Invesco AUM drops 14.1% in quarter; hiring freeze initiated to cut costs

Invesco on Thursday reported assets under management of $1.05 trillion, down 14.1% from three months earlier and up 10.3% from a year earlier.

The firm also instated a global hiring freeze to minimize costs in the near term amid uncertainty in the markets and economic environment caused by the coronavirus pandemic, executives on its quarterly earnings call said.

“As a result of the recent market reaction to the COVID-19 crisis, AUM declined during the first quarter, but remain(ed) above $1 trillion,” the firm’s Thursday earnings release said.

“The decline in AUM adversely impacted our revenues in the first quarter, and we expect it will continue pressuring revenues in the near term,” the release said. “During this period of market turbulence and uncertainty, we believe it is imperative to maintain financial flexibility. We continue to manage our expense base to align with the current lower revenue environment through reduced variable compensation and discretionary spend.”

The company reported net outflows of $2.1 billion for the first quarter vs. net outflows of $20.4 billion during the fourth quarter and net inflows of $3.5 billion during the first quarter of 2019.

Invesco reported revenues of $1.6 billion in the first quarter, down 8.3% from the fourth quarter and up 31.6% from the year-earlier quarter. As a result of the COVID-19 health crisis, 99% of Invesco’s global workforce is working from home, Martin L. Flanagan, president and CEO, said during the earnings call.

The firm also recently implemented a hiring freeze to save on expenses, Loren M. Starr, chief financial officer, said on the Thursday call.

“In light of the uncertainty in the markets and the economic environment, we have undertaken a thoughtful review of our operating expense base and focused on what we could do in the near term to minimize costs,” Mr. Starr said. “We’ve determined that we will freeze hiring for the time being. Additionally, we are aggressively managing discretionary expenses and reviewing other aspects of the firm’s expense base.”

The firm now expects its quarterly operating expenses to be approximately $80 million per quarter lower, on average, for the remainder of 2020, Mr. Starr said.
Invesco had previously set a quarterly run rate operating expense guidance of $755 million per quarter, he added.

In addition to Invesco’s hiring freeze, other announcements made by the manager on its earnings call reflected “a worsened financial posture,” for the firm, Neal Epstein, vice president, senior credit officer at Moody’s Investors Services, said in an emailed statement on Thursday.

“Invesco’s efforts to conserve capital, while credit positive, highlight negative underlying pressures in their business. The company announced a common dividend cut, hiring freeze, liquidation of seed capital and suspension of share repurchases,” Mr. Epstein continued.

Invesco will be reducing its quarterly common dividend to 15.5 cents from 31 cents per share, beginning with the dividend that will be paid in the second quarter, Mr. Flanagan said in a statement in the earnings release.

The firm also plans to redeem up to $200 million of seed capital investments from certain investment products in the near term, and during the first quarter withheld 2.3 million shares ($31.5 million) related to employee share vestings, the earnings release said.

Mr. Epstein of Moody’s also noted in his statement that “revenue declines in the face of coronavirus market impacts lowered earnings and reduced average fees earned on AUM. Commitments made following the Oppenheimer acquisition, including a $1 billion share repurchase and a 5.9% preferred dividend, have weighed on the company’s cash position, although operating cash flow continues at $1 billion per year.”