Invesco Ltd

Welcome to the Invesco Second 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, you may press star 1. This call will last one hour. To allow more participants to ask questions, one question and a follow-up can be submitted per participant. As a reminder, today's call is being recorded. Now I'll turn the call over to Greg Ketron, Invesco's Head of Investor Relations.

Thanks, operator, and to everyone joining us today. In addition to the press release, we have provided a presentation that covers the top of the 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 discussion 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, and then we'll open up the call for questions. I'll now turn the call over to Andrew.

All right. Thanks, Greg, and good morning to everyone. I'm pleased to be speaking with you all today. We have built significant momentum thus far in 2026. as we continue to execute against our strategic priorities. Year to date, we posted record net inflows of $67 billion, or a 7% annualized organic growth rate, and generated record net revenue with an increase of 17% over the same period last year. Our broad product suite and global reach is resonating with clients as they seek to navigate an ever more complex market environment. Our increasingly scaled platform and disciplined approach to expense management gives us significant operating leverage. We increased operating income by 35% in the first half of this year, and we expanded our operating margin by nearly 470 basis points as compared to the same period last year, reaching 37.5% in the second quarter. Further, we grew our bottom line by nearly 60% in the first half of 2026. as compared to the first half of last year. This is a testament to the hard work that our colleagues across Invesco have been doing over the past several quarters to streamline our business, drive profitability and margin expansion, and strengthen our balance sheet. As highlighted on slide three, we are innovating for our clients, clarifying and simplifying our organization, and as a result, we are delivering for our shareholders. Product line management and innovation are key to our growth and are critical in remaining relevant to our clients. As such, we have made several additions and advancements in areas where there is significant demand, like ETFs, SMAs, model portfolios, and private assets. We have launched more than 50 products this year across the Americas, EMEA, and APAC. This includes six new active ETF launches and a new partnership with Superstate, where we are now the manager of our first tokenized treasury strategy. Another way we are innovating for our clients is through partnerships. Our bearings and LGT Capital private markets partnerships are designed to help us accelerate growth in the high opportunity U.S. private wealth and defined contribution markets. We completed our first product initiatives with bearings at the beginning of this year, and we look forward to sharing more details on additional product launches with each firm later this year. We have also established partnerships in India and Canada that have allowed us to redefine our position in these markets from full ownership to minority status and as a sub-advisor, respectively, while aligning with strong local financial institutions. These changes have resulted in greater firm-wide focus, reduced operating expenses, increased leverage of our global investment platform, created balance sheet benefits, and enhanced revenue opportunities. To this end, during the second quarter, we successfully completed CI's acquisition of our Canadian products, and we have commenced our long-term strategic partnership with them, where we are now sub-advising funds with approximately $9 billion in AUM. Another clear indicator of the innovation aptitude at Invesco was the successful conversion late last year of the QQQ fund. In the first half of 2026, The Q's generated an incremental $130 million in net revenues for Invesco. Its AUM grew 20% and it produced strong organic net flow growth in the second quarter. We have significant opportunities to continue to expand this flagship, competitively advantaged product, not only here in the United States where the traction is incredibly strong, but also in other international markets. The QQQ is now cross-listed on both the Hong Kong and Tokyo stock exchanges with over $10 billion of AUM raised in a short period of time. Examples like these are indicators of the strength of the multi-decade QQQ brand that is recognized around the world for its innovation. We see several avenues to continue to expand QQQ's client base, our innovation suite in general, and our wider $1.25 trillion ETF complex. Beyond these and other strategic efforts, we have continued to make progress on our balance sheet recapitalization. We have significantly improved our leverage ratio over the last year from 2.7 times to 1.9 times, inclusive of the outstanding preferreds. We have also increased our common share buybacks by 80% year-to-date versus the first six months of last year. Importantly, we have done this while continuing to invest in the business and reduce debt including the outstanding prefers. Allison will speak more about these efforts later in the call. We will also update you on our transformational hybrid investment platform implementation, which is another strategically important priority, which will yield benefits across our organization and for our clients. As we discussed on previous calls, our strategy continues to prioritize opportunities at the intersection of market size and secular change. where Invesco is uniquely positioned to selectively drive growth across regions, channels, and asset classes. We continue to execute with discipline, allocate capital and resources accordingly, and improve performance. So moving on to slide four, I'll discuss how our efforts drove record net long-term inflows in the second quarter. The advantages of our broad, increasingly scaled, diversified global platform were evident again this quarter. Markets were supportive, driven by strong equity appreciation and improving fixed income returns, resulting in investor capital remaining in motion across the industry, albeit more narrowly focused and mindful of ongoing macroeconomic and policy uncertainty. Clients continue to entrust Invesco with significant new capital across our global product set. Net long-term inflows during the period were a record $45.1 billion Marking the 12th straight quarter of net inflows and representing annualized organic growth of nearly 9%. Additionally, we generated $13.2 billion in global liquidity inflows, ending the period with $215 billion in AUM. Altogether, we reached an AUM high watermark of $2.5 trillion. Importantly, we continue to be encouraged by the breadth of our overall growth. We had solid positive flows across several dimensions, including in many of our strategically important investment capabilities across each of our three regions and in both our active and passive strategies. The breadth of our inflows was also demonstrated by the fact that over 30 of our products generated more than $500 million in net inflows during the quarter. The Asian Pacific and EMEA regions again produced very strong net inflows with 10% and nearly 7% annualized organic growth, respectively. Additionally, on a growth sales basis, we had our highest volume quarter for actively managed funds. With all of this as a macro backdrop, I'd like to spend a few minutes highlighting growth drivers in each of our investment capabilities, starting with our ETF and index offering, where we continue to meaningfully scale and diversify our platform to meet evolving client demands. Ending AUM for these funds stood at a record $753 billion, or nearly $1.25 trillion when including the QQQ. We also had a record $30 billion of net inflows during the quarter, with 17% annualized organic growth. Within our ETF range, we garnered net inflows across a diverse set of products, led by our Q's Innovation Suite and our Quality and Momentum Equity Factor Funds, which raised a record $7 billion It's also notable that nearly a third of our net inflows were generated in the EMEA region, where we continue to see strong demand for our ETF range. We remain focused on innovation in the ETF space. During the quarter, we expanded our bullet share lineup with seven new fund launches in the United States, in addition to launching five ETFs in the EMEA region, including two new active funds. We have built a robust ETF platform globally which continues to grow as demand has accelerated for high quality differentiated strategies. We currently manage $25 billion in active ETFs across more than 40 products and the AUM base increases to more than $40 billion when including index strategies that are executed by our active investment teams. Our QQQ fund also attracted strong interest in the second quarter with $14 billion in net inflows or 12% annualized organic growth. This reflects our competitively advantaged position supported by a very large and broad institutional and retail investor base that's with unmatched liquidity, with tight spreads and deep options and derivative markets built over multiple decades for this flagship product. So moving on to fundamental fixed income, demand for our products remained robust. While we report on this slide, net inflows of a modest $0.4 billion for the quarter, when you widen the scope to include the fixed income flows from our ETF and China JV, it expands our overall asset class net long-term inflows to $14 billion during the quarter, or 11% annualized organic growth. This growth was broad with inflows from each of our regions, from both the retail and institutional channels, and across both active and passive products. Two drivers of fundamental fixed income flows were demand for individual SMAs from U.S. wealth management clients and overall institutional fixed income demand in EMEA, where we recorded net inflows of nearly $2 billion for the quarter. Our entire U.S. wealth management SMA platform, which also includes a portion of equity assets, now stands at nearly $40 billion in AUM. We have one of the fastest growing SMA offerings in the market, generating an annualized organic growth of 23% this quarter. The strong results, once again, indicate that we are well positioned to capture fixed income money in motion by meeting client needs across the credit and duration spectrum, geographic preferences, and active and passive exposures. Moving on to our China JV, our growth continues to be underpinned by our scale and the improving macro stability in this market. We reached a record high AUM of $163 billion, a 15% increase over the prior quarter. Net long-term inflows were $6.9 billion, delivering a 22% annualized organic growth rate. Net inflows were driven by our fixed income and our fixed income plus strategies, which, as you recall, are a form of balance funds. The continued growth in our domestic Chinese business is supported by a diversified product line with various style offerings which allows us to adapt to changing client needs in different market environments. To further support growth in our business, we launched 11 new funds this quarter, which collectively generated $1.2 billion in net inflows. These funds align with the growing demand for innovation and balance in equity strategies. We continue to be well positioned as the Chinese asset management market develops and evolves in both the individual investor and retirement sectors. Shifting to private markets, where we posted $1.9 billion of net inflows across our alternative credit and direct real estate offering. In credit, we saw a return to demand for our industry-leading bank loan ETF, BKLN. This growth was also augmented by net inflows into our CLO products. Despite near-term volatility and heightened headline risk, credit fundamentals remain broadly intact and spillover risks into the structured loan space have been limited. We continue to see strong demand for private credit solutions from institutional investors on a global basis and the current environment has not changed our long-term expansion plans in the retirement and wealth management channels. We have a favorable position with dry powder, diversification, and extensive experience. For managers with our discipline, continued volatility may ultimately prove to be an opportunity. Our private real estate capabilities also recorded positive net inflows of $1.4 billion, or an annualized organic growth rate of 8% this quarter. These results were led by NCREF, which is our real estate debt fund for U.S. wealth management clients, which continued to gain scale and assets, including leverage is now totaling over $6 billion. This fund was launched only a few years back, and it's yet another example of our deep investment talent product innovation and strong distribution teams collectively driving growth. We are excited about prospects across our private markets business with organic growth opportunities amplified by our partnerships with Barings and LGT Capital to further penetrate the wealth management and defined contribution markets. Moving on to our multi-asset capability where we had modest net outflows for the quarter. Continued inflows in our systematic equity offerings were offset by outflows from Balanced Risk Allocation Strategies, which remain out of favor. Finally, in Fundamental Equities, we continue to have positive net inflows from clients in Asia Pacific, driven by ongoing momentum in our Global Equity Income Fund, which remains the top-selling retail active fund in the Japanese market. This fund posted net inflows of nearly $3 billion during the quarter, rapidly growing to $28 billion in AUF, while generating a very favorable net revenue yield for Invesco. We also posted our second consecutive quarter of net inflows in our U.S. value equity strategies. Furthermore, our developed markets fund continues to experience significant moderation of outflows with just half a billion dollars during the quarter. Additionally, on an overall gross sales basis, we are among our best fundamental equity flow quarters since the beginning of 2022 on the heels of an exceptionally strong first quarter. Despite these positive fundamental equity flow highlights, We remained in net outflows of $7.7 billion overall in this segment. The uptick this quarter included a few large idiosyncratic liquidations from a couple of institutional investors making overall reallocation positioning decisions. We continue to focus on strengthening our fundamental equity long-term investment quality through talent, risk management, and overall platform tool enhancements. We are making progress and we are seeing improved performance as outlined on the next slide. So moving on to slide five, 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 integral to winning and maintaining market share, regardless of overall market demand. As such, achieving first quartile investment performance remains a key priority for Invesco. 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 over on a five year basis. Further, nearly 70% of our active AUM is beating its respective benchmark on both a three and five year basis. And as I mentioned, we are beginning to see improved performance in our fundamental equities lineup, which now has over 40% of funds performing in the top quartile of peers on a five year time horizon. with over half beating their benchmark. So with that, I'm going to take a pause and turn the call over to Allison to discuss the quarter's financial results, and I look forward to your questions.