GAAP Diluted Net Income of $0.56 per Unit
Adjusted Diluted Net Income of $0.64 per Unit
Cash Distribution of $0.64 per Unit
NASHVILLE, Tenn., Oct. 28, 2022 /PRNewswire/ -- AllianceBernstein L.P. ("AB") and AllianceBernstein Holding L.P. ("AB Holding") (NYSE: AB) today reported financial and operating results for the quarter ended September 30, 2022.
"Global financial markets declined in the third quarter amidst continued volatility stemming from accelerating inflation and higher interest rates," said Seth P. Bernstein, President and CEO of AllianceBernstein. "AB was not immune to industrywide conditions, as net outflows were $10.5 billion, or $6.6 billion excluding anticipated AXA redemptions. Growth in alternatives/multi-asset and municipals was outweighed by taxable fixed income and active equity outflows. Our fee rate improved by 7% year-over-year, growing in each channel, driven by the addition of CarVal and favorable asset mix. Our institutional pipeline increased to $24.7 billion, up $14.5 billion sequentially, driven by a $7.5 billion custom target-date mandate, $4.6 billion of CarVal commitments, and additional diversified active mandates. While near-term investment performance reflects a challenging environment, long-term performance remained strong in equities and above average in fixed income. Overall, AB's financial performance reflected lower asset prices, with year-over-year adjusted operating income declining by 27% and adjusted earnings per Unit and distributions to Unitholders declining by 28%."
(US $ Thousands except per Unit amounts)
U.S. GAAP Financial Measures
AB Holding Diluted EPU
Adjusted Financial Measures (1)
AB Holding Diluted EPU
AB Holding cash distribution per Unit
(US $ Billions)
Assets Under Management ("AUM")
(1) The adjusted financial measures represent non-GAAP financial measures. See page 12 for reconciliations of GAAP Financial Results to Adjusted Financial Results and pages 13-14 for notes describing the adjustments.
Bernstein continued, "Retail sales continued to moderate, reflecting lower active equity sales driven by weaker markets. Taxable fixed income net outflows improved, and municipals posted their 9th consecutive quarter of organic growth. Retail net outflows were $5.0 billion, or $2.8 billion ex-AXA redemptions. Our Institutional channel saw net outflows of $6.3 billion, or $4.6 billion ex-AXA redemptions. Private Wealth grew organically for the 7th of the last 9 quarters, with net inflows of $0.8 billion. Bernstein Research revenues decreased 19% versus the prior year driven by lower customer trading activity in Europe and Asia amidst a volatile and uncertain global environment."
Bernstein concluded, "With macroeconomic concerns continuing to set the market tone, our investment teams continue to pursue a fundamental approach to identifying the best opportunities for our clients. While we are managing expenses judiciously in this environment, we continue to invest in select client-driven growth opportunities, including the recent launch of our first two active fixed income ETF's. Our dedication to securing the best outcome for our clients remains our guiding principle; thus, we were pleased to be ranked recently by Investor's Business Daily as the 6th Most Trusted Financial Company. Across AB, our talented teams seek to maintain and grow our customers' trust every day."
The firm's cash distribution per Unit of $0.64 is payable on November 23, 2022, to holders of record of AB Holding Units at the close of business on November 7, 2022.
Global equity and fixed income markets were down in the third quarter of 2022.
S&P 500 Total Return
MSCI EAFE Total Return
Bloomberg Barclays US Aggregate Return
Bloomberg Barclays Global High Yield Index
Assets Under Management
Total assets under management as of September 30, 2022 were $612.7 billion, down $34.1 billion, or 5%, from June 30, 2022 and down $129.5 billion, or 18%, from September 30, 2021.
Assets Under Management 9/30/2022
Net Flows for Three Months Ended 9/30/2022:
Total net outflows were $10.5 billion in the third quarter, compared to net outflows of $2.7 billion in the second quarter of 2022, and net inflows of $7.2 billion in the prior year third quarter. AXA redemptions and net flows excluding these redemptions were as follows:
Net (outflows) inflows excluding AXA redemptions
Institutional channel third quarter net outflows of $6.3 billion compared to net inflows of $0.7 billion in the second quarter of 2022. Excluding AXA redemptions of low-fee fixed income mandates of $1.7 billion in the third quarter, net outflows were $4.6 billion. Institutional gross sales of $1.9 billion decreased sequentially from $3.3 billion. The pipeline of awarded but unfunded Institutional mandates increased sequentially to $24.7 billion at September 30, 2022 from $10.2 billion at June 30, 2022.
Retail channel third quarter net outflows of $5.0 billion compared to net outflows of $2.2 billion in the second quarter of 2022. Retail gross sales of $13.8 billion decreased sequentially from $17.3 billion. Excluding AXA redemptions of passive fixed income and equity mandates of $2.2 billion in the third quarter, net outflows were $2.8 billion.
Private Wealth channel third quarter net inflows of $0.8 billion compared to net outflows of $1.2 billion in the second quarter of 2022. Private Wealth gross sales of $4.1 billion increased sequentially from $3.3 billion.
Third 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
Third quarter net revenues of $987 million decreased 10% from $1.1 billion in the third quarter of 2021. The decrease was primarily due to lower investment advisory base fees, distribution revenues, Bernstein Research revenues and performance-based fees.
Sequentially, net revenues of $987 million increased 2%. The increase was due to lower investment losses and higher investment advisory base fees, partially offset by lower Bernstein Research revenues, performance-based fees and distribution revenues.
Third quarter Bernstein Research revenues of $92 million decreased 19% compared to the prior year third quarter and decreased 14% sequentially. The decrease was driven by significantly lower trading activity in Europe and Asia due to the prevailing macro-economic environment. The sequential decrease was driven by a decline in global customer trading activity.
Third quarter operating expenses of $817 million increased less than 1% from $813 million in the third quarter of 2021. The increase is primarily due to higher general and administrative ("G&A") expenses, amortization of intangibles and interest expense, offset by lower promotion and servicing expenses and total employee compensation and benefit expense. Within G&A, the increase was driven by higher professional fees, technology expenses, an unfavorable foreign exchange translation impact and higher portfolio servicing fees. Promotion and servicing expenses decreased due to lower distribution-related payments and lower transfer fees, partially offset by higher marketing and travel and entertainment expenses. Employee compensation and benefits expense decreased due to lower incentive compensation, partially offset by higher base compensation, other employment costs and commissions.
Sequentially, operating expenses increased 5% from $778 million, primarily driven by higher total employee compensation and benefits expense, amortization of intangibles, general and administrative expenses and interest on borrowings, offset by lower promotion and servicing expenses. Employee compensation and benefits expense increased due to higher incentive compensation and higher base compensation, partially offset by lower commissions. Within G&A, the increase was driven by higher professional fees, office-related expenses and technology expenses, partially offset by lower portfolio servicing fees. Promotion and servicing expenses decreased due to lower distribution-related payments, travel and entertainment expenses, marketing expenses and trade execution costs.
Operating Income, Margin and Net Income Per Unit
Third quarter operating income of $170 million decreased 39% from $280 million in the third quarter of 2021 and the operating margin of 18.3% in the third quarter of 2022 decreased 740 basis points from 25.7% in the third quarter of 2021.
Sequentially, operating income decreased 12% from $193 million in the second quarter of 2022 and the operating margin of 18.3% decreased 430 basis points from 22.6% in the second quarter of 2022.
Third quarter diluted net income per Unit was $0.56 compared to $0.89 in the third quarter of 2021 and $0.69 in the second quarter of 2022.
This section discusses our third quarter 2022 non-GAAP financial results, compared to the third quarter of 2021 and the second quarter of 2022. 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.
Third quarter adjusted net revenues of $814 million decreased 8% from $884 million in the third quarter of 2021. The decrease was due to lower investment advisory base fees, Bernstein Research revenues and performance-based fees, partially offset by investment gains in the current year compared to investment losses in the prior year.
Sequentially, adjusted net revenues decreased less than 1% from $816 million. The decrease was due to lower Bernstein Research revenues and lower performance-based fees, partially offset by investment gains in the current quarter compared to investment losses in the prior quarter, higher investment advisory base fees and higher net dividend and interest income.
Third quarter adjusted operating expenses of $610 million increased 1% from $603 million in the third quarter of 2021. Higher G&A expense, interest expense on borrowings and promotion and servicing expenses were partially offset by lower employee compensation and benefits. Within G&A, the increase was driven by higher technology expenses and an unfavorable foreign exchange translation impact, partially offset by lower portfolio servicing fees. Promotion and servicing expenses increased due to higher marketing expenses, firm meeting expenses and travel and entertainment expenses, partially offset by lower trade execution costs and transfer fees. Employee compensation and benefits expense decreased due to lower incentive compensation, partially offset by higher base compensation, other employment costs and commissions and fringes.
Sequentially, adjusted operating expenses increased 3% from $590 million. Higher total employee compensation and benefits, interest on borrowings and higher G&A expense were partially offset by lower promotion and servicing expenses. Employee compensation and benefits expense increased due to higher incentive compensation and higher base compensation, partially offset by lower commissions. Within G&A, the increase was driven by higher office-related expenses and technology expenses, partially offset by lower portfolio servicing fees and other taxes. Promotion and servicing expenses decreased due to lower travel and entertainment, trade execution costs and marketing expenses.
Operating Income, Margin and Net Income Per Unit
Third quarter adjusted operating income of $204 million decreased 27% from $281 million in the third quarter of 2021, and the adjusted operating margin of 25.1% decreased 670 basis points from 31.8%.
Sequentially, adjusted operating income of $204 million decreased 9% from $226 million and the adjusted operating margin of 25.1% decreased 260 basis points from 27.7%.
Third quarter adjusted diluted net income per Unit was $0.64 compared to $0.89 in the third quarter of 2021 and $0.71 in the second quarter of 2022.
As of September 30, 2022, we had 4,490 employees, including 196 employees as a result of the CarVal acquisition, compared to 4,050 employees as of September 30, 2021 and 4,313 as of June 30, 2022.
Three Months Ended
Nine Months Ended
Total amount of AB Holding Units Purchased/Retained (1)
Total Cash Paid for AB Holding Units Purchased/Retained (1)
Open Market Purchases of AB Holding Units Purchased (1)
Total Cash Paid for Open Market Purchases of AB Holding Units (1)
(1) Purchased on a trade date basis. The difference between open-market purchases and units retained reflects the retention of AB Holding Units from employees to
Third Quarter 2022 Earnings Conference Call Information
Management will review Third Quarter 2022 financial and operating results during a conference call beginning at 9:00 a.m. (CT) on Friday, October 28, 2022. The conference call will be hosted by Seth Bernstein, President & Chief Executive Officer; Kate Burke, Chief Operating Officer & Chief Financial Officer; Onur Erzan, Head of Global Client Group & Head of Private Wealth; and Bill Siemers, Controller & Chief Accounting Officer.
Parties may access the conference call by either webcast or telephone:
To listen by webcast, please visit AB's Investor Relations website at https://www.alliancebernstein.com/corporate/en/investor-relations.html at least 15 minutes prior to the call to download and install any necessary audio software.
To listen by telephone, participants are required to register using the following link, where they will be provided a phone number and personal access code: https://register.vevent.com/register/BI5b0986f17ea24f72859ec5ec2c2dbad2.
The presentation management will review during the conference call will be available on AB's Investor Relations website shortly after the release of third quarter 2022 financial and operating results on October 28, 2022.
A replay of the webcast will be made available beginning approximately one hour after the conclusion of the conference call.
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, 2021 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.
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 September 30, 2022, including both the general partnership and limited partnership interests in AllianceBernstein, AllianceBernstein Holding owned approximately 36.5% of AllianceBernstein and Equitable Holdings ("EQH"), directly and through various subsidiaries, owned an approximate 64.3% 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
(US $ Thousands)
Bernstein research services
Dividends and interest
Less: interest expense
Total net revenues
GAAP operating expenses:
Employee compensation and benefits
Promotion and servicing
Amortization of deferred sales commissions
Trade execution, marketing, T&E and other
General and administrative
Contingent payment arrangements
Interest on borrowings
Amortization of intangible assets
Total operating expenses
Net (loss) of consolidated entities attributable to non-
Net income attributable to AB Unitholders
AB Holding L.P. (The Publicly-Traded Partnership)
SUMMARY STATEMENTS OF INCOME
(US $ Thousands)
Equity in Net Income Attributable to AB Unitholders
Additional Equity in Earnings of Operating Partnership (1)
Net Income - Diluted
Diluted Net Income per Unit
Distribution per Unit
(1) To reflect higher ownership in the Operating Partnership resulting from application of the treasury stock method to outstanding options.
Weighted average - basic
Weighted average - diluted
AB Holding L.P.
Weighted average - basic