Eaton Vance Corp. Report for the Three Month Period Ended January 31, 2021
BOSTON, Feb. 24, 2021 /PRNewswire/ -- Eaton Vance Corp. (NYSE: EV) today reported earnings of $0.74 per diluted share for the first quarter of fiscal 2021, which compares to earnings of $0.91 per diluted share in the first quarter of fiscal 2020 and $(0.31) per diluted share in the fourth quarter of fiscal 2020.
The Company reported record quarterly adjusted earnings([1]) of $0.94 per diluted share for the first quarter of fiscal 2021, an increase of 11 percent from $0.85 of adjusted earnings per diluted share in the first quarter of fiscal 2020 and an increase of 7 percent from $0.88 of adjusted earnings per diluted share in the fourth quarter of fiscal 2020.
In the first quarter of fiscal 2021, adjusted earnings exceeded earnings under U.S. generally accepted accounting principles (U.S. GAAP) by $0.20 per diluted share, reflecting the reversal of $70.6 million of compensation expenses and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley announced on October 8, 2020, the reversal of $27.3 million of net excess tax benefits related to stock–based compensation awards, the reversal of $20.1 million of net gains of consolidated sponsored funds and consolidated collateralized loan obligation (CLO) entities (collectively, consolidated investment entities) and the Company's other seed capital investments, and the add-back of $2.2 million of management fees and expenses of consolidated investment entities. Earnings under U.S. GAAP exceeded adjusted earnings by $0.06 per diluted share in the first quarter of fiscal 2020, reflecting the reversal of $4.9 million of net excess tax benefits related to stock-based compensation awards, the reversal of $3.6 million of net gains of consolidated investment entities and other seed capital investments, and the add-back of $2.4 million of management fees and expenses of consolidated investment entities. In the fourth quarter of fiscal 2020, adjusted earnings exceeded earnings under U.S. GAAP by $1.19 per diluted share, reflecting the reversal of $114.9 million of compensation expenses and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley, the reversal of a $21.8 million impairment loss recognized on the Company's investment in Hexavest Inc. (Hexavest), the reversal of $2.9 million of net excess tax benefits related to stock–based compensation awards, the reversal of $1.8 million of net losses of consolidated investment entities and other seed capital investments, and the add-back of $1.7 million of management fees and expenses of consolidated investment entities.
In the first quarter of fiscal 2021, the Company had record quarterly consolidated net inflows of $20.0 billion, representing 16 percent annualized internal growth in managed assets (consolidated net flows divided by beginning of period consolidated assets under management). This compares to net inflows of $6.1 billion and 5 percent annualized internal growth in managed assets in the first quarter of fiscal 2020 and net inflows of $5.2 billion and 4 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2020. Excluding Parametric overlay services, the Company had net inflows of $6.9 billion and 7 percent annualized internal growth in managed assets in the first quarter of fiscal 2021, net inflows of $5.0 billion and 5 percent annualized internal growth in managed assets in the first quarter of fiscal 2020, and net inflows of $4.8 billion and 5 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2020.
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 8 percent in the first quarter of fiscal 2021 and 5 percent in both the first quarter and the fourth quarter of fiscal 2020.
Consolidated assets under management were a record $584.2 billion on January 31, 2021, up 13 percent from $518.2 billion of consolidated managed assets on January 31, 2020 and $515.7 billion of consolidated managed assets on October 31, 2020. The year-over-year increase in consolidated assets under management reflects $18.6 billion of net inflows, $45.1 billion of price appreciation in managed assets and $2.3 billion of new managed assets gained in the acquisition of the business assets of WaterOak Advisors, LLC (WaterOak) on October 16, 2020. The sequential increase in consolidated assets under management in the first quarter of fiscal 2021 reflects $20.0 billion of quarterly net inflows and $48.5 billion of price appreciation in managed assets.
"In what we expect will be Eaton Vance's last quarterly reporting period as an independent public company, the Company set new records for consolidated net inflows, consolidated ending assets under management, adjusted operating income and adjusted earnings per diluted share," said Thomas E. Faust Jr., Chairman and Chief Executive Officer. "We approach the Company's acquisition by Morgan Stanley with strong momentum across our businesses, and look forward to building on that strength as part of Morgan Stanley Investment Management."
Average consolidated assets under management were $562.2 billion in the first quarter of fiscal 2021, up 10 percent from $509.9 billion in the first quarter of fiscal 2020 and up 9 percent from $516.7 billion in the fourth quarter of fiscal 2020.
Attachments 5 and 6 summarize the Company's consolidated assets under management and net flows by investment mandate and investment vehicle reporting categories. Among investment mandate reporting categories, consolidated net inflows in the first quarter of fiscal 2021 were $13.1 billion for Parametric overlay services, $3.5 billion for fixed income, $2.4 billion for Parametric custom portfolios, $608 million for floating-rate income, $214 million for equity and $191 million for alternative mandates. Annualized internal growth in managed assets for the first quarter of fiscal 2021 was 55 percent for Parametric overlay services, 19 percent for fixed income, 10 percent for alternative, 8 percent for floating-rate income, 6 percent for Parametric custom portfolios and 1 percent for equity mandates. Annualized internal growth in management fee revenue for the first quarter of fiscal 2021 was 51 percent for Parametric overlay services, 21 percent for fixed income, 11 percent for Parametric custom portfolios, 10 percent for alternative, 6 percent for floating-rate income and -1 percent for equity mandates.
By investment affiliate, consolidated net inflows in the first quarter of fiscal 2021 were $14.9 billion for Parametric, $4.0 billion for Eaton Vance Management (EVM), $1.6 billion for Calvert and $(517) million for Atlanta Capital. Annualized internal growth in managed assets for the first quarter of 2021 was 24 percent for Calvert, 19 percent for Parametric, 10 percent for EVM and -8 percent for Atlanta Capital. Annualized internal growth in management fee revenue for the first quarter of fiscal 2021 was 26 percent for Calvert, 9 percent for EVM, 7 percent for Parametric and -13 percent for Atlanta Capital.
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 of January 31, 2021, managed assets of the Company's 49 percent-owned affiliate Hexavest were $4.3 billion, down 67 percent from $13.0 billion of managed assets on January 31, 2020 and down 26 percent from $5.8 billion of managed assets on October 31, 2020. Hexavest had net outflows of $2.2 billion in the first quarter of fiscal 2021, $0.5 billion in the first quarter of fiscal 2020 and $0.9 billion in the fourth quarter of fiscal 2020. 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 our consolidated totals.
(1) | Adjusted financial measures represent non-U.S GAAP financial measures. See Attachment 2 for reconciliations to the most directly comparable U.S. GAAP financial measures and other important disclosures. | ||||
Financial Highlights | |||||||
(in thousands, except per share figures) | |||||||
Three Months Ended | |||||||
January 31, | October 31, | January 31, | |||||
2021 | 2020 | 2020 | |||||
U.S. GAAP Financial Measures: | |||||||
Revenue | $ | 488,946 | $ | 451,081 | $ | 452,554 | |
Expenses | $ | 409,424 | $ | 464,737 | $ | 317,835 | |
Operating income (loss) | $ | 79,522 | $ | (13,656) | $ | 134,719 | |
Operating margin | 16.3% | (3.0)% | 29.8% | ||||
Net income (loss) attributable to | |||||||
Eaton Vance Corp. shareholders | $ | 89,914 | $ | (35,934) | $ | 103,985 | |
Earnings (loss) per diluted share | $ | 0.74 | $ | (0.31) | $ | 0.91 | |
Adjusted Non-U.S. GAAP Financial Measures:(1) | |||||||
Revenue | $ | 490,917 | $ | 452,485 | $ | 454,479 | |
Expenses | $ | 327,459 | $ | 309,344 | $ | 316,548 | |
Operating income | $ | 163,458 | $ | 143,141 | $ | 137,931 | |
Operating margin | 33.3% | 31.6% | 30.3% | ||||
Net income attributable to | |||||||
Eaton Vance Corp. shareholders | $ | 115,269 | $ | 101,503 | $ | 97,947 | |
Earnings per diluted share | $ | 0.94 | $ | 0.88 | $ | 0.85 | |
Weighted Average Shares Outstanding: | |||||||
Basic | 116,220 | 110,701 | 109,380 | ||||
Diluted | 122,279 | 115,878 | 114,688 | ||||
(1) See Attachment 2 for reconciliations between the U.S. GAAP and adjusted non-U.S. GAAP financial measures identified here as well as other important disclosures. | |||||||
First Quarter Fiscal 2021 vs. First Quarter Fiscal 2020
In the first quarter of fiscal 2021, revenue increased 8 percent to $488.9 million from $452.6 million in the first quarter of fiscal 2020. Management fees were up 9 percent, as a 10 percent increase in average consolidated assets under management more than offset a 1 percent decrease in the Company's consolidated average annualized management fee rate. Performance fees were $0.2 million in both the first quarter of fiscal 2021 and the first quarter of fiscal 2020. Distribution and service fee revenues in the first quarter of fiscal 2021 were collectively up 2 percent from the first quarter of fiscal 2020, reflecting higher average managed assets in fund share classes that are subject to these fees.
Operating expenses increased 29 percent to $409.4 million in the first quarter of fiscal 2021 from $317.8 million in the first quarter of fiscal 2020, reflecting increases in compensation expense, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses, partially offset by a decrease in distribution expense. The increase in compensation expense primarily reflects $39.6 million of stock-based and other compensation costs and associated payroll taxes recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The increase in compensation expense further reflects higher salary and benefit expense associated with increases in headcount, higher operating income-based and investment performance-based bonus accruals, and higher sales-based incentive compensation, partially offset by lower severance expenses. The increase in service fee expense reflects higher private fund and Class A 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, partially offset by a reduction in fund expenses borne by the Company. Other operating expenses increased 69 percent, primarily reflecting higher professional service expenses driven by proxy solicitation fees and other legal and consulting costs associated with the proposed acquisition of Eaton Vance by Morgan Stanley, and an increase in information technology spending, partially offset by lower travel expenses. The decline in distribution expense reflects lower Class C distribution fee payments, up-front sales commission expense, promotional costs and finder's fees, partially offset by higher intermediary marketing support payments. Excluding expenses in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other adjustments as shown in Attachment 2, operating expenses in the first quarter of fiscal 2021 were $327.5 million, an increase of 3 percent from operating expenses of $316.5 million in the first quarter of fiscal 2020.
Operating income decreased to $79.5 million in the first quarter of fiscal 2021 from $134.7 million in the first quarter of fiscal 2020, primarily reflecting $81.0 million of compensation expense and other costs recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The Company's operating margin decreased to 16.3 percent in the first quarter of fiscal 2021 from 29.8 percent in the first quarter of fiscal 2020.
As shown in Attachment 2, the Company's operating income on an adjusted basis was a quarterly record of $163.5 million in the first quarter of fiscal 2021, an increase of 19 percent from $137.9 million of adjusted operating income in the first quarter of fiscal 2020. The Company's adjusted operating margin increased to 33.3 percent in the first quarter of fiscal 2021 from 30.3 percent in the first quarter of fiscal 2020.
Non-operating income totaled $41.2 million in the first quarter of fiscal 2021 and $8.4 million in the first quarter of fiscal 2020. The year-over-year increase reflects a $25.1 million improvement in net income (expense) of consolidated CLO entities, primarily driven by gains realized upon the sale of the Company's interests in four CLO entities that the Company no longer consolidates, but continues to manage, and a $7.7 million increase in net gains and other investment income of consolidated sponsored funds and the Company's investments in other sponsored strategies.
The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 7.5 percent in the first quarter of fiscal 2021 and 22.8 percent in the first quarter of fiscal 2020. The Company's effective tax rate is discussed in greater detail under "Taxation" below.
Equity in net income of affiliates was $0.6 million and $2.3 million in the first quarters of fiscal 2021 and 2020, 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 $22.4 million in the first quarter of fiscal 2021 and $8.9 million in the first quarter of fiscal 2020. The year-over-year change primarily reflects an increase in income earned by consolidated sponsored funds.
The Company's weighted average basic shares outstanding were 116.2 million in the first quarter of fiscal 2021 and 109.4 million in the first quarter of fiscal 2020, an increase of 6 percent. The year-over-year increase reflects 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 122.3 million in the first quarter of fiscal 2021 and 114.7 million in the first quarter of fiscal 2020, an increase of 7 percent. The change in weighted average diluted shares outstanding further reflects an increase in the dilutive effect of in-the-money options due to higher market prices of the Company's non-voting common stock, partially offset by a decrease in the dilutive effect of restricted stock awards due to the accelerated vesting of restricted stock awards in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley.
First Quarter Fiscal 2021 vs. Fourth Quarter Fiscal 2020
In the first quarter of fiscal 2021, revenue increased 8 percent to $488.9 million from $451.1 million in the fourth quarter of fiscal 2020. Management fees were up 9 percent, primarily reflecting a 9 percent increase in average consolidated assets under management. Performance fees were $0.2 million in the first quarter of fiscal 2021, versus $1.5 million in the fourth quarter of fiscal 2020. Distribution and service fee revenues in the first quarter of fiscal 2021 were collectively up 7 percent from the fourth quarter of fiscal 2020, reflecting higher average managed assets in fund share classes that are subject to these fees.
Operating expenses decreased 12 percent to $409.4 million in the first quarter of fiscal 2021 from $464.7 million in the fourth quarter of fiscal 2020, reflecting lower compensation expense, partially offset by increases in distribution expense, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses. The decrease in compensation expense primary reflects a reduction in stock-based compensation expense due to the acceleration of $146.0 million of expense recognized in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley, partially offset by $39.6 million of stock-based and other compensation costs and associated payroll taxes recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition. The decrease in compensation expense further reflects lower operating income-based bonus accruals, partially offset by higher sales-based incentive compensation, higher performance-based bonus accruals and higher salary and benefit expense associated with year-end compensation increases for continuing employees and slightly higher headcount, and seasonal increases in benefit costs and payroll taxes. The increase in distribution expense reflects higher intermediary marketing support payments, partially offset by a decrease in promotion costs and lower Class C distribution fee payments. The increase in service fee expense reflects higher private fund and Class A service fee payments. The increase in fund-related expenses reflects higher sub-advisory fees paid. Other operating expenses increased 52 percent, primarily reflecting higher professional service expenses driven by increases in proxy solicitation fees and other legal costs associated with the proposed acquisition of Eaton Vance by Morgan Stanley. Excluding expenses in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other adjustments as shown in Attachment 2, operating expenses in the first quarter of fiscal 2021 were $327.5 million, an increase of 6 percent from operating expenses of $309.3 million in the fourth quarter of fiscal 2020.
Operating income (loss) increased to $79.5 million in the first quarter of fiscal 2021 from $(13.7) million in the fourth quarter of fiscal 2020. The sequential change primarily reflects a $73.4 million decrease in compensation expense and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The Company's operating margin increased to 16.3 percent in the first quarter of fiscal 2021 from (3.0) percent in the fourth quarter of fiscal 2020.
As shown in Attachment 2, the Company's $163.5 million of adjusted operating income in the first quarter of fiscal 2021 compared to $143.1 million of adjusted operating income in the fourth quarter of fiscal 2020, an increase of 14 percent. The Company's adjusted operating margin increased to 33.3 percent in the first quarter of fiscal 2021 from 31.6 percent in the fourth quarter of fiscal 2020.
Non-operating income totaled $41.2 million in the first quarter of fiscal 2021 versus $7.1 million of non-operating expense in the fourth quarter of fiscal 2020. The sequential change reflects a $28.6 million improvement in net income (expense) of consolidated CLO entities, primarily driven by gains realized upon the sale of the Company's interests in four CLO entities that the Company no longer consolidates, but continues to manage, and a $19.8 million increase in net gains and other investment income of consolidated sponsored funds and the Company's investments in other sponsored strategies.
The Company's effective tax rate, calculated as a percentage of income (loss) before income taxes and equity in net income of affiliates, was 7.5 percent in the first quarter of fiscal 2021 and 36.6 percent in the fourth quarter of fiscal 2020. The Company's effective tax rate is discussed in greater detail under "Taxation" below.
Equity in net income (loss) of affiliates was $0.6 million in the first quarter of fiscal 2021 and $(20.8) million in the fourth quarter of fiscal 2020, respectively. In both the first quarter of fiscal 2021 and the fourth quarter of fiscal 2020, substantially all of the Company's equity in net income of affiliates related to the Company's investment in Hexavest. Equity in net income (loss) of affiliates in the fourth quarter of fiscal 2020 included a $21.8 million impairment loss recognized on the Company's investment in Hexavest.
As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $22.4 million in the first quarter of fiscal 2021 and $2.0 million in the fourth quarter of fiscal 2020. The sequential change primarily reflects an increase in income earned by consolidated sponsored funds.
The Company's weighted average basic shares outstanding were 116.2 million in the first quarter of fiscal 2021 and 110.7 million in the fourth quarter of fiscal 2020, an increase of 5 percent. The increase reflects 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 122.3 million in the first quarter of fiscal 2021 and 115.9 million in the fourth quarter of fiscal 2020, an increase of 6 percent. The change in weighted average diluted shares outstanding further reflects an increase in the dilutive effect of in-the-money options due to higher market prices of the Company's non-voting common stock, partially offset by a decrease in the dilutive effect of restricted stock awards due to the accelerated vesting of restricted stock awards in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley.
Taxation
The following table reconciles the U.S. statutory federal income tax rate to the Company's effective income tax rate:
Three Months Ended | |||||||
January 31, | October 31, | January 31, | |||||
2021 | 2020 | 2020 | |||||
Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |
State income tax, net of federal income tax benefits | 4.0 | 5.8 | 4.9 | ||||
Net income (loss) attributable to non-controlling | |||||||
and other beneficial interests | (3.6) | 2.0 | (0.5) | ||||
Non-deductible costs related to the proposed | |||||||
acquisition of Eaton Vance by Morgan Stanley | 8.4 | - | - | ||||
Other items | 0.3 | (6.0) | 0.8 | ||||
Net excess tax benefits from stock-based | |||||||
compensation plans(1) | (22.6) | 13.8 | (3.4) | ||||
Effective income tax rate | 7.5 | % | 36.6 | % | 22.8 | % | |
(1) Represents net excess tax benefits from stock-based compensation plans. Amounts have been reduced for executive compensation limitations under Section 162(m) of the Internal Revenue Code. | |||||||
The net loss experienced by the Company in the fourth quarter of fiscal 2020 resulted in a tax benefit being recognized during the quarter.
The Company's income tax provision was reduced by net excess tax benefits related to stock-based compensation awards totaling $27.3 million in the first quarter of fiscal 2021, $4.9 million in the first quarter of fiscal 2020 and $2.9 million in the fourth quarter of fiscal 2020. The Company's income tax provision is also impacted by other items, which include non-deductible executive compensation, prior period adjustments primarily related to the filing of tax returns and other differences in the treatment of certain items for book and tax purposes.
As shown in Attachment 2, the Company's calculations of adjusted net income and adjusted earnings per diluted share remove compensation expenses and other costs related to the proposed acquisition of Eaton Vance by Morgan Stanley, remove the impairment losses recognized in the fourth quarter of fiscal 2020 on the Company's investment in 49 percent-owned affiliate Hexavest, exclude gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments, add back the management fees and expenses of consolidated investment entities and exclude the tax impact of stock-based compensation shortfalls or windfalls. On this basis, the Company's adjusted effective tax rate was 25.8 percent in the first quarter of fiscal 2021, 27.6 percent in the first quarter of fiscal 2020 and 26.2 percent in the fourth quarter of fiscal 2020.
Balance Sheet Information
As of January 31, 2021, the Company held cash and cash equivalents of $606.1 million and its investments included $20.4 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.
Proposed Acquisition of Eaton Vance by Morgan Stanley
As described above, Eaton Vance and Morgan Stanley announced on October 8, 2020 that they have entered into a definitive agreement for Morgan Stanley to acquire Eaton Vance. Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833 shares of Morgan Stanley common stock per share of Eaton Vance common stock held. The merger agreement contains an election procedure whereby each Eaton Vance shareholder may elect to receive the merger consideration all in cash or all in stock, subject to proration and adjustment.
The merger agreement also provides for Eaton Vance shareholders to receive a special cash dividend of $4.25 per share of Eaton Vance common stock held. On November 23, 2020, the Eaton Vance Board of Directors declared the $4.25 per share special dividend, which was paid on December 18, 2020 to shareholders of record on December 4, 2020.
Eaton Vance and Morgan Stanley currently expect to complete the proposed transaction no later than early in the second quarter of 2021. Subject to the satisfaction of customary closing conditions, including receipt of necessary regulatory approvals and client consents, the transaction could close as soon as March 1, 2021.
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 January 31, 2021, Eaton Vance had consolidated assets under management of $584.2 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, the scope and duration of the COVID-19 pandemic and its impact on the global economy or capital markets, the completion of the proposed transaction with Morgan Stanley and the anticipated terms and timing, including obtaining required regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company's operations and other conditions to the completion of the acquisition, 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 | |||||||||||
Consolidated Statements of Income | |||||||||||
(in thousands, except per share figures) | |||||||||||
Three Months Ended | |||||||||||
% | % | ||||||||||
Change | Change | ||||||||||
Q1 2021 | Q1 2021 | ||||||||||
January 31, | October 31, | January 31, | vs. | vs. | |||||||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | |||||||
Revenue: | |||||||||||
Management fees | $ | 430,315 | $ | 396,268 | $ | 394,801 | 9 | % | 9 | % | |
Distribution and underwriter fees | 18,211 | 18,215 | 21,578 | - | (16) | ||||||
Service fees | 38,598 | 34,906 | 33,939 | 11 | 14 | ||||||
Other revenue | 1,822 | 1,692 | 2,236 | 8 | (19) | ||||||
Total revenue | 488,946 | 451,081 | 452,554 | 8 | 8 | ||||||
Expenses: | |||||||||||
Compensation and related costs | 221,402 | 315,847 | 171,982 | (30) | 29 | ||||||
Distribution expense | 35,630 | 35,436 | 40,003 | 1 | (11) | ||||||
Service fee expense | 34,218 | 30,542 | 29,755 | 12 | 15 | ||||||
Amortization of deferred sales commissions | 6,501 | 6,400 | 5,968 | 2 | 9 | ||||||
Fund-related expenses | 12,125 | 10,932 | 11,067 | 11 | 10 | ||||||
Other expenses | 99,548 | 65,580 | 59,060 | 52 | 69 | ||||||
Total expenses | 409,424 | 464,737 | 317,835 | (12) | 29 | ||||||
Operating income (loss) | 79,522 | (13,656) | 134,719 | NM | (41) | ||||||
Non-operating income (expense): | |||||||||||
Gains and other investment income, net | 23,816 | 3,994 | 16,090 | 496 | 48 | ||||||
Interest expense | (5,921) | (5,800) | (5,888) | 2 | 1 | ||||||
Other income (expense) of consolidated | |||||||||||
collateralized loan obligation (CLO) entities: | |||||||||||
Gains and other investment income, net | 41,768 | 10,961 | 15,563 | 281 | 168 | ||||||
Interest and other expense | (18,467) | (16,246) | (17,396) | 14 | 6 | ||||||
Total non-operating income (expense) | 41,196 | (7,091) | 8,369 | NM | 392 | ||||||
Income (loss) before income taxes and equity | |||||||||||
in net income (loss) of affiliates | 120,718 | (20,747) | 143,088 | NM | (16) | ||||||
Income tax benefit (expense) | (9,009) | 7,594 | (32,578) | NM | (72) | ||||||
Equity in net income (loss) of affiliates, net of tax | 628 | (20,793) | 2,325 | NM | (73) | ||||||
Net income (loss) | 112,337 | (33,946) | 112,835 | NM | - | ||||||
Net income attributable to non-controlling | |||||||||||
and other beneficial interests | (22,423) | (1,988) | (8,850) | NM | 153 | ||||||
Net income (loss) attributable to | |||||||||||
Eaton Vance Corp. shareholders | $ | 89,914 | $ | (35,934) | $ | 103,985 | NM | (14) | |||
Earnings (loss) per share: | |||||||||||
Basic | $ | 0.77 | $ | (0.32) | $ | 0.95 | NM | (19) | |||
Diluted | $ | 0.74 | $ | (0.31) | $ | 0.91 | NM | (19) | |||
Weighted average shares outstanding: | |||||||||||
Basic | 116,220 | 110,701 | 109,380 | 5 | 6 | ||||||
Diluted | 122,279 | 115,878 | 114,688 | 6 | 7 | ||||||
Dividends declared per share | $ | 4.625 | $ | 0.375 | $ | 0.375 | NM | NM | |||
Attachment 2
Non-U.S. GAAP Information and Reconciliations
Management believes that certain non-U.S. GAAP financial measures, specifically, adjusted operating income, 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, operating income, 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 debt repayments and tax settlements, the tax impact of stock-based compensation shortfalls or windfalls, impairment charges, costs in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other acquisition-related items, and non-recurring charges for the effect of tax law changes. Adjustments to operating income also include the add-back of management fee revenue received from consolidated sponsored funds and consolidated collateralized loan obligation (CLO) entities (collectively, consolidated investment entities) that are eliminated in consolidation and the non-management expenses of consolidated sponsored funds recognized in consolidation. Adjustments to net income attributable to Eaton Vance Corp. shareholders include the after-tax impact of these adjustments to operating income and the elimination of gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments included in non-operating income (expense), as determined net of tax and non-controlling and other beneficial interests. Management and our Board of Directors, as well as certain of our outside investors, consider the adjusted numbers a measure of the Company's underlying operating performance. Management believes adjusted operating income, 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.
Effective in the second quarter of fiscal 2020, the Company's calculation of non-U.S. GAAP financial measures was revised to reflect the treatment of consolidated investment entities and other seed capital investments described in the previous paragraph. All prior period non-U.S. GAAP financial measures have been updated to reflect this change.
Reconciliation of operating income (loss) to adjusted operating income: | ||||||||||||
(in thousands, except as noted) | ||||||||||||
Three Months Ended | ||||||||||||
% | % | |||||||||||
Change | Change | |||||||||||
Q1 2021 | Q1 2021 | |||||||||||
January 31, | October 31, | January 31, | vs. | vs. | ||||||||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | ||||||||
Total revenue | $ | 488,946 | $ | 451,081 | $ | 452,554 | 8 | % | 8 | % | ||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities(1) | 1,971 | 1,404 | 1,925 | 40 | 2 | |||||||
Adjusted total revenue | $ | 490,917 | $ | 452,485 | $ | 454,479 | 8 | 8 | ||||
Total expenses | $ | 409,424 | $ | 464,737 | $ | 317,835 | (12) | % | 29 | % | ||
Non-management expenses of consolidated | ||||||||||||
sponsored funds(2) | (922) | (942) | (1,287) | (2) | (28) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton Vance | ||||||||||||
by Morgan Stanley(3) | (5,702) | (145,993) | - | (96) | NM | |||||||
Other compensation expenses related to the proposed | ||||||||||||
acquisition of Eaton Vance by Morgan Stanley(4) | (33,943) | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley(5) | (41,398) | (8,458) | - | 389 | NM | |||||||
Adjusted total expenses | $ | 327,459 | $ | 309,344 | $ | 316,548 | 6 | 3 | ||||
Operating income (loss) | $ | 79,522 | $ | (13,656) | $ | 134,719 | NM | % | (41) | % | ||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities(1) | 1,971 | 1,404 | 1,925 | 40 | 2 | |||||||
Non-management expenses of consolidated | ||||||||||||
sponsored funds(2) | 922 | 942 | 1,287 | (2) | (28) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton Vance | ||||||||||||
by Morgan Stanley(3) | 5,702 | 145,993 | - | (96) | NM | |||||||
Other compensation expenses related to the proposed | ||||||||||||
acquisition of Eaton Vance by Morgan Stanley(4) | 33,943 | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley(5) | 41,398 | 8,458 | - | 389 | NM | |||||||
Adjusted operating income | $ | 163,458 | $ | 143,141 | $ | 137,931 | 14 | 19 | ||||
Operating margin | 16.3 | % | (3.0) | % | 29.8 | % | NM | (45) | ||||
Adjusted operating margin | 33.3 | % | 31.6 | % | 30.3 | % | 5 | 10 | ||||
Attachment 2 (continued) | ||||||||||||
Reconciliation of income (loss) before income taxes and equity in net income (loss) of affiliates to adjusted income before income taxes and equity in net income (loss) of affiliates and income tax expense (benefit) to adjusted income tax expense: | ||||||||||||
(in thousands, except as noted) | ||||||||||||
Three Months Ended | ||||||||||||
% | % | |||||||||||
Change | Change | |||||||||||
Q1 2021 | Q1 2021 | |||||||||||
January 31, | October 31, | January 31, | vs. | vs. | ||||||||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | ||||||||
Income (loss) before income taxes and equity in net | ||||||||||||
income (loss) of affiliates | $ | 120,718 | $ | (20,747) | $ | 143,088 | NM | % | (16) | % | ||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities, pre-tax(1) | 1,971 | 1,404 | 1,925 | 40 | 2 | |||||||
Non-management expenses of consolidated | ||||||||||||
sponsored funds, pre-tax(2) | 922 | 942 | 1,287 | (2) | (28) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton | ||||||||||||
Vance by Morgan Stanley, pre-tax(3) | 5,702 | 145,993 | - | (96) | NM | |||||||
Other compensation expenses related to the | ||||||||||||
proposed acquisition of Eaton Vance by | ||||||||||||
Morgan Stanley, pre-tax(4) | 33,943 | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley, pre-tax(5) | 41,398 | 8,458 | - | 389 | NM | |||||||
Net gains and other investment income related | ||||||||||||
to consolidated sponsored funds and other | ||||||||||||
seed capital investments, pre-tax(6) | (24,298) | (3,861) | (13,811) | 529 | 76 | |||||||
Other (income) expense of consolidated CLO | ||||||||||||
entities, pre-tax(7) | (23,301) | 5,285 | 1,833 | NM | NM | |||||||
Adjusted income before income taxes and equity | ||||||||||||
in net income (loss) of affiliates | $ | 157,055 | $ | 137,474 | $ | 134,322 | 14 | 17 | ||||
Income tax expense (benefit) | $ | 9,009 | $ | (7,594) | $ | 32,578 | NM | % | (72) | % | ||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities(1) | 505 | 359 | 497 | 41 | 2 | |||||||
Non-management expenses of consolidated | ||||||||||||
sponsored funds(2) | 236 | 241 | 332 | (2) | (29) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton | ||||||||||||
Vance by Morgan Stanley(3) | 1,461 | 37,345 | - | (96) | NM | |||||||
Other compensation expenses related to the | ||||||||||||
proposed acquisition of Eaton Vance by | ||||||||||||
Morgan Stanley(4) | 8,700 | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley(5) | 286 | 2,164 | - | (87) | NM | |||||||
Net gains and other investment income related | ||||||||||||
to consolidated sponsored funds and other | ||||||||||||
seed capital investments(6) | (959) | (722) | (1,715) | 33 | (44) | |||||||
Other (income) expense of consolidated CLO | ||||||||||||
entities(7) | (5,972) | 1,352 | 474 | NM | NM | |||||||
Net excess tax benefits from stock-based | ||||||||||||
compensation plans(8) | 27,281 | 2,872 | 4,860 | 850 | 461 | |||||||
Adjusted income tax expense | $ | 40,547 | $ | 36,017 | $ | 37,026 | 13 | 10 | ||||
Effective income tax rate | 7.5 | % | 36.6 | % | 22.8 | % | (80) | (67) | ||||
Adjusted effective income tax rate | 25.8 | % | 26.2 | % | 27.6 | % | (2) | (7) | ||||
Attachment 2 (continued) | ||||||||||||
Reconciliation of net income (loss) attributable to Eaton Vance Corp. shareholders to adjusted net income attributable to Eaton Vance Corp. shareholders and earnings (loss) per diluted share to adjusted earnings per diluted share: | ||||||||||||
(in thousands, except per share figures) | ||||||||||||
Three Months Ended | ||||||||||||
% | % | |||||||||||
Change | Change | |||||||||||
Q1 2021 | Q1 2021 | |||||||||||
January 31, | October 31, | January 31, | vs. | vs. | ||||||||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | ||||||||
Net income (loss) attributable to Eaton Vance | ||||||||||||
Corp. shareholders | $ | 89,914 | $ | (35,934) | $ | 103,985 | NM | % | (14) | % | ||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities, net of tax(1) | 1,466 | 1,045 | 1,428 | 40 | 3 | |||||||
Non-management expenses of consolidated | ||||||||||||
sponsored funds, net of tax(2) | 686 | 701 | 955 | (2) | (28) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton | ||||||||||||
Vance by Morgan Stanley, net of tax(3) | 4,241 | 108,648 | - | (96) | NM | |||||||
Other compensation expenses related to the | ||||||||||||
proposed acquisition of Eaton Vance by | ||||||||||||
Morgan Stanley, net of tax(4) | 25,243 | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley, net of tax(5) | 41,112 | 6,294 | - | 553 | NM | |||||||
Net gains and other investment income | ||||||||||||
related to consolidated sponsored funds and | ||||||||||||
other seed capital investments, net of tax(6) | (2,783) | (2,100) | (4,920) | 33 | (43) | |||||||
Other (income) expense of consolidated CLO | ||||||||||||
entities, net of tax(7) | (17,329) | 3,933 | 1,359 | NM | NM | |||||||
Net excess tax benefit from stock-based(8) | ||||||||||||
compensation plans | (27,281) | (2,872) | (4,860) | 850 | 461 | |||||||
Impairment loss(9) | - | 21,788 | - | (100) | NM | |||||||
Adjusted net income attributable to Eaton | ||||||||||||
Vance Corp. shareholders | $ | 115,269 | $ | 101,503 | $ | 97,947 | 14 | 18 | ||||
Earnings (loss) per diluted share | $ | 0.74 | $ | (0.31) | $ | 0.91 | NM | (19) | ||||
Management fees of consolidated sponsored | ||||||||||||
funds and consolidated CLO entities, net of tax | 0.01 | 0.01 | 0.01 | - | - | |||||||
Non-management expenses of consolidated | ||||||||||||
sponsored funds, net of tax | - | 0.01 | 0.01 | (100) | (100) | |||||||
Accelerated stock-based compensation expense | ||||||||||||
related to the proposed acquisition of Eaton | ||||||||||||
Vance by Morgan Stanley, net of tax | 0.03 | 0.94 | - | (97) | NM | |||||||
Other compensation expenses related to the | ||||||||||||
proposed acquisition of Eaton Vance by | ||||||||||||
Morgan Stanley, net of tax | 0.21 | - | - | NM | NM | |||||||
Other costs related to the proposed acquisition of | ||||||||||||
Eaton Vance by Morgan Stanley, net of tax | 0.33 | 0.05 | - | 560 | NM | |||||||
Net gains and other investment income | ||||||||||||
related to consolidated sponsored funds and | ||||||||||||
other seed capital investments, net of tax | (0.02) | (0.02) | (0.04) | - | (50) | |||||||
Other (income) expense of consolidated CLO | ||||||||||||
entities, net of tax | (0.14) | 0.03 | 0.01 | NM | NM | |||||||
Net excess tax benefit from stock-based | ||||||||||||
compensation plans | (0.22) | (0.02) | (0.05) | NM | 340 | |||||||
Impairment loss | - | 0.19 | - | (100) | NM | |||||||
Adjusted earnings per diluted share | $ | 0.94 | $ | 0.88 | $ | 0.85 | 7 | 11 | ||||
Notes to Reconciliations: | ||||||||||||||||||||
(1) Represents management fees eliminated upon the consolidation of sponsored funds and CLO entities. | ||||||||||||||||||||
(2) Represents expenses of consolidated sponsored funds. | ||||||||||||||||||||
(3) Represents stock-based compensation expense accelerated pursuant to the terms of the merger agreement with Morgan Stanley and | ||||||||||||||||||||
(4) Other compensation pertains to bonus payments made to employees in lieu of the special divided on outstanding and unvested stock | ||||||||||||||||||||
(5) Primarily represents proxy solicitation fees and legal and consulting costs related to the proposed acquisition of Eaton Vance by | ||||||||||||||||||||
(6) Represents gains, losses and other investment income earned on investments in sponsored strategies, whether accounted for as | ||||||||||||||||||||
(7) Represents other income and expenses of consolidated CLO entities. | ||||||||||||||||||||
(8) Represents net excess tax benefits from stock-based compensation plans. Amounts have been reduced for executive compensation | ||||||||||||||||||||
(9) Represents an impairment loss recognized on the Company's investment in 49 percent-owned affiliate Hexavest. | ||||||||||||||||||||
Attachment 3 | ||||||||||||
Components of net income attributable | ||||||||||||
to non-controlling and other beneficial interests | ||||||||||||
(in thousands) | ||||||||||||
Three Months Ended | ||||||||||||
% | % | |||||||||||
Change | Change | |||||||||||
Q1 2021 | Q1 2021 | |||||||||||
January 31, | October 31, | January 31, | vs. | vs. | ||||||||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | ||||||||
Consolidated sponsored funds | $ | 20,555 | $ | 1,040 | $ | 7,177 | NM | % | 186 | % | ||
Majority-owned subsidiaries | 1,868 | 948 | 1,673 | 97 | 12 | |||||||
Net income attributable to non-controlling | ||||||||||||
and other beneficial interests | $ | 22,423 | $ | 1,988 | $ | 8,850 | NM | 153 | ||||
Attachment 4 | ||||||
Consolidated Balance Sheet | ||||||
(in thousands, except share figures) | ||||||
January 31, | October 31, | |||||
2021 | 2020 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 606,101 | $ | 799,384 | ||
Management fees and other receivables | 279,858 | 249,806 | ||||
Investments | 558,376 | 783,246 | ||||
Assets of consolidated CLO entities: | ||||||
Cash | 19,674 | 91,795 | ||||
Bank loans and other investments | 399,234 | 2,064,133 | ||||
Other assets | 7,555 | 28,044 | ||||
Deferred sales commissions | 62,780 | 60,655 | ||||
Deferred income taxes | 21,215 | 33,423 | ||||
Equipment and leasehold improvements, net | 72,171 | 71,830 | ||||
Operating lease right-of-use assets | 248,923 | 253,109 | ||||
Intangible assets, net | 118,782 | 120,175 | ||||
Goodwill | 259,681 | 259,681 | ||||
Loan to affiliate | 5,000 | 5,000 | ||||
Other assets | 140,376 | 129,017 | ||||
Total assets | $ | 2,799,726 | $ | 4,949,298 | ||
Liabilities, Temporary Equity and Permanent Equity | ||||||
Liabilities: | ||||||
Accrued compensation | $ | 111,577 | $ | 246,129 | ||
Accounts payable and accrued expenses | 116,403 | 83,991 | ||||
Dividend payable | 43,977 | 42,988 | ||||
Debt | 621,556 | 621,348 | ||||
Operating lease liabilities | 296,796 | 301,419 | ||||
Liabilities of consolidated CLO entities: | ||||||
Senior and subordinated note obligations | 396,778 | 1,616,243 | ||||
Line of credit | - | 43,625 | ||||
Other liabilities | 13,058 | 399,562 | ||||
Other liabilities | 61,045 | 47,454 | ||||
Total liabilities | 1,661,190 | 3,402,759 | ||||
Commitments and contingencies | ||||||
Temporary Equity: | ||||||
Redeemable non-controlling interests | 197,842 | 222,854 | ||||
Total temporary equity | 197,842 | 222,854 | ||||
Permanent Equity: | ||||||
Voting Common Stock, par value $0.00390625 per share: | ||||||
Authorized, 1,280,000 shares | ||||||
Issued and outstanding, 464,716 and 464,716 shares, respectively | 2 | 2 | ||||
Non-Voting Common Stock, par value $0.00390625 per share: | ||||||
Authorized, 190,720,000 shares | ||||||
Issued and outstanding, 117,010,114 and 114,196,609 shares, respectively | 457 | 446 | ||||
Additional paid-in capital | 285,910 | 176,461 | ||||
Notes receivable from stock option exercises | (6,288) | (7,086) | ||||
Accumulated other comprehensive loss | (59,448) | (63,276) | ||||
Retained earnings | 720,061 | 1,217,138 | ||||
Total permanent equity | 940,694 | 1,323,685 | ||||
Total liabilities, temporary equity and permanent equity | $ | 2,799,726 | $ | 4,949,298 | ||
Attachment 5 | ||||||||||
Consolidated Assets under Management and Net Flows by Investment Mandate(1) | ||||||||||
(in millions) | ||||||||||
Three Months Ended | ||||||||||
January 31, | October 31, | January 31, | ||||||||
2021 | 2020 | 2020 | ||||||||
Equity assets – beginning of period(2) | $ | 135,174 | $ | 133,008 | $ | 131,895 | ||||
Sales and other inflows | 7,248 | 5,904 | 7,806 | |||||||
Redemptions/outflows | (7,034) | (7,016) | (6,182) | |||||||
Net flows | 214 | (1,112) | 1,624 | |||||||
Assets acquired(3) | - | 2,163 | - | |||||||
Exchanges | 90 | (101) | 3 | |||||||
Market value change | 17,057 | 1,216 | 5,186 | |||||||
Equity assets – end of period | $ | 152,535 | $ | 135,174 | $ | 138,708 | ||||
Fixed income assets – beginning of period(4) | 73,271 | 68,955 | 62,378 | |||||||
Sales and other inflows | 8,757 | 8,546 | 5,086 | |||||||
Redemptions/outflows | (5,298) | (3,952) | (3,947) | |||||||
Net flows | 3,459 | 4,594 | 1,139 | |||||||
Assets acquired(3) | - | 104 | - | |||||||
Exchanges | 21 | 37 | 23 | |||||||
Market value change | 1,889 | (419) | 722 | |||||||
Fixed income assets – end of period | $ | 78,640 | $ | 73,271 | $ | 64,262 | ||||
Floating-rate income assets – beginning of period | 28,960 | 28,569 | 35,103 | |||||||
Sales and other inflows | 2,319 | 1,578 | 1,689 | |||||||
Redemptions/outflows | (1,711) | (1,458) | (3,046) | |||||||
Net flows | 608 | 120 | (1,357) | |||||||
Exchanges | (19) | (22) | (27) | |||||||
Market value change | 916 | 293 | 117 | |||||||
Floating-rate income assets – end of period | $ | 30,465 | $ | 28,960 | $ | 33,836 | ||||
Alternative assets – beginning of period(5) | 7,424 | 7,467 | 8,372 | |||||||
Sales and other inflows | 742 | 470 | 675 | |||||||
Redemptions/outflows | (551) | (560) | (593) | |||||||
Net flows | 191 | (90) | 82 | |||||||
Exchanges | (5) | (1) | - | |||||||
Market value change | 91 | 48 | 99 | |||||||
Alternative assets – end of period | $ | 7,701 | $ | 7,424 | $ | 8,553 | ||||
Parametric custom portfolios assets – beginning of period(6) | 176,435 | 175,039 | 164,895 | |||||||
Sales and other inflows | 12,356 | 8,680 | 9,745 | |||||||
Redemptions/outflows | (9,927) | (7,359) | (6,221) | |||||||
Net flows | 2,429 | 1,321 | 3,524 | |||||||
Exchanges | 9 | 86 | 1 | |||||||
Market value change | 23,776 | (11) | 6,898 | |||||||
Parametric custom portfolios assets – end of period | $ | 202,649 | $ | 176,435 | $ | 175,318 | ||||
Parametric overlay services assets – beginning of period | 94,473 | 94,350 | 94,789 | |||||||
Sales and other inflows | 37,035 | 21,238 | 21,313 | |||||||
Redemptions/outflows | (23,935) | (20,879) | (20,199) | |||||||
Net flows | 13,100 | 359 | 1,114 | |||||||
Exchanges | (107) | - | - | |||||||
Market value change | 4,745 | (236) | 1,611 | |||||||
Parametric overlay services assets – end of period | $ | 112,211 | $ | 94,473 | $ | 97,514 | ||||
Total assets under management – beginning of period | 515,737 | 507,388 | 497,432 | |||||||
Sales and other inflows | 68,457 | 46,416 | 46,314 | |||||||
Redemptions/outflows | (48,456) | (41,224) | (40,188) | |||||||
Net flows | 20,001 | 5,192 | 6,126 | |||||||
Assets acquired(3) | - | 2,267 | - | |||||||
Exchanges | (11) | (1) | - | |||||||
Market value change | 48,474 | 891 | 14,633 | |||||||
Total assets under management – end of period | $ | 584,201 | $ | 515,737 | $ | 518,191 | ||||
(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. Excludes equity mandates reported as Parametric custom portfolios. | |||||||||
(3) | Represents managed assets gained in the acquisition of the business assets of WaterOak Advisors, LLC (WaterOak) on October 16, 2020. | |||||||||
(4) | Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios. | |||||||||
(5) | Consists of absolute return and commodity mandates. | |||||||||
(6) | Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized. | |||||||||
Attachment 6 | ||||||||||
Consolidated Assets under Management and Net Flows by Investment Vehicle(1) | ||||||||||
(in millions) | ||||||||||
Three Months Ended | ||||||||||
January 31, | October 31, | January 31, | ||||||||
2021 | 2020 | 2020 | ||||||||
Funds – beginning of period | $ | 181,420 | $ | 176,215 | $ | 174,068 | ||||
Sales and other inflows | 15,435 | 13,549 | 11,496 | |||||||
Redemptions/outflows | (10,828) | (9,283) | (9,161) | |||||||
Net flows | 4,607 | 4,266 | 2,335 | |||||||
Assets acquired(2) | - | 237 | - | |||||||
Exchanges | 10 | (4) | - | |||||||
Market value change | 15,000 | 706 | 4,136 | |||||||
Funds – end of period | $ | 201,037 | $ | 181,420 | $ | 180,539 | ||||
Institutional separate accounts – beginning of period | 163,677 | 163,818 | 173,331 | |||||||
Sales and other inflows | 39,658 | 25,051 | 23,605 | |||||||
Redemptions/outflows | (27,903) | (25,070) | (25,449) | |||||||
Net flows | 11,755 | (19) | (1,844) | |||||||
Exchanges | (29) | 63 | - | |||||||
Market value change | 14,263 | (185) | 3,771 | |||||||
Institutional separate accounts – end of period | $ | 189,666 | $ | 163,677 | $ | 175,258 | ||||
Individual separate accounts – beginning of period | 170,640 | 167,355 | 150,033 | |||||||
Sales and other inflows | 13,364 | 7,816 | 11,213 | |||||||
Redemptions/outflows | (9,725) | (6,871) | (5,578) | |||||||
Net flows | 3,639 | 945 | 5,635 | |||||||
Assets acquired(2) | - | 2,030 | - | |||||||
Exchanges | 8 | (60) | - | |||||||
Market value change | 19,211 | 370 | 6,726 | |||||||
Individual separate accounts – end of period | $ | 193,498 | $ | 170,640 | $ | 162,394 | ||||
Total assets under management – beginning of period | 515,737 | 507,388 | 497,432 | |||||||
Sales and other inflows | 68,457 | 46,416 | 46,314 | |||||||
Redemptions/outflows | (48,456) | (41,224) | (40,188) | |||||||
Net flows | 20,001 | 5,192 | 6,126 | |||||||
Assets acquired(2) | - | 2,267 | - | |||||||
Exchanges | (11) | (1) | - | |||||||
Market value change | 48,474 | 891 | 14,633 | |||||||
Total assets under management – end of period | $ | 584,201 | $ | 515,737 | $ | 518,191 | ||||
(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) | Represents managed assets gained in the acquisition of the business assets of WaterOak on October 16, 2020. | |||||||||
Attachment 7 | ||||||||||||||
Consolidated Assets under Management by Investment Mandate(1) | ||||||||||||||
(in millions) | ||||||||||||||
January 31, | October 31, | % | January 31, | % | ||||||||||
2021 | 2020 | Change | 2020 | Change | ||||||||||
Equity(2) | $ | 152,535 | $ | 135,174 | 13% | $ | 138,708 | 10% | ||||||
Fixed income(3) | 78,640 | 73,271 | 7% | 64,262 | 22% | |||||||||
Floating-rate income | 30,465 | 28,960 | 5% | 33,836 | -10% | |||||||||
Alternative(4) | 7,701 | 7,424 | 4% | 8,553 | -10% | |||||||||
Parametric custom portfolios(5) | 202,649 | 176,435 | 15% | 175,318 | 16% | |||||||||
Parametric overlay services | 112,211 | 94,473 | 19% | 97,514 | 15% | |||||||||
Total | $ | 584,201 | $ | 515,737 | 13% | $ | 518,191 | 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. Excludes equity mandates reported as Parametric custom portfolios. | |||||||||||||
(3) | Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios. | |||||||||||||
(4) | Consists of absolute return and commodity mandates. | |||||||||||||
(5) | Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized. | |||||||||||||
Attachment 8 | ||||||||||||||
Consolidated Assets under Management by Investment Vehicle(1) | ||||||||||||||
(in millions) | ||||||||||||||
January 31, | October 31, | % | January 31, | % | ||||||||||
2021 | 2020 | Change | 2020 | Change | ||||||||||
Open-end funds | $ | 120,161 | $ | 108,576 | 11% | $ | 108,290 | 11% | ||||||
Closed-end funds | 24,793 | 23,098 | 7% | 24,873 | 0% | |||||||||
Private funds(2) | 56,083 | 49,746 | 13% | 47,376 | 18% | |||||||||
Institutional separate accounts | 189,666 | 163,677 | 16% | 175,258 | 8% | |||||||||
Individual separate accounts | 193,498 | 170,640 | 13% | 162,394 | 19% | |||||||||
Total | $ | 584,201 | $ | 515,737 | 13% | $ | 518,191 | 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 and floating-rate income, and alternative funds and CLO entities. | |||||||||||||
Attachment 9 | ||||||||||||||
Consolidated Assets under Management by Investment Affiliate(1)(2) | ||||||||||||||
(in millions) | ||||||||||||||
January 31, | October 31, | % | January 31, | % | ||||||||||
2021 | 2020 | Change | 2020 | Change | ||||||||||
Eaton Vance Management(3)(4) | $ | 169,278 | $ | 154,394 | 10% | $ | 149,994 | 13% | ||||||
Parametric | 356,621 | 310,183 | 15% | 320,848 | 11% | |||||||||
Atlanta Capital | 27,698 | 24,963 | 11% | 25,552 | 8% | |||||||||
Calvert(5) | 30,604 | 26,197 | 17% | 21,797 | 40% | |||||||||
Total | $ | 584,201 | $ | 515,737 | 13% | $ | 518,191 | 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) | The Company's policy for reporting managed assets of investment portfolios overseen by multiple Eaton Vance affiliates is to base the classification on the strategy's primary identity. | |||||||||||||
(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) | Includes managed assets gained in the acquisition of the business assets of WaterOak on October 16, 2020. | |||||||||||||
(5) | Includes managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital, and Calvert-sponsored funds managed by unaffiliated third-party advisers under Calvert supervision. | |||||||||||||
Attachment 10 | ||||||
Average Annualized Management Fee Rates by Investment Mandate(1)(2) | ||||||
(in basis points on average managed assets) | ||||||
Three Months Ended | ||||||
% | % | |||||
Change | Change | |||||
Q1 2021 | Q1 2021 | |||||
January 31, | October 31, | January 31, | vs. | vs. | ||
2021 | 2020 | 2020 | Q4 2020 | Q1 2020 | ||
Equity(3) | 57.3 | 56.4 | 57.0 | 2% | 1% | |
Fixed income(4) | 40.2 | 40.4 | 41.4 | 0% | -3% | |
Floating-rate income | 48.9 | 49.1 | 49.9 | 0% | -2% | |
Alternative(5) | 68.3 | 70.5 | 64.5 | -3% | 6% | |
Parametric custom portfolios(6) | 16.0 | 15.5 | 15.2 | 3% | 5% | |
Parametric overlay services | 4.8 | 5.1 | 4.9 | -6% | -2% | |
Total | 30.4 | 30.5 | 30.8 | 0% | -1% | |
(1) | Excludes performance-based fees, which were $0.2 million in the three months ended January 31, 2021, $1.5 million in the three months ended October 31, 2020 and $0.2 million in the three months ended January 31, 2020. | |||||
(2) | Excludes management fees earned on consolidated investment entities that are eliminated in consolidation, which were $2.0 million in the three months ended January 31, 2021, $1.4 million in the three months ended October 31, 2020 and $1.9 million in the three months ended January 31, 2020. The managed assets and flows of consolidated investment entities are reflected in our consolidated totals. | |||||
(3) | Includes balanced and other multi–asset mandates. Excludes equity mandates reported as Parametric custom portfolios. | |||||
(4) | Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios. | |||||
(5) | Consists of absolute return and commodity mandates. | |||||
(6) | Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized. | |||||
Attachment 11 | |||||||||||
Hexavest Inc. Assets under Management and Net Flows | |||||||||||
(in millions) | |||||||||||
Three Months Ended | |||||||||||
January 31, | October 31, | January 31, | |||||||||
2021 | 2020 | 2020 | |||||||||
Eaton Vance distributed: | |||||||||||
Eaton Vance sponsored funds – beginning of period(1) | $ | 56 | $ | 93 | $ | 152 | |||||
Sales and other inflows | 1 | 1 | 3 | ||||||||
Redemptions/outflows | (7) | (37) | (26) | ||||||||
Net flows | (6) | (36) | (23) | ||||||||
Market value change | 7 | (1) | 1 | ||||||||
Eaton Vance sponsored funds – end of period | $ | 57 | $ | 56 | $ | 130 | |||||
Eaton Vance distributed separate accounts – | |||||||||||
beginning of period(2) | $ | 479 | $ | 584 | $ | 1,563 | |||||
Sales and other inflows | - | - | 6 | ||||||||
Redemptions/outflows | (265) | (94) | (22) | ||||||||
Net flows | (265) | (94) | (16) | ||||||||
Market value change | 66 | (11) | 19 | ||||||||
Eaton Vance distributed separate accounts – end of period | $ | 280 | $ | 479 | $ | 1,566 | |||||
Total Eaton Vance distributed – beginning of period | $ | 535 | $ | 677 | $ | 1,715 | |||||
Sales and other inflows | 1 | 1 | 9 | ||||||||
Redemptions/outflows | (272) | (131) | (48) | ||||||||
Net flows | (271) | (130) | (39) | ||||||||
Market value change | 73 | (12) | 20 | ||||||||
Total Eaton Vance distributed – end of period | $ | 337 | $ | 535 | $ | 1,696 | |||||
Hexavest directly distributed – beginning of period(3) | $ | 5,311 | $ | 6,129 | $ | 11,640 | |||||
Sales and other inflows | 13 | 23 | 96 | ||||||||
Redemptions/outflows | (1,933) | (751) | (554) | ||||||||
Net flows | (1,920) | (728) | (458) | ||||||||
Market value change | 607 | (90) | 114 | ||||||||
Hexavest directly distributed – end of period | $ | 3,998 | $ | 5,311 | $ | 11,296 | |||||
Total Hexavest managed assets – beginning of period | $ | 5,846 | $ | 6,806 | $ | 13,355 | |||||
Sales and other inflows | 14 | 24 | 105 | ||||||||
Redemptions/outflows | (2,205) | (882) | (602) | ||||||||
Net flows | (2,191) | (858) | (497) | ||||||||
Market value change | 680 | (102) | 134 | ||||||||
Total Hexavest managed assets – end of period | $ | 4,335 | $ | 5,846 | $ | 12,992 | |||||
(1) | Managed assets and flows of Eaton Vance-sponsored funds 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 the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10. | ||||||||||
(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 the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10. | ||||||||||
(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 the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10. | ||||||||||
SOURCE Eaton Vance Corp.
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