Invesco's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Invesco (IVZ)

Q1 2012 Earnings Call

April 26, 2012 9:00 am ET

Executives

Aaron Uhde - Director of Investor Relations and Assistant Treasurer

Martin L. Flanagan - Chief Executive Officer, President and Executive Director

Loren M. Starr - Chief Financial Officer and Senior Managing Director

Analysts

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

William R. Katz - Citigroup Inc, Research Division

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Michael Carrier - Deutsche Bank AG, Research Division

Matthew Kelley - Morgan Stanley, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Roger A. Freeman - Barclays Capital, Research Division

Presentation

Aaron Uhde

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions.

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs, such as will, may, could, should and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially's from our expectations.

We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

Good morning, and welcome to Invesco's First Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to the speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin L. Flanagan

Thank you very much, and thanks, everybody, for joining us. I'll speak to the presentation on the website, if you're some [ph] quite to follow. And I'll go through business results, and Loren will get into the greater detail on the financials. And as always, Loren and I will address any questions people have afterwards.

So if you happen to be following, I'm starting on Slide 3 of the presentation. To get started, long-term investment performance remained very strong for Invesco across the board in the first quarter. And again, we continue to see some areas of exceptional investment performance. And on the back of the strong investment performance, we contributed to a continued trend of positive long-term net inflows for the firm in spite of the continuing volatility in the marketplace. This is the seventh consecutive quarter of net positive long-term flow for the firm, which we think is quite strong in consideration of the marketplace that we evolve and operating in.

And importantly, during the quarter, we're raising our quarterly dividend 41% to $0.1725 per share, reflecting continued confidence in the fundamentals of our business. And during the quarter, we've repurchased 3.1 million shares for $75 million.

Taking a look at the summary results for the quarter. Assets under management ended the quarter at $672 billion versus $625 billion at the end of 2011. Invesco continued to generate a strong long-term investment performance for our clients during the quarter, which contributed to the net long-term inflows of $7 billion. This further extended the positive trend that we've demonstrated over the last several quarters.

Operating income rose to $269 million versus $256 million in the fourth quarter last year. The operating margin was 36.6% during the first quarter, again, expanding over the fourth quarter operating margin of 35.8%.

Earnings per share for the quarter were $0.44 per share, up approximately 5% quarter-over-quarter. And again, Loren will go into a much greater detail with the financial results.

Let's take a moment and look at investment performance, and again, it's our continued commitment to investment excellence and the hard work to build and maintain the culture. The strong investment culture has generated this strong long-term investment performance across the enterprise. And if you take a look over at the firm as a whole, 65% of the assets were ahead of peers on a linear basis and 77% of assets were ahead of peers on a 5-year basis.

And as we mentioned the last quarter, the softness in the 3-year number reflects the rolling off of some very strong numbers in the fourth quarter 2008 and a brief period where we trail the market during that snapback data rally in the early part of 2009. Based on the strength of the recovery later in that year in 2009, we would expect that 3-year numbers to solidify in mid-2012.

Moving on to flows, again strong investment performance contributed to positive inflows in spite of the volatile markets. And as I've mentioned earlier, net long-term inflows totaled $7 billion for the quarter. During the first quarter, we saw a strong client interest in the Balanced-Risk Allocation product, real estate capabilities, ETFs and also in our [indiscernible] International Equity, bank loans, maintaining, Muni [Municipal], stable value. So it was really some broadness in the interest across the organization.

Globally, the ABRA suite of product is generating tremendous interest from clients who are attracted to what is a very effective investment capability in this very volatile market. And also the top decile performance has been generated by the investment team. And as a result of the strong performance, ABRA flows were $3.4 billion during the first quarter. And this represents a 40% organic growth rate versus just last quarter. So it's an accelerating level of interest into this investment capability.

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