GAAP Diluted Net Income of
Adjusted Diluted Net Income of
Cash Distribution of
'The firm delivered strong financial results in an improving, though still uncertain economic and market environment,' said
Active net inflows of
(US $ Thousands except per Unit amounts) 3Q 2020 3Q 2019 % Change 2Q 2020 % Change
Net revenues
Operating income
Operating margin 24.1 % 22.6 % 150 bps 21.7 % 240 bps
AB Holding Diluted EPU
Adjusted Financial Measures (1)
Net revenues
Operating income
Operating margin 29.7 % 27.5 % 220 bps 27.9 % 180 bps
AB Holding Diluted EPU
(US $ Billions)
Assets Under Management ('AUM')
Ending AUM
Average AUM
(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.
629.213.5672
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212.969.1157
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Bernstein continued, 'In Retail, we generated net inflows despite gross sales normalizing following record prior periods. Active equities grew 8% organically, with inflows of
Our colleagues around the world have proven their resiliency in the face of recent circumstances, strengthening the foundation of our firm. We move forward with confidence in our ability to continue to deliver for our clients.' The firm's cash distribution per Unit of
Market Performance
recovery from steep declines experienced during the first quarter.
S&P 500 Total Return 8.9 %
MSCI EAFE Total Return 4.9 %
Bloomberg Barclays US Aggregate Return 0.6 %
Bloomberg Barclays Global Aggregate ex US Index Return 4.1 %
Bloomberg Barclays Global High Yield Index 4.3 %
Bloomberg Barclays
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Assets Under Management
($ Billions)
Total assets under management as of
Institutional Retail
Private
Wealth
Management Total
Assets Under Management
Net Flows for Three Months Ended 9/30/2020:
Active
Passive (1.1) (1.0) 0.1 (2.0)
Total
Total net inflows were
Institutional channel third quarter net inflows of
Retail channel third quarter net inflows of
Private Wealth channel third quarter net inflows of
Our ending AUM at
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Third Quarter Financial Results
We are presenting both earnings information derived in accordance with accounting principles generally accepted in
US GAAP Earnings
Revenues
Third quarter net revenues of
Sequentially, net revenues of
Third quarter
Expenses
Third quarter operating expenses of
Higher promotion and servicing expenses were partially offset by lower total employee compensation and benefits expense. Promotion and servicing expenses increased due to higher distribution related payments and amortization of deferred sales commissions, partially offset by lower travel and entertainment and marketing expenses. Employee compensation and benefits expense decreased due to lower fringes, commissions and recruitment costs, partially offset by higher incentive compensation.
Sequentially, operating expenses increased 3% from
Operating Income and Net Income Per Unit Third quarter operating income of
Sequentially, operating income increased 4% from
Third quarter diluted net income per Unit was
Non-GAAP Earnings
This section discusses our third quarter 2020 non-GAAP financial results, compared to the third quarter of 2019 and the second quarter of 2020. 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
Third quarter adjusted net revenues of
Sequentially, adjusted net revenues increased 4% from
Expenses
Third quarter adjusted operating expenses of
Sequentially, adjusted operating expenses increased 1% from
Employee compensation and benefits expense increased due to higher commissions, base compensation and incentive compensation, partially offset by lower fringes. Within promotion and servicing expenses, the decrease was driven by lower trade execution costs. Within G&A, the decrease is attributable to lower technology and office-related expenses, partially offset by higher professional fees.
Operating Income, Margin and Net Income Per Unit
Third quarter adjusted operating income of
Sequentially, adjusted operating income of
www.alliancebernstein.com 5 of 13 Third quarter adjusted diluted net income per Unit of
Headcount
As of
2019 and 3,825 as of
Unit Repurchases
Three Months Ended
Nine Months Ended
2020 2019 2020 2019
(in millions)
Total amount of AB Holding Units Purchased (1) 0.3 0.9 2.5 2.9
Total Cash Paid for AB Holding Units Purchased (1)
Open Market Purchases of AB Holding Units Purchased (2) 0.2 0.6 2.4 2.5
Total Cash Paid for Open Market Purchases of AB Holding Units (2)
(1) Purchased on a trade date basis.
(2) The remainder related to purchases of AB Holding Units from employees to fulfill statutory tax withholding requirements at the time
of delivery of long-term incentive compensation awards.
Third Quarter 2020 Earnings Conference Call Information
Management will review Third Quarter 2020 financial and operating results during a conference call beginning at
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 (833) 495-0952 in theU.S. or (409) 216-0498 outside theU.S. 10 minutes before the scheduled start time. The conference ID# is 5360089.
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 2020 financial and operating results on
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 #: 5360089.
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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 forwardlooking 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
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
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
About
As of
Additional information about
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AB (
US GAAP Consolidated Statement of Income
(Unaudited)
(US $ Thousands) 3Q 2020 3Q 2019 % Change 2Q 2020 % Change
GAAP revenues:
Base fees
Performance fees 6,946 7,619 (8.8) 8,907 (22.0)
Bernstein research services 98,514 102,014 (3.4) 113,609 (13.3)
Distribution revenues 135,693 118,635 14.4 120,099 13.0
Dividends and interest 9,070 24,882 (63.5) 12,692 (28.5)
Investments gains (losses) 1,106 4,433 (75.1) 24,189 (95.4)
Other revenues 26,583 24,497 8.5 26,092 1.9
Total revenues 901,505 890,845 1.2 874,884 3.0
Less: interest expense 1,467 12,978 (88.7) 3,435 (57.3)
Total net revenues 900,038 877,867 2.5 871,449 3.3
GAAP operating expenses:
Employee compensation and benefits 357,821 361,822 (1.1) 349,638 2.3
Promotion and servicing
Distribution-related payments 148,380 127,726 16.2 125,678 18.1
Amortization of deferred sales commissions 7,434 3,605 106.2 6,622 12.3
Trade execution, marketing, T&E and other 41,220 53,814 (23.4) 44,288 (6.9)
General and administrative
General & administrative 119,318 117,056 1.9 121,424 (1.7)
Real estate charges - 153 (100.0) 5,526 (100.0)
Contingent payment arrangements 813 829 (1.9) 807 0.7
Interest on borrowings 1,073 2,802 (61.7) 1,096 (2.1)
Amortization of intangible assets 6,833 7,277 (6.1) 6,723 1.6
Total operating expenses 682,892 675,084 1.2 661,802 3.2
Operating income 217,146 202,783 7.1 209,647 3.6
Income taxes 9,089 10,827 (16.1) 11,386 (20.2)
Net income 208,057 191,956 8.4 198,261 4.9
Net income (loss) of consolidated entities
attributable to non-controlling interests 81 4,145 (98.0) 20,940 (99.6)
Net income attributable to AB Unitholders
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Partnership)
SUMMARY STATEMENTS OF INCOME
(US $ Thousands) 3Q 2020 3Q 2019 % Change 2Q 2020 % Change
Equity in Net Income Attributable to AB Unitholders
Income Taxes 6,875 6,894 (0.3) 6,275 9.6
Net Income 66,999 59,828 12.0 56,926 17.7
Additional Equity in Earnings of Operating
Partnership (1) 14 17 (17.6%) 3 n/m
Net Income - Diluted
Diluted Net Income per Unit
Distribution per Unit
(1) To reflect higher ownership in theOperating Partnership resulting from application of the treasury stock method to outstanding options.
Units Outstanding 3Q 2020 3Q 2019 % Change 2Q 2020 % Change
Period-end 268,362,084 268,182,957 0.1% 268,620,187 (0.1) %
Weighted average - basic 268,537,856 268,567,071 -% 269,080,676 (0.2)
Weighted average - diluted 268,564,862 268,603,472 -% 269,090,125 (0.2)
Period-end 96,174,568 95,991,941 0.2% 96,431,971 (0.3) %
Weighted average - basic 96,349,686 96,375,961 -% 96,892,460 (0.6)
Weighted average - diluted 96,376,692 96,412,362 -% 96,901,909 (0.5)
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ASSETS UNDER MANAGEMENT |
($ Billions)
Ending and Average Three Months Ended
Ending Assets Under Management
Average Assets Under Management
Three-Month Changes By Distribution Channel
Institutions Retail
Private Wealth
Management Total
Beginning of Period
Sales/New accounts 8.3 17.5 3.5 29.3
Redemption/Terminations (5.7) (14.3) (3.2) (23.2)
Net Cash Flows (0.5) (2.5) - (3.0)
Net Flows 2.1 0.7 0.3 3.1
Transfers 0.6 - (0.6) -
Investment Performance 10.6 12.7 4.4 27.7
End of Period
Three-Month Changes By Investment Service
Equity
Active
Equity
Passive (1)
Fixed
Income
Taxable
Fixed
Income
TaxExempt
Fixed
Income
Passive (1) Other (2) Total
Beginning of Period
Sales/New accounts 12.0 1.2 11.0 2.2 - 2.9 29.3
Redemption/Terminations (8.8) (1.7) (10.4) (1.6) (0.1) (0.6) (23.2)
Net Cash Flows (1.0) (0.5) (0.8) 0.2 (1.0) 0.1 (3.0)
Net Flows 2.2 (1.0) (0.2) 0.8 (1.1) 2.4 3.1
Investment Performance 13.5 4.2 5.6 0.8 0.2 3.4 27.7
End of Period
Three-Month Net Flows By Investment Service (Active versus Passive)
Actively
Managed
Passively
Managed (1) Total
Equity
Fixed Income 0.6 (1.1) (0.5)
Other (2) 2.3 0.1 2.4
Total
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services and certain alternative investments.
By Client Domicile
Institutions Retail Private Wealth Total
Non-
Total
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RECONCILIATION OF GAAP
FINANCIAL RESULTS TO
ADJUSTED FINANCIAL RESULTS
Three Months Ended
(US $ Thousands, unaudited)
Net Revenues, GAAP basis
Exclude:
Distribution-related adjustments:
Distribution revenues (135,693) (120,099) (130,857) (127,553) (118,635) (108,347)
Investment advisory services
fees (20,120) (12,202) (14,814) (15,120) (12,696) (11,148)
Pass through adjustments:
Investment advisory services
fees (3,888) (3,331) (7,062) (6,717) (5,119) (4,356)
Other revenues (9,344) (10,195) (9,607) (9,436) (9,571) (9,160)
Impact of consolidated companysponsored investment funds (765) (21,552) 24,135 (8,567) (4,820) (8,697)
Long-term incentive
compensation-related investment
(gains) losses (3,140) (5,257) 7,099 (1,457) (189) (1,389)
Long-term incentive
compensation-related dividends
and interest (91) (88) (106) (997) (128) (136)
Write-down of investment - - 859 - - -
Adjusted Net Revenues
Operating Income, GAAP
basis
Exclude:
Real estate (985) 5,188 (339) 2,623 - -
Long-term incentive
compensation-related items (416) 104 566 66 517 277
CEO's EQH award compensation 205 209 184 217 217 227
Write-down of investment - - 859 - - -
Acquisition-related expenses 356 805 526 3,459 556 2,718
Contingent payment
arrangements - - - (3,051) - -
Sub-total of non-GAAP
adjustments (840) 6,306 1,796 3,314 1,290 3,222
Less: Net income (loss) of
consolidated entities attributable
to non-controlling interests 81 20,940 (25,571) 7,623 4,145 7,757
Adjusted Operating Income
Operating Margin, GAAP basis excl. noncontrolling interests 24.1 % 21.7 % 23.3 % 26.4 % 22.6 % 20.6 %
Adjusted Operating Margin 29.7 % 27.9 % 27.6 % 32.3 % 27.5 % 25.1 %
RECONCILIATION OF GAAP EPU TO
ADJUSTED EPU
Three Months Ended
($ Thousands except per Unit amounts,
unaudited)
Net Income - Diluted, GAAP basis
Impact on net income of AB non-GAAP
adjustments (289) 2,533 326 1,234 512 1,234
Adjusted Net Income - Diluted
Diluted Net Income per Holding Unit,
GAAP basis
Impact of AB non-GAAP adjustments (0.01) 0.02 0.01 0.01 0.01 0.02
Adjusted Diluted Net Income per Holding
Unit
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AB
Notes to Consolidated Statements of Income and Supplemental Information
(Unaudited)
Adjusted Net Revenues
Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected by us and passed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is passed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.
We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. These fees do not affect operating income, but they do affect our operating margin. As such, we exclude these fees from adjusted net revenues.
We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.
Also, adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments.
Lastly, during the first quarter of 2020, we wrote-down an investment that had been received in exchange for the sale of software technology; the write-down brought the investment balance to zero. Previously, we had been excluding the value of this investment from adjusted net revenues.
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensationrelated investments, (3) our CEO's EQH award compensation, as discussed below, (4) the write-down of an investment, (5) acquisition-related expenses, (6) adjustments to contingent payment arrangements, and (7) the impact of consolidated company-sponsored investment funds.
Real estate charges (credits) incurred have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers. However, beginning in the fourth quarter of 2019, real estate charges (credits), while excluded in the period in which the charges (credits) are recorded, are included ratably over the remaining applicable lease term.
Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments is recorded within investment gains and losses on the income statement. Management believes it is useful to reflect the offset www.alliancebernstein.com 12 of 13 achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.
The board of directors of EQH granted to
The write-down of the investment in the first quarter of 2020 has been excluded due to its non-recurring nature and because it is not part of our core operating results.
Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers.
The recording of changes in estimates of contingent consideration payable with respect to contingent payment arrangements associated with our acquisitions are not considered part of our core operating results and, accordingly, have been excluded.
We adjusted for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation. We also excluded the limited partner interests we do not own.
Adjusted Operating Margin
Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period
without the volatility noted above in our discussion of adjusted operating income and to compare our
performance to industry peers on a basis that better reflects our performance in our core business. Adjusted
operating margin is derived by dividing adjusted operating income by adjusted net revenues.
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