Invesco(IVZ) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a record AUM of $2.1 trillion, reflecting a $123 billion increase or 6% from the previous quarter and a $329 billion increase or 18% year-over-year [24] - Average long-term AUM rose to $1.46 trillion, a 9% increase from the last quarter and a 16% increase from the same quarter last year [24] - Net revenues for the third quarter reached $1.2 billion, an increase of $82 million compared to the same quarter last year, primarily driven by higher investment management fees [31] Business Line Data and Key Metrics Changes - The company reported strong net long-term inflows of nearly $29 billion, marking an 8% annualized organic growth, the best flow quarter since 2021 [12] - In the ETF and indexed offerings, the company reached $1 trillion in AUM, with an annualized organic growth of 15% [13] - Fundamental fixed income saw over $4 billion in net long-term inflows, while total fixed income inflows across all products reached nearly $13 billion [15] Market Data and Key Metrics Changes - Nearly 40% of long-term AUM now comes from clients outside the U.S., with two-thirds of net inflows this quarter from AMEA and Asia-Pacific regions [12] - The China joint venture reached a record high AUM of $122 billion, reflecting a 16% increase over the last quarter, with $7.3 billion of net long-term inflows [16] - The company experienced a significant increase in demand for fixed income products, particularly in Asia, with strong institutional interest in investment-grade bonds [15] Company Strategy and Development Direction - The company is focused on capital management and has repaid approximately 25% of the term loans used for a $1 billion preferred stock repurchase, enhancing earnings accretion [4] - A hybrid investment platform is being implemented, expected to be completed by the end of 2026, aimed at simplifying operations and improving investment performance [5][6] - The company is pursuing growth through partnerships, such as the Barings Private Markets partnership, and is in the final stages of selling a majority interest in its Indian business [9][10] Management's Comments on Operating Environment and Future Outlook - Management noted strong momentum in the market, with key indices reaching new highs and increased investor confidence following a Fed rate cut [11] - The company is optimistic about future growth opportunities, particularly in private markets and fixed income, as it continues to innovate and meet client demand [19][20] - Management expressed confidence in the ongoing initiatives to enhance investment performance and reduce redemption rates in fundamental equities [22] Other Important Information - The company recorded a non-cash impairment charge of $36 million related to the sale of IntelliFlow, which is expected to close in the fourth quarter [33] - The effective non-GAAP tax rate for the third quarter was significantly impacted by a favorable resolution of a tax matter, resulting in an 11.2% effective tax rate [34] - The company plans to continue common share repurchases, with a total payout ratio expected to be near 60% this year [38] Q&A Session Summary Question: Update on QQQ shareholder vote and marketing expenses - Management indicated strong participation and momentum in favor of the fee change proposals, but could not disclose specific quorum details [41][42] - The reclassification of marketing expenses does not impact operating income or the proposal's approval likelihood [43] Question: Clarification on proxy voting expenses - Proxy solicitation expenses are considered marketing expenses of the fund and are not expected to affect Invesco's operating expenses [45][46] Question: Insights on fixed income flows and future expectations - The company has seen strong fixed income performance and expects continued strength, despite some recent volatility [51][52] Question: Details on divestitures and capital return priorities - Proceeds from the sale of the Indian business are expected to be $140 to $150 million, with negligible impact on overall operating results [57][58] - The company remains focused on improving its balance sheet and returning capital to shareholders while investing in growth [59] Question: Future expense growth related to the Alpha platform - Implementation costs for the Alpha platform are expected to remain high through 2026, with a focus on managing fixed expenses [63][64] Question: Variable expenses outlook for 2026 and 2027 - Variable expenses are expected to fluctuate with revenue, while fixed expenses will be closely managed to drive operating leverage [70][71]