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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a generally positive outlook, with strong fixed income flows, robust growth in China, and strategic divestitures to support shareholder returns. The Q&A section reassured analysts on expense management and capital return priorities. Despite some management vagueness, the overall sentiment remains positive due to strategic growth plans and strong market positions, particularly in China and fixed income. However, the absence of guidance and ongoing high implementation costs for the Alpha platform temper the outlook slightly.
Assets Under Management (AUM) Reached a record $2.1 trillion, an increase of $123 billion (6%) from the previous quarter and $329 billion (18%) year-over-year. Growth was driven by market gains of $99 billion and net long-term inflows of $29 billion.
Net Long-Term Inflows Nearly $29 billion, representing an 8% annualized organic growth rate. This is the best flow quarter since 2021, driven by diversified global platform performance and strong growth across investment capabilities.
ETF and Index Offerings Reached $1 trillion in AUM, with an annualized organic growth rate of 15%. Record net inflows were seen in diverse products, including QQQM and China technology ETFs.
China Joint Venture (JV) AUM Reached a record $122 billion, a 16% increase over the last quarter. Delivered $8.1 billion in net long-term inflows, with $7.3 billion from the China JV, representing a 34% annualized organic growth rate.
Private Markets Net Inflows $600 million, driven by private credit and direct real estate. Private credit had nearly $1 billion in net inflows, while direct real estate contributed $100 million.
Fundamental Equities Net Outflows Recorded $5 billion in net outflows, driven by broader secular trends in actively managed equities and $4.5 billion in outflows from the developing markets fund due to strategic repositioning.
Adjusted Operating Margin Improved to 34.2%, a 300 basis point increase sequentially and a 260 basis point increase year-over-year, driven by strong revenue growth and well-managed expenses.
Adjusted Diluted Earnings Per Share (EPS) $0.61 for the third quarter, reflecting improved financial performance and operating leverage.
Net Revenue Yield 22.9 basis points, with a slight decline from the previous quarter. The decline is stabilizing due to a more balanced AUM profile.
India Asset Management Business Sale Expected to generate $140 million to $150 million in cash proceeds. Post-sale, India's AUM (~$15 billion) and operating results will no longer be reported in Invesco's results.
Hybrid Investment Platform: Implementation of a hybrid investment platform combining Alpha and Aladdin programs, with the second wave of significant equity AUM launched onto the Alpha platform. Expected completion by 2026.
New Active ETFs: Launched 5 new active ETFs in Q3, bringing the total to 36 for the year. Expanded active UCITS ETFs in EMEA region.
Private Markets Partnership: Launched the Invesco Dynamic Credit Opportunity Fund in partnership with Barings, targeting U.S. wealth management market. A second co-managed fund is in development for early next year.
India Joint Venture: Selling majority interest in Indian business to Hinduja Group, establishing a local joint venture. Expected to close in Q4, with $140-$150 million in cash proceeds.
China JV Growth: Achieved record AUM of $122 billion in China JV, with $8.1 billion in net long-term inflows. Launched 12 new products, including the first fixed income ETF.
ETF and Index Growth: Reached $1 trillion in AUM for ETF and index offerings, with 15% annualized organic growth. Strong inflows in U.S. and EMEA regions.
Capital Management: Repaid 25% of term loans used for $1 billion preferred stock repurchase, improving flexibility and deleveraging.
Organizational Simplification: Realigned fundamental equities and regional investment teams under a single CIO, consolidating global equity platform.
Intelliflo Sale: Announced sale of Intelliflo, generating $100 million in net cash at closing and up to $65 million in future earn-outs.
QQQ ETF Modernization: Modernizing the structure of the QQQ ETF, with strong shareholder support. Special meeting adjourned to December 5 for additional vote solicitation.
Global Equity Income Fund: Achieved record net inflows of $3.8 billion, primarily from Japanese market, growing to $20 billion in AUM.
Market Conditions: Broadening investor demand and market dynamics are favorable, but there is a risk of shifts in market conditions that could impact asset flows and revenue.
Strategic Execution Risks: The implementation of the hybrid investment platform and other strategic initiatives, such as the QQQ ETF modernization and the India joint venture, carry execution risks and potential delays.
Regulatory Hurdles: The QQQ ETF modernization requires shareholder approval, and delays in obtaining sufficient votes have already occurred, potentially impacting timelines.
Competitive Pressures: The firm faces competitive pressures in actively managed equities, particularly in the U.S., with ongoing net outflows in this segment.
Economic Uncertainties: Economic conditions, including interest rate changes and global economic shifts, could impact investor confidence and asset flows.
Supply Chain Disruptions: Not explicitly mentioned, but operational complexities in implementing new platforms and strategies could pose challenges.
Financial Risks: The firm is managing significant debt repayments and balance sheet recapitalization, which could strain financial flexibility if cash flows are impacted.
Capital Management: The company has improved flexibility in capital management, enabling further deleveraging. Approximately 25% of the term loans used for the $1 billion preferred stock repurchase have been repaid, accelerating expected earnings accretion and paving the way for future redemptions.
Hybrid Investment Platform Implementation: The hybrid investment platform implementation, combining Alpha and Aladdin programs, is on track to be completed by the end of 2026. This initiative aims to drive simplification, improve investment system consolidation, and achieve future cost avoidance.
Sale of Intelliflo: The sale of Intelliflo, a cloud-based practice management software subsidiary, is expected to close in the fourth quarter, generating net cash of approximately $100 million and up to $65 million in additional future potential earn-outs.
Barings Private Markets Partnership: The partnership with Barings has launched its first joint product, the Invesco Dynamic Credit Opportunity Fund, targeting the U.S. wealth management market. A second co-managed fund is in development and expected to launch at the beginning of next year.
Indian Business Joint Venture: The company is in the final stages of selling a majority interest in its Indian business to the Hinduja Group, with the transaction expected to close in the fourth quarter. This will establish a local joint venture, enhancing growth in the Indian market while allowing Invesco to retain a minority ownership.
QQQ ETF Modernization: The company is modernizing the structure of its QQQ ETF and is in the process of soliciting shareholder approval. The special meeting of QQQ shareholders has been adjourned until December 5 to allow additional time for vote solicitation.
ETF and Index Offerings: The company continues to scale its ETF platform, gaining market share and launching products to meet client demand. It has reached $1 trillion in AUM for its ETF and index offerings, with 65% of ETF launches this year being active.
China JV Growth: The China JV reached a record high AUM of $122 billion, reflecting a 16% increase over the last quarter. The company expects continued growth driven by secular and cyclical tailwinds in the Chinese market.
Private Markets Growth: Private credit had nearly $1 billion in net inflows, with strong CLO demand in the U.S. and EMEA. The company launched three new CLOs during the quarter and has $7 billion in dry powder for emerging opportunities in real estate.
Common Share Repurchases: In the third quarter, the company repurchased $25 million worth of common shares, equivalent to 1.2 million shares. The company intends to continue a regular common share repurchase program going forward.
Preferred Stock Repurchase: Earlier this year, the company repurchased $1 billion of preferred stock, funded by $1 billion in term loans. Approximately 25% of these loans have already been repaid, with plans to repay the remaining balance by the end of the month.
Common Share Repurchases: In the third quarter, the company repurchased $25 million worth of common shares, equivalent to 1.2 million shares. The company intends to continue a regular common share repurchase program going forward.
Preferred Stock Repurchase: Earlier this year, the company repurchased $1 billion of preferred stock, funded by $1 billion in term loans. Approximately 25% of these loans have already been repaid, with plans to repay the remaining balance by the end of the month.
The earnings call reflects a generally positive outlook, with strong fixed income flows, robust growth in China, and strategic divestitures to support shareholder returns. The Q&A section reassured analysts on expense management and capital return priorities. Despite some management vagueness, the overall sentiment remains positive due to strategic growth plans and strong market positions, particularly in China and fixed income. However, the absence of guidance and ongoing high implementation costs for the Alpha platform temper the outlook slightly.
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