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Eaton Vance Corp. Report for the Three and Nine Month Periods Ended July 31, 2018

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Eaton Vance Corp. Report for the Three and Nine Month Periods Ended July 31, 2018

PR Newswire

BOSTON, Aug. 29, 2018 /PRNewswire/ -- Eaton Vance Corp. (NYSE:EV) today reported earnings per diluted share of $0.83 for the third quarter of fiscal 2018, an increase of 43 percent from $0.58 of earnings per diluted share in the third quarter of fiscal 2017 and an increase of 6 percent from $0.78 of earnings per diluted share in the second quarter of fiscal 2018. 

The Company reported adjusted earnings per diluted share(1) of $0.82 for the third quarter of fiscal 2018, an increase of 32 percent from $0.62 of adjusted earnings per diluted share in the third quarter of fiscal 2017 and an increase of 6 percent from $0.77 of adjusted earnings per diluted share in the second quarter of fiscal 2018. In the third quarter of fiscal 2018, earnings under U.S. generally accepted accounting principles (U.S. GAAP) exceeded adjusted earnings by $0.01 per diluted share to reflect the reversal of $1.3 million of net excess tax benefits recognized from the exercise of employee stock options and vesting of restricted stock awards during the period. In the third quarter of fiscal 2017, adjusted earnings exceeded U.S. GAAP earnings by $0.04 per diluted share, reflecting $5.4 million of costs associated with the May 2017 retirement of $250 million aggregate principal amount of the Company's 6.5 percent senior notes due October 2, 2017 (2017 Senior Notes) and $3.5 million of structuring fees paid in connection with the initial public offering of Eaton Vance Floating-Rate 2022 Target Term Trust (2022 Target Term Trust) in July 2017. In the second quarter of fiscal 2018, U.S. GAAP earnings exceeded adjusted earnings by $0.01 per diluted share to reflect the reversal of $1.9 million of net excess tax benefits recognized from the exercise of employee stock options and vesting of restricted stock awards during the period.

Net gains and other investment income related to seed capital investments contributed $0.01 to earnings per diluted share in each of the third quarter of fiscal 2018, the third quarter of fiscal 2017 and the second quarter of fiscal 2018.

Consolidated net inflows of $3.7 billion in the third quarter of fiscal 2018 represent a 3 percent annualized internal growth rate in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management). This compares to net inflows of $9.1 billion and 9 percent annualized internal growth in managed assets in the third quarter of fiscal 2017 and net inflows of $4.4 billion and annualized internal growth in managed assets of 4 percent in the second quarter of fiscal 2018. Excluding exposure management mandates, the Company's annualized internal growth rate in managed assets was 8 percent in the third quarter of fiscal 2018, 11 percent in the third quarter of fiscal 2017 and 9 percent in the second quarter of fiscal 2018.

The Company's annualized internal management fee revenue growth rate (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows, divided by beginning of period consolidated management fee revenue) was 5 percent in the third quarter of fiscal 2018, 6 percent in the third quarter of fiscal 2017 and 7 percent in the second quarter of fiscal 2018.

Consolidated assets under management were $453.2 billion on July 31, 2018, up 12 percent from $405.6 billion of consolidated managed assets on July 31, 2017 and up 3 percent from $440.1 billion of consolidated managed assets on April 30, 2018. The year-over-year increase in consolidated assets under management reflects net inflows of $23.2 billion and market price appreciation of $24.4 billion. The sequential quarterly increase in consolidated assets under management reflects net inflows of $3.7 billion and market price appreciation of $9.4 billion in the third quarter of fiscal 2018.

"In the third quarter of fiscal 2018, Eaton Vance reached new highs in managed assets, revenue and profits, both on a U.S. GAAP basis and as adjusted," said Thomas E. Faust Jr., Chairman and Chief Executive Officer. "Our diverse range of leading investment franchises, strong investment performance and outstanding distribution and client service have enabled Eaton Vance to continue growing even as the investment industry landscape has turned more difficult."

Average consolidated assets under management were $446.0 billion in the third quarter of fiscal 2018, up 13 percent from $395.2 billion in the third quarter of fiscal 2017 and up 1 percent from $440.6 billion in the second quarter of fiscal 2018.

Excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 33.5 basis points in the third quarter of fiscal 2018, down 2 percent from 34.2 basis points in the third quarter of fiscal 2017 and up 1 percent from 33.3 basis points in the second quarter of fiscal 2018. Changes in average annualized management fee rates for the compared periods primarily reflect shifts in the Company's mix of business.

Attachments 5 and 6 summarize the Company's consolidated assets under management and net flows by investment mandate and investment vehicle. 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 $38.0 billion in the third quarter of fiscal 2018, down 5 percent from $39.8 billion in the third quarter of fiscal 2017 and down 4 percent from $39.4 billion in the second quarter of fiscal 2018.  Excluding exposure management mandates, third quarter fiscal 2018 consolidated sales and other inflows were up 4 percent from the third quarter of fiscal 2017 and down 6 percent from the second quarter of fiscal 2018.

Consolidated redemptions and other outflows were $34.2 billion in the third quarter of fiscal 2018, up 11 percent from $30.7 billion in the third quarter of fiscal 2017 and down 2 percent from $35.0 billion in the second quarter of fiscal 2018. Excluding exposure management mandates, third quarter fiscal 2018 consolidated redemptions and other outflows were up 10 percent from the third quarter of fiscal 2017 and down 5 percent from the second quarter of fiscal 2018.

As of July 31, 2018, our 49 percent-owned affiliate Hexavest Inc. (Hexavest) managed $15.2 billion of client assets, down 1 percent from $15.4 billion of managed assets on July 31, 2017 and down 4 percent from the $15.8 billion of managed assets on April 30, 2018. Hexavest had net outflows of $0.8 billion in the third quarter of fiscal 2018 versus net inflows of $0.4 billion in the third quarter of fiscal 2017 and net outflows of $0.2 billion in the second quarter of fiscal 2018. Attachment 11 summarizes the assets under management and net flows of Hexavest. Other than Eaton Vance-sponsored funds for which Hexavest is adviser or sub-adviser, the managed assets and flows of Hexavest are not included in Eaton Vance consolidated totals.


Financial Highlights








(in thousands, except per share figures)



















Three Months Ended



July 31,


April 30,


July 31,



2018


2018


2017


Revenue

$

430,602


$

414,261


$

393,746


Expenses


288,338



281,575



272,715


Operating income


142,264



132,686



121,031


   Operating margin


33.0%



32.0%



30.7%


Non-operating income (expense)


(20)



(5,349)



(6,039)


Income taxes


(37,219)



(34,044)



(42,462)


Equity in net income of affiliates, net of tax


2,750



3,113



2,323


Net income


107,775



96,406



74,853


Net (income) loss attributable to non-controlling










   and other beneficial interests


(5,981)



195



(7,492)


Net income attributable to










   Eaton Vance Corp. shareholders

$

101,794


$

96,601


$

67,361


Adjusted net income attributable to










   Eaton Vance Corp. shareholders

$

100,469


$

94,765


$

72,849


Earnings per diluted share

$

0.83


$

0.78


$

0.58


Adjusted earnings per diluted share

$

0.82


$

0.77


$

0.62

 

Third Quarter Fiscal 2018 vs. Third Quarter Fiscal 2017

In the third quarter of fiscal 2018, revenue increased 9 percent to $430.6 million from $393.7 million in the third quarter of fiscal 2017. Management fees were up 10 percent, as a 13 percent increase in average consolidated assets under management more than offset lower consolidated average management fee rates. Performance fees were $(0.4) million in the third quarter of fiscal 2018 versus $0.5 million in the third quarter of fiscal 2017. Distribution and service fee revenues collectively were up 1 percent, reflecting higher managed assets in fund share classes that are subject to these fees.

Operating expenses increased 6 percent to $288.3 million in the third quarter of fiscal 2018 from $272.7 million in the third quarter of fiscal 2017. Increases in compensation, amortization of deferred sales commissions, fund-related expenses and other operating expenses were partially offset by lower distribution expense. The increase in compensation expense reflects higher salaries and benefits associated with increases in headcount, higher operating income- and performance-based bonus accruals, and higher stock-based compensation, partially offset by a decrease in sales-based incentive compensation and lower costs associated with employee terminations. The increase in amortization of deferred sales commissions reflects higher commission amortization for private funds, partially offset by lower Class C commission amortization. The increase in fund-related expenses reflects increases in fund subsidies, higher sub-advisory fees paid and an increase in fund expenses borne by the Company on funds for which it earns an all-in fee, partially offset by a $1.9 million decrease in fund expenses borne by the Company related to a one-time reimbursement made by the Company to certain funds in the third quarter of fiscal 2017. Other operating expenses increased 10 percent, reflecting higher information technology and facilities expenses, partially offset by lower travel and other corporate expenses. The decrease in distribution expense primarily reflects a decrease in closed-end fund structuring fees and lower marketing and promotion costs, partially offset by an increase in intermediary marketing support payments.

Operating income increased 18 percent to $142.3 million in the third quarter of fiscal 2018 from $121.0 million in the third quarter of fiscal 2017. Operating margin increased to 33.0 percent in the third quarter of fiscal 2018 from 30.7 percent in the third quarter of fiscal 2017. Excluding the $3.5 million of closed-end fund structuring fees paid during the third quarter of fiscal 2017, adjusted operating income was up 14 percent year-over-year and adjusted operating margin was 31.6 percent in the third quarter of fiscal 2017.

Non-operating income (expense) was negligible in the third quarter of fiscal 2018 versus $(6.0) million in the third quarter of fiscal 2017. The year-over-year change primarily reflects $5.4 million of costs incurred in connection with retiring the Company's 2017 Senior Notes in the third quarter of fiscal 2017, a $1.6 million increase in net gains and other investment income from the Company's investments in sponsored strategies, including consolidated sponsored funds, and a $0.3 million decrease in interest expense, partially offset by $1.2 million of net expense from consolidated CLO entities. The decrease in interest expense primarily reflects the retirement of the 2017 Senior Notes in the third quarter of fiscal 2017.

The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 26.2 percent in the third quarter of fiscal 2018 and 36.9 percent in the third quarter of fiscal 2017. The Company's effective tax rate in the third quarter of fiscal 2018 is discussed in greater detail in the section captioned "Taxation" below.

Equity in net income of affiliates was $2.8 million and $2.3 million in the third quarters of fiscal 2018 and 2017, respectively, 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 $6.0 million in the third quarter of fiscal 2018 and $7.5 million in the third quarter of fiscal 2017. The year-over-year change primarily reflects a decrease in income earned by consolidated sponsored funds.

Third Quarter Fiscal 2018 vs. Second Quarter of Fiscal 2018

In the third quarter of fiscal 2018, revenue increased 4 percent to $430.6 million from $414.3 million in the second quarter of fiscal 2018. Management fees were up 4 percent, primarily reflecting a 1 percent increase in average consolidated assets under management and the impact of three more fee days in the fiscal third quarter. Performance fees were $(0.4) million in the third quarter of fiscal 2018 and $(0.5) million in the second quarter of fiscal 2018. Distribution and service fee revenues collectively were up 3 percent, reflecting higher managed assets in fund share classes that are subject to these fees and the effect of three more fee days in the fiscal third quarter.

Operating expenses increased 2 percent to $288.3 million in the third quarter of fiscal 2018 from $281.6 million in the second quarter of fiscal 2018. Increases in compensation, distribution expense, service fee expense, amortization of deferred sales commissions and fund-related expenses were partially offset by a decrease in other operating expenses. The increase in compensation expense reflects higher salaries associated with increases in headcount and three more payroll days in the third fiscal quarter, higher stock-based compensation, primarily driven by an increase in employee accelerations due to retirements, and higher operating income-based bonus accruals, partially offset by decreases in payroll taxes and benefits, lower sales-based incentive compensation and a decrease in performance-based bonus accruals. The increase in distribution expense primarily reflects an increase in intermediary marketing support payments and higher Class A and Class C distribution fees, primarily driven by three more fee days in the fiscal third quarter, partially offset by lower marketing and promotion costs. The increase in service fee expense primarily reflects the impact of three more fee days in the fiscal third quarter and higher average assets under management in certain fund share classes that are subject to service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization, partially offset by lower Class C commission amortization. The increase in fund-related expenses reflects higher fund subsidies. Other operating expenses decreased 2 percent, primarily reflecting lower facilities, professional services, travel and other corporate expenses, partially offset by an increase in information technology expense.

Operating income increased 7 percent to $142.3 million in the third quarter of fiscal 2018 from $132.7 million in the second quarter of fiscal 2018. Operating margin increased to 33.0 percent in the third quarter of fiscal 2018 from 32.0 percent in the second quarter of fiscal 2018.

Non-operating income (expense) was negligible in the third quarter of fiscal 2018 versus $(5.3) million in the second quarter of fiscal 2018. The sequential change reflects a $7.4 million increase in net gains and other investment income from the Company's investments in sponsored strategies, including consolidated sponsored funds, partially offset by a $2.1 million decrease 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 26.2 percent in the third quarter of fiscal 2018 and 26.7 percent in the second quarter of fiscal 2018. The Company's effective tax rate in the third and second quarters of fiscal 2018 is discussed in greater detail in the section captioned "Taxation" below.

Equity in net income of affiliates was $2.8 million in the third quarter of fiscal 2018 and $3.1 million in the second quarter of fiscal 2018. In the third quarter of fiscal 2018, substantially all equity in net income of affiliates related to the Company's investment in Hexavest. Equity in net income of affiliates in the second quarter of fiscal 2018 included $2.8 million from the Company's Hexavest investment and $0.3 million from the Company's investment in a private equity partnership.

As detailed in Attachment 3, net income (loss) attributable to non-controlling and other beneficial interests was $6.0 million in the third quarter of fiscal 2018 and $(0.2) million in the second quarter of fiscal 2018. The sequential change primarily reflects an increase in income earned by consolidated sponsored funds.

Taxation

On December 22, 2017, the Tax Cuts and Jobs Act (the 2017 Tax Act) was signed into law in the U.S. Among other significant changes, the 2017 Tax Act reduced the statutory federal income tax rate for U.S. corporate taxpayers from a maximum of 35 percent to 21 percent and required the deemed repatriation of foreign earnings not previously subject to U.S. taxation. Because the lower federal income tax rate took effect two months into the Company's fiscal year, a blended federal tax rate of 23.3 percent applies to the Company for fiscal 2018 (see table below).

The Company's income tax provision in the third and second quarters of fiscal 2018 was reduced by net excess tax benefits of $1.3 million and $1.9 million, respectively, related to the exercise of stock options and vesting of restricted stock during those periods. New accounting guidance adopted in the first quarter of fiscal 2018 requires these net excess tax benefits to be recognized in earnings.

Our calculations of adjusted net income and adjusted earnings per diluted share remove the effect of the net excess tax benefits recognized in connection with the new accounting guidance. On this basis, our adjusted effective tax rate was 27.1 percent and 28.2 percent in the third and second quarters of fiscal 2018, respectively. On the same adjusted basis, the Company estimates that its effective tax rate will be approximately 27.25 to 27.75 percent in the fourth quarter of fiscal 2018 and for the fiscal year as a whole. The Company's actual tax rates in the fourth quarter and for the full fiscal year may vary from these estimates due to, among other things, changes in the Company's tax policy interpretations and assumptions, as well as additional regulatory guidance that may be issued.

The following table reconciles the statutory federal income tax rate to the Company's effective tax rate for the third and second quarters of fiscal 2018:



Three Months Ended



July 31,


April 30,




2018


2018



Statutory U.S. federal income tax rate(2)

23.3

%

23.3

%


State income taxes for current year, net of federal

     income tax benefits

4.4


4.3



Net income attributable to non-controlling and

     other beneficial interests

(1.0)


0.1



Other items

0.4


0.5



Adjusted effective income tax rate(3)

27.1


28.2



Net excess tax benefits from stock-based

     compensation plans(4)

(0.9)


(1.5)



Effective income tax rate

26.2

%

26.7

%

The Company continues to carefully evaluate the impact of the 2017 Tax Act, certain provisions of which will not take effect for the Company until fiscal 2019, including, but not limited to, the global intangible low-taxed income, foreign-derived intangible income and base erosion anti-abuse tax provisions.

Balance Sheet Information

As of July 31, 2018, the Company held $562.9 million of cash and cash equivalents and $257.9 million of investments in 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 the first nine months of fiscal 2018, the Company used $186.1 million to repurchase and retire approximately 3.4 million shares of its Non-Voting Common Stock under its repurchase authorizations. Of the current 8.0 million share repurchase authorization, approximately 2.6 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 and nine months ended July 31, 2018. To participate in the conference call, please dial 866-521-4909 (domestic) or 647-427-2311 (international) and refer to "Eaton Vance Corp. Third 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 6276355 when instructed.

About Eaton Vance Corp.

Eaton Vance is a leading global asset manager whose history dates to 1924. With offices in North America, Europe, Asia and Australia, Eaton Vance and its affiliates offer individuals and institutions a broad array of investment strategies and wealth management solutions. The Company's long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today's most discerning investors. For more information about Eaton Vance, 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


(in thousands, except per share figures)


























Three Months Ended


Nine Months Ended











%

%


















Change

Change


















Q3 2018

Q3 2018












July 31,

April 30,

July 31,

vs.

vs.


July 31,

July 31,

%





2018

2018

2017

Q2 2018

Q3 2017


2018

2017

Change


Revenue:




















Management fees

$

374,553

$

361,009

$

339,866

4

%

10

%


$

1,101,929

$

966,148

14

%



Distribution and underwriter fees


20,099


19,801


20,114

2


-




60,393


58,991

2




Service fees


31,260


29,831


30,515

5


2




91,935


89,493

3




Other revenue


4,690


3,620


3,251

30


44




12,018


8,705

38





Total revenue


430,602


414,261


393,746

4


9




1,266,275


1,123,337

13



Expenses:




















Compensation and related costs


152,921


147,989


142,338

3


7




455,958


412,940

10




Distribution expense


35,045


34,534


37,160

1


(6)




105,219


100,284

5




Service fee expense


28,760


27,329


28,630

5


-




84,651


83,384

2




Amortization of deferred sales commissions

4,637


4,428


4,182

5


11




13,342


12,062

11




Fund-related expenses


15,857


15,333


14,029

3


13




46,036


36,752

25




Other expenses


51,118


51,962


46,376

(2)


10




150,319


133,528

13





Total expenses


288,338


281,575


272,715

2


6




855,525


778,950

10



Operating income


142,264


132,686


121,031

7


18




410,750


344,387

19



Non-operating income (expense):




















Gains (losses) and other investment income, net


7,131


(261)


5,537

NM


29




9,468


15,319

(38)




Interest expense


(5,906)


(5,903)


(6,180)

-


(4)




(17,716)


(21,592)

(18)




Loss on extinguishment of debt


-


-


(5,396)

NM


(100)




-


(5,396)

(100)




Other income (expense) of consolidated




















collateralized loan obligation (CLO) entities:




















   Gains and other investment income, net

1,847


1,259


-

47


NM




4,823


-

NM





   Interest and other expense


(3,092)


(444)


-

596


NM




(3,630)


-

NM





Total non-operating income (expense)


(20)


(5,349)


(6,039)

(100)


(100)




(7,055)


(11,669)

(40)
























Income before income taxes and equity



















   in net income of affiliates

142,244


127,337


114,992

12


24




403,695


332,718

21



Income taxes


(37,219)


(34,044)


(42,462)

9


(12)




(119,880)


(123,864)

(3)



Equity in net income of affiliates, net of tax


2,750


3,113


2,323

(12)


18




8,877


7,973

11



Net income


107,775


96,406


74,853

12


44




292,692


216,827

35



Net (income) loss attributable to non-controlling


















   and other beneficial interests


(5,981)


195


(7,492)

NM


(20)




(16,241)


(16,780)

(3)



Net income attributable to



















   Eaton Vance Corp. shareholders

$

101,794

$

96,601

$

67,361

5


51



$

276,451

$

200,047

38
























Earnings per share:



















Basic

$

0.89

$

0.84

$

0.61

6


46



$

2.40

$

1.81

33




Diluted

$

0.83

$

0.78

$

0.58

6


43



$

2.24

$

1.73

29
























Weighted average shares outstanding:




















Basic


114,610


115,625


111,284

(1)


3




115,157


110,540

4




Diluted


122,741


123,779


117,051

(1)


5




123,553


115,751

7
























Dividends declared per share

$

0.31

$

0.31

$

0.28

-


11



$

0.93

$

0.84

11


 

 
















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


Nine Months Ended










%

%


















Change

Change


















Q3 2018

Q3 2018










July 31,

April 30,

July 31,


vs.

vs.


July 31,

July 31,


%


2018

2018

2017


Q2 2018

Q3 2017


2018

2017


Change






















Net income attributable to Eaton Vance





















Corp. shareholders

$

101,794

$

96,601

$

67,361


5

%

51

%


$

276,451

$

200,047


38

%






















Repatriation of undistributed earnings of





















foreign subsidiaries(1)


6


42


-


(86)


NM




3,062


-


NM























Net excess tax benefit from stock-based





















compensation plans(2)


(1,331)


(1,878)


-


(29)


NM




(15,071)


-


NM























Revaluation of deferred tax amounts(3)


-


-


-


NM


NM




21,653


-


NM























Loss on write-off of Hexavest option, net of tax(4)


-


-


-


NM


NM




5,660


-


NM























Loss on extinguishment of debt, net of tax(5)


-


-


3,346


NM


(100)




-


3,346


(100)























Closed-end fund structuring fees, net of tax(6)


-


-


2,139


NM


(100)




-


2,139


(100)























Non-controlling interest value adjustments


-


-


3


NM


(100)




-


(71)


(100)























Adjusted net income attributable to Eaton





















Vance Corp. shareholders

$

100,469

$

94,765

$

72,849


6


38



$

291,755

$

205,461


42























Earnings per diluted share

$

0.83

$

0.78

$

0.58


6


43



$

2.24

$

1.73


29























Repatriation of undistributed earnings of





















foreign subsidiaries


-


-


-


NM


NM




0.02


-


NM























Net excess tax benefit from stock-based





















compensation plans


(0.01)


(0.01)


-


-


NM




(0.13)


-


NM























Revaluation of deferred tax amounts


-


-


-


NM


NM




0.18


-


NM























Loss on write-off of Hexavest option, net of tax


-


-


-


NM


NM




0.05


-


NM























Loss on extinguishment of debt, net of tax


-


-


0.03


NM


(100)




-


0.03


(100)























Closed-end fund structuring fees, net of tax


-


-


0.01


NM


(100)




-


0.02


(100)











































Adjusted earnings per diluted share

$

0.82

$

0.77

$

0.62


6


32



$

2.36

$

1.78


33























(1) 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.






















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






















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


(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.    






















(5) Reflects the $5.4 million loss on extinguishment of debt associated with retiring the Company's 2017 Senior Notes in May 2017, net of the associated impact to taxes of $2.1 million.






















(6) Reflects structuring fees of $3.5 million (net of the associated impact to taxes of $1.4 million) paid in connection with the July 2017 initial public offering of Eaton Vance Floating-Rate

     2022 Target Term Trust.






















Eaton Vance Corp.

Reconciliation of operating income and operating margin

 to adjusted operating income and adjusted operating margin

(in thousands)
























Three Months Ended


Nine Months Ended










%

%


















Change

Change


















Q3 2018

Q3 2018










July 31,

April 30,

July 31,


vs.

vs.


July 31,

July 31,


%


2018

2018

2017


Q2 2018

Q3 2017


2018

2017


Change






















Operating income

$

142,264

$

132,686

$

121,031


7

%

18

%


$

410,750

$

344,387


19

%





















Closed-end fund structuring fees


-


-


3,450


NM


(100)




-


3,450


(100)












































Adjusted operating income

$

142,264

$

132,686

$

124,481


7


14



$

410,750

$

347,837


18






















Operating margin


33.0

%

32.0

%

30.7

%

3


7




32.4

%

30.7

%

6






















Closed-end fund structuring fees


-


-


0.9


NM


(100)




-


0.3


(100)












































Adjusted operating margin


33.0

%

32.0

%

31.6

%

3


4




32.4

%

31.0

%

5


 

 















Attachment 3

Eaton Vance Corp.

Components of net income attributable

to non-controlling and other beneficial interests

(in thousands)






















Three Months Ended


Nine Months Ended









%

%
















Change

Change
















Q3 2018

Q3 2018










July 31,

April 30,

July 31,

vs.

vs.


July 31,

July 31,

%



2018

2018

2017

Q2 2018

Q3 2017


2018

2017

Change




















Consolidated sponsored funds

$

1,862

$

(3,947)

$

3,124

NM

%

(40)

%


$

4,215

$

4,836

(13)

%




















Majority-owned subsidiaries


4,119


3,752


4,365

10


(6)




12,026


12,015

-





















Non-controlling interest value adjustments


-


-


3

NM


(100)




-


(71)

(100)





















Net income (loss) attributable to non-controlling



















and other beneficial interests

$

5,981

$

(195)

$

7,492

NM


(20)



$

16,241

$

16,780

(3)


 

 







 Attachment 4


Eaton Vance Corp.


Balance Sheet


(in thousands, except per share figures)






July 31,



October 31,




2018



2017


Assets














Cash and cash equivalents

$

562,890


$

610,555


Management fees and other receivables


218,955



200,453


Investments


1,052,663



898,192


Assets of consolidated CLO entities:







   Cash


88,020



-


   Bank loans and other investments


608,819



31,348


   Other assets


6,918



-


Deferred sales commissions


47,517



36,423


Deferred income taxes


40,697



67,100


Equipment and leasehold improvements, net


51,056



48,989


Intangible assets, net


83,102



89,812


Goodwill


259,681



259,681


Loan to affiliate


5,000



5,000


Other assets


60,914



83,348


   Total assets

$

3,086,232


$

2,330,901









Liabilities, Temporary Equity and Permanent Equity














Liabilities:














Accrued compensation

$

173,279


$

207,330


Accounts payable and accrued expenses


83,652



68,115


Dividend payable


46,109



44,634


Debt


619,469



618,843


Liabilities of consolidated CLO entities:







   Senior note obligations


465,306



-


   Line of credit


145,709



12,598


   Other liabilities


31,982



-


Other liabilities


105,581



116,298


   Total liabilities


1,671,087



1,067,818









Commitments and contingencies














Temporary Equity:







Redeemable non-controlling interests


308,945



250,823


   Total temporary equity


308,945



250,823









Permanent Equity:







Voting Common Stock, par value $0.00390625 per share:







   Authorized, 1,280,000 shares







   Issued and outstanding, 422,935 and 442,932 shares, respectively


2



2


Non-Voting Common Stock, par value $0.00390625 per share:







   Authorized, 190,720,000 shares







   Issued and outstanding, 118,043,471 and 118,077,872 shares, respectively


461



461


Additional paid-in capital


78,214



148,284


Notes receivable from stock option exercises


(9,343)



(11,112)


Accumulated other comprehensive loss


(50,110)



(47,474)


Retained earnings


1,086,145



921,235


   Total Eaton Vance Corp. shareholders' equity


1,105,369



1,011,396


Non-redeemable non-controlling interests


831



864


   Total permanent equity


1,106,200



1,012,260


Total liabilities, temporary equity and permanent equity

$

3,086,232


$

2,330,901








 

 













Attachment 5

Eaton Vance Corp.

Consolidated Assets under Management and Net Flows by Investment Mandate(1)(2)

(in millions)



















Three Months Ended


Nine Months Ended



July 31,


April 30,


July 31,


July 31,


July 31,



2018


2018


2017


2018


2017

Equity assets – beginning of period(3)

$

117,757


$

122,595


$

104,666


$

113,472


$

89,981


Sales and other inflows


5,385



5,913



5,745



17,174



15,955


Redemptions/outflows


(4,900)



(5,265)



(4,259)



(15,485)



(14,317)


  Net flows


485



648



1,486



1,689



1,638


Assets acquired(4)


-



-



-



-



5,704


Exchanges


8



(5)



7



6



60


Market value change


4,216



(5,481)



4,039



7,299



12,815

Equity assets end of period

$

122,466


$

117,757


$

110,198


$

122,466


$

110,198

Fixed income assets – beginning of period(5)


74,024



72,663



66,881



70,797



60,607


Sales and other inflows(6)


6,730



6,164



5,516



19,221



16,841


Redemptions/outflows


(4,065)



(3,925)



(4,178)



(11,927)



(13,006)


  Net flows


2,665



2,239



1,338



7,294



3,835


Assets acquired(4)


-



-



-



-



4,170


Exchanges


(16)



(7)



(2)



(5)



(147)


Market value change


146



(871)



491



(1,267)



243

Fixed income assets end of period

$

76,819


$

74,024


$

68,708


$

76,819


$

68,708

Floating-rate income assets – beginning of period


42,282



39,793



36,957



38,819



32,107


Sales and other inflows


3,387



4,561



3,567



10,222



12,874


Redemptions/outflows


(2,438)



(2,205)



(2,113)



(6,298)



(6,962)


  Net flows


949



2,356



1,454



3,924



5,912


Exchanges


25



18



(8)



40



146


Market value change


(301)



115



351



172



589

Floating-rate income assets – end of period

$

42,955


$

42,282


$

38,754


$

42,955


$

38,754

Alternative assets – beginning of period


13,506



13,248



11,212



12,637



10,687


Sales and other inflows


1,254



1,864



1,359



4,832



3,546


Redemptions/outflows


(999)



(1,344)



(666)



(3,377)



(2,351)


  Net flows


255



520



693



1,455



1,195


Exchanges


(20)



(2)



-



(28)



(7)


Market value change


(276)



(260)



(28)



(599)



2

Alternative assets – end of period

$

13,465


$

13,506


$

11,877


$

13,465


$

11,877

Portfolio implementation assets – beginning of period


107,170



110,442



86,376



99,615



71,426


Sales and other inflows


6,085



5,791



5,869



16,984



18,160


Redemptions/outflows


(3,025)



(3,542)



(2,790)



(10,322)



(9,260)


  Net flows


3,060



2,249



3,079



6,662



8,900


Exchanges


(1)



1



5



(16)



5


Market value change


4,806



(5,522)



3,825



8,774



12,954

Portfolio implementation assets end of period

$

115,035


$

107,170


$

93,285


$

115,035


$

93,285

Exposure management assets – beginning of period


85,333



90,488



80,921



86,976



71,572


Sales and other inflows


15,131



15,083



17,734



52,866



56,293


Redemptions/outflows


(18,814)



(18,688)



(16,649)



(58,657)



(47,897)


  Net flows


(3,683)



(3,605)



1,085



(5,791)



8,396


Market value change


793



(1,550)



757



1,258



2,795

Exposure management assets – end of period(2)

$

82,443


$

85,333


$

82,763


$

82,443


$

82,763

Total assets under management – beginning of period


440,072



449,229



387,013



422,316



336,380


Sales and other inflows(6)


37,972



39,376



39,790



121,299



123,669


Redemptions/outflows


(34,241)



(34,969)



(30,655)



(106,066)



(93,793)


  Net flows


3,731



4,407



9,135



15,233



29,876


Assets acquired(4)


-



-



-



-



9,874


Exchanges


(4)



5



2



(3)



57


Market value change


9,384



(13,569)



9,435



15,637



29,398

Total assets under management end of period

$

453,183


$

440,072


$

405,585


$

453,183


$

405,585

















(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) Reported consolidated assets under management and net flows exclude client positions in exposure management mandates identified as transitory in nature. Such positions totaled

     $12.6 billion as of July 31, 2017. The Company did not manage any such client positions as of July 31, 2018 or April 30, 2018.

















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

















(4) Represents managed assets gained in the acquisition of the business assets of Calvert Investment Management, Inc. (Calvert Investments) on December 30, 2016.  Equity assets acquired

     and total assets acquired exclude $2.1 billion of managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital and previously included in the Company's consolidated

     assets under management.

















(5) Includes cash management mandates.

















(6) Includes $0.8 billion of managed assets gained in assuming the fixed income business assets of the former Oechsle International Advisors, LLC on January 31, 2018.

 

 













Attachment 6

Eaton Vance Corp.

Consolidated Assets under Management and Net Flows by Investment Vehicle(1)(2)

(in millions)



















Three Months Ended


Nine Months Ended



July 31,


April 30,


July 31,


July 31,


July 31,



2018


2018


2017


2018


2017

Fund assets – beginning of period(3)

$

162,869


$

164,554


$

147,341


$

156,853


$

125,722


Sales and other inflows


10,855



11,796



9,736



33,167



30,664


Redemptions/outflows


(7,878)



(8,672)



(7,641)



(25,364)



(24,946)


  Net flows


2,977



3,124



2,095



7,803



5,718


Assets acquired(4)


-



-



-



-



9,821


Exchanges(5)


304



5



2



305



2,186


Market value change


2,628



(4,814)



3,296



3,817



9,287

Fund assets end of period

$

168,778


$

162,869


$

152,734


$

168,778


$

152,734

Institutional separate accounts – beginning of period


163,816



169,406



149,044



159,986



136,451


Sales and other inflows(6)


18,929



19,956



21,227



64,566



66,452


Redemptions/outflows


(22,293)



(21,733)



(19,109)



(67,360)



(56,984)


  Net flows


(3,364)



(1,777)



2,118



(2,794)



9,468


Assets acquired(4)


-



-



-



-



40


Exchanges(5)


(308)



246



-



18



(2,055)


Market value change


2,557



(4,059)



3,091



5,491



10,349

Institutional separate accounts – end of period(2)

$

162,701


$

163,816


$

154,253


$

162,701


$

154,253

High-net-worth separate accounts – beginning of period


42,154



43,693



33,225



39,715



25,806


Sales and other inflows


2,654



2,232



3,103



6,949



9,827


Redemptions/outflows


(1,297)



(1,454)



(1,347)



(4,212)



(3,893)


  Net flows


1,357



778



1,756



2,737



5,934


Exchanges


27



(197)



4



(207)



(31)


Market value change


1,841



(2,120)



1,454



3,134



4,730

High-net-worth separate accounts – end of period

$

45,379


$

42,154


$

36,439


$

45,379


$

36,439

Retail managed accounts – beginning of period


71,233



71,576



57,403



65,762



48,401


Sales and other inflows


5,534



5,392



5,724



16,617



16,726


Redemptions/outflows


(2,773)



(3,110)



(2,558)



(9,130)



(7,970)


  Net flows


2,761



2,282



3,166



7,487



8,756


Assets acquired(4)


-



-



-



-



13


Exchanges


(27)



(49)



(4)



(119)



(43)


Market value change


2,358



(2,576)



1,594



3,195



5,032

Retail managed accounts – end of period

$

76,325


$

71,233


$

62,159


$

76,325


$

62,159

Total assets under management – beginning of period


440,072



449,229



387,013



422,316



336,380


Sales and other inflows(6)


37,972



39,376



39,790



121,299



123,669


Redemptions/outflows


(34,241)



(34,969)



(30,655)



(106,066)



(93,793)


  Net flows


3,731



4,407



9,135



15,233



29,876


Assets acquired(4)


-



-



-



-



9,874


Exchanges


(4)



5



2



(3)



57


Market value change


9,384



(13,569)



9,435



15,637



29,398

Total assets under management – end of period

$

453,183


$

440,072


$

405,585


$

453,183


$

405,585

















(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) Reported consolidated assets under management and net flows exclude client positions in exposure management mandates identified as transitory in nature. Such positions (held as

     institutional separate accounts) totaled $12.6 billion as of July 31, 2017. The Company did not manage any such client positions as of July 31, 2018 or April 30, 2018.

















(3) Includes assets in cash management funds.

















(4) Represents managed assets gained in the acquisition of the business assets of Calvert Investments on December 30, 2016.  Fund assets acquired and total assets acquired exclude $2.1

     billion of managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital and previously included in the Company's consolidated assets under management.

















(5) Reflects the reclassification from institutional separate accounts to funds of $2.1 billion of managed assets of Calvert Equity Fund sub-advised by Atlanta Capital upon the

     Company's acquisition of the business assets of Calvert Investments on December 30, 2016.

















(6) Includes $0.8 billion of managed assets gained in assuming the fixed income business assets of the former Oechsle International Advisors, LLC on January 31, 2018.

 

 












Attachment 7

Eaton Vance Corp.

Consolidated Assets under Management by Investment Mandate(1)(2)

(in millions)


















July 31,



April 30,


%



July 31,


%




2018



2018


Change



2017


Change

Equity(3)

$

122,466


$

117,757


4%


$

110,198


11%

Fixed income(4)


76,819



74,024


4%



68,708


12%

Floating-rate income


42,955



42,282


2%



38,754


11%

Alternative


13,465



13,506


0%



11,877


13%

Portfolio implementation


115,035



107,170


7%



93,285


23%

Exposure management(2)


82,443



85,333


-3%



82,763


0%

   Total

$

453,183


$

440,072


3%


$

405,585


12%















(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) Reported consolidated assets under management exclude client positions in exposure management mandates identified as transitory in nature. Such positions totaled $12.6 billion

     as of July 31, 2017. The Company did not manage any such client positions as of July 31, 2018 or April 30, 2018.















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















(4) Includes cash management mandates.


























Attachment 8

Eaton Vance Corp.

Consolidated Assets under Management by Investment Vehicle(1)(2)

(in millions)


















July 31,



April 30,


%



July 31,


%




2018



2018


Change



2017


Change

Open-end funds(3)

$

104,898


$

101,682


3%


$

95,797


10%

Closed-end funds


24,947



24,635


1%



24,648


1%

Private funds(4)


38,933



36,552


7%



32,289


21%

Institutional separate accounts(2)


162,701



163,816


-1%



154,253


5%

High-net-worth separate accounts


45,379



42,154


8%



36,439


25%

Retail managed accounts


76,325



71,233


7%



62,159


23%

   Total

$

453,183


$

440,072


3%


$

405,585


12%















(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) Reported consolidated assets under management exclude client positions in exposure management mandates identified as transitory in nature. Such positions (held as institutional

     separate accounts) totaled $12.6 billion as of July 31, 2017. The Company did not manage any such client positions as of July 31, 2018 or April 30, 2018.















(3) Includes assets in NextShares funds.















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


























Attachment 9

Eaton Vance Corp.

Consolidated Assets under Management by Investment Affiliate(1)(2)

(in millions)


















July 31,



April 30,


%



July 31,


%




2018



2018


Change



2017


Change

Eaton Vance Management(3)

$

179,558


$

173,269


4%


$

160,570


12%

Parametric(2)


236,272



231,452


2%



213,213


11%

Atlanta Capital(4)


25,004



23,593


6%



21,476


16%

Calvert Research and Management(4)


12,349



11,758


5%



10,326


20%

   Total

$

453,183


$

440,072


3%


$

405,585


12%















(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) Reported consolidated assets under management exclude client positions in exposure management mandates identified as transitory in nature. Such positions (managed by Parametric)

     totaled $12.6 billion as of July 31, 2017. The Company did not manage any such client positions as of July 31, 2018 or April 30, 2018.















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















(4) 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

     Research and Management, including assets sub-advised by other Eaton Vance affiliates, were $14.7 billion as of July 31, 2018, $14.0 billion as of April 30, 2018 and $12.5 billion as of

     July 31, 2017.















 

 

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


Nine Months Ended





%

%









Change

Change









Q3 2018

Q3 2018






July 31,

April 30,

July 31,

vs.

vs.


July 31,

July 31,

%


2018

2018

2017

Q2 2018

Q3 2017


2018

2017

Change

Equity

59.9

59.4

61.5

1%

-3%


60.1

62.1

-3%

Fixed income

35.1

35.8

37.7

-2%

-7%


35.8

38.3

-7%

Floating-rate income

50.4

50.8

50.7

-1%

-1%


50.9

51.5

-1%

Alternative

69.3

68.8

63.2

1%

10%


68.7

63.0

9%

Portfolio implementation

14.5

14.1

14.6

3%

-1%


14.5

14.6

-1%

Exposure management(2)

5.2

5.1

5.1

2%

2%


5.1

5.1

0%

Consolidated average










   annualized fee rates

33.5

33.3

34.2

1%

-2%


33.6

34.7

-3%











(1) Excludes performance-based fees, which were $(0.4) million for the three months ended July 31, 2018, $(0.5) million for the three months ended April 30, 2018, $0.5 million for the three

     months ended July 31, 2017, $(1.4) million for the nine months ended July 31, 2018 and $0.6 million for the nine months ended July 31, 2017.











(2) Excludes management fees attributable to client positions in exposure management mandates identified as transitory in nature.