Factors that Led to a Rise in Invesco’s Total Operating Expenses



Operating expenses

Invesco Limited (IVZ) incurred total operating expenses of $3.8 billion in 2017 compared to $3.5 billion in 2016, implying an increase of 9.1% year-over-year. The company incurred expenses of ~$1.5 billion in 2017 in third-party distribution, service, and advisory services. In 2016, it incurred operating expenses of $1.4 billion. The company’s employee compensation expenses totaled $1.5 billion in 2017 and in 2016, it incurred $1.3 billion.

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Invesco incurred marketing expenses of $123.7 million in 2017 compared to $114.8 million in 2016. This trend implies a 7.8% increase on the back of travel and entertainment expenses, advertising costs, and other marketing expenses. However, the fluctuations in foreign exchange rates positively impacted these expenses in 2017.

General and administrative expenses

Invesco incurred general and administrative expenses of $365.5 million in 2017 compared to $331.5 million in 2016. This trend indicates an increase of 10.3% that resulted from fund expenses, irrecoverable taxes, amortization of intangibles, and travel expenses. However, a rise in its professional services, audit, consulting, and legal expenses also contributed to this trend.

The fluctuations in the foreign exchange rate favorably impacted Invesco’s general and administrative expenses in 2017.

Invesco’s free cash flow yield stood at ~4.4% on an LTM (last-12-months) basis. Among its peers (XLF), SEI Investments (SEIC), Legg Mason (LM), and Franklin Resources (BEN) have free cash flow yields of ~2.5%, ~3.8%, and ~7.8%, respectively, on an LTM basis.

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