EX-99.1 2 earningsrelease.htm EARNINGS RELEASE

 

News Release

 

Contacts: Laurie G. Hylton 617.672.8527

Eric Senay 617.672.6744

 

Eaton Vance Corp.

Report for the Three Months and Fiscal Year Ended October 31, 2019

 

Boston, MA, November 26, 2019 – Eaton Vance Corp. (NYSE: EV) today reported earnings per diluted share of $3.50 for the fiscal year ended October 31, 2019, an increase of 13 percent from $3.11 of earnings per diluted share in the fiscal year ended October 31, 2018.

 

The Company reported adjusted earnings per diluted share(1) of $3.45 for the fiscal year ended October 31, 2019, an increase of 7 percent from $3.21 of adjusted earnings per diluted share in the fiscal year ended October 31, 2018. Earnings under U.S. generally accepted accounting principles (U.S. GAAP) exceeded adjusted earnings by $0.05 per diluted share in the fiscal year ended October 31, 2019, reflecting the reversal of net excess tax benefits related to stock-based compensation awards of $5.4 million. Adjusted earnings exceeded earnings under U.S. GAAP by $0.10 per diluted share in the fiscal year ended October 31, 2018, reflecting the add back of $24.0 million of charges related to enactment of the Tax Cuts and Jobs Act (the 2017 Tax Act), a $6.5 million charge recognized upon the expiration of the Company’s option to acquire an additional 26 percent ownership interest in 49 percent-owned Hexavest, Inc. (Hexavest) and the reversal of net excess tax benefits related to stock-based compensation awards of $17.5 million.

 

The Company reported earnings per diluted share of $0.96 for the fourth quarter of fiscal 2019, an increase of 10 percent from $0.87 of earnings per diluted share in the fourth quarter of fiscal 2018 and an increase of 7 percent from $0.90 of earnings per diluted share in the third quarter of fiscal 2019.

 

The Company reported adjusted earnings per diluted share of $0.95 for the fourth quarter of fiscal 2019, an increase of 12 percent from $0.85 of adjusted earnings per diluted share in the fourth quarter of fiscal 2018 and an increase of 6 percent from $0.90 of adjusted earnings per diluted share in the third quarter of fiscal 2019. Earnings under U.S. GAAP exceeded adjusted earnings by $0.01 per diluted share in the fourth quarter of fiscal 2019 and $0.02 per diluted share in the fourth quarter of fiscal 2018, reflecting the reversal of net excess tax benefits related to stock-based compensation awards of $1.5 million and $2.4 million, respectively. Earnings under U.S. GAAP matched adjusted earnings in the third quarter of fiscal 2019.

 

Net gains and other investment income related to seed capital investments contributed $0.13 and $0.03 to earnings per diluted share in the fiscal years ended October 31, 2019 and 2018, respectively. Other income and expense amounts related to consolidated collateralized loan obligation (CLO) entities contributed $0.07 and $0.01 to earnings per diluted share in the fiscal years ended October 31, 2019 and 2018, respectively.

 

(1) Although the Company reports its financial results in accordance with U.S. GAAP, management believes that certain non-U.S. GAAP financial measures, specifically, adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share, while not a substitute for U.S. GAAP financial measures, may be effective indicators of the Company’s performance over time. Non-U.S. GAAP financial measures should not be construed to be superior to U.S. GAAP measures. In calculating these non-U.S. GAAP financial measures, net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share are adjusted to exclude items management deems non-operating or non-recurring in nature, or otherwise outside the ordinary course of business. These adjustments may include, when applicable, the add back of closed-end fund structuring fees, costs associated with special dividends, debt repayments and tax settlements, the tax impact of stock-based compensation shortfalls or windfalls, and non-recurring charges for the effect of tax law changes. Management and our Board of Directors, as well as certain of our outside investors, consider these adjusted numbers a measure of the Company’s underlying operating performance. Management believes adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.

 

 

Net gains and other investment income related to seed capital investments contributed $0.04 to earnings per diluted share in the fourth quarter of fiscal 2019, $0.01 in the fourth quarter of fiscal 2018 and $0.06 in the third quarter of fiscal 2019. Other income and expense amounts related to consolidated CLO entities contributed $0.04 to earnings per diluted share in the fourth quarter of fiscal 2019, were negligible in the fourth quarter of fiscal 2018 and reduced earnings by $0.02 per diluted share in the third quarter of fiscal 2019.

 

Consolidated net inflows of $23.9 billion in the fiscal year ended October 31, 2019 represent 5 percent internal growth in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management). This compares to net inflows of $17.3 billion and 4 percent internal growth in managed assets in the fiscal year ended October 31, 2018. Excluding exposure management mandates, the Company’s internal growth in managed assets was 4 percent and 8 percent in the fiscal years ended October 31, 2019 and 2018, respectively.

 

Consolidated net inflows of $9.8 billion in the fourth quarter of fiscal 2019 represent 8 percent annualized internal growth in managed assets. This compares to net inflows of $2.1 billion and 2 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2018 and net inflows of $8.0 billion and 7 percent annualized internal growth in managed assets in the third quarter of fiscal 2019. Excluding exposure management mandates, the Company’s annualized internal growth in managed assets was 3 percent in the fourth quarter of fiscal 2019 and 5 percent in both the fourth quarter of fiscal 2018 and the third quarter of fiscal 2019.

 

The Company’s internal management fee revenue growth (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows divided by beginning of period consolidated management fee revenue) was negligible in the fiscal year ended October 31, 2019 and 4 percent in the fiscal year ended October 31, 2018. The Company’s annualized internal management fee revenue growth was 2 percent in the fourth quarter of fiscal 2019, 1 percent in the fourth quarter of fiscal 2018 and 2 percent in the third quarter of fiscal 2019. These growth rates reflect the Company’s retrospective adoption of Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers, on November 1, 2018, which provides for management fee revenue to be recorded net of associated subsidy expenses.

 

Consolidated assets under management were $497.4 billion on October 31, 2019, up 13 percent from $439.3 billion of consolidated managed assets on October 31, 2018 and up 3 percent from $482.8 billion of consolidated managed assets on July 31, 2019. The year-over-year increase in consolidated assets under management reflects net inflows of $23.9 billion and market price appreciation of $34.2 billion in the fiscal year ended October 31, 2019. The sequential quarterly increase in consolidated assets under management reflects net inflows of $9.8 billion and market price appreciation of $4.9 billion in the fourth quarter of fiscal 2019.

 

“Eaton Vance closed fiscal 2019 with record annual and quarterly earnings and new highs in assets under management,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer. “While not immune from our industry’s continuing challenges, we remain confident of our future growth prospects.”

 

Average consolidated assets under management were $462.8 billion in the fiscal year ended October 31, 2019, up 5 percent from $442.4 billion in the fiscal year ended October 31, 2018. Average consolidated assets under management were $488.9 billion in the fourth quarter of fiscal 2019, up 8 percent from $453.3 billion in the fourth quarter of fiscal 2018 and up 4 percent from $471.0 billion in the third quarter of fiscal 2019.

 

As shown in Attachment 10, excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 31.6 basis points in the fiscal year ended October 31, 2019, down 4 percent from 33.0 basis points in the fiscal year ended October 31, 2018. Excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 30.8 basis points in the fourth quarter of fiscal 2019, down 6 percent from 32.7 basis points in the fourth quarter of fiscal 2018 and down 3 percent from 31.8 basis points in the third quarter of fiscal 2019. Changes in average annualized management fee rates for the compared periods primarily reflect shifts in the Company’s mix of business. Average annualized management fee rates for prior year periods have been restated to reflect the retrospective adoption of ASU 2014-09 on November 1, 2018 as described above.

 

Attachments 5 and 6 summarize the Company’s consolidated assets under management and net flows by investment mandate and investment vehicle reporting categories. Attachments 7, 8 and 9 summarize the Company’s ending consolidated assets under management by investment mandate, investment vehicle and investment affiliate. Attachment 10 shows the Company’s average annualized management fee rates by investment mandate.

 

As shown in Attachments 5 and 6, consolidated sales and other inflows were $168.9 billion in the fiscal year ended October 31, 2019, up 8 percent from $156.5 billion in the fiscal year ended October 31, 2018. Consolidated sales and other inflows were $46.6 billion in the fourth quarter of fiscal 2019, up 32 percent from $35.2 billion in the fourth quarter of fiscal 2018 and up 14 percent from $40.8 billion in the third quarter of fiscal 2019.

 

Consolidated redemptions and other outflows were $144.9 billion in the fiscal year ended October 31, 2019, up 4 percent from $139.1 billion in the fiscal year ended October 31, 2018. Consolidated redemptions and other outflows were $36.8 billion in the fourth quarter of fiscal 2019, up 12 percent from $33.0 billion in the fourth quarter of fiscal 2018 and up 12 percent from $32.8 billion in the third quarter of fiscal 2019.

 

As of October 31, 2019, the Company’s 49 percent-owned affiliate Hexavest Inc. (Hexavest) managed $13.4 billion of client assets, down 3 percent from $13.8 billion of managed assets on October 31, 2018 and substantially unchanged from the $13.4 billion of managed assets on July 31, 2019. Hexavest had net outflows of $1.6 billion and $2.2 billion in the fiscal years ended October 31, 2019 and 2018, respectively. Hexavest had net outflows of $0.4 billion in the fourth quarter of fiscal 2019, net outflows of $0.9 billion in the fourth quarter of fiscal 2018 and net outflows of $0.6 billion in the third quarter of fiscal 2019. Attachment 11 summarizes the assets under management and net flows of Hexavest. Other than Eaton Vance-sponsored funds for which Hexavest is the adviser or sub-adviser, the managed assets and flows of Hexavest are not included in Eaton Vance consolidated totals.

 

 

 
 

Financial Highlights(2)

(in thousands, except per share figures)                  
                       
  Three Months Ended   Fiscal Year Ended
  October 31, July 31, October 31,   October 31, October 31,
  2019 2019 2018   2019 2018
Revenue $ 433,740 $ 431,235 $ 430,795   $ 1,683,252 $ 1,692,422
Expenses   298,307   294,100   286,343     1,162,381   1,137,220
Operating income   135,433   137,135   144,452     520,871   555,202
   Operating margin   31.2%   31.8%   33.5%     30.9%   32.8%
Non-operating income (expense)   15,599   5,470   (4,912)     38,167   (11,967)
Income taxes   (34,254)   (36,304)   (36,823)     (135,252)   (156,703)
Equity in net income of affiliates, net of tax   2,172   2,235   2,496     9,090   11,373
Net income   118,950   108,536   105,213     432,876   397,905
Net income attributable to non-controlling                      
   and other beneficial interests   (9,744)   (6,315)   274     (32,841)   (15,967)
Net income attributable to                      
   Eaton Vance Corp. shareholders $ 109,206 $ 102,221 $ 105,487   $ 400,035 $ 381,938
Adjusted net income attributable to                      
   Eaton Vance Corp. shareholders $ 107,665 $ 101,584 $ 102,383   $ 394,631 $ 394,138
Earnings per diluted share $ 0.96 $ 0.90 $ 0.87   $ 3.50 $ 3.11
Adjusted earnings per diluted share $ 0.95 $ 0.90 $ 0.85   $ 3.45 $ 3.21

 

Fiscal 2019 vs. Fiscal 2018(2)

 

In fiscal 2019, revenue decreased 1 percent to $1.68 billion from $1.69 billion in fiscal 2018. Management fees were substantially unchanged year-over-year, as a 5 percent increase in average consolidated assets under management was offset by lower consolidated average management fee rates. Performance fees were $1.7 million in fiscal 2019 and $(1.7) million in fiscal 2018. Distribution and service fee revenues were collectively down 5 percent, reflecting lower managed assets in fund share classes that are subject to these fees.

 

Operating expenses increased 2 percent to $1.16 billion in fiscal 2019 from $1.14 billion in fiscal 2018. Increases in compensation, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses were partially offset by a decrease in distribution expense. The increase in compensation reflects higher salaries and benefits associated with increases in headcount, higher stock-based compensation and increases in severance, partially offset by lower sales-based incentive compensation and operating income-based bonus accruals. The increase in service fee expense reflects higher Class A and private fund service fee payments, partially offset by lower Class C service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization. The increase in fund-related expenses reflects higher sub-advisory fees paid. Other operating expenses increased 5 percent, primarily reflecting increases in information technology spending, facilities expenses and travel expenses, partially offset by a decrease in amortization expense related to certain intangible assets that were fully amortized during the first quarter of fiscal 2019 and lower professional services expenses. The decrease in distribution expense primarily reflects lower Class C distribution fee payments, partially offset by higher marketing and promotion costs and an increase in up-front sales commission expense.

 

Operating income decreased 6 percent to $520.9 million in fiscal 2019 from $555.2 million in fiscal 2018. Operating margin decreased to 30.9 percent in fiscal 2019 from 32.8 percent in fiscal 2018.

 

(2) Prior period revenue and expenses have been restated to reflect certain classification adjustments resulting from the Company’s retrospective adoption of ASU 2014-09 on November 1, 2018. The adoption of the new revenue recognition accounting standard had no impact on operating income or earnings per share.

 
 

 

Non-operating income totaled $38.2 million in fiscal 2019 versus $12.0 million of non-operating expense in fiscal 2018. The year-over-year change primarily reflects a $41.0 million increase in net gains and other investment income from the Company’s investments in sponsored strategies, including consolidated sponsored funds, and a $9.3 million increase in income contribution from consolidated CLO entities.

 

The Company’s effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 24.2 percent in fiscal 2019 and 28.8 percent in fiscal 2018. The Company’s effective tax rate is discussed in greater detail under “Taxation” below.

 

Equity in net income of affiliates was $9.1 million in fiscal 2019 and $11.4 million in fiscal 2018. In fiscal 2019, substantially all equity in net income of affiliates related to the Company’s investment in Hexavest. Equity in net income of affiliates in fiscal 2018 included $11.0 million from the Company’s Hexavest investment and $0.4 million from the Company’s investment in a private equity partnership.

 

As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $32.8 million in fiscal 2019 and $16.0 million in fiscal 2018. The year-over-year change reflects an increase in income earned by consolidated sponsored funds and the Company’s accelerated repurchase of certain profit and capital interests in Parametric Portfolio Associates LLC (Parametric) entities held by current and former employees, which settled at the end of the fourth quarter of fiscal 2019.

 

The Company’s weighted average basic shares outstanding were 110.1 million in fiscal 2019 and 114.7 million in fiscal 2018, a decrease of 4 percent. The year-over-year reduction reflects share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company’s weighted average shares outstanding were 114.4 million in fiscal 2019 and 122.9 million in fiscal 2018, a decrease of 7 percent. The decline in weighted average diluted shares outstanding further reflects a decrease in the dilutive effect of in-the-money options and unvested restricted stock awards due to lower market prices of the Company’s shares.

 

Fourth Quarter Fiscal 2019 vs. Fourth Quarter Fiscal 2018(2)

 

In the fourth quarter of fiscal 2019, revenue increased 1 percent to $433.7 million from $430.8 million in the fourth quarter of fiscal 2018. Management fees were up 2 percent, as an 8 percent increase in average consolidated assets under management more than offset lower consolidated average management fee rates. Performance fees were $0.1 million in the fourth quarter of fiscal 2019 and $(0.3) million in the fourth quarter of fiscal 2018. Distribution and service fee revenues were collectively down 3 percent, reflecting lower managed assets in fund share classes that are subject to these fees.

 

Operating expenses increased 4 percent to $298.3 million in the fourth quarter of fiscal 2019 from $286.3 million in the fourth quarter of fiscal 2018. Increases in compensation, service fee expense, amortization of deferred sales commissions and fund-related expenses were partially offset by decreases in distribution expense and other operating expenses. The increase in compensation reflects higher salaries and benefits associated with increases in headcount, higher stock-based compensation and increases in severance, partially offset by decreases in performance-based and operating income-based bonus accruals and lower sales-based incentive compensation. The increase in service fee expense reflects higher Class A and private fund service fee payments, partially offset by lower Class C service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization. The increase in fund-related expenses reflects higher sub-advisory fees paid. The decrease in distribution expense primarily reflects lower Class C distribution fee payments, partially offset by an increase in up-front sales commission expense. Other operating expenses decreased by 1 percent, primarily reflecting lower professional services expenses and a decrease in amortization expense related to certain intangible assets that were fully amortized during the first quarter of fiscal 2019, partially offset by an increase in information technology spending and facilities expenses. 

 

Operating income decreased 6 percent to $135.4 million in the fourth quarter of fiscal 2019 from $144.5 million in the fourth quarter of fiscal 2018. Operating margin decreased to 31.2 percent in the fourth quarter of fiscal 2019 from 33.5 percent in the fourth quarter of fiscal 2018.

 

Non-operating income totaled $15.6 million in the fourth quarter of fiscal 2019 versus $4.9 million of non-operating expense in the fourth quarter of fiscal 2018. The year-over-year change reflects a $14.6 million increase in net gains and other investment income from the Company’s investments in sponsored strategies, including consolidated sponsored funds, and a $5.9 million increase in income contribution from consolidated CLO entities.

 

The Company’s effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 22.7 percent in the fourth quarter of fiscal 2019 and 26.4 percent in the fourth quarter of fiscal 2018. The Company’s effective tax rate is discussed in greater detail under “Taxation” below.

 

Equity in net income of affiliates was $2.2 million and $2.5 million in the fourth quarters of fiscal 2019 and 2018, respectively, substantially all relating to the Company’s investment in Hexavest.

 

As detailed in Attachment 3, net income (loss) attributable to non-controlling and other beneficial interests was $9.7 million in the fourth quarter of fiscal 2019 and $(0.3) million in the fourth quarter of fiscal 2018. The year-over-year change reflects an increase in income earned by consolidated sponsored funds and the Company’s accelerated repurchase of certain profit and capital interests in Parametric entities held by current and former employees, which settled at the end of the fourth quarter of fiscal 2019.

 

The Company’s weighted average basic shares outstanding were 108.7 million in the fourth quarter of fiscal 2019 and 113.6 million in the fourth quarter of fiscal 2018, a decrease of 4 percent. The year-over-year reduction reflects share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company’s weighted average shares outstanding were 113.7 million in the fourth quarter of fiscal 2019 and 121.0 million in the fourth quarter of fiscal 2018, a decrease of 6 percent. The decline in weighted average diluted shares outstanding further reflects a decrease in the dilutive effect of in-the-money options and unvested restricted stock awards due to lower market prices of the Company’s shares.

 

Fourth Quarter Fiscal 2019 vs. Third Quarter Fiscal 2019

 

In the fourth quarter of fiscal 2019, revenue increased 1 percent to $433.7 million from $431.2 million in the third quarter of fiscal 2019. Management fees were up 1 percent, as a 4 percent increase in average consolidated assets under management more than offset lower consolidated average management fee rates. Performance fees were $0.1 million in both the fourth and third quarters of fiscal 2019. Distribution and service fee revenues were collectively up 1 percent, reflecting higher managed assets in fund share classes that are subject to these fees.

 

Operating expenses increased 1 percent to $298.3 million in the fourth quarter of fiscal 2019 from $294.1 million in the third quarter of fiscal 2019, reflecting increases in compensation, distribution expense, service fee expense, amortization of deferred sales commissions and fund-related expenses. The increase in compensation reflects higher salaries and benefits associated with increases in headcount, higher sales-based incentive compensation and increases in severance, partially offset by decreases in performance-based and operating income-based bonus accruals, lower payroll taxes and a decrease in stock-based compensation. The increase in distribution expense reflects higher marketing and promotion costs and an increase in up-front sales commission expense. The increase in service fee expense reflects higher private fund service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization. The increase in fund-related expenses primarily reflects an increase in fund expenses borne by the Company and higher sub-advisory fees paid. Other operating expenses in the fourth quarter of fiscal 2019 were substantially unchanged from the third quarter of fiscal 2019.

 

Operating income decreased 1 percent to $135.4 million in the fourth quarter of fiscal 2019 from $137.1 million in the third quarter of fiscal 2019. Operating margin decreased to 31.2 percent in the fourth quarter of fiscal 2019 from 31.8 percent in the third quarter of fiscal 2019.

 

Non-operating income totaled $15.6 million in the fourth quarter of fiscal 2019 and $5.5 million in the third quarter of fiscal 2019. The sequential change reflects a $9.8 million increase in income contribution from consolidated CLO entities and a $0.3 million increase in net gains and other investment income from the Company’s investments in sponsored strategies, including consolidated sponsored funds.

 

The Company’s effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 22.7 percent in the fourth quarter of fiscal 2019 and 25.5 percent in the third quarter of fiscal 2019. The Company’s effective tax rate is discussed in greater detail under “Taxation” below.

 

Equity in net income of affiliates was $2.2 million in both the fourth and third quarters of fiscal 2019, substantially all relating to the Company’s investment in Hexavest.

 

As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $9.7 million in the fourth quarter of fiscal 2019 and $6.3 million in the third quarter of fiscal 2019. The sequential change reflects an increase in income earned by consolidated sponsored funds and the Company’s accelerated repurchase of certain profit and capital interests in Parametric entities held by current and former employees, which settled at the end of the fourth quarter of fiscal 2019.

 

The Company’s weighted average basic shares outstanding decreased to 108.7 million in the fourth quarter of fiscal 2019 from 109.1 million in the third quarter of fiscal 2019. The sequential reduction reflects share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company’s weighted average shares outstanding increased to 113.7 million in the fourth quarter of fiscal 2019 from 113.5 million in the third quarter of fiscal 2019. The increase in weighted average diluted shares outstanding reflects an increase in the dilutive effect of in-the-money options and unvested restricted stock awards due to higher market prices of the Company’s shares.

 
 

Taxation

 

The following table reconciles the statutory federal income tax rate to the Company’s effective tax rate:

 

  Three Months Ended   Fiscal Year Ended
  October 31, July 31, October 31,   October 31, October 31,
  2019 2019 2018   2019 2018
Statutory U.S. federal income tax rate(3) 21.0 % 21.0 % 23.3 %   21.0 % 23.3 %

State income taxes for current year, net of

federal income tax benefits

 4.5   5.0   4.4     4.7   4.4  

Net income attributable to non-controlling

and other beneficial interests

 (1.7)   (1.3)         (1.2)   (0.7)  
Other items (0.1)   1.2   0.9     0.7   0.6  
Adjusted effective income tax rate(4) 23.7   25.9   28.6     25.2   27.6  
Non-recurring impact of U.S. tax reform     -      -      (0.5)         4.4  

Net excess tax benefits from stock-based

compensation plans(5)

 (1.0)   (0.4)   (1.7)     (1.0)   (3.2)  
Effective income tax rate 22.7 % 25.5 % 26.4 %   24.2 % 28.8 %

 

The Company’s income tax provision for fiscal 2019 includes $3.2 million of charges associated with certain provisions of the 2017 Tax Act taking effect for the Company in fiscal 2019, relating principally to limitations on the deductibility of executive compensation. These charges totaled $0.7 million in the fourth quarter of fiscal 2019 and $1.1 million in the third quarter of fiscal 2019.

 

The Company’s income tax provision for fiscal 2019 and 2018 was reduced by net excess tax benefits related to stock-based compensation awards of $5.4 million and $17.5 million, respectively. These net excess tax benefits totaled $1.5 million in the fourth quarter of fiscal 2019, $2.4 million in the fourth quarter of fiscal 2018 and $0.6 million in the third quarter of fiscal 2019.

 

The Company’s income tax provision for fiscal 2018 also included a non-recurring charge of $24.0 million related to the enactment of the 2017 Tax Act. In the fourth quarter of fiscal 2018, the Company’s income tax provision was reduced by $0.7 million due to the refinement of prior estimates used to calculate the non-recurring impact of the 2017 Tax Act.

 

The Company’s calculations of adjusted net income and adjusted earnings per diluted share remove the tax impact of stock-based compensation shortfalls or windfalls recognized in connection with the accounting guidance adopted by the Company in fiscal 2018 and the non-recurring tax impact of U.S. tax law changes. On this basis, the Company’s adjusted effective tax rate was 25.2 percent and 27.6 percent for fiscal 2019 and 2018, respectively, and was 23.7 percent in the fourth quarter of fiscal 2019, 28.6 percent in the fourth quarter of fiscal 2018 and 25.9 percent in the third quarter of fiscal 2019. On the same adjusted basis, the Company estimates that its effective tax rate will be approximately 26.5 to 27.0 percent for fiscal 2020. The Company’s actual adjusted effective tax rate for fiscal 2020 may vary from this estimate due to changes in the Company’s tax policy interpretations and assumptions, additional regulatory guidance that may be issued and other factors.

 

(3) The statutory U.S. federal income tax rate in effect for the Company’s fiscal 2019 was 21 percent, the federal corporate income tax rate pursuant to the 2017 Tax Act. The statutory U.S. federal income tax rate in effect for the Company’s fiscal 2018 was a blend of 35 percent and 21 percent based on the number of days in the Company’s fiscal year before and after the January 1, 2018 effective date of the 2017 Tax Act.

 

(4) Represents the Company’s effective income tax rate, excluding the tax impact of stock-based compensation shortfalls or windfalls and the non-recurring tax impact of U.S. tax law changes. Management believes that the Company’s adjusted effective income tax rate is an important indicator of our operations because it excludes items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.

 

(5) Reflects the impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which was adopted by the Company in fiscal 2018. The Company anticipates that the adoption of this guidance may cause fluctuations in the Company’s effective tax rate, particularly in the first quarter of each fiscal year, when most of the Company’s annual stock-based awards vest.

 
 

 

 Balance Sheet Information

 

As of October 31, 2019, the Company held cash and cash equivalents of $557.7 million and its investments included $297.8 million of short-term debt securities with maturities between 90 days and one year. There were no outstanding borrowings under the Company’s $300 million credit facility at such date. During fiscal 2019, the Company used $299.9 million to repurchase and retire approximately 7.4 million shares of its Non-Voting Common Stock under its repurchase authorizations. Of the current 8.0 million share repurchase authorization, approximately 6.3 million shares remain available.

 

Conference Call Information

 

Eaton Vance Corp. will host a conference call and webcast at 11:00 AM eastern time today to discuss the financial results for the three months and fiscal year ended October 31, 2019. To participate in the conference call, please dial 866-521-4909 (domestic) or 647-427-2311 (international) and refer to “Eaton Vance Corp. Fourth Fiscal Quarter Earnings.” A webcast of the conference call can also be accessed via Eaton Vance’s website, eatonvance.com.

 

A replay of the call will be available for one week by calling 800-585-8367 (domestic) or 416-621-4642 (international) or by accessing Eaton Vance’s website, eatonvance.com. To listen to the replay, enter the conference ID number 9993809 when instructed.

 

About Eaton Vance Corp.

 

Eaton Vance Corp. (NYSE: EV) provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Through principal investment affiliates Eaton Vance Management, Parametric, Atlanta Capital, Calvert and Hexavest, the Company offers a diversity of investment approaches, encompassing bottom-up and top-down fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. As of October 31, 2019, Eaton Vance had consolidated assets under management of $497.4 billion. Exemplary service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924. For more information, visit eatonvance.com.

 

Forward-Looking Statements

 

This news release may contain statements that are not historical facts, referred to as “forward-looking statements.” The Company’s actual future results may differ significantly from those stated in any forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions, client sales and redemption activity, the continuation of investment advisory, administration, distribution and service contracts, and other risks discussed in the Company’s filings with the Securities and Exchange Commission.

 
 

 

                            Attachment 1
  Eaton Vance Corp.
  Summary of Results of Operations(1)
  (in thousands, except per share figures)
                                       
      Three Months Ended   Fiscal Year Ended
                  % %              
                  Change Change              
                  Q4 2019 Q4 2019              
      October 31, July 31, October 31, vs. vs.   October 31, October 31, %
      2019 2019 2018 Q3 2019 Q4 2018   2019 2018 Change
  Revenue:                                  
  Management fees $ 378,062 $ 375,747 $ 372,292 1 % 2 %   $ 1,463,943 $ 1,459,186 - %
  Distribution and underwriter fees   21,187   21,281   23,529 -   (10)       85,612   97,371 (12)  
  Service fees   32,272   31,855   31,364 1   3       123,073   122,231 1  
  Other revenue   2,219   2,352   3,610 (6)   (39)       10,624   13,634 (22)  
    Total revenue   433,740   431,235   430,795 1   1       1,683,252   1,692,422 (1)  
  Expenses:                                  
  Compensation and related costs   160,441   158,642   148,673 1   8       626,513   604,631 4  
  Distribution expense   38,731   38,070   41,142 2   (6)       150,239   165,033 (9)  
  Service fee expense   28,287   28,037   27,237 1   4       107,762   106,831 1  
  Amortization of deferred sales commissions   5,831   5,644   5,052 3   15       22,593   18,394 23  
  Fund-related expenses   11,037   9,715   9,829 14   12       40,357   37,602 7  
  Other expenses   53,980   53,992   54,410 -   (1)       214,917   204,729 5  
    Total expenses   298,307   294,100   286,343 1   4       1,162,381   1,137,220 2  
  Operating income   135,433   137,135   144,452 (1)   (6)       520,871   555,202 (6)  
  Non-operating income (expense):                                  
  Gains and other investment income, net   15,155   14,846   598 2   NM       51,040   10,066 407  
  Interest expense   (5,888)   (5,888)   (5,913) -   -       (23,795)   (23,629) 1  
  Other income (expense) of consolidated                                  
    collateralized loan obligation (CLO) entities:                                  
       Gains and other investment income, net   24,777   18,260   12,059 36   105       70,272   16,882 316  
       Interest and other expense   (18,445)   (21,748)   (11,656) (15)   58       (59,350)   (15,286) 288  
    Total non-operating income (expense)   15,599   5,470   (4,912) 185   NM       38,167   (11,967) NM  
                                       
  Income before income taxes and equity                                  
     in net income of affiliates   151,032   142,605   139,540 6   8       559,038   543,235 3  
  Income taxes   (34,254)   (36,304)   (36,823) (6)   (7)       (135,252)   (156,703) (14)  
  Equity in net income of affiliates, net of tax   2,172   2,235   2,496 (3)   (13)       9,090   11,373 (20)  
  Net income   118,950   108,536   105,213 10   13       432,876   397,905 9  
  Net (income) loss attributable to non-controlling                                  
     and other beneficial interests   (9,744)   (6,315)   274 54   NM       (32,841)   (15,967) 106  
  Net income attributable to                                  
     Eaton Vance Corp. shareholders $ 109,206 $ 102,221 $ 105,487 7   4     $ 400,035 $ 381,938 5  
                                       
  Earnings per share:                                  
  Basic $ 1.00 $ 0.94 $ 0.93 6   8     $ 3.63 $ 3.33 9  
  Diluted $ 0.96 $ 0.90 $ 0.87 7   10     $ 3.50 $ 3.11 13  
                                       
  Weighted average shares outstanding:                                  
  Basic   108,690   109,111   113,576 -   (4)       110,064   114,745 (4)  
  Diluted   113,702   113,464   121,021 -   (6)       114,388   122,932 (7)  
                                       
  Dividends declared per share $ 0.375 $ 0.350 $ 0.350 7   7     $ 1.425 $ 1.280 11  
 

(1) Prior year amounts have been restated to reflect the Company’s retrospective adoption of ASU 2014-09 on November 1, 2018. Fund subsidies previously included as a component of fund-related expenses are now presented as a contra-revenue component of management fees. In addition, certain front-end load sales commissions that were previously reported on a net basis as a component of distribution expense are now reported on a gross basis in distribution and underwriter fee revenue and distribution expense. The adoption of ASU 2014-09 had no impact on net income or earnings per share.

  
   
   
   
 
 

 

                        Attachment 2
Eaton Vance Corp.
Reconciliation of net income attributable to Eaton Vance Corp.
shareholders to adjusted net income attributable to Eaton Vance Corp.
shareholders and earnings per diluted share to adjusted earnings per diluted share
(in thousands, except per share figures)
                                         
    Three Months Ended   Fiscal Year Ended
                  % %                
                  Change Change                
                  Q4 2019 Q4 2019                
  October 31, July 31, October 31,   vs. vs.   October 31, October 31,   %
  2019 2019 2018   Q3 2019 Q4 2018   2019 2018   Change
                                         
Net income attributable to Eaton Vance                                      
  Corp. shareholders $ 109,206 $ 102,221 $ 105,487   7 % 4 %   $ 400,035 $ 381,938   5 %
                                         
Net excess tax benefit from stock-based                                      
  compensation plans(1)   (1,541)   (637)   (2,416)   142   (36)       (5,404)   (17,487)   (69)  
                                         
Revaluation of deferred tax amounts(2)   -   -   (433)   NM   (100)       -   21,220   (100)  
                                         
Repatriation of undistributed earnings of                                      
  foreign subsidiaries(3)   -   -   (255)   NM   (100)       -   2,807   (100)  
                                         
Loss on write-off of Hexavest option, net of tax(4)   -   -   -   NM   NM       -   5,660   (100)  
                                         
Adjusted net income attributable to Eaton                                      
  Vance Corp. shareholders $ 107,665 $ 101,584 $ 102,383   6   5     $ 394,631 $ 394,138   -  
                                         
                                         
Earnings per diluted share $ 0.96 $ 0.90 $ 0.87   7   10     $ 3.50 $ 3.11   13  
                                         
Net excess tax benefit from stock-based                                      
  compensation plans   (0.01)   -   (0.02)   NM   (50)       (0.05)   (0.14)   (64)  
                                         
Revaluation of deferred tax amounts   -   -   -   NM   NM       -   0.17   (100)  
                                         
Repatriation of undistributed earnings of                                      
  foreign subsidiaries   -   -   -   NM   NM       -   0.02   (100)  
                                         
Loss on write-off of Hexavest option, net of tax   -   -   -   NM   NM       -   0.05   (100)  
                                         
                                         
Adjusted earnings per diluted share $ 0.95 $ 0.90 $ 0.85   6   12     $ 3.45 $ 3.21   7  
                                         

(1) Reflects the impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which was adopted in the first quarter of fiscal 2018.

(2) Reflects the revaluation of deferred tax assets and deferred tax liabilities resulting from the enactment of the 2017 Tax Act on December 22, 2017.

(3) Reflects the recognition of incremental tax expense related to the deemed repatriation of foreign earnings considered to be indefinitely reinvested abroad and not  previously subject to U.S taxation.

(4) Reflects the $6.5 million loss recognized upon expiration of the Company's option to acquire an additional 26 percent ownership interest in Hexavest, net of the associated impact to taxes of $0.8 million.

 

                              Attachment 3
Eaton Vance Corp.
Components of net income (loss) attributable
to non-controlling and other beneficial interests
(in thousands)
                                       
    Three Months Ended   Fiscal Year Ended
                  % %              
                  Change Change              
                  Q4 2019 Q4 2019              
    October 31, July 31, October 31,   vs. vs.   October 31, October 31, %
  2019 2019 2018   Q3 2019 Q4 2018   2019 2018 Change
                                       
Consolidated sponsored funds $ 6,759 $ 2,760 $ (4,447)   145 % NM %   $ 20,081 $ (232) NM %
                                     
Majority-owned subsidiaries   2,985   3,555   4,173   (16)   (28)       12,760   16,199 (21)  
                                       
Net income (loss) attributable to non-controlling                                    
  and other beneficial interests $ 9,744 $ 6,315 $ (274)   54   NM     $ 32,841 $ 15,967 106  
 
 

 

             Attachment 4
  Eaton Vance Corp.
  Balance Sheet
  (in thousands, except per share figures)
   
      October 31,     October 31,(1)
      2019     2018
  Assets          
             
  Cash and cash equivalents $ 557,668   $ 600,696
  Management fees and other receivables   237,864     236,736
  Investments   1,060,739     1,078,627
  Assets of consolidated CLO entities:          
     Cash   48,704     216,598
     Bank loans and other investments   1,704,270     874,304
     Other assets   28,039     4,464
  Deferred sales commissions   55,211     48,629
  Deferred income taxes   62,661     45,826
  Equipment and leasehold improvements, net   72,798     52,428
  Intangible assets, net   75,907     80,885
  Goodwill   259,681     259,681
  Loan to affiliate   5,000     5,000
  Other assets   85,087     95,454
     Total assets $ 4,253,629   $ 3,599,328
             
  Liabilities, Temporary Equity and Permanent Equity          
             
  Liabilities:          
             
  Accrued compensation $ 240,722   $ 233,836
  Accounts payable and accrued expenses   89,984     91,410
  Dividend payable   55,177     51,731
  Debt   620,513     619,678
  Liabilities of consolidated CLO entities:          
     Senior and subordinated note obligations   1,617,095     873,008
     Other liabilities   51,122     154,185
  Other liabilities   108,982     131,952
     Total liabilities   2,783,595     2,155,800
             
  Commitments and contingencies          
             
  Temporary Equity:          
  Redeemable non-controlling interests   285,915     335,097
     Total temporary equity   285,915     335,097
             
  Permanent Equity:          
  Voting Common Stock, par value $0.00390625 per share:          
     Authorized, 1,280,000 shares          
     Issued and outstanding, 422,935 and 422,935 shares, respectively   2     2
  Non-Voting Common Stock, par value $0.00390625 per share:          
     Authorized, 190,720,000 shares          
     Issued and outstanding, 113,143,567 and 116,527,845 shares, respectively   442     455
  Additional paid-in capital   -     17,514
  Notes receivable from stock option exercises   (8,447)     (8,057)
  Accumulated other comprehensive loss   (58,317)     (53,181)
  Retained earnings   1,250,439     1,150,698
     Total Eaton Vance Corp. shareholders' equity   1,184,119     1,107,431
  Non-redeemable non-controlling interests   -     1,000
     Total permanent equity   1,184,119     1,108,431
  Total liabilities, temporary equity and permanent equity $ 4,253,629   $ 3,599,328
             
 
 

 

                    Attachment 5
Eaton Vance Corp.
Consolidated Assets under Management and Net Flows by Investment Mandate(1)
(in millions)
                               
    Three Months Ended   Fiscal Year Ended
    October 31,   July 31,   October 31,   October 31,   October 31,
    2019   2019   2018   2019   2018
Equity assets – beginning of period(2) $ 128,996   $ 125,869   $ 122,466   $ 115,772   $ 113,472
  Sales and other inflows   6,833     6,749     4,666     24,852     21,840
  Redemptions/outflows   (4,861)     (5,130)     (5,328)     (20,022)     (20,813)
    Net flows   1,972     1,619     (662)     4,830     1,027
  Exchanges   (9)     (43)     31     (10)     37
  Market value change   936     1,551     (6,063)     11,303     1,236
Equity assets – end of period $ 131,895   $ 128,996   $ 115,772   $ 131,895   $ 115,772
Fixed income assets – beginning of period(3)   91,399     86,744     76,819     77,844     70,797
  Sales and other inflows   7,731     8,005     7,038     33,310     26,259
  Redemptions/outflows   (5,383)     (4,566)     (4,788)     (21,429)     (16,715)
    Net flows   2,348     3,439     2,250     11,881     9,544
  Exchanges   161     69     5     626     -
  Market value change   167     1,147     (1,230)     3,724     (2,497)
Fixed income assets – end of period $ 94,075   $ 91,399   $ 77,844   $ 94,075   $ 77,844
Floating-rate income assets – beginning of period   38,339     39,750     42,955     44,837     38,819
  Sales and other inflows   1,289     1,772     4,079     8,706     14,301
  Redemptions/outflows   (3,890)     (2,963)     (2,103)     (16,988)     (8,401)
    Net flows   (2,601)     (1,191)     1,976     (8,282)     5,900
  Exchanges   (67)     (38)     46     (428)     86
  Market value change   (568)     (182)     (140)     (1,024)     32
Floating-rate income assets – end of period $ 35,103   $ 38,339   $ 44,837   $ 35,103   $ 44,837
Alternative assets – beginning of period   9,031     9,409     13,465     12,139     12,637
  Sales and other inflows   405     466     847     2,717     5,679
  Redemptions/outflows   (970)     (1,109)     (1,570)     (6,618)     (4,947)
    Net flows   (565)     (643)     (723)     (3,901)     732
  Exchanges   (88)     9     (75)     (255)     (103)
  Market value change   (6)     256     (528)     389     (1,127)
Alternative assets – end of period $ 8,372   $ 9,031   $ 12,139   $ 8,372   $ 12,139
Portfolio implementation assets – beginning of period   128,636     125,391     115,035     110,840     99,615
  Sales and other inflows   5,961     6,468     5,578     25,900     22,562
  Redemptions/outflows   (4,306)     (4,378)     (3,819)     (17,518)     (14,141)
    Net flows   1,655     2,090     1,759     8,382     8,421
  Exchanges   2     3     (6)     59     (22)
  Market value change   2,905     1,152     (5,948)     13,917     2,826
Portfolio implementation assets – end of period $ 133,198   $ 128,636   $ 110,840   $ 133,198   $ 110,840
Exposure management assets – beginning of period   86,379     82,775     82,443     77,871     86,976
  Sales and other inflows   24,388     17,307     12,946     73,376     65,812
  Redemptions/outflows   (17,400)     (14,611)     (15,438)     (62,363)     (74,095)
    Net flows   6,988     2,696     (2,492)     11,013     (8,283)
  Market value change   1,422     908     (2,080)     5,905     (822)
Exposure management assets – end of period $ 94,789   $ 86,379   $ 77,871   $ 94,789   $ 77,871
Total assets under management – beginning of period   482,780     469,938     453,183     439,303     422,316
  Sales and other inflows   46,607     40,767     35,154     168,861     156,453
  Redemptions/outflows   (36,810)     (32,757)     (33,046)     (144,938)     (139,112)
    Net flows   9,797     8,010     2,108     23,923     17,341
  Exchanges   (1)     -     1     (8)     (2)
  Market value change   4,856     4,832     (15,989)     34,214     (352)
Total assets under management – end of period $ 497,432   $ 482,780   $ 439,303   $ 497,432   $ 439,303
                               

(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

(2) Whenever presented, Equity assets include balanced and other multi-asset mandates.

(3) Whenever presented, Fixed Income assets include cash management mandates.

 
 

 

                        Attachment 6
Eaton Vance Corp.
Consolidated Assets under Management and Net Flows by Investment Vehicle(1)
(in millions)
                               
    Three Months Ended   Fiscal Year Ended
    October 31,   July 31,   October 31,   October 31,   October 31,
    2019   2019   2018   2019   2018
Funds – beginning of period(2) $ 173,433   $ 170,962   $ 168,778   $ 164,968   $ 156,853
  Sales and other inflows   10,020     10,084     11,303     44,337     44,470
  Redemptions/outflows   (9,613)     (8,912)     (9,438)     (43,349)     (34,802)
    Net flows   407     1,172     1,865     988     9,668
  Exchanges   (1)     22     -     (84)     305
  Market value change   229     1,277     (5,675)     8,196     (1,858)
Funds – end of period $ 174,068   $ 173,433   $ 164,968   $ 174,068   $ 164,968
Institutional separate accounts – beginning of period   165,311     160,460     162,701     153,996     159,986
  Sales and other inflows   27,342     20,903     14,936     85,401     79,502
  Redemptions/outflows   (21,782)     (17,861)     (18,278)     (78,471)     (85,638)
    Net flows   5,560     3,042     (3,342)     6,930     (6,136)
  Exchanges   4     (16)     -     86     18
  Market value change   2,456     1,825     (5,363)     12,319     128
Institutional separate accounts – end of period $ 173,331   $ 165,311   $ 153,996   $ 173,331   $ 153,996
Individual separate accounts – beginning of period(3)   144,036     138,516     121,704     120,339     105,477
  Sales and other inflows   9,245     9,780     8,915     39,123     32,481
  Redemptions/outflows   (5,415)     (5,984)     (5,330)     (23,118)     (18,672)
    Net flows   3,830     3,796     3,585     16,005     13,809
  Exchanges   (4)     (6)     1     (10)     (325)
  Market value change   2,171     1,730     (4,951)     13,699     1,378
Individual separate accounts – end of period $ 150,033   $ 144,036   $ 120,339   $ 150,033   $ 120,339
Total assets under management – beginning of period   482,780     469,938     453,183     439,303     422,316
  Sales and other inflows   46,607     40,767     35,154     168,861     156,453
  Redemptions/outflows   (36,810)     (32,757)     (33,046)     (144,938)     (139,112)
    Net flows   9,797     8,010     2,108     23,923     17,341
  Exchanges   (1)     -     1     (8)     (2)
  Market value change   4,856     4,832     (15,989)     34,214     (352)
Total assets under management – end of period $ 497,432   $ 482,780   $ 439,303   $ 497,432   $ 439,303
                               

(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

(2) Whenever presented, Fund assets include assets of cash management funds.

(3) In the first quarter of fiscal 2019, the Company revised its classification of consolidated assets under management and net flows by investment vehicle to combine the formerly separate high-net-worth separate account and retail managed account categories into a single individual separate account category. The above presentation of  prior year results has been revised for comparability purposes. The reclassification does not affect total consolidated assets under management or total consolidated net flows for any period.

 
 

 

                      Attachment 7
Eaton Vance Corp.
Consolidated Assets under Management by Investment Mandate(1)
(in millions)
                           
      October 31,     July 31,   %     October 31,   %
      2019     2019   Change     2018   Change
Equity(2) $ 131,895   $ 128,996   2%   $ 115,772   14%
Fixed income(3)   94,075     91,399   3%     77,844   21%
Floating-rate income   35,103     38,339   -8%     44,837   -22%
Alternative   8,372     9,031   -7%     12,139   -31%
Portfolio implementation   133,198     128,636   4%     110,840   20%
Exposure management   94,789     86,379   10%     77,871   22%
   Total $ 497,432   $ 482,780   3%   $ 439,303   13%
                           

(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

(2) Includes balanced and other multi-asset mandates.

(3) Includes cash management mandates.

                           
                      Attachment 8
Eaton Vance Corp.
Consolidated Assets under Management by Investment Vehicle(1)
(in millions)
                           
      October 31,     July 31,   %     October 31,   %
      2019     2019   Change     2018   Change
Open-end funds $ 105,043   $ 105,614   -1%   $ 102,426   3%
Closed-end funds   24,284     24,307   0%     23,998   1%
Private funds(2)   44,741     43,512   3%     38,544   16%
Institutional separate accounts   173,331     165,311   5%     153,996   13%
Individual separate accounts(3)   150,033     144,036   4%     120,339   25%
   Total $ 497,432   $ 482,780   3%   $ 439,303   13%
                           

(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

(2) Includes privately offered equity, fixed income and floating-rate income funds and CLO entities.

(3) In the first quarter of fiscal 2019, the Company revised its classification of consolidated assets under management by investment vehicle to combine the formerly separate  high-net-worth separate account and retail managed account categories into a single individual separate account category. The above presentation of prior year results has been revised for comparability purposes. The reclassification does not affect total consolidated assets under management for any period.

                           
                      Attachment 9
Eaton Vance Corp.
Consolidated Assets under Management by Investment Affiliate(1)
(in millions)
                           
      October 31,     July 31,   %     October 31,   %
      2019     2019   Change     2018   Change
Eaton Vance Management(2) $ 187,711   $ 188,144   0%   $ 179,321   5%
Parametric   265,824     252,447   5%     224,238   19%
Atlanta Capital(3)   27,564     27,008   2%     23,355   18%
Calvert(3)   16,333     15,181   8%     12,389   32%
   Total $ 497,432   $ 482,780   3%   $ 439,303   13%
                           

(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

(2) Includes managed assets of Eaton Vance-sponsored funds and separate accounts managed by Hexavest and unaffiliated third-party advisers under Eaton Vance supervision.

(3) Consistent with the Company's policies for reporting the managed assets and flows of investment portfolios for which multiple Eaton Vance affiliates have management responsibilities, the managed assets of Atlanta Capital indicated above include the assets of Calvert Equity Fund, for which Atlanta Capital serves as sub-adviser. The total managed assets of Calvert, including assets sub-advised by other Eaton Vance affiliates, were $19.8 billion as of October 31, 2019, $18.2 billion as of July 31, 2019 and $14.7 billion as of October 31, 2018.

 
 

 

Attachment 10
Eaton Vance Corp.
Average Annualized Management Fee Rates by Investment Mandate(1)(2)
(in basis points on average managed assets)
                   
  Three Months Ended   Fiscal Year Ended
        % %        
        Change Change        
        Q4 2019 Q4 2019        
  October 31, July 31, October 31, vs. vs.   October 31, October 31, %
  2019 2019 2018 Q3 2019 Q4 2018   2019 2018 Change
Equity 56.2 57.1 58.2 -2% -3%   56.9 58.9 -3%
Fixed income 32.5 32.8 33.9 -1% -4%   32.9 34.9 -6%
Floating-rate income 49.3 49.7 50.3 -1% -2%   49.7 50.6 -2%
Alternative 62.7 66.9 60.2 -6% 4%   61.4 64.8 -5%
Portfolio implementation 14.9 15.1 14.7 -1% 1%   14.8 14.6 1%
Exposure management 4.9 5.2 5.4 -6% -9%   5.1 5.2 -2%
  Total 30.8 31.8 32.7 -3% -6%   31.6 33.0 -4%
                   

(1) Prior year management fee rates have been restated to reflect the Company’s retrospective adoption of ASU 2014-09 on November 1, 2018. Fund subsidies previously included as a component of fund-related expenses are now presented as a contra-revenue component of management fees. Fluctuations in fund subsidies may cause average  management fee rates to fluctuate from one period to the next.

(2) Excludes performance-based fees, which were $0.1 million in both the three months ended October 31, 2019 and July 31, 2019, $(0.3) million in the three months ended October 31, 2018, $1.7 million in the fiscal year ended October 31, 2019 and $(1.7) million in the fiscal year ended October 31, 2018.

 
 

 

Attachment 11
Eaton Vance Corp.
Hexavest Inc. Assets under Management and Net Flows
(in millions)
                                 
      Three Months Ended   Fiscal Year Ended
      October 31,   July 31,   October 31,   October 31,   October 31,
      2019   2019   2018   2019   2018
Eaton Vance distributed:                            
Eaton Vance sponsored funds – beginning of period(1) $ 170   $ 184   $ 168   $ 159   $ 182
  Sales and other inflows   1     3     1     48     12
  Redemptions/outflows   (24)     (17)     (4)     (69)     (35)
     Net flows   (23)     (14)     (3)     (21)     (23)
  Market value change   5     -     (6)     14     -
Eaton Vance sponsored funds – end of period $ 152   $ 170   $ 159   $ 152   $ 159
Eaton Vance distributed separate accounts –                            
    beginning of period(2) $ 1,745   $ 2,076   $ 2,522   $ 2,169   $ 3,092
  Sales and other inflows   2     79     58     105     230
  Redemptions/outflows   (226)     (414)     (327)     (859)     (1,176)
     Net flows   (224)     (335)     (269)     (754)     (946)
  Market value change   42     4     (84)     148     23
Eaton Vance distributed separate accounts – end of period $ 1,563   $ 1,745   $ 2,169   $ 1,563   $ 2,169
Total Eaton Vance distributed – beginning of period $ 1,915   $ 2,260   $ 2,690   $ 2,328   $ 3,274
  Sales and other inflows   3     82     59     153     242
  Redemptions/outflows   (250)     (431)     (331)     (928)     (1,211)
     Net flows   (247)     (349)     (272)     (775)     (969)
  Market value change   47     4     (90)     162     23
Total Eaton Vance distributed – end of period $ 1,715   $ 1,915   $ 2,328   $ 1,715   $ 2,328
Hexavest directly distributed – beginning of period(3) $ 11,474   $ 11,634   $ 12,553   $ 11,467   $ 12,748
  Sales and other inflows   140     410     233     1,769     1,149
  Redemptions/outflows   (321)     (646)     (844)     (2,574)     (2,416)
     Net flows   (181)     (236)     (611)     (805)     (1,267)
  Market value change   347     76     (475)     978     (14)
Hexavest directly distributed – end of period $ 11,640   $ 11,474   $ 11,467   $ 11,640   $ 11,467
Total Hexavest managed assets – beginning of period $ 13,389   $ 13,894   $ 15,243   $ 13,795   $ 16,022
  Sales and other inflows   143     492     292     1,922     1,391
  Redemptions/outflows   (571)     (1,077)     (1,175)     (3,502)     (3,627)
     Net flows   (428)     (585)     (883)     (1,580)     (2,236)
  Market value change   394     80     (565)     1,140     9
Total Hexavest managed assets – end of period $ 13,355   $ 13,389   $ 13,795   $ 13,355   $ 13,795
                                 

(1) Managed assets and flows of Eaton Vance-sponsored pooled investment vehicles for which Hexavest is adviser or sub-adviser. Eaton Vance receives management fees (and in some cases also distribution fees) on these assets, which are included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9.

(2) Managed assets and flows of Eaton Vance-distributed separate accounts managed by Hexavest. Eaton Vance receives distribution fees, but not management fees, on these assets, which are not included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9.

(3) Managed assets and flows of pre-transaction Hexavest clients and post-transaction Hexavest clients in Canada. Eaton Vance receives no management fees or distribution fees on these assets, which are not included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9.