Eaton Vance Corp EV
Q2 2013 Earnings Call Transcript

Transcript Call Date 05/22/2013

Operator: Greetings, and welcome to the Eaton Vance Second Quarter Fiscal Year 2013 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Dan Cataldo, Treasurer for Eaton Vance Corp. Thank you sir. You may begin.

Daniel C. Cataldo - Treasurer: Thanks. Welcome to our 2013 fiscal second quarter earnings call and webcast. Here this morning are Tom Faust, Chairman and CEO of Eaton Vance; and Laurie Hylton, our CFO. We will first comment on the quarter and then we will take your questions.

The full earnings release and charts we will refer to during the call are available on our website, under the heading Press Releases. Today's presentation contains forward-looking statements about our business and financial results. The actual results may differ materially from those projected due to risks and uncertainties in our business, including but not limited to those discussed in our SEC filings. These filings including our 2012 Annual Report and Form 10-K are available on our website or on request at no charge.

I'll now turn it over to, Tom.

Thomas E. Faust, Jr. - Chairman, CEO, and President: Good morning. I'm happy to report that the strong business trends we saw in the first fiscal quarter continued throughout the second quarter and in fact still continues today. We generated $6.6 billion of net inflows in the three months ended April 30, which equates to an 11% organic growth rate.

When combined with the $5.4 billion of net inflows in the first quarter, we've seen $12 billion in net inflows for the first half of our fiscal year and annualized internal growth rate of 12%.

While the net inflows in the first fiscal quarter (indiscernible) significant part by our lower fee implementation services businesses, this quarter's organic growth was driven by strong flows into higher fee floating rate income and alternative mandates.

We finished the quarter with $260.3 billion in managed assets up 5% from the beginning of the quarter and up 32% from a year ago. Excluding the $34.8 billion in managed assets acquired in the December 2012 acquisition of the Clifton Group, our assets under management have grown 14% over the past year.

As a reminder we did not include in our reported flow in AUM numbers the directly managed assets of our 49% owned affiliate Hexavest, Inc. Since our Hexavest transaction closed last August their managed assets have grown from $11 billion to $15.3 billion for the first six months of the fiscal year Hexavest has raised net flows of $1.5 billion.

For our second fiscal quarter, we are reporting adjusted earnings per diluted share of $0.52 up $0.07 or 16% from the year ago quarter and up $0.02 or 4% from last quarter. Laurie and Dan will discuss the financials in more detail after I conclude my comments.

With $24.7 billion in gross inflows, this was by wide margin our best quarter ever from a sales perspective. As many of you are aware, we've seen extraordinary demand of late for our floating rate income strategies, which were our single bestselling category in the quarter. The $6.1 billion of floating-rate gross inflows in the second quarter were up 87% from the preceding quarter and 267% from the year ago quarter. However, floating-rate income was not our only area of sales strength. The $2.8 billion of sales and other inflows into alternative strategies were up 53% from the prior quarter and up 147% from last year's second quarter.

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