ALLIANCEBERNSTEIN HOLDING L.P. ANNOUNCES THIRD QUARTER RESULTS
GAAP Diluted Net Income of $1.12 per Unit
Adjusted Diluted Net Income of $0.77 per Unit
Cash Distribution of $0.77 per Unit
NASHVILLE, Tenn., Oct. 24, 2024 /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, 2024.
"AB's relentless commitment to delivering better investment outcomes continues to resonate with our clients globally," said Seth Bernstein, President and CEO of AllianceBernstein. "We registered our third consecutive quarter of organic gains while reaching approximately $806 billion in assets under management, buoyed by strong Equity and Fixed Income markets. Active net inflows totaled $2.2 billion in the third quarter of 2024, led by Taxable and Tax-Exempt Fixed Income, in addition to organic gains in Alternatives/Multi-Asset. We were among the first asset managers to benefit from re-allocations into Fixed Income, having registered nearly $20 billion in Active Fixed Income inflows year-to-date, more than 50% higher than the full prior year's organic gains. Active Equity outflows persisted, primarily concentrated at the Institutional level. Compared to prior year, average AUM and investment advisory base fees grew 14%, adjusted operating income increased 12% and adjusted operating margin of 31.3% expanded by 330 bps, or 470 bps excluding the impact from duplicate lease expense. Adjusted earnings per Unit and distributions to Unitholders rose 19%."
(US $ Thousands except per Unit amounts)
3Q 2024
3Q 2023
% Change
2Q 2024
% Change
U.S. GAAP Financial Measures
Net revenues
$ 1,085,489
$ 1,032,056
5.2 %
$ 1,027,943
5.6 %
Operating income
$ 365,281
$ 175,250
108.4 %
$ 199,289
83.3 %
Operating margin
33.2 %
17.2 %
1600 bps
19.0 %
1420 bps
AB Holding Diluted EPU
$ 1.12
$ 0.50
124.0 %
$ 0.99
13.1 %
Adjusted Financial Measures (1)
Net revenues
$ 845,095
$ 845,792
(0.1) %
$ 825,833
2.3 %
Operating income
$ 264,154
$ 236,854
11.5 %
$ 254,186
3.9 %
Operating margin
31.3 %
28.0 %
330 bps
30.8 %
50 bps
AB Holding Diluted EPU
$ 0.77
$ 0.65
18.5 %
$ 0.71
8.5 %
AB Holding cash distribution per Unit
$ 0.77
$ 0.65
18.5 %
$ 0.71
8.5 %
(US $ Billions)
Assets Under Management ("AUM")
Ending AUM
$ 805.9
$ 669.0
20.5 %
$ 769.5
4.7 %
Average AUM
$ 785.9
$ 689.6
14.0 %
$ 755.5
4.0 %
(1)
The adjusted financial measures represent non-GAAP financial measures. See page 13 for reconciliations of GAAP Financial Results to Adjusted Financial Results and pages 14-15 for notes describing the adjustments.
Bernstein continued, "Our Retail channel extended organic gains for the fifth consecutive quarter, generating $5.4 billion inflows, the channel's highest quarterly gain since 2021. Robust Retail demand for Taxable and Tax-Exempt Fixed Income, respectively growing at 17% and 27% annualized rates, was further supported by Active Equities, growing modestly at 2% annualized organic growth rate. Institutional net outflows persisted with Active Equity outflows offsetting organic gains in other asset classes. Institutional pipeline remains stable at $10 billion, reflective of strong fundings and increased pass through assets during the third quarter. Private Wealth net flows flipped positive in the third quarter. While relatively muted earlier in the year, we remain confident in the channel's flows outlook as sales and advisor productivity are tracking record-levels."
Bernstein concluded, "The third quarter of 2024 was a turning point for monetary and fiscal policy around the world, initiating a rate cutting cycle in many developed economies and stimulus measures in China. In this fluid macroeconomic environment, to be followed shortly by an upcoming global election cycle, we remain resolute in our pursuit of insight that unlocks opportunity. Our long-standing investment experience and our seasoned capabilities across various regions and styles enable us to take advantage of shifting investment landscapes."
The firm's cash distribution per Unit of $0.77 is payable on November 21, 2024, to holders of record of AB Holding Units at the close of business on November 4, 2024.
Market Performance
Global equity and fixed income markets were up in the third quarter of 2024.
3Q 2024
S&P 500 Total Return
5.9 %
MSCI EAFE Total Return
7.3
Bloomberg Barclays US Aggregate Return
5.2
Bloomberg Barclays Global High Yield Index - Hedged
5.5
Assets Under Management
($ Billions)
Total assets under management as of September 30, 2024 were $805.9 billion, up $36.4 billion, or 5%, from June 30, 2024 and up $136.9 billion, or 21%, from September 30, 2023.
Institutional
Retail
Private
Wealth
Total
Assets Under Management 9/30/2024
$335.2
$334.5
$136.2
$805.9
Net Flows for Three Months Ended 9/30/2024:
Active
($4.0)
$6.6
($0.4)
$2.2
Passive
(0.4)
(1.2)
0.5
(1.1)
Total
($4.4)
$5.4
$0.1
$1.1
Total net inflows were $1.1 billion in the third quarter, compared to net inflows of $0.9 billion in the second quarter of 2024 and net outflows of $1.9 billion in the prior year third quarter.
Institutional channel third quarter net outflows of $4.4 billion compared to net outflows of $1.8 billion in the second quarter of 2024. Institutional gross sales were $4.2 billion compared to gross sales of $3.3 billion in the second quarter of 2024. The pipeline of awarded but unfunded Institutional mandates increased sequentially to $10.1 billion at September 30, 2024 compared to $9.8 billion at June 30, 2024.
Retail channel third quarter net inflows of $5.4 billion increased compared to net inflows of $2.8 billion in the second quarter of 2024. Retail gross sales of $26.6 billion increased sequentially from $23.2 billion.
Private Wealth channel third quarter net inflows of $0.1 billion were flat from the second quarter of 2024. Private Wealth gross sales of $4.7 billion decreased sequentially from $5.4 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 incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense 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
Effective April 1, 2024, AB and Societe Generale completed their previously announced transaction to form a global joint venture with two joint venture holding companies, one outside of North America and one within North America. As such, AB has deconsolidated the Bernstein Research Services business.
Revenues
Third quarter net revenues of $1.1 billion increased 5% from the third quarter of 2023. The increase was primarily due to higher investment advisory base fees, distribution revenues and other revenues, partially offset by the Bernstein Research Services deconsolidation and lower dividend and interest income.
Sequentially, net revenues of $1.1 billion increased 6% from $1.0 billion. The increase was due to higher investment advisory base fees, lower investment losses and higher distribution revenues, partially offset by lower performance fees and lower dividend and interest income.
Third quarter Bernstein Research Services revenues decreased 100% compared to the third quarter of 2023. The decrease was driven by the Bernstein Research Services deconsolidation in the second quarter of 2024.
Expenses
Third quarter operating expenses of $720 million decreased 16% from $857 million in the third quarter of 2023. The decrease was primarily due to a contingent payment arrangement gain, lower employee compensation and benefits expense and lower interest on borrowings, partially offset by higher promotion and servicing expense and higher general and administrative ("G&A") expense. The contingent payment arrangement gain was recognized in connection with the fair value adjustment related to our contingent payment liability associated with our acquisition of AB CarVal in 2022. Employee compensation and benefits expense decreased due to lower base compensation resulting from the Bernstein Research Services deconsolidation, lower fringe benefits and incentive compensation, partially offset by higher commissions. The decrease in interest expense is driven by lower average borrowings. Promotion and servicing expense increased due to higher distribution related payments and higher amortization of deferred sales commissions, partially offset by lower trade execution and clearance costs resulting from the Bernstein Research Services deconsolidation. G&A expenses increased primarily due to higher office-related expense primarily driven our early exit from our previous New York office location, partially offset by lower technology and related expense.
Sequentially, operating expenses of $720 million decreased 13% from $829 million, driven primarily to a contingent payment arrangement gain partially offset by higher promotion and servicing expense and G&A expenses.The contingent payment arrangement gain was recognized in connection with the fair value adjustment related to our contingent payment liability associated with our acquisition of AB CarVal in 2022. Promotion and servicing expense increased due to higher distribution-related payments and higher amortization of deferred sales commissions. G&A expense increased primarily due to higher office-related expenses primarily driven by our early exit from our previous New York office location, partially offset by lower professional fees.
Operating Income, Margin and Net Income Per Unit
Third quarter operating income of $365 million increased 108% from $175 million in the third quarter of 2023 and the operating margin of 33.2% in the third quarter of 2024 increased 1600 basis points from 17.2% in the third quarter of 2023.
Sequentially, operating income increased 83% from $199 million in the second quarter of 2024 and the operating margin of 33.2% increased 1420 basis points from 19.0% in the second quarter of 2024.
Third quarter diluted net income per Unit was $1.12 compared to $0.50 in the third quarter of 2023 and $0.99 in the second quarter of 2024.
Non-GAAP Earnings
This section discusses our third quarter 2024 non-GAAP financial results, compared to the third quarter of 2023 and the second quarter of 2024. 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.
Adjusted Revenues
Third quarter adjusted net revenues of $845 million decreased slightly from $846 million in the third quarter of 2023. The decrease was primarily due to the Bernstein Research Services deconsolidation, partially offset by higher investment advisory base fees. Base fees increased 14% from the third quarter of 2023.
Sequentially, adjusted net revenues of $845 million increased 2% from $826 million. The increase was primarily due higher investment advisory base fees, partially offset by lower performance-based fees, lower investment gains and lower net dividends and interest income.
Adjusted Expenses
Third quarter adjusted operating expenses of $581 million decreased 5% from $609 million in the third quarter of 2023 primarily driven by lower promotion and servicing expense and lower employee compensation and benefits associated with the Bernstein Research Services deconsolidation. Promotion and servicing expense decreased 32% from the third quarter of 2023 primarily due to lower trade execution costs driven by the Bernstein Research Services deconsolidation. Employee compensation and benefits expense decreased 3% from the third quarter of 2023 primarily due to decreased base compensation resulting from the Bernstein Research Services deconsolidation. G&A was essentially flat.
Sequentially, adjusted operating expenses of $581 million increased 2% from $572 million, primarily driven by higher G&A expenses, partially offset by lower promotion and servicing expense. G&A expenses increased 9% sequentially primarily due to higher office and related expenses primarily driven by the acceleration of lease expense and write off of related assets associated with our early exit from our New York office location. Promotion and servicing expense decreased 9% from the second quarter of 2024, primarily due to lower trade execution costs. Compensation and benefits expense was essentially flat.
Adjusted operating Income, Margin and Net Income Per Unit
Third quarter adjusted operating income of $264 million increased 12% from $237 million in the third quarter of 2023, and the adjusted operating margin of 31.3% increased 330 basis points from 28.0%.
Sequentially, adjusted operating income of $264 million increased 4% from $254 million and the adjusted operating margin of 31.3% increased 50 basis points from 30.8%.
Third quarter adjusted diluted net income per Unit was $0.77 compared to $0.65 in the third quarter of 2023 and $0.71 in the second quarter of 2024.
Headcount
As of September 30, 2024, we had 4,292 employees, compared to 4,657 employees as of September 30, 2023 and 4,264 employees as of June 30, 2024. The decrease in headcount as of September 30, 2023 is due the Bernstein Research Services deconsolidation and transferring 546 employees to the newly formed joint ventures. Excluding Bernstein, the increase in headcount as compared to September 30, 2023 was predominantly driven by hiring of offshore personnel.
Unit Repurchases
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
(in millions)
Total amount of AB Holding Units Purchased (1)
1.1
1.8
2.1
2.3
Total Cash Paid for AB Holding Units Purchased (1)
$ 38.6
$ 56.9
$ 71.7
$ 75.7
Open Market Purchases of AB Holding Units Purchased (1)
1.1
1.8
1.8
1.8
Total Cash Paid for Open Market Purchases of AB Holding Units (1)
$ 38.6
$ 56.9
$ 60.1
$ 56.9
(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 fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards.
Third Quarter 2024 Earnings Conference Call Information
Management will review third quarter 2024 financial and operating results during a conference call beginning at 9:00 a.m. (CST) on Thursday, October 24, 2024. The conference call will be hosted by Seth Bernstein, President & Chief Executive Officer; Jackie Marks, Chief Financial Officer; Onur Erzan, Head of Global Client Group & Head of Private Wealth; and Matthew Bass, Head of Private Alternatives.
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, please dial (888) 440-3310 in the U.S. or +1 (646) 960-0513 outside the U.S. 10 minutes before the scheduled start time. The conference ID# is 6072615.
The presentation management will review during the conference call will be available on AB's Investor Relations website shortly after the release of our third quarter 2024 financial and operating results on October 24, 2024.
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, 2023 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 September 30, 2024, including both the general partnership and limited partnership interests in AllianceBernstein, AllianceBernstein Holding owned approximately 39.3% of AllianceBernstein and Equitable Holdings ("EQH"), directly and through various subsidiaries, owned an approximate 61.6% 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)
