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AllianceBernstein Holding L.P. Announces First Quarter Results

Cision

GAAP Diluted Net Income of $0.63 per Unit

Adjusted Diluted Net Income of $0.64 per Unit

Cash Distribution of $0.64 per Unit

NEW YORK , April 28, 2020 /PRNewswire/ -- AllianceBernstein L.P. ("AB") and AllianceBernstein Holding L.P. ("AB Holding") (NYSE: AB) today reported financial and operating results for the quarter ended March 31, 2020.

"AB's thoughts are with those most impacted by the COVID-19 crisis, including the communities and individuals, first responders and healthcare workers whose sacrifices are for the greater good," said Seth P. Bernstein , President and CEO of AllianceBernstein. "I am proud of AB's employees, who have remained resilient and focused, and have responded with solutions for both our clients and our communities as we collectively address the challenges of this unprecedented time.  AB's financial condition has remained strong throughout this period, enabling us to focus on our clients' needs."

(US $ Thousands except per Unit amounts)

1Q 2020


1Q 2019


% Change


4Q 2019


% Change











U.S. GAAP Financial Measures










Net revenues

$

874,156



$

795,462



9.9

%


$

987,304



(11.5)

%

Operating income

$

178,223



$

168,151



6.0

%


$

268,283



(33.6)

%

Operating margin

23.3

%


19.9

%


340 bps


26.4

%


(310 bps)

AB Holding Diluted EPU

$

0.63



$

0.49



28.6

%


$

0.84



(25.0)

%











Adjusted Financial Measures (1)










Net revenues

$

743,803



$

657,884



13.1

%


$

817,457



(9.0)

%

Operating income

$

205,590



$

158,857



29.4

%


$

263,974



(22.1)

%

Operating margin

27.6

%


24.1

%


350 bps


32.3

%


(470 bps)

AB Holding Diluted EPU

$

0.64



$

0.49



30.6

%


$

0.85



(24.7)

%

AB Holding cash distribution per Unit

$

0.64



$

0.49



30.6

%


$

0.85



(24.7)

%











(US $ Billions)










Assets Under Management ("AUM")










Ending AUM

$

541.8



$

554.7



(2.3)

%


$

622.9



(13.0)

%

Average AUM

$

602.0



$

539.2



11.6

%


$

606.8



(0.8)

%











(1)  The adjusted financial measures represent non-GAAP financial measures. See page 11 for reconciliations of GAAP Financial Results to Adjusted Financial Results and pages 12-13 for notes describing the adjustments.

"First quarter results reflected the strength of AB's diversified, global platform and the committed efforts of our talented team members during a turbulent period," Bernstein said.  "Despite sharp declines in markets in March, driven by the uncertain economic impact of the novel coronavirus, we generated solid year-over-year revenue growth and expanded operating margins.  Both our institutional channel and active equity platform grew organically in the quarter, with our pipeline of institutional mandates reaching record levels. Investment performance was mixed; while active equities improved, fixed income lagged notably behind expectations, as most strategies maintained a strategic overweight to credit sectors. Bernstein Research had a very strong quarter as higher market volatility drove robust global trading volumes."

Bernstein continued, "In Retail, gross sales reached a record $24.2 billion - the highest in Retail history - and March was notably our fourth highest month ever. Our active equity platform generated net inflows while our Fixed Income business experienced net outflows in March, as investors retreated from volatile and illiquid markets, which are now showing signs of stabilization. In Institutional, net flows were positive, driven by a 13% active equity organic growth rate. Our institutional pipeline grew to a record $15.4B , with a 46% equity mix, the highest proportion ever. Our pipeline's annualized fee base reached a new high of over $40 million for the third consecutive quarter. In Private Wealth, advisor sales and productivity grew year-over-year, but most importantly, we were present when our clients needed us most, with proactive communications throughout the crisis.  Bernstein Research grew by over 30% organically, benefitting from strong global trading volumes and a mix shift to higher-touch trades. As a firm, we expanded our adjusted operating margin of 27.6% by 350 basis points versus the same period a year ago."

Bernstein concluded, "AB's financial results reflect the capital markets, and assets under management have declined by 13% from year-end 2019. Looking forward, we expect to experience further market volatility in the face of continued uncertainty stemming from the global effects of COVID-19. Despite operating almost entirely remotely, AB's talented and dedicated staff continues to work diligently to help our clients navigate through tumultuous markets. While there will be enormous challenges to overcome, I believe AB is well positioned to capitalize on the opportunities that will undoubtedly arise as the severity of this health crisis abates and the unprecedented level of fiscal and monetary support begin to impact the global economy."

The firm's cash distribution per Unit of $0.64 is payable on May 28, 2020 , to holders of record of AB Holding Units at the close of business on May 11, 2020 .

Market Performance

US and global equity and fixed income markets were mostly lower in the first quarter. The S&P 500's total return was (19.6)% and the MSCI EAFE Index's total return was (22.7)%. The Bloomberg Barclays US Aggregate Index returned 3.2% during the first quarter and the Bloomberg Barclays Global Aggregate ex US Index's total return was (2.7)%.

Assets Under Management ($ Billions)

Total assets under management as of March 31, 2020 were $541.8 billion , down $81.1 billion , or 13.0%, from December 31, 2019, and down $12.9 billion , or 2.3%, from March 31, 2019.


Institutional


Retail


Private
Wealth
Management


Total

Assets Under Management 3/31/2020

$256.7


$198.6


$86.5


$541.8

Net Flows for Three Months Ended 3/31/2020:








       Active

$(0.7)


$(3.7)


$(0.8)


$(5.2)

       Passive

1.1


(1.7)


0.2


(0.4)

Total

$0.4


$(5.4)


$(0.6)


$(5.6)

Total net outflows were $5.6 billion in the first quarter, compared to net inflows of $6.5 billion in the fourth quarter of 2019, and net inflows of $1.1 billion in the prior year first quarter.

Institutional channel first quarter net inflows of $0.4 billion compared to net inflows of $1.4 billion in the fourth quarter of 2019. Institutional gross sales of $3.9 billion decreased sequentially from $5.4 billion . The pipeline of awarded but unfunded Institutional mandates increased sequentially to $15 .4 billion at March 31, 2020 from $15.1 billion at December 31, 2019.

Retail channel first quarter net outflows of $5.4 billion compared to net inflows of $5.2 billion in the fourth quarter of 2019. Retail gross sales of $24.2 billion increased 28% sequentially from $18.9 billion .

Private Wealth channel first quarter net outflows of $0.6 billion compared to net outflows of $0.1 billion in the fourth quarter of 2019. Private Wealth gross sales of $3.5 billion increased sequentially from $2.7 billion .

Our ending AUM at March 31, 2020 reflects $1 billion in outflows resulting from AXA S.A.'s redemption of certain low-fee fixed income mandates. We expect these redemptions to total approximately $14 billion and to be completed in the first half of 2020.  The revenue we earn from the management of these assets is not significant.

First Quarter Financial Results

We are presenting both earnings information derived in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and non-GAAP, adjusted earnings information in this release. Management principally uses these non-GAAP financial measures in evaluating performance because we believe they present a clearer picture of our operating performance and allow management to see long-term trends without the distortion caused by long-term incentive compensation-related mark-to-market adjustments, real estate charges/credits and other adjustment items. Similarly, we believe that non-GAAP earnings information helps investors better understand the underlying trends in our results and, accordingly, provides a valuable perspective for investors. Please note, however, that these non-GAAP measures are provided in addition to, and not as a substitute for, any measures derived in accordance with US GAAP and they may not be comparable to non-GAAP measures presented by other companies. Management uses both US GAAP and non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because they do not include all of our revenues and expenses.

AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to its Unitholders (including the General Partner). Available Cash Flow typically is the adjusted diluted net income per unit for the quarter multiplied by the number of units outstanding at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted diluted net income per unit, unless management determines, with concurrence of the Board of Directors, that one or more adjustments made to adjusted net income should not be made with respect to the Available Cash Flow calculation.

US GAAP Earnings

Revenues

First quarter net revenues of $874 million increased 10% from $795 million in the first quarter of 2019. Higher investment advisory fees, Bernstein Research revenues, distribution revenues and performance-based fees were partially offset by investment losses compared to investment gains in the prior year first quarter.

Sequentially, net revenues decreased 12% from $987 million . Lower performance-based fees, investment losses compared to investment gains in the prior period and lower investment advisory fees were partially offset by higher Bernstein Research revenues and distribution revenues.

First quarter Bernstein Research revenues of $129 million increased 43% compared to the prior year first quarter and increased 18% sequentially. Excluding revenues from the Autonomous acquisition, which closed on April 1, 2019 , Bernstein Research revenues increased 31% from the prior year first quarter due to higher revenues in  U.S., Europe and Asia , resulting from increased customer trading activity attributed to greater global market volatility, which also drove the sequential increase.

Expenses

First quarter operating expenses of $696 million increased 11% from $627 million in the first quarter of 2019. Total promotion and servicing, employee compensation and benefits and general and administrative ("G&A") expenses were all higher. Promotion and servicing expense increased due to higher distribution related payments, trade execution costs and transfer fees, partially offset by lower travel and entertainment expenses. Employee compensation and benefits expense increased due to higher base compensation, incentive compensation and commissions, partially offset by lower fringes. The increase in G&A was primarily due to higher portfolio servicing fees, technology costs and occupancy expense, partially offset by lower professional fees.

Sequentially, operating expenses decreased 3%. Total employee compensation and benefits expense and G&A expenses were both lower. Employee compensation and benefits expense decreased due to lower incentive compensation, partially offset by higher commissions and base compensation. Within G&A, lower occupancy expense, other taxes, charitable contributions and a favorable foreign exchange translation impact were partially offset by higher portfolio servicing fees. In addition, during the fourth quarter of 2019, we recorded an intangible asset impairment charge of $3.1 million and a change in our contingent payment liability of $3.1 million , both relating to our 2016 acquisition.

Operating Income and Net Income Per Unit

First quarter operating income of $178 million increased 6% from $168 million in the first quarter of 2019 and the operating margin of 23.3% in the first quarter of 2020 increased 340 basis points from 19.9% in the first quarter of 2019.

Sequentially, operating income decreased 34% from $268 million in the fourth quarter of 2019 and the operating margin of 23.3% decreased 310 basis points from 26.4% in the fourth quarter of 2019.

First quarter diluted net income per Unit was $0.63 compared to $0.49 in the first quarter of 2019 and $0.84 in the fourth quarter of 2019.

Non-GAAP Earnings

This section discusses our first quarter 2020 non-GAAP financial results, compared to the first quarter of 2019 and the fourth quarter of 2019. The phrases "adjusted net revenues", "adjusted operating expenses", "adjusted operating income", "adjusted operating margin" and "adjusted diluted net income per Unit" are used in the following earnings discussion to identify non-GAAP information.

Revenues

First quarter adjusted net revenues of $744 million increased 13% from the first quarter of 2019. Higher investment advisory fees and Bernstein Research revenues were partially offset by investment losses compared to investment gains in the prior year first quarter.

Sequentially, adjusted net revenues decreased 9% from $817 million . Lower performance-based fees, investment advisory base fees, investment losses compared to investment gains in the prior period and lower net dividend and interest income were partially offset by higher Bernstein Research revenues.

Expenses

First quarter adjusted operating expenses of $538 million increased 8% from $499 million in the first quarter of 2019, driven by higher total employee compensation and benefits and promotion and servicing expenses. Employee compensation and benefits expense increased due to higher incentive compensation, base compensation and commissions, partially offset by lower fringes. Within promotion and servicing expenses, higher trade execution costs, transfer fees and marketing expenses were partially offset by lower travel and entertainment expense.

Sequentially, adjusted operating expenses decreased 3% from $553 million . Total employee compensation and benefits, G&A and promotion and servicing expenses were all lower. Employee compensation and benefits expense decreased due to lower incentive compensation, partially offset by higher commissions and base compensation. Within G&A, the decrease was driven by lower professional fees, other taxes, charitable contributions and a favorable foreign exchange translation impact, partially offset by higher portfolio servicing fees. Promotion and servicing expense decreased due to lower travel and entertainment, partially offset by higher trade execution costs.

Operating Income, Margin and Net Income Per Unit

First quarter adjusted operating income of $206 million increased 29% from $159 million in the first quarter of 2019, and the adjusted operating margin of 27.6% increased 350 basis points from 24.1%.

Sequentially, adjusted operating income decreased 22% from $264 million and the adjusted operating margin of 27.6% in the first quarter of 2020 decreased 470 basis points from 32.3%.

First quarter adjusted diluted net income per Unit of $0.64 was up from $0.49 in the first quarter of 2019 and down from $0.85 in the fourth quarter of 2019.

Headcount

As of March 31, 2020, we had 3,846 employees, compared to 3,657 employees as of March 31, 2019 and 3,811 as of December 31, 2019.

Unit Repurchases



1Q20


1Q19



(US $ Millions)

Total amount of AB Holding Units Purchased (1)


0.9



2.0


Total Cash Paid for AB Holding Units Purchased (1)


$

19.8



$

58.6


Open Market Purchases of AB Holding Units Purchased (2)


0.8



1.9


Total Cash Paid for Open Market Purchases of AB Holding Units (2)


$

17.3



$

55.2



(1)  Purchased on a trade date basis.

(2)  The remainder related to purchases of AB Holding Units from employees to all them to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards.

First Quarter 2020 Earnings Conference Call Information

Management will review First Quarter 2020 financial and operating results during a conference call beginning at 8:00 a.m. (EDT) on Tuesday, April 28, 2020. The conference call will be hosted by Seth P. Bernstein , President and Chief Executive Officer, and John C. Weisenseel , Chief Financial Officer.

Parties may access the conference call by either webcast or telephone:

  1. To listen by webcast, please visit AB's Investor Relations website at http://alliancebernstein.com/investorrelations  at least 15 minutes prior to the call to download and install any necessary audio software.
  2. To listen by telephone, please dial (866) 556-2265 in the U.S. or (973) 935-8521 outside the U.S. 10 minutes before the scheduled start time. The conference ID# is 9592750.

The presentation management will review during the conference call will be available on AB's Investor Relations website shortly after the release of First Quarter 2020 financial and operating results on April 28, 2020.

A replay of the webcast will be made available beginning approximately one hour after the conclusion of the conference call and will be available on AB's website for one week. An audio replay of the conference call will also be available for one week. To access the audio replay, please call (855) 859-2056 in the US, or (404) 537-3406 outside the US, and provide the conference ID #: 9592750.

Cautions Regarding Forward-Looking Statements

Certain statements provided by management in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions, and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. AB cautions readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made; AB undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see "Risk Factors" and "Cautions Regarding Forward-Looking Statements" in AB's Form 10-K for the year ended December 31, 2019 and subsequent Forms 10-Q. Any or all of the forward-looking statements made in this news release, Form 10-K, Forms 10-Q, other documents AB files with or furnishes to the SEC, and any other public statements issued by AB, may turn out to be wrong. It is important to remember that other factors besides those listed in "Risk Factors" and "Cautions Regarding Forward-Looking Statements", and those listed below, could also adversely affect AB's revenues, financial condition, results of operations and business prospects.

The forward-looking statements referred to in the preceding paragraph include statements regarding:

  • The pipeline of new institutional mandates not yet funded: Before they are funded, institutional mandates do not represent legally binding commitments to fund and, accordingly, the possibility exists that not all mandates will be funded in the amounts and at the times currently anticipated, or that mandates ultimately will not be funded.
  • The possibility that AB will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.

Qualified Tax Notice

This announcement is intended to be a qualified notice under Treasury Regulation §1.1446-4(b)(4).  Please note that 100% of AB Holding's distributions to foreign investors is attributable to income that is effectively connected with a United States trade or business. Accordingly, AB Holding's distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate, 37% effective January 1, 2018 .

About AllianceBernstein

AllianceBernstein is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private wealth clients in major world markets.

As of March 31, 2020, including both the general partnership and limited partnership interests in AllianceBernstein, AllianceBernstein Holding owned approximately 35.9% of AllianceBernstein and Equitable Holdings ("EQH"), directly and through various subsidiaries, owned an approximate 64.9% economic interest in AllianceBernstein.

Additional information about AllianceBernstein may be found on our website, www.alliancebernstein.com .

...

AB (The Operating Partnership)










US GAAP Consolidated Statement of Income
(Unaudited)




















(US $ Thousands)

1Q 2020


1Q 2019


% Change


4Q 2019


% Change











GAAP revenues:










Base fees

$

613,587



$

552,230



11.1

%


$

626,357



(2.0)

%

Performance fees

8,138



4,364



86.5



76,344



(89.3)


Bernstein research services

129,223



90,235



43.2



109,671



17.8


Distribution revenues

130,857



100,509



30.2



127,553



2.6


Dividends and interest

20,465



27,346



(25.2)



24,539



(16.6)


Investments gains (losses)

(44,306)



15,735



n/m


7,541



n/m

Other revenues

25,511



22,206



14.9



26,061



(2.1)


  Total revenues

883,475



812,625



8.7



998,066



(11.5)


Less: interest expense

9,319