Invesco Ltd. (IVZ) Earnings

Management highlights

### Strategic Execution and Growth Momentum - Year-to-date 2026 delivered record net inflows of $67 billion (7% annualized organic growth) and record net revenue (up 17% YoY), with 35% higher first-half operating income and a 37.5% operating margin (up nearly 470 basis points YoY H1). - 12 consecutive quarters of net long-term inflows, with Q2 2026 net long-term inflows hitting a record $45.1 billion (nearly 9% annualized organic growth). - Growth is broad-based: over 30 products generated more than $500 million in net inflows in Q2, with double-digit annualized organic growth in Asia Pacific and 7% in EMEA. ### Product Innovation and Partnerships - Launched more than 50 new products YTD 2026 across regions, including six new active ETFs and Invesco's first tokenized treasury strategy via a partnership with Superstate. - Completed strategic partnership transactions in Canada: CI acquired Invesco's Canadian products, and Invesco now acts as sub-advisor for ~$9 billion in AUM, reducing operating expenses and unlocking balance sheet capacity. - The converted QQQ flagship fund generated $130 million in incremental net revenue in H1 2026, with 20% AUM growth, establishing a strong global brand with cross-listings in Asia. - New partnerships with Barings and LGT Capital accelerate private market penetration in the U.S. private wealth and defined contribution channels, with additional product launches planned for 2026. ### Investment Performance Improvement - 44% of active funds rank in the top quartile of peers on a 3-year basis, with nearly 50% hitting top quartile on a 5-year basis. - ~70% of active AUM outperforms its benchmark across 3-year and 5-year horizons, with fundamental equities now reaching over 40% top quartile 5-year performance (over half beating benchmarks). ### Balance Sheet and Capital Management - Leverage ratio (inclusive of preferreds) improved to 1.9x, down from 2.7x one year prior, driven by $1.5 billion in preferred share repurchases, debt reduction, and higher EBITDA. - Common share buybacks increased 80% YTD versus 2025 H1, with $50 million in buybacks (1.9 million shares) in Q2, and the quarterly common dividend was raised to 21.5 cents per share in April. ### Hybrid Investment Platform Implementation - Implementation costs were $14 million in Q2 2026, in line with expectations, with $5 million in incremental ongoing operating costs for assets already migrated to the platform.

Guidance

- Operating margin: Management maintains the target of expanding to consistently deliver operating margin in the high 30% range, building durable margin across market cycles. - Hybrid investment platform: One-time implementation costs are expected to average ~$15 million per quarter in H2 2026, with implementation targeted for completion by the end of 2026. Incremental ongoing platform costs are expected to build to ~$10 million per quarter in H2 2026. One-time implementation costs will taper off beginning in Q1 2027, with only limited residual activity bleeding into the quarter. - Effective tax rate: Non-GAAP effective tax rate for Q3 2026 is expected to be in the 25% to 26% range (excluding discrete items). - Capital allocation: Management maintains a target combined payout ratio (common dividends plus share buybacks) near 60% of earnings. Management expects to be in a position to address additional preferred share repurchases (with MassMutual) by late 2026 or early 2027, after further reducing revolver balances. - 2026 compensation ratio: Full-year 2026 compensation as a percentage of net revenue is expected to be ~40%, with a 22.7% to 23% range for service and distribution ratio. - Leverage: Further improvement in leverage ratios is expected for the remainder of 2026, driven by continued debt reduction and EBITDA growth.

Segment performance

Invesco reached a total record AUM of $2.5 trillion at the end of Q2 2026, with average long-term AUM of $2.1 trillion (58% higher than Q2 2025). Net revenue for the quarter was $1.3 billion, up 20% year-over-year, with an adjusted net revenue yield of 22.4 basis points (end-of-quarter exit yield of 22 basis points). Adjusted operating income was ~$500 million (up 45% YoY), adjusted diluted EPS was $0.71 (nearly double YoY), and adjusted operating margin reached 37.5% (up 630 basis points YoY). Product segment performance: 1. ETF and Index: Record ending AUM of $1.25 trillion (including QQQ), with $30 billion in net inflows (17% annualized organic growth). QQQ alone generated $14 billion in net inflows (12% annualized organic growth), with total cross-listed AUM in Hong Kong and Tokyo reaching $10 billion. Active ETFs now have $25 billion in AUM across 40+ products. 2. Fundamental Fixed Income: $0.4 billion in standalone net inflows; including ETF and China JV flows, total long-term inflows hit $14 billion (11% annualized organic growth). The full U.S. wealth management SMA platform (including equity assets) stands at ~$40 billion, with 23% annualized organic growth. 3. China JV: Record AUM of $163 billion (15% higher than Q1), with $6.9 billion in net inflows (22% annualized organic growth), driven by fixed income and fixed income plus strategies. 4. Private Markets: $1.9 billion in total net inflows, with $1.4 billion in net inflows to private real estate (8% annualized organic growth). The U.S. wealth real estate debt fund NCREF now totals over $6 billion in AUM (including leverage). 5. Multi-Asset: Modest net outflows, as inflows to systematic equity were offset by outflows from out-of-favor Balanced Risk Allocation Strategies. 6. Fundamental Equities: Total net outflows of $7.7 billion, driven by three large idiosyncratic institutional liquidations. Positives included $3 billion in net inflows to the top-selling Japanese retail Global Equity Income Fund (now $28 billion AUM) and a second consecutive quarter of net inflows for U.S. value equity strategies, with developed market outflows moderated to just $0.5 billion.

Risks & headwinds

- Ongoing macroeconomic and policy uncertainty has made investor capital allocation more narrow and risk-focused, creating headwinds for some traditional higher-fee product categories such as fundamental equities. - Heightened headline risk and near-term volatility in private credit markets, though management noted spillover risks to structured loan products have remained limited to date. - New lower-cost competing products targeting the same exposure as QQQ create competitive pricing pressure, though management noted QQQ's entrenched brand and ecosystem mitigate this risk. - Fundamental equities continue to face industry-wide headwinds to consistent positive net inflows, even with improved performance, relying on favorable market demand dynamics to return to sustained positive flows. - Hybrid platform implementation costs may fluctuate quarter to quarter based on timing of migration activities.

Analyst Q&A

• Q: With new lower-fee competitor products launching to compete with QQQ, what is your approach to potential fee adjustments, and do you have flexibility to cut other expenses to offset any revenue reduction from a fee cut? /

  A: Management notes QQQ has a 25-year entrenched brand, unmatched liquidity, tight bid-ask spreads, a deep options ecosystem, and large scale that create lower total cost of ownership than just the stated expense ratio. QQQ already proved resilient to a lower-fee internal competitor (QQQM), which now has $100 billion AUM while QQQ continued to grow. Management will not make short-term reactive pricing changes, and will continue investing in the QQQ brand globally, leveraging existing decades of brand investment that competitors cannot easily match. There is flexibility to reallocate marketing spend to focus on new international cross-listings, which have already scaled to $10 billion in AUM quickly.

• Q: Operating margin came in stronger than expected; what are your updated margin targets, and what cost savings will come from the hybrid platform implementation? /

  A: Management reaffirms the near to medium term target of consistently delivering operating margin in the high 30s, building durable margin across market cycles. Implementation guidance remains unchanged: $15 million in quarterly one-time implementation costs in H2 2026, with incremental ongoing platform costs rising to $10 million per quarter. Once implementation is complete, management will focus on driving additional operating expense savings in 2027. Organic growth in scalable segments like ETFs, SMAs, and fixed income will also support continued margin expansion.

• Q: Now that your balance sheet is much stronger, how are you prioritizing capital allocation between share repurchases, preferred buybacks, and acquisitions? /

  A: Management maintains a 60% combined payout ratio target for dividends and buybacks, and continues to increase buybacks and dividends as EPS grows. The firm will first pay down remaining revolver balances before pursuing additional preferred share repurchases, which require mutual agreement with MassMutual and favorable market pricing, with a target of moving forward by late 2026 or early 2027. Management continues to prioritize organic investment in existing product capabilities, which has delivered stronger shareholder returns from consistent organic growth than potential acquisitions to date, though inorganic opportunities are still evaluated regularly.

• Q: What is the outlook for real estate product demand with interest rates staying higher for longer? /

  A: Management continues to see strong demand for real estate debt products, specifically the NCREF wealth management real estate credit fund, which has grown consistently to $6 billion AUM and remains a fast-growing product. Higher rates have not returned the market to the low-rate demand levels of prior years, but the market has largely adjusted to the new rate environment. Invesco has $7 billion in dry powder on the real estate side, and transaction activity is starting to pick up, so management remains modestly optimistic about demand even with the current rate outlook.

• Q: What explains the lower than expected net revenue yield for QQQ, and what is the outlook for future yield changes? /

  A: The 6 basis point net revenue yield for QQQ was in line with management expectations, driven by existing variable marketing costs that offset gross revenue, leaving the net yield and margin impact as expected. The 22 basis point end-of-quarter exit yield for the full firm was driven by strong late-quarter flows and market gains in lower-fee products including QQQ, QQQM, and RSP, which naturally pulled down the aggregate yield. Management does not plan any changes to QQQ's pricing at this time.