Invesco(IVZ) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Overview CEO Update & Key Highlights In Q2 2025, Invesco achieved a record $2.0 trillion in AUM, driven by $15.6 billion in net long-term inflows, while GAAP diluted EPS was $(0.03) and adjusted diluted EPS was $0.36, reflecting strategic capital actions - CEO Andrew Schlossberg highlighted that the company's global scale and product breadth led to $16 billion in net long-term inflows (a 5% annualized growth rate) and record AUM of $2 trillion, emphasizing controlled expenses, positive operating leverage, and a commitment to returning capital to shareholders through common and preferred stock repurchases[4] - Q2 2025 GAAP diluted EPS was $(0.03), which includes a negative impact of $0.35 per share from costs related to the repurchase of preferred stock, while Adjusted diluted EPS, a non-GAAP measure, was $0.36[2][15] Key Highlights | Metric | Q2 2025 Value | | :--- | :--- | | Net Long-Term Inflows | $15.6 billion | | Ending AUM | $2.0 trillion (Record High) | | AUM Increase from Prior Quarter | 8.5% | | U.S. GAAP Operating Margin | 14.1% | | Adjusted Operating Margin | 31.2% | | Common Share Repurchases | $25 million (1.7 million shares) | | Preferred Stock Repurchases | $1.0 billion | Financial Performance U.S. GAAP Operating Results Q2 2025 GAAP operating income decreased 22.8% sequentially to $214.2 million due to higher employee compensation, but increased 3.6% year-over-year as higher revenues offset compensation rises moderated by lower G&A costs Q2 2025 vs. Q1 2025 (GAAP) Operating revenues decreased by 0.9% to $1,515.5 million, while expenses rose $49.4 million due to deferred compensation and severance, leading to a 22.8% drop in operating income to $214.2 million - Operating revenues decreased by $13.7 million compared to Q1 2025, with investment management fees slightly up but offset by lower service, distribution, and other fees[11] - Operating expenses increased by $49.4 million versus Q1 2025, primarily due to a $45.8 million rise in employee compensation, which included $29.3 million in mark-to-market on deferred compensation and $16.9 million in severance from the reorganization of fundamental equities teams[12] - The effective tax rate increased to 28.1% from 22.5% in the prior quarter, mainly due to the impact of lower pre-tax income and unfavorable changes in non-controlling interests[14] Q2 2025 vs. Q2 2024 (GAAP) Operating revenues grew 2.2% year-over-year to $1,515.5 million, but expenses increased $24.8 million from higher employee compensation, partially offset by lower G&A due to a prior-year regulatory settlement, resulting in a 3.6% rise in operating income to $214.2 million - Operating revenues increased by $32.2 million compared to Q2 2024, with investment management fees rising $35.1 million due to higher average AUM[16] - Operating expenses rose by $24.8 million year-over-year, with employee compensation increasing by $58.1 million, while General and Administrative expenses decreased by $41.2 million, primarily because the prior-year quarter included an expense for a regulatory settlement[17] - The effective tax rate rose to 28.1% from 24.6% in Q2 2024, attributed to tax rate changes and an unfavorable mix of income across tax jurisdictions[18] Adjusted (Non-GAAP) Operating Results Adjusted Q2 2025 net revenues were $1,104.6 million, with operating income at $344.4 million, showing slight sequential declines but year-over-year growth of 1.7% in net revenues and 2.7% in operating income, with adjusted diluted EPS at $0.36 Q2 2025 vs. Q1 2025 (Adjusted) Adjusted net revenues marginally decreased by $4.1 million, and operating expenses slightly increased, leading to a $5.1 million drop in adjusted operating income to $344.4 million and a 0.3 percentage point dip in margin to 31.2% Adjusted Operating Results Comparison | Metric | Q2-25 | Q1-25 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,104.6 m | $1,108.7 m | ($4.1 m) | | Adjusted Operating Income | $344.4 m | $349.5 m | ($5.1 m) | | Adjusted Operating Margin | 31.2% | 31.5% | (0.3 pts) | - The effective tax rate on adjusted net income increased to 26.5% from 24.4% in Q1 2025, primarily due to an unfavorable change in the mix of income across tax jurisdictions[21] Q2 2025 vs. Q2 2024 (Adjusted) Adjusted net revenues increased by $18.8 million year-over-year, with operating expenses rising $9.7 million, resulting in a $9.1 million increase in adjusted operating income and a modest expansion of the adjusted operating margin to 31.2% from 30.9% in the prior-year quarter Adjusted Operating Results Comparison | Metric | Q2-25 | Q2-24 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,104.6 m | $1,085.8 m | +$18.8 m | | Adjusted Operating Income | $344.4 m | $335.3 m | +$9.1 m | | Adjusted Operating Margin | 31.2% | 30.9% | +0.3 pts | - The effective tax rate on adjusted net income increased to 26.5% from 22.1% in Q2 2024, due to tax rate changes and an unfavorable income mix across jurisdictions[24] Capital Management & Shareholder Returns Capital Structure & Share Repurchases In Q2 2025, Invesco increased total debt to $1.88 billion by taking on $1.0 billion in new bank loans to repurchase preferred stock, while also repurchasing $25 million of common shares and increasing its revolving credit facility to $2.5 billion Balance Sheet Items | Balance Sheet Item | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $922.7 million | $821.7 million | | Debt | $1,883.9 million | $964.8 million | - Debt increased significantly due to $1.0 billion in new 3-year and 5-year bank term loans used to fund the repurchase of Series A Preferred Stock on May 16, 2025[27] - The company repurchased 1.7 million common shares for $25 million in Q2 2025 and repurchased $1.0 billion of its outstanding Series A Preferred Stock[28][30] Dividends Invesco declared a quarterly common dividend of $0.21 per share and a preferred dividend of $14.75 per share, having paid $95.2 million in common and $56.6 million in preferred dividends during Q2 2025 Declared Dividends | Dividend Type | Declared Amount per Share | Payable Date | | :--- | :--- | :--- | | Common | $0.21 | September 2, 2025 | | Preferred | $14.75 | September 1, 2025 | - Total dividends paid during Q2 2025 amounted to $95.2 million for common shares and $56.6 million for preferred shares[31] Assets Under Management (AUM) Analysis Overall AUM and Net Flows In Q2 2025, Invesco achieved a record $2.0 trillion in ending AUM, driven by $15.6 billion in net long-term inflows, strong market performance, and favorable foreign exchange movements, representing an 8.5% sequential and 16.6% year-over-year increase Net Flows Summary | Flow Type | Q2-25 (billions) | Q1-25 (billions) | Q2-24 (billions) | | :--- | :--- | :--- | :--- | | Active Net Long-Term | $3.8 | $1.5 | $2.3 | | Passive Net Long-Term | $11.8 | $16.1 | $14.4 | | Total Net Long-Term | $15.6 | $17.6 | $16.7 | | Money Market | ($3.2) | $10.0 | $4.9 | | Total Net Flows | $15.2 | $32.6 | $28.2 | AUM Change Drivers | Driver | Q2-25 Impact (billions) | | :--- | :--- | | Net Long-Term Inflows | +$15.6 | | Net Market Gains | +$126.4 | | Foreign Exchange Movements | +$14.0 | | Money Market Outflows | -$3.2 | | Ending AUM | $2,001.4 | AUM by Investment Approach (Active vs. Passive) Passive strategies led growth with $11.8 billion in net long-term inflows, complemented by $3.8 billion from active strategies, resulting in ending AUM of $1.09 trillion for Active and $913.9 billion for Passive Q2 2025 Net Long-Term Flows by Approach | Investment Approach | Net Long-Term Flows (billions) | | :--- | :--- | | Active | $3.8 | | Passive | $11.8 | Ending AUM by Approach | Investment Approach | Ending AUM (June 30, 2025, billions) | | :--- | :--- | | Active | $1,087.5 | | Passive | $913.9 | AUM by Channel and Client Domicile Retail and Institutional channels contributed $9.1 billion and $6.5 billion in net long-term inflows respectively, with Asia Pacific and EMEA showing strong regional inflows, while the Americas experienced modest net long-term outflows Q2 2025 Net Long-Term Flows by Channel | Channel | Net Long-Term Inflows (billions) | | :--- | :--- | | Retail | $9.1 | | Institutional | $6.5 | Q2 2025 Net Long-Term Flows by Domicile | Region | Net Long-Term Flows (billions) | | :--- | :--- | | Asia Pacific | $9.8 | | EMEA | $6.6 | | Americas | ($0.8) | AUM by Investment Capability Growth was driven by ETFs and Index strategies ($12.6 billion), China JV & India ($5.6 billion), and Fundamental Fixed Income ($2.8 billion), partially offset by outflows from Fundamental Equities and Private Markets Q2 2025 Net Long-Term Flows by Investment Capability | Capability | Net Long-Term Flows (billions) | | :--- | :--- | | Inflows | | | ETFs and Index | $12.6 | | China JV & India | $5.6 | | Fundamental Fixed Income | $2.8 | | Multi-Asset/Other | $0.5 | | Outflows | | | Fundamental Equities | ($3.6) | | Private Markets | ($2.3) | Financial Statements and Reconciliations Condensed Consolidated Income Statements (U.S. GAAP) Q2 2025 U.S. GAAP income statement reported $1,515.5 million in total operating revenues and $214.2 million in operating income, but a $159.3 million preferred share repurchase cost led to a net loss of $12.5 million, or $(0.03) per diluted share Q2 2025 U.S. GAAP Income Statement Highlights | Line Item | Q2-25 (millions) | Q1-25 (millions) | Q2-24 (millions) | | :--- | :--- | :--- | :--- | | Total operating revenues | $1,515.5 | $1,529.2 | $1,483.3 | | Total operating expenses | $1,301.3 | $1,251.9 | $1,276.5 | | Operating income | $214.2 | $277.3 | $206.8 | | Cost of preferred share repurchase | ($159.3) | — | — | | Net income/(loss) attributable to Invesco Ltd. | ($12.5) | $171.1 | $132.2 | | Diluted EPS | ($0.03) | $0.38 | $0.29 | Non-GAAP Reconciliations This section details reconciliations from U.S. GAAP to non-GAAP measures, adjusting for items like amortization, deferred compensation changes, severance, and the significant $159.3 million preferred stock repurchase cost to derive Adjusted Net Income - Non-GAAP measures like Net Revenues, Adjusted Operating Income, and Adjusted EPS are used to provide insight into ongoing operational performance by excluding certain items[41] - Adjustments for Q2 2025 included severance costs ($16.9M) for reorganizing investment teams, a software impairment ($8.0M), and the cost of the preferred stock repurchase ($159.3M), which are removed to aid comparability[47] Q2 2025 Reconciliation of GAAP Net Income to Adjusted Net Income | Description | Amount (millions) | | :--- | :--- | | Net (loss) attributable to Invesco Ltd., U.S. GAAP basis | ($12.5) | | Amortization of intangible assets | $9.7 | | Deferred compensation net market valuation changes | ($19.0) | | Severance | $16.9 | | Software impairment | $8.0 | | Tax adjustments | $2.8 | | Cost of preferred stock repurchase | $159.3 | | Adjusted net income attributable to Invesco Ltd. | $165.2 | Supplemental Information (Cash Flow & Balance Sheet) Supplemental tables provide cash flow and balance sheet data excluding Consolidated Investment Products (CIP), showing Invesco's cash and cash equivalents at $922.7 million and total assets of $19.2 billion, with total liabilities of $5.3 billion, as of June 30, 2025 - The supplemental information provides non-GAAP presentations of the balance sheet and cash flow statement, excluding the impact of Consolidated Investment Products (CIP), as CIP assets are not available for use by Invesco[60][63] Balance Sheet Excluding CIP | Item | June 30, 2025 (billions) | | :--- | :--- | | Total Assets | $19.2 | | Total Liabilities | $5.3 | | Total Equity | $13.9 |