Invesco(IVZ) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a record AUM of $2.1 trillion, with net long-term inflows of nearly $29 billion, representing an 8% annualized organic growth, the best flow quarter since 2021 [13][24] - Total AUM increased by $123 billion, or 6%, from the previous quarter, and by $329 billion, or 18%, year-over-year [24] - Adjusted diluted earnings per share for the third quarter was $0.61, with a significant improvement in operating margin to 34.2% [25][36] Business Line Data and Key Metrics Changes - The ETF platform reached a milestone of $1 trillion in AUM, with an annualized organic growth of 15% [14] - Fundamental fixed income garnered over $4 billion in net long-term inflows, with total fixed income inflows reaching nearly $13 billion when including ETFs [16] - The company recorded net outflows of $5 billion in fundamental equities, primarily due to a broader secular outflow trend in actively managed equities [21] Market Data and Key Metrics Changes - Nearly 40% of long-term AUM is now from clients outside the U.S., with two-thirds of net inflows this quarter coming from EMEA and Asia-Pacific regions [13] - The China joint venture reached a record high AUM of $122 billion, reflecting a 16% increase over the last quarter, with $8.1 billion in net long-term inflows [17] - The company launched 12 new products in its China JV, including its first fixed income ETF, indicating strong demand for innovative products [19] 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 [5][26] - A hybrid investment platform is being implemented, expected to be completed by the end of 2026, aimed at simplifying operations and improving investment performance [7][32] - The company is pursuing growth through partnerships, such as the Barings private markets partnership, which has already launched its first joint product [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 [12] - The company is optimistic about future growth, particularly in fixed income and private markets, despite some volatility in the credit space [56][57] - Management emphasized the importance of investment performance, with over half of funds performing in the top quartile of peers on a three-year basis [23] Other Important Information - The company is in the process of selling a majority interest in its Indian business, expecting cash proceeds of $140 million to $150 million [35] - A non-cash impairment charge of $36 million was recorded related to the sale of intelliflo, which is expected to close in the fourth quarter [33][34] - The effective non-GAAP tax rate for the third quarter was significantly impacted by a favorable resolution of a tax matter, resulting in an effective rate of 11.2% [34] Q&A Session Summary Question: Update on QQQ shareholder vote and marketing expenses - Management is pleased with the progress of the QQQ shareholder vote, noting overwhelming support for the fee change, but cannot disclose specific quorum details [40][41] - The reclassification of marketing expenses does not impact operating income or the proposal's approval likelihood [42] Question: Use of proxy voting firm and expense classification - The proxy solicitation firm's expenses are considered marketing expenses of the fund and are not expected to affect Invesco's operating expenses [45][46] Question: Fixed income flows and market outlook - Management reported strong fixed income performance and organic growth, with no material implications from recent market events [55][56] Question: Details on divestitures and capital return priorities - Proceeds from the India sale are expected to enhance balance sheet flexibility, while the intelliflo sale is anticipated to have negligible impact on overall results [61][63] Question: Expense growth and Alpha platform integration - Implementation costs for the Alpha platform are expected to remain high through 2026, with a focus on managing fixed expenses [67][68] Question: Variable expenses and operating leverage - Variable expenses are expected to fluctuate with revenue, while fixed expenses will be closely managed to drive operating leverage [75][76]