Invesco Ltd

Welcome to the fourth quarter earnings conference call all participants will be in listen only mode until the question and answer session at that time to ask a question press star 1. This call will last 1 hour to allow more participants to ask questions. 1 question and a follow up can be submitted for participant. As a reminder, today's call is being recorded. Now, if I turn the call over to Greg Ketron, Invesco's head of investor relations.

All right, thanks, Shirley, and to all of you joining us today. In addition to the press release, we have provided a presentation that covers the topics we plan to address. The press release and presentation are available on our website, Invesco.com. This information can be found by going to the investor relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slide two, as well as the appendix for the appropriate reconciliations to GAAP. Finally, Invesco is not responsible for the accuracy of our earnings transcripts provided by third parties. The only authorized webcasts are located on our website. Andrew Schlossberg, President and CEO, and Allison Dukes, Chief Financial Officer, will present our results this morning, then we'll open up the call for questions. I'll now turn the call over to Andrew.

Okay, thanks, Greg, and good morning to everyone. I am pleased to be speaking with you today. 2025 marked a year of significant milestones for Invesco. We focused on our clients, transformed key aspects of our business, unlocked value across the organization, and accelerated strategic priorities to position the firm for continued profitable growth in the evolving global asset management market. Slide three of our presentation highlights several of our most impactful initiatives, which are allowing us to streamline our business, drive profitability and margin expansion, and strengthen our balance sheet. Significant among these accomplishments is the recapitalization of our balance sheet. We have now pulled forward a total of $1.5 billion in preferred stock that was otherwise non-callable, enabling us to further deleverage, increase our balance sheet flexibility, and free up earnings available to common shareholders. Allison's going to provide more details on the progress we have made recently with debt repayments, thus accelerating the earnings accretion of these transactions. We have also made substantial progress in our efforts to narrow our organizational focus. Following our April 2025 announcement that we were moving to a hybrid alpha investment platform, we have onboarded several waves of assets and are now on pace to finish by the end of this year. The hybrid platform will drive simplification, improve investment systems consolidation, and future cost avoidance. Also in 2025, we took several strategic actions to focus and realign our resources across the company. In the fourth quarter, we completed the sale of IntelliFlow to Carlyle, as well as the sale of a majority interest in our Indian asset management business to the Hinduja Group, establishing a local joint venture in India. Our ongoing minority ownership structure in this JV will allow us to participate in the growth of the market and utilize the strength of our local partner while refocusing our resources accordingly. Earlier this month, we also announced the decision to transform our Canadian business through a strategic partnership with CI Global Asset Management. Through this transaction, CI GAM will acquire our entire Canadian mutual fund and ETF complex which is comprised of 100 funds totaling approximately $19 billion in AUM. Importantly, we will continue as an investment subadvisor for 63 of the funds, totaling approximately $10 billion of the AUM. We're excited about the prospects of this ongoing relationship with CI. The Canadian market has become increasingly concentrated and more vertically integrated, and we believe that CI is the right partner to address these market dynamics. As an ongoing investment sub-advisor and strategic partner to CI, we will participate in the success of their growth, larger platform, and strong presence in the Canadian market. Allison's going to detail the financial implications of these transactions later in the call, but I will note that these strategic actions are clear examples of how we are rethinking, refocusing, and unlocking value in innovative ways across Invesco. One of the key pillars of our strategy is to accelerate the growth of our $130 billion private markets platform. To that end, in 2025, we announced two strategic private markets partnerships targeting both the U.S. wealth and the defined contribution markets. In the second quarter, we announced our partnership with Barings to launch two jointly managed credit strategies with $650 million in capital committed by MassMutual. We're pleased with the progress of this partnership as we recently brought our first co-managed product to the U.S. wealth management market. A second co-managed product is currently in development and expected to be launched later this year. In December, we also announced our second strategic partnership with LGT Capital Partners, who is a leading private market specialist. We're developing co-managed total return growth-oriented multi-asset products that are targeting U.S. wealth and defined contribution investors. LGT Capital is also committing Seed Capital to support these new launches, which will begin later this year. These two partnerships complement our investment strengths in real estate and alternative credit capabilities and the progress we have made with our existing evergreen funds in the markets, such as our rapidly growing real estate debt fund. These partnerships and new product offerings are indicative of our commitment in private markets and our objective to bring more innovative solutions and education to wealth management and retirement investors, both in the United States and globally. Finally, our 2025 transformative growth initiatives were capped off in late December with the modernization of our sizable QQQ ETFs. We received the necessary votes and completed the conversion of the fund on December 20th. Fund shareholders are now paying a lower fee, and we are earning revenue on the more than $400 billion of AUM in the fund. I hold deep gratitude for our team. What we collectively accomplished this past year was remarkable in bringing so many of these large-scale initiatives to fruition while also delivering exceptional operating performance. And I feel all of this bodes well for the future of Invesco. So turning now to slide four for a snapshot of our financial progress in 2025. We performed extraordinarily well against our key performance drivers, leveraging Invesco's unique position to deliver profitable growth in the highest opportunity regions, channels, and asset classes. We grew net revenues 6% in 2025 with several encouraging signs for the future trajectory of our top-line results. Our ETF and index investment capability produced record revenues and grew the top line by 22% as we continue to scale this business. We also generated considerable revenue growth from our Asian and EMEA regions, where combined revenue was up 13% for the year. Fundamental equity revenue was flat to the prior year, but up 4% from 2023. This is an encouraging data point as we consider the headwinds of client demand for fundamental equities and our work to stabilize this trend and focus on investment performance. On the expense side, we continue to be disciplined, maintaining a relatively flat expense base while continuing to redeploy resources and invest in our business. This revenue growth and well-managed expenses translated into a significant operating leverage and a 230 basis point increase in our operating margin, 14% growth in our operating income, and 19% improvement in earnings per share in 2025 as compared with the prior year. Further, our clients continue to demonstrate that we have the right products in the right markets at the right time. We generated over $80 billion in net long-term inflows in 2025, or 6% organic growth. Importantly, nearly 40 products each generated at least $1 billion in net inflows, reflecting the diversity and breadth of our client offering. Considering the work we have done on the balance sheet, our leverage ratio over the past year has also significantly improved. We will continue to see progress here as we actively manage our balance sheet while continuing to return capital to shareholders. Allison's going to outline our expectations in this regard for 2026. Finally, the advancements we have made on our strategic initiatives and our efforts to unlock value across the organization have yielded a significant increase in our total shareholder returns and resulted in Invesco having the highest TSR among our publicly listed peers. We're pleased with the overall strong results in 2025, and we will continue to stay focused on our highly defined growth strategy with an emphasis on relentless execution, client centricity, and teamwork across our firm. So let's now pivot to slide five. focusing on fourth quarter flows. We delivered another strong quarter of broad-based net inflows, resulting in an annualized long-term organic growth rate of 5%. Markets had strong momentum coming into the quarter, which continued as U.S. and global capital markets remained resilient. Equities were robust through year end. Fixed income rebounded with clear rate cut expectations. and we began to see broadening investor demand beyond technology stocks. Against that backdrop, we reached a record AUM of $2.2 trillion, with strong net long-term inflows of $19 billion in the fourth quarter. Even more encouraging was the breadth of this growth, reflecting our diversified, scaled global platform. We had solid positive flows across several dimensions, including many of our strategically important investment capabilities, in both our active and passive strategies, in equity and fixed income, and across wealth management and institutional channels. Specifically, we were pleased to see continued strong flow growth in EMEA and Asia Pacific regions, which together account for nearly $700 billion of our long-term AUM. We continue to scale our ETF and index capability, which now stands at a record $630 billion in AUM, ex the QQQ. We had nearly $12 billion of net inflows during the quarter, or 8% annualized organic growth. Within our ETF range, we garnered net inflows across a diverse set of products in both equity and fixed income, despite a nearly $4 billion headwind from the bullet share redemption that happens annually in the fourth quarter. We also continue to build out our active ETF suite. With our most recent launches, we now have nearly 40 active ETFs, across a range of asset classes. Bringing the depth of our active investment capabilities into the ETF wrapper has long been a part of our overall strategy and will continue to be as we innovate to meet evolving client demands. With our QQ2 fund conversion on December 20th, flows are now included in our long-term view. However, for the fourth quarter, that means we just had a fraction of the $13 billion in total QQ2 net flows counted into our overall long-term flow number presented here. The fund continues to attract strong demand, reaching a record high of $407 billion in AUM at quarter ends. Moving on to fundamental fixed income, where we garnered $2.2 billion in net long-term inflows. However, this only considers what is included in our fundamental fixed income strategies. If you look more broadly at the asset class, across all of our investment capabilities, that net flow number jumps to nearly $12 billion of inflows in the quarter, with the inclusion of related ETF and China-based fixed income products. Fundamental fixed income flows were driven by continued strength and investment grade, with institutional interest particularly strong from EMEA and Asia Pacific. We also saw ongoing demand for our leading stable value product in the U.S. defined contribution market. Additionally, our SMA platform in the U.S. continued to help drive flows, particularly in municipal bond strategies. Our entire SMA platform, which also includes a portion of equity assets, now stands at $35 billion in AUM. We have one of the fastest growing SMA offerings in the U.S. wealth market, generating an annualized organic growth rate of 7% this quarter. Moving on to our China JV, which now only reflects our domestic Invesco Great Wall business. Here we produced another exceptionally strong quarter, demonstrating that we are exceedingly well positioned for the shifting dynamics in this market. We reached a record high AUM of $132 billion, delivering a robust $8.9 billion of net long-term inflows, marking one of our best quarters to date and representing a 36% annualized organic growth rate. Flows in the China JV were led by fixed income plus demand from both retail and institutional clients. This product line has industry leading investment performance and is benefiting from increased client risk appetite as these funds provide an effective means of balancing fixed income with enhanced equity exposure. We're also seeing interest in pure equity strategies via passive funds, as demand for standalone active equity has been slower to regenerate. We continue to innovate in our China JV to meet evolving client demand across active, passive, and multi-asset capabilities. We launched four new products in the JV this quarter, but it's important to note that existing products remain the predominant driver of organic growth, an indication of the breadth of our platform. We expect to continue to benefit in the China JV as both the secular and now cyclical tailwinds develop. Shifting to private markets, where we posted $300 million of net inflows driven by direct real estate. INCREF, which is our real estate debt strategy targeting the U.S. wealth management channel, continues to generate net inflows and be onboarded with new platforms and clients. Increp is now on three of the four major U.S. wealth management platforms. Assets in this fund with leverage now total $4.7 billion after just over two years in the market. In private credit, we had good activity during the quarter. We closed another U.S. CLO, bringing our issuance total to $2.5 billion across the U.S. and Europe in 2025, as these products continue to offer meaningful value versus corporate bonds. In direct lending, we launched our first European Long-Term Investment Fund, or LTIF. This European upper-middle-market income fund was launched with the support from several Anchor clients. Private credit remains in a strong position. Despite a lower M&A environment, fundraising continues to be robust. However, deployment challenges persist due to fewer transactions in the current environment. With rate cuts pending this year, it's anticipated that deal activity will pick up, particularly within direct lending. CLOs are expected to benefit from increased allocation to broader fixed income, even as carry compresses. Furthermore, our real estate team remains well positioned in the institutional markets with $7 billion of dry powder to capitalize on emerging opportunities. As we look ahead, we are excited for our prospects in private markets. driven by our organic growth opportunities and amplified by our partnerships with Barings and LGT Capital to further penetrate the wealth management and defined contribution markets. Finally, in fundamental equities, we continued to see aggregate positive flows from our clients in EMEA and Asia Pacific, specifically for global and regional products. Ongoing momentum in these markets is headlined by our Global Equity Income Fund, managed out of the UK, which remains the top-selling retail active fund in the Japanese market and is gaining increased interest more broadly. This fund posted net inflows of $3 billion for the quarter, rapidly growing to $23 billion in AUM while generating a very favorable net revenue yield for Invesco. Despite these positive fundamental equity flow highlights, we did record $5.5 billion in net outflows overall in this segment. Our results partially reflect the broader secular outflow trend in actively managed equities, particularly in the United States. This was compounded by the expected net outflows from a developing markets fund, which totaled $1.5 billion for the quarter. This was partially driven by our strategic decision to reposition this fund with a new internal portfolio management team this past summer. The outflow rate in this fund has moderated from the recent high we experienced last quarter. I will also point out that on a gross sales basis, we had our best fundamental equity slow quarter since the beginning of 2022, giving us optimism of future prospects. Moving to slide six, which shows our overall investment performance relative to benchmarks and peers, as well as our performance and key capabilities, where information is readily comparable and more meaningful to driving results. Investment performance is key to winning and maintaining market share regardless of overall market demand. As such, achieving first quartile investment performance remains a top priority for Invesco. Overall, 44% of our active funds are performing in the top quartile of peers on a three-year time horizon, with nearly half reaching that bar on a five-year basis. Further, 70% of our active AUM is beating its respective benchmark also on a five-year basis. With that, I'm going to take a pause, and I'm going to turn the call over to Allison to discuss this quarter's financial results, and I look forward to your questions.