Key Highlights

  • Invesco reported adjusted EPS of $0.72, up from $0.61, and GAAP EPS of $0.65, down from $0.66.
  • Net revenues rose 16.5% to $1,381.7 million, and adjusted operating margin reached 40.7%.
  • Net long-term inflows were $35.1 billion, the 13th consecutive quarter of inflows.
  • Ending assets under management were $2,537.8 billion, up 19.4% from a year earlier.
  • The company repurchased $1.5 billion of preferred stock from MassMutual on October 26, funded by a term loan.

Invesco Earnings: Did a 40.7% Margin Offset the Adjusted EPS Miss?

Invesco (NYSE:IVZ) reported third-quarter adjusted diluted EPS of $0.72 on Tuesday, October 27, up from $0.61 a year earlier and $0.71 in the second quarter. As screened, the estimate was $0.74, a surprise of negative 2.55%. GAAP diluted EPS was $0.65, versus $0.66 a year earlier and $0.76 in the second quarter.

Net revenues were $1,381.7 million, up 4.0% sequentially and 16.5% year over year, and adjusted operating income rose 38.5% to $562.3 million. The adjusted operating margin of 40.7% compares with 37.5% in the second quarter and 34.2% a year ago.

Invesco Flows: Where Did the $35.1 Billion of Inflows Come From?

Net long-term inflows were $35.1 billion versus $45.1 billion in the second quarter and $28.9 billion a year ago, an annualized organic growth rate of 6.3% against 8.5% last quarter. The chief executive described the result as the 13th consecutive quarter of net long-term inflows.

ETFs and index strategies added $28.5 billion, including $6.7 billion into QQQ, and multi-asset and other strategies added $3.3 billion. The China joint venture contributed $1.5 billion, while fundamental fixed income lost $2.6 billion, fundamental equities lost $1.9 billion and private markets lost $0.4 billion.

By channel, retail brought in $41.7 billion and institutional lost $6.6 billion. Money market inflows of $52.9 billion lifted total net flows to $88.5 billion versus $62.7 billion in the second quarter.

Ending assets under management were $2,537.8 billion, up 2.7% sequentially and 19.4% year over year, after $26.4 billion of market losses and a $4.5 billion currency benefit.

Invesco Costs and Capital: What Drove the Margin and the Preferred Buyback?

Operating expenses fell 1% sequentially while net revenues rose 4%, expanding the margin by more than three percentage points. Management cited higher average assets and China joint venture performance fees. Employee compensation fell $52.9 million, mainly on a $43.7 million lower mark-to-market adjustment on deferred compensation.

GAAP operating income was $436.5 million versus $270.9 million, a 23.3% margin. Net income attributable to Invesco was $294.5 million, and adjusted net income was $326.4 million versus $275.4 million.

The company repurchased 2.1 million common shares for $65 million and declared a common dividend of $0.215 per share, payable December 2 to holders of record on November 13. Net debt fell by $393 million in the quarter to $315.8 million, with cash of $965.5 million and debt of $1,281.3 million.

After quarter end, on October 26, Invesco repurchased $1.5 billion of Series A preferred stock held by MassMutual, funded with a five-year floating-rate bank term loan of the same size. That brings repurchases over 18 months to $3 billion and leaves $1 billion outstanding, and the transaction is not in the September 30 balance sheet.

Invesco Next Steps: What Should Investors Watch After the Quarter?

The release did not provide numeric guidance. Investors will track whether inflows hold after the sequential slowdown, whether institutional outflows narrow, and how the new term loan changes interest expense and net debt in the fourth quarter. Sensitivity to markets remains visible in the $26.4 billion of market losses recorded in the quarter.