Flanagan Plans Another $200MM of Invesco Optimization
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Wednesday, October 28, 2020

Flanagan Plans Another $200MM of Invesco Optimization

Marty Flanagan and his team are planning more expense cuts over the next two years.

Martin L. "Marty" Flanagan
President and CEO
Yesterday, Flanagan, president and CEO of Invesco [profile], revealed (on the firm's Q3 earnings call, as transcribed by Seeking Alpha) plans to trim the Atlanta-based multinational asset manager's "normalized annual operating expenses by a net $200 million by the end of 2022." Later on the call, chief financial officer Allison Dukes confirmed that they expect $150 million (75 percent) of those cuts to come by the end of 2021. (Here's the accompanying earnings call presentation.)

Dukes put Invesco's normalized operating expense run rate at $2.88 billion, so they're aiming for roughly $2.66 billion by the end of 2022. That's roughly a 6.9 percent drop. And the cuts follow already-completed trimmings in the wake of Invesco's OpFunds acquisition last year.

As for where the new cuts will come from, Dukes later clarified, in response to a question from Jefferies analyst Dan Fannon, that 50 to 60 percent of will come from "compensation expense."

"The other 40% to 50% would be split across occupancy, tech expense and G&A," Dukes said. "On the compensation side, it is primarily realigning our workforce to lower cost locations, and reallocating and reorganizing across our business to make sure we're investing in our highest capability."

At the same time, watch for the Invesco team to double down in certain areas with further investments. Dukes pointed to alternatives, China, ETFs, global equities, and solutions as five "key areas" where the Invesco team sees an "opportunity to invest."

Yesterday, before the earnings call, the Invesco team reported non-GAAP earnings per share of $0.53 for Q3 2020, rising $0.18 from Q2and beating expectations by $0.05. Invesco brought in $1.09 billion in Q3 revenue (in line with expectations), and its AUM rose 6.4 percent to $1.2182 trillion. Invesco brought in $7.8 billion in long-term net inflows in Q3, up from $14.2 billion in net Q2 outflows.

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