Market Overview

Eaton Vance Corp. Report for the Three and Nine Month Periods Ended July 31, 2019

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BOSTON, Aug. 27, 2019 /PRNewswire/ -- Eaton Vance Corp. (NYSE:EV) today reported earnings per diluted share of $0.90 for the third quarter of fiscal 2019, an increase of 8 percent from $0.83 of earnings per diluted share in the third quarter of fiscal 2018 and an increase of 1 percent from $0.89 of earnings per diluted share in the second quarter of fiscal 2019.  

The Company reported adjusted earnings per diluted share(1) of $0.90 for the third quarter of fiscal 2019, an increase of 10 percent from $0.82 of adjusted earnings per diluted share in the third quarter of fiscal 2018 and an increase of 1 percent from $0.89 of adjusted earnings per diluted share in the second quarter of fiscal 2019. Earnings under U.S. generally accepted accounting principles (U.S. GAAP) matched adjusted earnings in both the third and second quarters of fiscal 2019 and exceeded adjusted earnings by $0.01 per diluted share in the third quarter of fiscal 2018, reflecting the reversal of net excess tax benefits related to stock‐based awards of $1.3 million.

Net gains and other investment income related to seed capital investments contributed $0.06 to earnings per diluted share in the third quarter of fiscal 2019, $0.01 in the third quarter of fiscal 2018 and $0.03 in the second quarter of fiscal 2019. Other income and expense amounts related to consolidated collateralized loan obligation (CLO) entities reduced earnings by $0.02 and $0.01 per diluted share in the third quarter of fiscal 2019 and fiscal 2018, respectively, and contributed $0.07 to earnings per diluted share in the second quarter of fiscal 2019.

Consolidated net inflows of $8.0 billion in the third quarter of fiscal 2019 represent a 7 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 $3.7 billion and 3 percent annualized internal growth in managed assets in the third quarter of fiscal 2018 and net inflows of $4.6 billion and annualized internal growth in managed assets of 4 percent in the second quarter of fiscal 2019. Excluding exposure management mandates, the Company's annualized internal growth rate in managed assets was 5 percent in the third quarter of fiscal 2019, 8 percent in the third quarter of fiscal 2018 and 3 percent in the second quarter of fiscal 2019.

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 2 percent in the third quarter of fiscal 2019, 5 percent in the third quarter of fiscal 2018 and 1 percent in the second 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 $482.8 billion on July 31, 2019, up 7 percent from $453.2 billion of consolidated managed assets on July 31, 2018 and up 3 percent from $469.9 billion of consolidated managed assets on April 30, 2019. The year-over-year increase in consolidated assets under management reflects net inflows of $16.2 billion and market price appreciation of $13.4 billion. The sequential quarterly increase in consolidated assets under management reflects net inflows of $8.0 billion and market price appreciation of $4.8 billion in the third quarter of fiscal 2019.

"Eaton Vance's distinctive array of investment strategies and services continued to attract strong investor interest in the third quarter of our fiscal 2019, propelling consolidated assets under management to a new record high," said Thomas E. Faust Jr., Chairman and Chief Executive Officer. "Innovation, investment management excellence and outstanding distribution and service remains our formula for success in a changing asset management industry."

Average consolidated assets under management were $471.0 billion in the third quarter of fiscal 2019, up 6 percent from $446.0 billion in the third quarter of fiscal 2018 and up 3 percent from $456.2 billion in the second quarter of fiscal 2019.

As shown in Attachment 10, excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 31.8 basis points in the third quarter of fiscal 2019, down 4 percent from 33.0 basis points in the third quarter of fiscal 2018 and unchanged from 31.8 basis points in the second quarter of fiscal 2019. Changes in average annualized management fee rates from the third quarter of fiscal 2018 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. 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 $40.8 billion in the third quarter of fiscal 2019, up 7 percent from $38.0 billion in the third quarter of fiscal 2018 and up 11 percent from $36.8 billion in the second quarter of fiscal 2019.

Consolidated redemptions and other outflows were $32.8 billion in the third quarter of fiscal 2019, down 4 percent from $34.2 billion in the third quarter of fiscal 2018 and up 2 percent from $32.2 billion in the second quarter of fiscal 2019.

As of July 31, 2019, the Company's 49 percent-owned affiliate Hexavest Inc. (Hexavest) managed $13.4 billion of client assets, down 12 percent from $15.2 billion of managed assets on July 31, 2018 and down 4 percent from $13.9 billion of managed assets on April 30, 2019. Hexavest had net outflows of $0.6 billion in the third quarter of fiscal 2019 versus net outflows of $0.8 billion in the third quarter of fiscal 2018 and net inflows of $0.2 billion in the second 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


July 31,

April 30,

July 31,


2019

2019

2018

Revenue


431,235

$

411,861

$

428,691

Expenses


294,100


284,688


286,427

Operating income


137,135


127,173


142,264

   Operating margin


31.8%


30.9%


33.2%

Non-operating income (expense)


5,470


20,291


(20)

Income taxes


(36,304)


(37,069)


(37,219)

Equity in net income of affiliates, net of tax


2,235


2,735


2,750

Net income


108,536


113,130


107,775

Net income attributable to non-controlling







   and other beneficial interests


(6,315)


(11,323)


(5,981)

Net income attributable to







   Eaton Vance Corp. shareholders

$

102,221

$

101,807

$

101,794

Adjusted net income attributable to







   Eaton Vance Corp. shareholders

$

101,584

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