3) (1.4) - (0.4) Net flows in money market funds 7.7 - - - 7.7 - Total net flows 5.2 (0.4) (0.3) (1.4) 7.7 (0.4) Reinvested distributions 1.0 0.2 0.4 0.2 - 0.2 Market gains and losses 20.9 16.1 3.5 1.7 0.1 (0.5) Foreign currency translation 1.9 0.9 0.1 0.3 0.2 0.4 March 31, 2023 1,005.2 294.3 276.7 67.1 211.5 155.6 Average AUM 1,002.0 289.5 274.4 67.9 213.6 156.6 % of total average AUM 100.0 % 28.9 % 27.4 % 6.8 % 21.3 % 15.6 % December 31, 2021 1,082.5 389.6 293.1 87.4 148.8 163.6 Long-term inflows 61.7 19.1 24.5 5.5 - 12.6 Long-term outflows (60.9) (24.2) (22.0) (6.2) - (8.5) Net long-term flows 0.8 (5.1) 2.5 (0.7) - 4.1 Net flows in money market funds 12.8 - - - 12.8 - Total net flows 13.6 (5.1) 2.5 (0.7) 12.8 4.1 Reinvested distributions 0.8 0.2 0.3 0.1 - 0.2 Market gains and losses (50.0) (35.2) (10.7) (8.2) 0.4 3.7 Foreign currency translation (4.2) (1.6) (1.9) (0.1) - (0.6) March 31, 2022 1,042.7 347.9 283.3 78.5 162.0 171.0 Average AUM 1,050.0 358.7 287.1 82.5 154.5 167.2 % of total average AUM 100.0 % 34.2 % 27.3 % 7.9 % 14.7 % 15.9 % ________
See accompanying notes immediately following these AUM tables.
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Passive AUM by Asset Class (2)
As of and for the Three Months Ended
$ in billions Total Equity Fixed Income Balanced Money Market Alternatives December 31, 2022 433.0 359.5 40.7 0.8 - 32.0 Long-term inflows 32.5 24.4 5.4 - - 2.7 Long-term outflows (27.1) (19.2) (2.6) - - (5.3) Net long-term flows 5.4 5.2 2.8 - - (2.6) Net flows in non-management fee earning AUM (1.6) (2.7) 1.1 - - - Total net flows 3.8 2.5 3.9 - - (2.6) Market gains and losses 41.0 39.5 0.4 - - 1.1 Foreign currency translation - (0.1) 0.1 - - - March 31, 2023 477.8 401.4 45.1 0.8 - 30.5 Average AUM 461.0 384.5 43.7 0.9 - 31.9 % of total average AUM 100.0 % 83.4 % 9.5 % 0.2 % - % 6.9 % December 31, 2021 528.4 452.0 41.7 1.2 - 33.5 Long-term inflows 44.6 31.5 4.9 - - 8.2 Long-term outflows (28.2) (20.8) (2.6) (0.1) - (4.7) Net long-term flows 16.4 10.7 2.3 (0.1) - 3.5 Net flows in non-management fee earning AUM (1.0) 0.4 (1.4) - - - Total net flows 15.4 11.1 0.9 (0.1) - 3.5 Market gains and losses (30.9) (31.3) (2.0) (0.1) - 2.5 Foreign currency translation 0.3 0.3 - - - - March 31, 2022 513.2 432.1 40.6 1.0 - 39.5 Average AUM 495.1 417.9 40.7 1.1 - 35.4 % of total average AUM 100.0 % 84.4 % 8.2 % 0.2 % - % 7.2 % ________
See accompanying notes immediately following these AUM tables.
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Total AUM by Client Domicile (3)
As of and for the Three Months Ended
$ in billions Total Americas APAC EMEA December 31, 2022 1,409.2 999.4 223.5 186.3 Long-term inflows 79.4 42.1 19.1 18.2 Long-term outflows (76.5) (41.4) (19.1) (16.0) Net long-term flows 2.9 0.7 - 2.2 Net flows in non-management fee earning AUM (1.6) 0.5 (1.3) (0.8) Net flows in money market funds 7.7 6.4 1.3 - Total net flows 9.0 7.6 - 1.4 Reinvested distributions 1.0 1.0 - - Market gains and losses 61.9 47.6 5.3 9.0 Foreign currency translation 1.9 0.1 (0.2) 2.0 March 31, 2023 1,483.0 1,055.7 228.6 198.7 December 31, 2021 1,610.9 1,132.5 247.3 231.1 Long-term inflows 106.3 61.5 21.4 23.4 Long-term outflows (89.1) (53.6) (15.8) (19.7) Net long-term flows 17.2 7.9 5.6 3.7 Net flows in non-management fee earning AUM (1.0) (2.2) (0.1) 1.3 Net flows in money market funds 12.8 12.4 1.2 (0.8) Total net flows 29.0 18.1 6.7 4.2 Reinvested distributions 0.8 0.8 - - Market gains and losses (80.9) (60.0) (12.4) (8.5) Foreign currency translation (3.9) 0.1 (1.8) (2.2) March 31, 2022 1,555.9 1,091.5 239.8 224.6 ________
See accompanying notes immediately following these AUM tables.
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Active AUM by Client Domicile (3)
As of and for the Three Months Ended
$ in billions Total Americas APAC EMEA December 31, 2022 976.2 670.8 191.0 114.4 Long-term inflows 46.9 21.7 16.8 8.4 Long-term outflows (49.4) (27.2) (15.8) (6.4) Net long-term flows (2.5) (5.5) 1.0 2.0 Net flows in money market funds 7.7 6.4 1.3 - Total net flows 5.2 0.9 2.3 2.0 Reinvested distributions 1.0 1.0 - - Market gains and losses 20.9 15.9 1.7 3.3 Foreign currency translation 1.9 0.1 0.1 1.7 March 31, 2023 1,005.2 688.7 195.1 121.4 December 31, 2021 1,082.5 724.5 208.8 149.2 Long-term inflows 61.7 34.5 19.8 7.4 Long-term outflows (60.9) (35.5) (14.7) (10.7) Net long-term flows 0.8 (1.0) 5.1 (3.3) Net flows in money market funds 12.8 12.4 1.2 (0.8) Total net flows 13.6 11.4 6.3 (4.1) Reinvested distributions 0.8 0.8 - - Market gains and losses (50.0) (33.6) (10.5) (5.9) Foreign currency translation (4.2) 0.1 (2.3) (2.0) March 31, 2022 1,042.7 703.2 202.3 137.2 ________
See accompanying notes immediately following these AUM tables.
29-------------------------------------------------------------------------------- Table of Contents Passive AUM by Client Domicile (3)
As of and for the Three Months Ended
$ in billions Total Americas APAC EMEA December 31, 2022 433.0 328.6 32.5 71.9 Long-term inflows 32.5 20.4 2.3 9.8 Long-term outflows (27.1) (14.2) (3.3) (9.6) Net long-term flows 5.4 6.2 (1.0) 0.2 Net flows in non-management fee earning AUM (1.6) 0.5 (1.3) (0.8) Total net flows 3.8 6.7 (2.3) (0.6) Market gains and losses 41.0 31.7 3.6 5.7 Foreign currency translation - - (0.3) 0.3 March 31, 2023 477.8 367.0 33.5 77.3 December 31, 2021 528.4 408.0 38.5 81.9 Long-term inflows 44.6 27.0 1.6 16.0 Long-term outflows (28.2) (18.1) (1.1) (9.0) Net long-term flows 16.4 8.9 0.5 7.0 Net flows in non-management fee earning AUM (1.0) (2.2) (0.1) 1.3 Total net flows 15.4 6.7 0.4 8.3 Market gains and losses (30.9) (26.4) (1.9) (2.6) Foreign currency translation 0.3 - 0.5 (0.2) March 31, 2022 513.2 388.3 37.5 87.4 ____________ (1) Channel refers to the internal distribution channel from which the AUM originated. Retail AUM represents AUM distributed by the company's retail sales team. Institutional AUM represents AUM distributed by our institutional sales team. This aggregation is viewed as a proxy for presenting AUM in the retail and institutional markets in which the company operates.
(2) Asset classes are descriptive groupings of AUM by common type of underlying investments.
(3) Client domicile disclosure groups AUM by the domicile of the underlying clients.
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Results of Operations for the three months ended March 31, 2023 compared to the
three months ended March 31, 2022 The discussion below includes the use of non-GAAP financial measures. See
"Schedule of Non-GAAP Information" for additional details and reconciliations of
the most directly comparable
Operating Revenues and Net Revenues
The main categories of revenues, and the dollar and percentage change between the periods, are as follows:
Variance
Three months ended March 31, 2023 vs 2022
$ in millions 2023 2022 $ Change % Change
Investment management fees 1,027.9 1,180.5 (152.6) (12.9) %
Service and distribution fees 334.2 379.0 (44.8) (11.8) %
Performance fees 5.6 1.0 4.6 460.0 %
Other 50.5 68.9 (18.4) (26.7) %
Total operating revenues 1,418.2 1,629.4 (211.2) (13.0) %
Revenue Adjustments:
Investment management fees (189.8) (205.9) 16.1 (7.8) %
Service and distribution fees (225.3) (257.7) 32.4 (12.6) %
Other (40.0) (49.0) 9.0 (18.4) %
Total Revenue Adjustments (1) (455.1) (512.6) 57.5 (11.2) %
Invesco Great Wall 100.5 124.1 (23.6) (19.0) %
CIP 12.3 11.5 0.8 7.0 %
Net revenues (2) 1,075.9 1,252.4 (176.5) (14.1) %
____________
(1) Total revenue adjustments include pass through investment management, service and distribution, and other revenues and equal the same amount as the third-party distribution, service and advisory expenses.
(2) See "Schedule of Non-GAAP Information" for additional important disclosures regarding the use of net revenues.
The impact of foreign exchange rate movements decreased operating revenues by$27.2 million during the three months endedMarch 31, 2023 when compared to the three months endedMarch 31, 2022 . Our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net business inflows (or outflows), changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. See the company's disclosures regarding the changes in AUM during the three months endedMarch 31, 2023 andMarch 31, 2022 in the "Assets Under Management" section above for additional information. Passive AUM generally earn a lower effective fee rate than active asset classes, and therefore, changes in the mix of AUM have an impact on revenues and net revenue yield. In addition, as a significant proportion of our AUM is based outside of theU.S. , changes in foreign exchange rates can result in a change to the mix ofU.S. Dollar denominated AUM for AUM denominated in other currencies. As fee rates differ across geographic locations, changes to exchange rates have an impact on revenues and net revenue yields. Average AUM was$1,463.0 billion in the three months endedMarch 31, 2023 , as compared to$1,545.1 billion in the three months endedMarch 31, 2022 . In addition to the impact of lower AUM, investors continued to shift AUM toward lower yield passive products, such as ETFs, during three months endedMarch 31, 2023 . 31 -------------------------------------------------------------------------------- Table of Contents Investment Management Fees Investment management fees were$1,027.9 million for three months endedMarch 31, 2023 as compared to$1,180.5 million for three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased investment management fees by$24.0 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange movements, investment management fees decreased by$128.6 million as a result of a decline in average AUM and lower revenue yields when compared to the three months endedMarch 31, 2022 period.
Service and Distribution Fees
In the three months endedMarch 31, 2023 , service and distribution fees were$334.2 million as compared to$379.0 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased service and distribution fees by$3.0 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange movements, service and distribution fees decreased by$41.8 million . The decrease is primarily driven by lower distribution fees of$24.8 million and transfer agency fees of$15.0 million , both of which are the result of lower AUM during the period.
Performance Fees
In the three months ended
Other Revenues
In the three months endedMarch 31, 2023 , other revenues were$50.5 million as compared to$68.9 million for the three months endedMarch 31, 2022 . The decrease in other revenues was primarily driven by lower real estate transaction fees and front end fees of$15.8 million and$6.7 million , respectively, partially offset by a$6.0 million increase in other revenues.
Invesco Great Wall
The company's most significant joint venture is our 49% investment in IGW. Management reflects 100% of IGW's results in its net revenues and adjusted operating expenses because it is important to evaluate the contribution that IGW is making to the business. The company's non-GAAP operating results reflect the economics of these holdings on a basis consistent with the underlying AUM and flows. Adjusted net income is reduced by the amount of earnings attributable to the 51% noncontrolling interests. See "Schedule of Non-GAAP Information" for additional disclosures regarding the use of net revenues. Net revenues from IGW were$100.5 million and average AUM was$91.0 billion for the three months endedMarch 31, 2023 (net revenues were$124.1 million and average AUM was$99.3 billion for the three months endedMarch 31, 2022 ). The impact of foreign exchange rate movements during the three months endedMarch 31, 2023 decreased net revenues by$7.8 million as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange movements, net revenues from IGW were$108.3 million . The decrease in revenue is a result of lower average AUM and a reduction in net revenue yield due to changes in the mix of AUM.
Management, performance and other fees earned from CIP
Management believes that the consolidation of investment products may impact a reader's analysis of our underlying results of operations and could result in investor confusion or the production of information about the company by analysts or external credit rating agencies that is not reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues for the impact of CIP in calculating net revenues. As management and performance fees earned by Invesco from the consolidated products are eliminated upon consolidation of the investment products, management believes that it is appropriate to add these operating revenues back in the calculation of net revenues. See "Schedule of Non-GAAP Information" for additional disclosures regarding the use of net revenues.
Management and performance fees earned from CIP were
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Operating Expenses
The main categories of operating expenses, and the dollar and percentage changes between periods, are as follows:
Variance
Three months ended March 31, 2023 vs 2022
$ in millions 2023 2022 $ Change % Change
Third-party distribution, service and
advisory 455.1 512.6 (57.5) (11.2) %
Employee compensation 462.8 432.9 29.9 6.9 %
Marketing 25.0 21.7 3.3 15.2 %
Property, office and technology 134.4 132.0 2.4 1.8 %
General and administrative 75.7 102.2 (26.5) (25.9) %
Transaction, integration and restructuring 41.6 35.2 6.4 18.2 %
Amortization of intangibles 14.1 15.1 (1.0) (6.6) %
Total operating expenses 1,208.7 1,251.7 (43.0) (3.4) %
The table below sets forth these expense categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense.
% of Total % of Total
Three months ended Operating % of Operating Three months ended Operating % of Operating
$ in millions March 31, 2023 Expenses Revenues March 31, 2022 Expenses Revenues
Third-party distribution,
service and advisory 455.1 37.6 % 32.1 % 512.6 41.0 % 31.5 %
Employee compensation 462.8 38.3 % 32.6 % 432.9 34.6 % 26.6 %
Marketing 25.0 2.1 % 1.8 % 21.7 1.7 % 1.3 %
Property, office and
technology 134.4 11.1 % 9.5 % 132.0 10.5 % 8.1 %
General and administrative 75.7 6.3 % 5.3 % 102.2 8.2 % 6.3 %
Transaction, integration and
restructuring 41.6 3.4 % 2.9 % 35.2 2.8 % 2.2 %
Amortization of intangibles 14.1 1.2 % 1.0 % 15.1 1.2 % 0.8 %
Total operating expenses 1,208.7 100.0 % 85.2 % 1,251.7 100.0 % 76.8 %
During the three months ended March 31, 2023 , operating expenses decreased by
$43.0 million as compared to the three months ended March 31, 2022 . The impact
of foreign exchange rate movements decreased operating expenses by $25.4 million
during the three months ended March 31, 2023 as compared to the three months
ended March 31, 2022 .
Third-Party Distribution, Service and Advisory
Third-party distribution, service and advisory expenses were$455.1 million for the three months endedMarch 31, 2023 as compared to$512.6 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased third-party costs by$6.1 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange rate changes, the decrease in costs was$51.4 million . The decrease is primarily due to a decrease of$23.6 million in distribution and service fees resulting from lower average AUM as well as decreases of$19.9 million in renewal commissions and$6.7 million in transaction fees.
Employee Compensation
Employee compensation was$462.8 million for the three months endedMarch 31, 2023 as compared to$432.9 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased employee compensation by$12.9 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange rate changes, there was an increase in employee compensation of$42.8 million . This increase was primarily driven by increases of$33.7 million related to mark-to-market gains on deferred compensation 33 -------------------------------------------------------------------------------- Table of Contents liabilities and costs associated with our previously announced executive retirements and other organizational changes of$13.3 million . We expect to recognize additional costs in the second quarter of approximately$20 million primarily related to executive retirements.
Headcount at
Marketing
Marketing expenses were$25.0 million for the three months endedMarch 31, 2023 as compared to$21.7 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased marketing expenses by$0.8 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 .
Property, Office and Technology
Property, office and technology costs were$134.4 million for the three months endedMarch 31, 2023 as compared to$132.0 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased property, office and technology expenses by$3.8 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange rate movements, the increase was$6.2 million . The increase was driven by higher property and office costs of$5.1 million as a result of overlapping rent associated with the move to our newAtlanta headquarters.
General and Administrative
General and administrative expenses were$75.7 million for the three months endedMarch 31, 2023 as compared to$102.2 million for the three months endedMarch 31, 2022 . The impact of foreign exchange rate movements decreased general and administrative expenses by$1.8 million during the three months endedMarch 31, 2023 as compared to the three months endedMarch 31, 2022 . After allowing for foreign exchange rate movements, the decrease was$24.7 million . The decrease was primarily due to$20 million of final recoveries related to losses incurred in previous periods and$9.8 million of indirect tax refunds which were received in the first quarter of 2023. The decrease was partially offset by higher travel and market data services costs.
Transaction, Integration and Restructuring
For the three months ended
Other Income and Expenses
The main categories of other income and expenses, and the dollar and percentage changes between periods, are as follows:
Variance
Three months ended March 31, 2023 vs 2022
$ in millions 2023 2022 $ Change % Change
Equity in earnings of unconsolidated
affiliates 26.1 33.4 (7.3) (21.9) %
Interest and dividend income 8.6 1.2 7.4 616.7 %
Interest expense (18.0) (23.2) 5.2 (22.4) %
Other gains/(losses), net 27.4 (45.5) 72.9 N/A
Other income/(expense) of CIP, net (17.9) (23.3) 5.4 (23.2) %
Total other income and expenses 26.2 (57.4) 83.6 N/A
Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates decreased$7.3 million to$26.1 million for the three months endedMarch 31, 2023 as compared to$33.4 million for the three months endedMarch 31, 2022 . The decrease is primarily driven by a decrease of$6.0 million in our joint venture investment in IGW due to lower revenues. 34 -------------------------------------------------------------------------------- Table of Contents Interest expense Interest expense was$18.0 million for the three months endedMarch 31, 2023 as compared to$23.2 million for the three months endedMarch 31, 2022 as a result of a decrease in debt. Other gains/(losses), net Other gains/(losses), net was a gain of$27.4 million for the three months endedMarch 31, 2023 as compared to a$45.5 million loss for the three months endedMarch 31, 2022 . Included in the gain for the first quarter of 2023 were$22.2 million of gains on investments and instruments held for our deferred compensation plans and$5.3 million of net gains related to the mark-to-market on seed capital investments. Included in the loss for the first quarter of 2022 were$42.9 million of losses on investments and instruments held for our deferred compensation plans and$5.9 million of net losses related to the mark-to-market on seed capital investments, partially offset by$2.4 million of net foreign exchange gains on intercompany loans.
Other income/(expense) of CIP, net
For the three months endedMarch 31, 2023 , other income/(expense) of CIP, net was a net expense of$17.9 million for the three months endedMarch 31, 2023 (three months endedMarch 31, 2022 : net expense of$23.3 million ). Interest and dividend income of CIP increased$65.1 million to$139.6 million (three months endedMarch 31, 2022 :$74.5 million ). Interest expense of CIP increased$51.8 million to$94.3 million (three months endedMarch 31, 2022 :$42.5 million ). Unrealized gains/(losses) of CIP were net losses of$63.2 million (three months endedMarch 31, 2022 : net losses of$55.3 million ). The net losses during the three months endedMarch 31, 2023 and 2022 were attributable to market-driven losses on investments held by consolidated funds.
Net impact of CIP and related noncontrolling interests in consolidated entities
The consolidation of investment products did not have an impact on net income attributable to Invesco for the three months endedMarch 31, 2023 andMarch 31, 2022 . The adjustment to net income for the net income/(loss) attributable to noncontrolling interests in consolidated entities represents the profit or loss attributable to third-party investors. The impact of any realized or unrealized gains or losses attributable to the interests of third-parties, which is reflected in other income/(expense) of CIP, net, is offset by this adjustment to arrive at net income attributable to Invesco. Also, the net income or loss of CIP is taxed at the investor level, not at the product level; therefore, a tax provision is not reflected in the net impact of CIP.
Additionally, CIP represent less than 1% of the company's AUM. Therefore, the net gains or losses of CIP are not indicative of the performance of the company's aggregate AUM.
Income Tax Expense
The company's subsidiaries operate in numerous taxing jurisdictions around the world, each with its own statutory tax rate. As a result, the blended statutory tax rate will vary from year to year depending on the mix of the profits and losses from each jurisdiction. Our effective tax rate increased to 29.7% for the three months endedMarch 31, 2023 (three months endedMarch 31, 2022 : 25.9%). The rate increase is primarily due to the impact that the increase in the net loss attributable to non-controlling interests in CIP has on the effective tax rate. 35 -------------------------------------------------------------------------------- Table of Contents Schedule of Non-GAAP Information We utilize the following non-GAAP performance measures: net revenue (and by calculation, net revenue yield on AUM), adjusted operating income, adjusted operating margin, adjusted net income attributable to Invesco and adjusted diluted EPS. The company believes the adjusted measures provide valuable insight into the company's ongoing operational performance and assist in comparisons to its competitors. These measures also assist the company's management with the establishment of operational budgets and forecasts. The most directly comparableU.S. GAAP measures are operating revenues (and by calculation, gross revenue yield on AUM), operating income, operating margin, net income attributable to Invesco and diluted EPS. Each of these measures is discussed more fully below. The following are reconciliations of operating revenues, operating income (and by calculation, operating margin) and net income attributable to Invesco (and by calculation, diluted EPS) on aU.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 (and by calculation, adjusted diluted EPS). These non-GAAP measures should not be considered as substitutes for anyU.S. GAAP measures and may not be comparable to other similarly titled measures of other companies. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate. The tax effects related to the reconciling items have been calculated based on the tax rate attributable to the jurisdiction to which the transaction relates. Notes to the reconciliations follow the tables.
Reconciliation of Operating revenues to Net revenues:
Three months ended March 31 ,
$ in millions 2023 2022
Operating revenues, U.S. GAAP basis 1,418.2 1,629.4 Revenue Adjustments (2) Investment management fees (189.8) (205.9) Service and distribution fees (225.3) (257.7) Other (40.0) (49.0) Total Revenue Adjustments (455.1) (512.6) Invesco Great Wall (1) 100.5 124.1 CIP (3) 12.3 11.5 Net revenues 1,075.9 1,252.4
Reconciliation of Operating income to Adjusted operating income:
Three months ended March 31,
$ in millions 2023 2022
Operating income, U.S. GAAP basis 209.5 377.7
Invesco Great Wall (1) 54.6 73.7
CIP (3) 14.7 14.8
Transaction, integration and restructuring (4) 41.6 35.2
Amortization of intangible assets (8) 14.1 15.1
Compensation expense related to market valuation changes in deferred compensation plans (10)
12.4 (21.9)
General and administrative (7) (20.0) -
Adjusted operating income 326.9 494.6
Operating margin(5) 14.8 % 23.2 %
Adjusted operating margin(6) 30.4 % 39.5 %
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Table of Contents Reconciliation of net income attributable to Invesco to Adjusted net income attributable to Invesco:
Three months ended March 31,
$ in millions, except per common share data 2023 2022
Net income attributable to Invesco Ltd., U.S. GAAP basis 145.0 197.7
Adjustments (excluding tax):
Transaction, integration and restructuring (4) 41.6 35.2
Amortization of intangible assets (8) 14.1 15.1
Deferred compensation plan market valuation changes and dividend income less compensation expense (10)
(10.4) 20.5
General and administrative (7) (20.0) -
Total adjustments excluding tax 25.3 70.8
Tax adjustment for amortization of intangible assets and goodwill (9)
4.2 3.7
Other tax effects of adjustments above (1.1) (12.9)
Adjusted net income attributable to Invesco Ltd. (11) 173.4 259.3
Average common shares outstanding - diluted 458.9 462.4
Diluted EPS $0.32 $0.43
Adjusted diluted EPS(12) $0.38 $0.56
____________
(1) Invesco Great Wall: The company reflects 100% of IGW in its net revenues and
adjusted operating expenses. The company's non-GAAP operating results reflect
the economics of these holdings on a basis consistent with the underlying AUM
and flows. Adjusted net income is reduced by the amount of earnings attributable
to the 51% noncontrolling interests.
(2) Revenue adjustments: The company calculates net revenues by reducing
operating revenues to exclude fees that are passed through to external parties
who perform functions on behalf of, and distribute, the company's managed funds.
The net revenue presentation assists in identifying the revenue contribution
generated by the company, removing distortions caused by the differing
distribution channel fees and allowing for a fair comparison with U.S. peer
investment managers and within Invesco's own investment units. Additionally,
management evaluates net revenue yield on AUM, which is equal to net revenues
divided by average AUM during the reporting period, as an indicator of the basis
point net revenues we receive for each dollar of AUM we manage.
Investment management fees are adjusted by renewal commissions and certain
administrative fees. Service and distribution fees are primarily adjusted by
distribution fees passed through to broker dealers for certain share classes and
pass through fund-related costs. Other revenues are primarily adjusted by
transaction fees passed through to third parties.
(3) CIP: See note 12, "Consolidated Investment Products," for a detailed
analysis of the impact to the company's Condensed Consolidated Financial
Statements from the consolidation of CIP. The company believes that the CIP may
impact a reader's analysis of our underlying results of operations and could
result in investor confusion or the production of information about the company
by analysts or external credit rating agencies that is not reflective of the
underlying results of operations and financial condition of the company.
Accordingly, the company believes that it is appropriate to adjust operating
revenues and operating income for the impact of CIP in calculating the
respective net revenues and adjusted operating income.
(4) Transaction, integration and restructuring: The company believes it is
useful to adjust for the transaction, integration and restructuring charges in
arriving at adjusted operating income, adjusted operating margin and adjusted
diluted EPS, as this will aid comparability of our results period to period, and
aid comparability with peer companies that may not have similar acquisition and
restructuring related charges.
(5) Operating margin is equal to operating income divided by operating revenues.
(6) Adjusted operating margin is equal to adjusted operating income divided by net revenues.
(7) General and administrative: The 2023 adjustment removes insurance recoveries related to fund-related losses incurred in prior periods.
(8) Amortization of intangible assets: The company removes amortization expense related to acquired assets in arriving at adjusted operating income, adjusted operating margin and adjusted diluted EPS, as this will aid comparability of our results period to period, and aid comparability with peer companies that may not have similar acquisition-related charges. (9) Tax adjustment for amortization of intangible assets and goodwill: The company reflects the tax benefit realized on the tax amortization of goodwill and intangibles in adjusted net income. The company believes it is useful to include this tax benefit in arriving at the adjusted diluted EPS measure. (10) Market movement on deferred compensation plan liabilities: Certain deferred compensation plan awards involve a return to the employee linked to the appreciation (depreciation) of specified investments. The company hedges economically the exposure to market movements for these investments. Since these plans are hedged economically, the company believes it is useful to reflect the offset ultimately achieved from hedging the market exposure in the calculation of adjusted operating income (and by calculation, adjusted operating margin) and adjusted net income (and by calculation, adjusted diluted EPS) to produce results that will be more comparable period to period.
(11) The effective tax rate on adjusted net income attributable to
(12) Adjusted diluted EPS is equal to adjusted net income attributable to
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