GAAP Diluted Net Income of $0.59 per Unit
Adjusted Diluted Net Income of $0.70 per Unit
Cash Distribution of $0.70 per Unit
NASHVILLE, Tenn., Feb. 8, 2023
/PRNewswire/ -- AllianceBernstein L.P. ("AB") and AllianceBernstein
Holding L.P. ("AB Holding") (NYSE: AB) today reported financial and
operating results for the quarter and year ended December 31, 2022.
"2022 presented an extraordinarily challenging investing and
operating environment. Investment returns were adversely impacted
by a concurrent decline in equity and fixed income markets, with
fixed income posting the worst annual returns on record.
Nevertheless, our diversified global platform posted its fourth
consecutive year of active organic growth," said Seth P. Bernstein, President and CEO of
AllianceBernstein. "Two of our three distribution channels grew
organically, driven primarily by our alternatives/multi-asset
services. Our full year effective fee rate improved by 3% due to
mix shift and the acquisition of CarVal, reflecting our strategic
growth into Private Alternatives, supported by our strategic
partner Equitable Holdings. For the full year, our average AUM
declined by 6%, adjusted operating income decreased by 22%, and
adjusted operating margin of 28.4% compared with 33.6% the prior
year. Adjusted earnings and unitholder distributions decreased by
24% year-over-year."
(US $ Thousands except
per Unit amounts)
|
Q4
2022
|
|
Q4
2021
|
|
%
Change
|
|
2022
|
|
2021
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Financial
Measures
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
990,176
|
|
$
1,264,682
|
|
(21.7) %
|
|
$
4,054,290
|
|
$
4,441,602
|
|
(8.7) %
|
Operating
income
|
$
203,741
|
|
$
392,605
|
|
(48.1) %
|
|
$
815,096
|
|
$
1,216,462
|
|
(33.0) %
|
Operating
margin
|
20.0 %
|
|
30.8 %
|
|
(1,080 bps)
|
|
21.5 %
|
|
27.3 %
|
|
(580 bps)
|
AB Holding Diluted
EPU
|
$
0.59
|
|
$
1.27
|
|
(53.5) %
|
|
$
2.69
|
|
$
3.88
|
|
(30.7) %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Financial
Measures (1)
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
802,114
|
|
$
1,024,326
|
|
(21.7) %
|
|
$
3,336,234
|
|
$
3,609,536
|
|
(7.6 %)
|
Operating
income
|
$
231,947
|
|
$
394,363
|
|
(41.2) %
|
|
$
947,197
|
|
$
1,214,310
|
|
(22.0 %)
|
Operating
margin
|
28.9 %
|
|
38.5 %
|
|
(960 bps)
|
|
28.4 %
|
|
33.6 %
|
|
(520 bps)
|
AB Holding Diluted
EPU
|
$
0.70
|
|
$
1.29
|
|
(45.7) %
|
|
$
2.94
|
|
$
3.89
|
|
(24.4 %)
|
AB Holding cash
distribution per Unit
|
$
0.70
|
|
$
1.29
|
|
(45.7) %
|
|
$
2.95
|
|
$
3.90
|
|
(24.4 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $
Billions)
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under Management
("AUM")
|
|
|
|
|
|
|
|
|
|
|
|
Ending AUM
|
$
646.4
|
|
$
778.6
|
|
(17.0 %)
|
|
$
646.4
|
|
$
778.6
|
|
(17.0 %)
|
Average AUM
|
$
636.0
|
|
$
761.1
|
|
(16.4 %)
|
|
$
686.5
|
|
$
730.8
|
|
(6.1 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The adjusted financial measures
represent non-GAAP financial measures. See page 15 for
reconciliations of GAAP Financial Results to Adjusted Financial
Results and pages 16-17 for notes describing the
adjustments.
|
Bernstein continued: "Our fixed income investment performance
lagged, with 20% of assets outperforming in 2022, while the
majority of equity assets outperformed. In Retail, gross sales of
$66 billion were down from a record
2021. Despite fixed income outflows, US and Japan retail grew organically, as did our
active equity and municipal businesses. In Institutional, we posted
net inflows for the fourth consecutive year, driven by robust
custom target date sales. Our year-end pipeline of $13.2 billion had an active fee rate more than
three times the channel average, with private alternatives more
than 80% of the fee base. Our Private Wealth business grew
organically for the fifth year in the last seven. Bernstein
Research revenues declined by 8% year-over-year, reflecting
constrained institutional trading volumes amidst global
uncertainty.
Bernstein concluded, "Entering 2023, we expect continued
volatility in global financial markets as inflation and interest
rates expectations evolve, with related impacts on the economy and
corporate earnings. Our experienced investment teams and diverse
offerings, which include an expanded private markets offering, and
new vehicles such as active ETF's, position us well to serve our
clients' needs. That said, we enter 2023 with an AUM base 17% below
the prior year period, necessitating global cost reduction
measures, including headcount reduction, while balancing select
growth investments. In this environment, we will continue to pursue
insight that unlocks opportunity, for our clients, unitholders and
stakeholders."
The firm's cash distribution per Unit of $0.70 is payable on March 16, 2023, to
holders of record of AB Holding Units at the close of business on
February 21, 2023.
Market Performance
Global equity and fixed income markets were up in the fourth
quarter and down for the full year of 2022.
|
4Q
2022
|
2022
|
S&P 500 Total
Return
|
7.6 %
|
(18.1) %
|
MSCI EAFE Total
Return
|
17.4
|
(14.0)
|
Bloomberg Barclays US
Aggregate Return
|
1.9
|
(13.0)
|
Bloomberg Barclays
Global High Yield Index
|
8.0
|
(12.7)
|
Assets Under
Management ($ Billions)
|
|
Total assets under
management as of December 31, 2022 were $646.4 billion, up
$33.7 billion, or 6%, from September 30, 2022, and down $132.2
billion, or 17%, from December 31, 2021.
|
|
|
Institutional
|
|
Retail
|
|
Private
Wealth
Management
|
|
Total
|
Assets Under Management
12/31/22
|
$297.3
|
|
$242.9
|
|
$106.2
|
|
$646.4
|
Net Flows for Three
Months Ended 12/31/22:
|
|
|
|
|
|
|
|
Active
|
$3.6
|
|
$(2.5)
|
|
$(1.2)
|
|
$(0.1)
|
Passive
|
(1.9)
|
|
(0.9)
|
|
1.0
|
|
$(1.8)
|
Total
|
$1.7
|
|
$(3.4)
|
|
$(0.2)
|
|
$(1.9)
|
|
|
|
|
|
|
|
|
Net Flows for Twelve
Months Ended 12/31/22:
|
|
|
|
|
|
|
|
Active
|
$9.1
|
|
$(7.1)
|
|
$(1.1)
|
|
$0.9
|
Passive
|
(2.8)
|
|
(4.5)
|
|
2.8
|
|
$(4.5)
|
Total
|
$6.3
|
|
$(11.6)
|
|
$1.7
|
|
$(3.6)
|
Total net outflows were $1.9
billion in the fourth quarter versus net outflows of
$10.5 billion in the third quarter,
and net inflows of $7.4 billion in
the prior year period. Total net outflows were $3.6 billion for the full year of 2022 versus net
inflows of $26.1 billion in the prior
year. Prior period AXA S.A. ("AXA") redemptions of low-fee fixed
income mandates and net flows excluding these redemptions were as
follows:
|
4Q
2022
|
|
4Q
2021
|
|
2022
|
|
2021
|
|
(in
billions)
|
|
|
AXA
redemptions
|
$—
|
|
$—
|
|
$4.5
|
|
$1.3
|
Net (outflows) Inflows
excluding AXA redemptions
|
$(1.9)
|
|
$7.4
|
|
$0.9
|
|
$27.4
|
Institutional channel fourth quarter net inflows of $1.7 billion compared to net outflows of
$6.3 billion in the third quarter.
Institutional gross sales of $12.6
billion increased sequentially from $1.9 billion. Full year 2022 net inflows of
$6.3 billion compared to net inflows
of $2.3 billion in the prior year.
Full year 2022 gross sales of $32.2
billion increased from $31.7
billion in the prior year. The pipeline of awarded but
unfunded Institutional mandates decreased sequentially to
$13.2 billion at December 31,
2022 from $24.7 billion at
September 30, 2022.
Retail channel fourth quarter net outflows of $3.4 billion compared to net outflows of
$5.0 billion in the third quarter.
Retail gross sales of $14.2 billion
increased sequentially from $13.8
billion. Full year 2022 net outflows of $11.6 billion compared to net inflows of
$20.8 billion in the prior year. Full
year 2022 gross sales of $65.9
billion decreased from $100.0
billion in the prior year.
Private Wealth channel fourth quarter net outflows of
$0.2 billion compared to net inflows
of $0.8 billion in the third quarter.
Private Wealth gross sales of $4.1
billion were flat sequentially. Full year 2022 net inflows
of $1.7 billion compared to net
inflows of $3.0 billion in the prior
year. Full year 2022 gross sales of $17.5
billion decreased from $18.3
billion in the prior year.
Fourth Quarter and Full Year 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
Fourth quarter 2022 net revenues of $990.2 million decreased 22% from the fourth
quarter of 2021. Lower performance-based fees, investment advisory
base fees, distribution revenues and Bernstein Research revenues
and higher investment losses were offset by higher net dividend and
interest income.
Full year 2022 net revenues of $4.1
billion decreased 9% from $4.4
billion in 2021. Lower investment advisory base fees,
performance-based fees, distribution revenues, Bernstein Research
revenues and higher investment losses were offset by higher net
dividend and interest income.
Fourth quarter 2022 Bernstein Research Services ("Bernstein")
revenues decreased 12% from the prior year period. The decrease was
driven by a significant decline in customer trading activity across
all regions as a result of market conditions. Full year 2022
Bernstein revenues decreased 8% compared to the prior year. The
decrease was driven by significantly lower customer trading
activity in Europe and
Asia due to local market
conditions.
Expenses
Fourth quarter 2022 operating expenses of $786 million decreased 10% from the fourth
quarter of 2021. The decrease was driven by lower promotion and
servicing expenses, employee compensation and benefits expense and
general and administrative ("G&A") expense, offset by higher
amortization of intangibles, interest expense and contingent
payment arrangements. Within promotion and servicing expenses,
lower distribution related payments, transfer fees, marketing
expense and amortization of deferred sales commissions were
partially offset by higher travel and entertainment. Within
employee compensation and benefit expense, lower incentive
compensation, commissions, fringes and recruitment costs were
offset by higher base compensation. G&A decreased due to lower
portfolio servicing fees and a favorable foreign exchange
translation impact, partially offset by higher professional fees,
valuation adjustments related to the classification of Bernstein as
held for sale and the impairment of certain acquisition related
intangible assets.
Full year 2022 operating expenses of $3.2
billion were flat as compared to 2021. Higher G&A
expenses, amortization of intangibles, interest expense and
contingent payment arrangements were offset by lower promotion and
servicing expense and employee compensation and benefits expense.
G&A increased due to higher professional fees, portfolio
servicing expenses, technology costs, office-related expenses,
valuation adjustments related to the classification of Bernstein as
held for sale and the impairment of certain acquisition related
intangible assets. Promotion and servicing expense decreased due to
lower distribution related payments, transfer fees and trade
execution costs, partially offset by higher travel and
entertainment and firm meeting expenses. Employee compensation and
benefits expense decreased due to lower incentive compensation,
partially offset by higher base compensation, commissions and other
employment costs.
Operating Income and Net Income Per Unit
Fourth quarter 2022 operating income of $204 million decreased 48% from $393 million in the fourth quarter of 2021 and
operating margin of 20.0% decreased 1,080 basis points from 30.8%
in the fourth quarter of 2021.
Full year 2022 operating income of $815
million decreased 33% from $1.2
billion in 2021, and operating margin of 21.5% decreased 580
basis points from 27.3% in 2021.
Fourth quarter 2022 diluted net income per Unit was $0.59 as compared to $1.27 in the fourth quarter of 2021. Full year
2022 diluted net income per Unit was $2.69 as compared to $3.88 in 2021.
Non-GAAP Earnings
This section discusses our fourth quarter and full year 2022
non-GAAP financial results, compared to the fourth quarter and full
year 2021 financial results. 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
Fourth quarter 2022 adjusted net revenues of $802 million decreased 22% from the fourth
quarter of 2021. The decrease is primarily due to lower
performance-based fees, investment advisory base fees and Bernstein
Research revenues.
Full year 2022 adjusted net revenues of $3.3 billion decreased 8% from 2021. The decrease
is primarily due to lower performance-based fees, investment
advisory base fees and Bernstein Research revenues.
Expenses
Fourth quarter 2022 adjusted operating expenses of $570 million decreased 9% from the fourth quarter
of 2021. The decrease is primarily due to lower employee
compensation and benefits expense, promotion and servicing expense
and general and administrative ("G&A") expenses, partially
offset by higher interest expense. Employee compensation and
benefits expense decreased due to lower incentive compensation,
commissions, fringes, other employment costs and base compensation.
Promotion and servicing expense decreased due to lower transfer
fees, trade execution costs and marketing expense, offset by higher
travel and entertainment. Within G&A, the decrease was driven
by a favorable foreign exchange translation impact, partially
offset by higher professional fees and technology costs.
Full year 2022 adjusted operating expenses of $2.4 billion was flat as compared to 2021. Lower
employee compensation and benefits expenses were partially offset
by higher G&A expenses, promotion and servicing expenses and
interest expense. Employee compensation and benefits expense
decreased due to lower incentive compensation, partially offset by
higher base compensation, commissions and other employment costs.
Within G&A, the increase was driven by higher technology costs,
professional fees, office-related expenses and portfolio servicing
expenses. Promotion and servicing expense increased due to higher
travel and entertainment costs and marketing expenses, partially
offset by lower trade execution costs and transfer fees.
Operating Income, Margin and Net Income Per Unit
Fourth quarter 2022 adjusted operating income of $232 million decreased 41% from $394 million in the fourth quarter of 2021.
Adjusted operating margin of 28.9% decreased 960 basis points from
38.5%.
Full year 2022 adjusted operating income of $947 million decreased 22% from $1.2 billion in 2021. Adjusted operating margin
of 28.4% decreased 520 basis points from 33.6%.
Fourth quarter 2022 adjusted diluted net income per Unit was
$0.70 as compared to $1.29 in the fourth quarter of 2021. Full year
adjusted diluted net income per Unit was $2.94 as compared to $3.89 in 2021.
Headcount
As of December 31, 2022, we had
4,436 employees, including 203 AB CarVal employees, compared to
4,118 employees as of December 31,
2021 and 4,490 as of September 30,
2022, including 196 AB CarVal employees.
Unit
Repurchases
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
(in
millions)
|
Total amount of AB
Holding Units Purchased/Retained(1)
|
2.6
|
|
2.7
|
|
5.2
|
|
5.6
|
Total Cash Paid for AB
Holding Units Purchased/Retained(1)
|
$
104.1
|
|
$
136.6
|
|
$
211.8
|
|
$
262.3
|
Open Market Purchases
of AB Holding Units Purchased(1)
|
—
|
|
0.3
|
|
2.3
|
|
2.6
|
Total Cash Paid for
Open Market Purchases of AB Holding Units(1)
|
$
—
|
|
$
14.2
|
|
$
92.7
|
|
$
117.9
|
|
(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.
|
Fourth Quarter 2022 Earnings Conference Call
Information
Management will review Fourth Quarter 2022 financial and
operating results during a conference call beginning at
8:30 a.m. (CT) on Thursday,
February 9, 2023. 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, 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 fourth quarter 2022 financial and
operating results on February 8, 2023.
A replay of the webcast will be made available beginning
approximately one hour after the conclusion of the conference
call.
Availability of 2022 Form 10-K
Unitholders may obtain a copy of our Form 10-K for the year
ended December 31, 2022, available on
February 10, 2023, in either
electronic format or hard copy on www.alliancebernstein.com:
- Download Electronic Copy: Unitholders can download an
electronic version of the report by visiting the "Investor &
Media Relations" page of our website at
www.alliancebernstein.com/investorrelations and clicking on the
"Reports & SEC Filings" section.
- Order Hard Copy Electronically or by Phone: Unitholders may
also order a hard copy of the report, which is expected to be
available for mailing in approximately eight weeks, free of charge.
Unitholders with internet access can follow the above instructions
to order a hard copy electronically. Unitholders without internet
access, or who would prefer to order by phone, can call
615-622-0000.
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, 2022,
available on February 10, 2023. Any
or all of the forward-looking statements made in this news release,
Form 10-K, 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 December 31, 2022, including
both the general partnership and limited partnership interests in
AllianceBernstein, AllianceBernstein Holding owned approximately
39.4% of AllianceBernstein and Equitable Holdings ("EQH"), directly
and through various subsidiaries, owned an approximate 61.3%
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 (Unaudited)
|
|
|
|
|
|
|
(US $
Thousands)
|
Q4
2022
|
|
Q4
2021
|
|
%
Change
|
|
|
|
|
|
|
|
|
GAAP
revenues:
|
|
|
|
|
|
|
Base fees
|
$
680,484
|
|
$
779,473
|
|
(12.7 %)
|
|
Performance
fees
|
32,732
|
|
157,164
|
|
(79.2 %)
|
|
Bernstein research
services
|
100,467
|
|
114,001
|
|
(11.9 %)
|
|
Distribution
revenues
|
137,764
|
|
178,490
|
|
(22.8 %)
|
|
Dividends and
interest
|
58,667
|
|
12,598
|
|
n/m
|
|
Investments
(losses)
|
(11,308)
|
|
(4,021)
|
|
181.2 %
|
|
Other
revenues
|
25,344
|
|
27,825
|
|
(8.9 %)
|
|
Total
revenues
|
1,024,150
|
|
1,265,530
|
|
(19.1 %)
|
|
Less: interest
expense
|
33,974
|
|
848
|
|
n/m
|
|
Total net
revenues
|
990,176
|
|
1,264,682
|
|
(21.7 %)
|
|
|
|
|
|
|
|
|
GAAP operating
expenses:
|
|
|
|
|
|
|
Employee compensation
and benefits
|
399,101
|
|
440,319
|
|
(9.4 %)
|
|
Promotion and
servicing
|
|
|
|
|
|
|
Distribution-related payments
|
142,791
|
|
190,691
|
|
(25.1 %)
|
|
Amortization of
deferred sales commissions
|
8,085
|
|
9,498
|
|
(14.9 %)
|
|
Trade execution,
marketing, T&E and other
|
52,331
|
|
56,809
|
|
(7.9 %)
|
|
General and
administrative
|
161,194
|
|
171,997
|
|
(6.3 %)
|
|
Contingent payment
arrangements
|
2,516
|
|
238
|
|
n/m
|
|
Interest on
borrowings
|
8,505
|
|
1,330
|
|
n/m
|
|
Amortization of
intangible assets
|
11,912
|
|
1,195
|
|
n/m
|
|
Total operating
expenses
|
786,435
|
|
872,077
|
|
(9.8 %)
|
|
Operating
income
|
203,741
|
|
392,605
|
|
(48.1 %)
|
|
Income taxes
|
11,030
|
|
17,474
|
|
(36.9 %)
|
|
Net income
|
192,711
|
|
375,131
|
|
(48.6 %)
|
|
Net income of
consolidated entities attributable to non-controlling
interests
|
5,574
|
|
2,904
|
|
91.9 %
|
|
Net income attributable
to AB Unitholders
|
$
187,137
|
|
$
372,227
|
|
(49.7 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AB Holding L.P. (The
Publicly-Traded Partnership)
|
|
|
|
|
|
|
SUMMARY STATEMENTS
OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $
Thousands)
|
Q4
2022
|
|
Q4
2021
|
|
%
Change
|
|
|
|
|
|
|
|
|
Equity in Net Income
Attributable to AB Unitholders
|
$
71,888
|
|
$
134,091
|
|
(46.4 %)
|
|
Income Taxes
|
8,108
|
|
8,929
|
|
(9.2 %)
|
|
Net
Income
|
63,780
|
|
125,162
|
|
(49.0 %)
|
|
Additional Equity in
Earnings of Operating Partnership (1)
|
—
|
|
3
|
|
(100.0 %)
|
|
Net Income -
Diluted
|
$
63,780
|
|
$
125,165
|
|
(49.0 %)
|
|
Diluted Net Income
per Unit
|
$
0.59
|
|
$
1.27
|
|
(53.5 %)
|
|
Distribution per
Unit
|
$
0.70
|
|
$
1.29
|
|
(45.7 %)
|
|
|
|
|
|
|
|
|
(1) To
reflect higher ownership in the Operating Partnership resulting
from application of the treasury stock method to outstanding
options.
|
|
Units
Outstanding
|
Q4
2022
|
|
Q4
2021
|
|
%
Change
|
|
AB L.P.
|
|
|
|
|
|
|
Period-end
|
285,979,913
|
|
271,453,043
|
|
5.4 %
|
|
Weighted average -
basic
|
280,672,157
|
|
270,664,117
|
|
3.7 %
|
|
Weighted average -
diluted
|
280,672,157
|
|
270,667,648
|
|
3.7 %
|
|
AB Holding
L.P.
|
|
|
|
|
|
|
Period-end
|
113,801,097
|
|
99,271,727
|
|
14.6 %
|
|
Weighted average -
basic
|
108,493,341
|
|
98,482,801
|
|
10.2 %
|
|
Weighted average -
diluted
|
108,493,341
|
|
98,486,332
|
|
10.2 %
|
|
AB (The Operating
Partnership)
|
|
|
|
|
|
|
US GAAP Consolidated
Statement of Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $
Thousands)
|
|
2022
|
|
2021
|
|
%
Change
|
GAAP
revenues:
|
|
|
|
|
|
|
Base fees
|
|
$
2,825,791
|
|
2,949,405
|
|
(4.2) %
|
Performance
fees
|
|
145,247
|
|
245,119
|
|
(40.7) %
|
Bernstein research
services
|
|
416,273
|
|
452,017
|
|
(7.9) %
|
Distribution
revenues
|
|
607,195
|
|
652,240
|
|
(6.9) %
|
Dividends and
interest
|
|
123,091
|
|
38,734
|
|
n/m
|
Investments
(losses)
|
|
(102,413)
|
|
(636)
|
|
n/m
|
Other
revenues
|
|
105,544
|
|
108,409
|
|
(2.6) %
|
Total
revenues
|
|
4,120,728
|
|
4,445,288
|
|
(7.3) %
|
Less: interest
expense
|
|
66,438
|
|
3,686
|
|
n/m
|
Total net
revenues
|
|
4,054,290
|
|
4,441,602
|
|
(8.7) %
|
|
|
|
|
|
|
|
GAAP operating
expenses:
|
|
|
|
|
|
|
Employee compensation
and benefits
|
|
1,666,636
|
|
1,716,013
|
|
(2.9) %
|
Promotion and
servicing
|
|
|
|
|
|
|
Distribution-related payments
|
|
629,572
|
|
708,117
|
|
(11.1) %
|
Amortization of deferred sales commissions
|
|
34,762
|
|
34,364
|
|
1.2 %
|
Trade
execution, marketing, T&E and other
|
|
215,556
|
|
197,486
|
|
9.2 %
|
General &
administrative
|
|
641,635
|
|
555,608
|
|
15.5 %
|
Contingent payment
arrangements
|
|
6,563
|
|
2,710
|
|
142.2 %
|
Interest on
borrowings
|
|
17,906
|
|
5,145
|
|
n/m
|
Amortization of
intangible assets
|
|
26,564
|
|
5,697
|
|
n/m
|
Total operating
expenses
|
|
3,239,194
|
|
3,225,140
|
|
0.4 %
|
|
|
|
|
|
|
|
Operating
income
|
|
815,096
|
|
1,216,462
|
|
(33.0) %
|
|
|
|
|
|
|
|
Income taxes
|
|
39,639
|
|
62,728
|
|
(36.8) %
|
|
|
|
|
|
|
|
Net income
|
|
775,457
|
|
1,153,734
|
|
(32.8) %
|
|
|
|
|
|
|
|
Net (loss) income of
consolidated entities attributable to non-controlling
interests
|
|
(56,356)
|
|
5,111
|
|
n/m
|
|
|
|
|
|
|
|
Net income attributable
to AB Unitholders
|
|
$
831,813
|
|
$
1,148,623
|
|
(27.6) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AB Holding L.P. (The
Publicly-Traded Partnership)
|
|
|
|
|
|
|
SUMMARY STATEMENTS
OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $
Thousands)
|
|
2022
|
|
2021
|
|
%
Change
|
Equity in Net Income
Attributable to AB Unitholders
|
|
$
305,504
|
|
$
416,326
|
|
(26.6) %
|
Income Taxes
|
|
31,339
|
|
30,483
|
|
2.8 %
|
Net
Income
|
|
274,165
|
|
385,843
|
|
(28.9) %
|
Additional Equity in
Earnings of Operating Partnership (1)
|
|
2
|
|
30
|
|
(93.3) %
|
Net Income -
Diluted
|
|
$
274,167
|
|
$
385,873
|
|
(28.9) %
|
Diluted Net Income
per Unit
|
|
$2.69
|
|
$3.88
|
|
(30.7) %
|
Distribution per
Unit
|
|
$2.95
|
|
$3.90
|
|
(24.4) %
|
|
|
|
|
|
|
|
(1) To
reflect higher ownership in the Operating Partnership resulting
from application of the treasury stock method to outstanding
options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
Outstanding
|
|
2022
|
|
2021
|
|
%
Change
|
AB L.P.
|
|
|
|
|
|
|
Period-end
|
|
285,979,913
|
|
271,453,043
|
|
5.4 %
|
Weighted average -
basic
|
|
273,942,916
|
|
271,729,240
|
|
0.8 %
|
Weighted average -
diluted
|
|
273,943,976
|
|
271,740,732
|
|
0.8 %
|
AB Holding
L.P.
|
|
|
|
|
|
|
Period-end
|
|
113,801,097
|
|
99,271,727
|
|
14.6 %
|
Weighted average -
basic
|
|
101,762,514
|
|
99,544,840
|
|
2.2 %
|
Weighted average -
diluted
|
|
101,763,574
|
|
99,556,332
|
|
2.2 %
|
AllianceBernstein
L.P.
|
|
|
ASSETS UNDER
MANAGEMENT | December 31, 2022
|
|
|
(US $
Billions)
|
|
|
Ending and
Average
|
Three Months
Ended
|
|
|
12/31/22
|
9/30/22
|
|
Ending Assets Under
Management
|
$646.4
|
$612.7
|
|
Average Assets Under
Management
|
$636.0
|
$653.9
|
Three-Month Changes
by Distribution Channel
|
|
|
|
|
|
|
|
|
|
Institutions
|
|
Retail
|
|
Private Wealth
Management
|
|
Total
|
|
Beginning of
Period
|
$
279.4
|
|
$
232.3
|
|
$
101.0
|
|
$
612.7
|
|
Sales/New
accounts
|
12.6
|
|
14.2
|
|
4.1
|
|
30.9
|
|
Redemption/Terminations
|
(3.5)
|
|
(15.4)
|
|
(4.3)
|
|
(23.2)
|
|
Net Cash
Flows
|
(7.4)
|
|
(2.2)
|
|
—
|
|
(9.6)
|
|
Net
Flows
|
1.7
|
|
(3.4)
|
|
(0.2)
|
|
(1.9)
|
|
Transfers
|
(0.1)
|
|
0.1
|
|
—
|
|
—
|
|
Investment
Performance
|
16.3
|
|
13.9
|
|
5.4
|
|
35.6
|
|
End of
Period
|
$
297.3
|
|
$
242.9
|
|
$
106.2
|
|
$
646.4
|
Three-Month Changes
by Investment Service
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Active
|
|
Equity
Passive (1)
|
|
Fixed
Income
Taxable
|
|
Fixed
Income
Tax-
Exempt
|
|
Fixed
Income
Passive
(1)
|
|
Alternatives/
Multi-
Asset
Solutions (2)
|
|
Total
|
|
Beginning of
Period
|
$
202.9
|
|
$
52.1
|
|
$
187.2
|
|
$
51.9
|
|
$
9.5
|
|
$
109.1
|
|
$
612.7
|
|
Sales/New
accounts
|
9.3
|
|
0.1
|
|
8.3
|
|
3.6
|
|
0.1
|
|
9.5
|
|
30.9
|
|
Redemption/Terminations
|
(9.5)
|
|
(1.5)
|
|
(6.3)
|
|
(4.5)
|
|
(0.1)
|
|
(1.3)
|
|
(23.2)
|
|
Net Cash
Flows
|
(2.4)
|
|
(0.9)
|
|
(6.0)
|
|
(0.2)
|
|
(0.3)
|
|
0.2
|
|
(9.6)
|
|
Net
Flows
|
(2.6)
|
|
(2.3)
|
|
(4.0)
|
|
(1.1)
|
|
(0.3)
|
|
8.4
|
|
(1.9)
|
|
Investment
Performance
|
17.6
|
|
4.0
|
|
7.1
|
|
1.7
|
|
0.2
|
|
5.0
|
|
35.6
|
|
End of
Period
|
$
217.9
|
|
$
53.8
|
|
$
190.3
|
|
$
52.5
|
|
$
9.4
|
|
$
122.5
|
|
$
646.4
|
Three-Month Net
Flows by Investment Service (Active versus Passive)
|
|
|
Actively
Managed
|
|
Passively
Managed (1)
|
|
Total
|
|
Equity
|
$
(2.6)
|
|
$
(2.3)
|
|
$
(4.9)
|
|
Fixed Income
|
(5.1)
|
|
(0.3)
|
|
(5.4)
|
|
Alternatives/Multi-
Asset Solutions (2)
|
7.6
|
|
0.8
|
|
8.4
|
|
Total
|
$
(0.1)
|
|
$
(1.8)
|
|
$
(1.9)
|
|
(1) Includes
index and enhanced index services.
|
(2)
Includes certain multi-asset solutions and services not included in
equity or fixed income services.
|
AllianceBernstein
L.P.
|
|
|
ASSETS UNDER
MANAGEMENT | December 31, 2022
|
|
|
(US $
Billions)
|
|
|
Ending and
Average
|
Twelve Months
Ended
|
|
|
12/31/22
|
12/31/21
|
|
Ending Assets Under
Management
|
$646.4
|
$778.6
|
|
Average Assets Under
Management
|
$686.5
|
$730.8
|
Twelve-Month Changes
by Distribution Channel
|
|
|
|
|
|
|
|
|
Institutions
|
|
Retail
|
|
Private Wealth
Management
|
|
Total
|
|
Beginning of
Period
|
$
337.1
|
|
$
319.9
|
|
$
121.6
|
|
$
778.6
|
|
Sales/New
accounts
|
32.2
|
|
65.9
|
|
17.5
|
|
115.6
|
|
Redemption/Terminations
|
(13.3)
|
|
(66.3)
|
|
(15.8)
|
|
(95.4)
|
|
Net Cash
Flows
|
(12.6)
|
|
(11.2)
|
|
—
|
|
(23.8)
|
|
Net
Flows(2)
|
6.3
|
|
(11.6)
|
|
1.7
|
|
(3.6)
|
|
Adjustments(3)
|
(0.4)
|
|
—
|
|
—
|
|
(0.4)
|
|
Acquisition(4)
|
12.2
|
|
—
|
|
—
|
|
12.2
|
|
Transfers
|
(0.1)
|
|
0.1
|
|
—
|
|
—
|
|
Investment
Performance
|
(57.8)
|
|
(65.5)
|
|
(17.1)
|
|
(140.4)
|
|
End of
Period
|
$
297.3
|
|
$
242.9
|
|
$
106.2
|
|
$
646.4
|
Twelve-Month Changes
by Investment Service
|
|
|
|
|
|
|
|
|
|
|
Equity
Active
|
|
Equity
Passive (1)
|
|
Fixed
Income
Taxable
|
|
Fixed
Income
Tax-
Exempt
|
|
Fixed
Income
Passive (1)
|
|
Alternatives/
Multi-
Asset
Solutions (5)
|
|
Total
|
|
Beginning of
Period
|
$
287.6
|
|
$
71.6
|
|
$
246.3
|
|
$
57.1
|
|
$
13.2
|
|
$
102.8
|
|
$
778.6
|
|
Sales/New
accounts
|
46.0
|
|
1.8
|
|
25.5
|
|
16.0
|
|
(0.1)
|
|
26.4
|
|
115.6
|
|
Redemption/Terminations
|
(39.0)
|
|
(3.1)
|
|
(32.6)
|
|
(15.0)
|
|
(1.5)
|
|
(4.2)
|
|
(95.4)
|
|
Net Cash
Flows
|
(9.7)
|
|
(4.0)
|
|
(10.8)
|
|
(0.4)
|
|
0.3
|
|
0.8
|
|
(23.8)
|
|
Net
Flows(2)
|
(2.7)
|
|
(5.3)
|
|
(17.9)
|
|
0.6
|
|
(1.3)
|
|
23.0
|
|
(3.6)
|
|
Adjustments(3)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.4)
|
|
(0.4)
|
|
Acquisition(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12.2
|
|
12.2
|
|
Transfers
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Investment
Performance
|
(67.0)
|
|
(12.5)
|
|
(38.1)
|
|
(5.2)
|
|
(2.5)
|
|
(15.1)
|
|
(140.4)
|
|
End of
Period
|
$
217.9
|
|
$
53.8
|
|
$
190.3
|
|
$
52.5
|
|
$
9.4
|
|
$
122.5
|
|
$
646.4
|
Twelve-Month Net
Flows by Investment Service (Active versus Passive)
|
|
|
Actively
Managed
|
|
Passively
Managed (1)
|
|
Total
|
|
Equity
|
$
(2.7)
|
|
$
(5.3)
|
|
$
(8.0)
|
|
Fixed Income
|
(17.3)
|
|
(1.3)
|
|
$
(18.6)
|
|
Alternatives/Multi-Asset Solutions
(3)
|
20.9
|
|
2.1
|
|
$
23.0
|
|
Total
|
$
0.9
|
|
$
(4.5)
|
|
$
(3.6)
|
|
(1) Includes
index and enhanced index services.
|
(2) Net
flows for our Institutions channel and fixed income-taxable
investment services include $4.5 billion of AXA
redemptions.
|
(3)
Approximately $0.4 billion of Institutional AUM was removed from
our total assets under management during the second quarter of 2022
due to a change in the fee structure.
|
(4) The
CarVal acquisition added approximately $12.2 billion of
Institutional AUM in the third quarter.
|
(5)
Includes certain multi-asset solutions and services not included in
equity or fixed income services.
|
By Client
Domicile
|
|
|
|
|
|
|
|
|
|
Institutions
|
|
Retail
|
|
Private
Wealth
|
|
Total
|
|
U.S. Clients
|
$
215.1
|
|
$
141.3
|
|
$
104.0
|
|
$
460.4
|
|
Non-U.S.
Clients
|
82.2
|
|
101.6
|
|
2.2
|
|
186.0
|
|
Total
|
$
297.3
|
|
$
242.9
|
|
$
106.2
|
|
$
646.4
|
AB
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
GAAP
FINANCIAL RESULTS TO
ADJUSTED FINANCIAL RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
(US $ Thousands,
unaudited)
|
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
3/31/2022
|
|
12/31/2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues, GAAP
basis
|
|
$
990,176
|
|
$
986,984
|
|
$
971,444
|
|
$
1,105,687
|
|
$
1,264,682
|
|
$
4,054,290
|
|
$
4,441,602
|
|
|
Exclude:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution-related
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
revenues
|
(137,764)
|
|
(147,960)
|
|
(153,130)
|
|
(168,341)
|
|
(178,490)
|
|
(607,195)
|
|
(652,240)
|
|
|
Investment
advisory
services fees
|
(13,112)
|
|
(12,385)
|
|
(14,357)
|
|
(17,285)
|
|
(21,699)
|
|
(57,139)
|
|
(90,242)
|
|
|
Pass through
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
advisory
services fees
|
(7,730)
|
|
(11,367)
|
|
(10,043)
|
|
(35,976)
|
|
(28,012)
|
|
(65,116)
|
|
(40,628)
|
|
|
Other
revenues
|
(10,055)
|
|
(10,505)
|
|
(9,436)
|
|
(8,963)
|
|
(9,091)
|
|
(38,959)
|
|
(37,209)
|
|
|
Impact of
consolidated
company-sponsored
investment funds
|
(2,512)
|
|
8,837
|
|
26,573
|
|
24,538
|
|
(3,304)
|
|
57,436
|
|
(6,933)
|
|
|
Incentive
compensation-
related items
|
(16,889)
|
|
427
|
|
5,295
|
|
4,084
|
|
(1,640)
|
|
(7,083)
|
|
(6,694)
|
|
|
Write-down of
investment
|
—
|
|
—
|
|
—
|
|
—
|
|
1,880
|
|
—
|
|
1,880
|
|
Adjusted Net
Revenues
|
|
$
802,114
|
|
$
814,031
|
|
$
816,346
|
|
$
903,744
|
|
$
1,024,326
|
|
$
3,336,234
|
|
$
3,609,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income,
GAAP basis
|
|
$
203,741
|
|
$
170,305
|
|
$
192,648
|
|
$
248,403
|
|
$
392,605
|
|
$
815,096
|
|
$
1,216,462
|
|
|
Exclude:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
(206)
|
|
(206)
|
|
(206)
|
|
(206)
|
|
(206)
|
|
(825)
|
|
(3,162)
|
|
|
Incentive
compensation-related
items
|
378
|
|
622
|
|
1,463
|
|
945
|
|
552
|
|
3,461
|
|
687
|
|
|
EQH award
compensation
|
134
|
|
133
|
|
164
|
|
175
|
|
241
|
|
606
|
|
940
|
|
|
Write-down of
investment
|
—
|
|
—
|
|
—
|
|
—
|
|
1,880
|
|
—
|
|
1,880
|
|
|
Acquisition-related
expenses
|
33,474
|
|
23,412
|
|
4,929
|
|
10,687
|
|
2,195
|
|
72,503
|
|
2,614
|
|
|
Sub-total of
non-GAAP
adjustments
|
33,780
|
|
23,961
|
|
6,350
|
|
11,601
|
|
4,662
|
|
75,745
|
|
2,959
|
|
|
Less: Net income (loss)
of
consolidated entities attributable
to non-controlling interests
|
5,574
|
|
(10,114)
|
|
(26,771)
|
|
(25,045)
|
|
2,904
|
|
(56,356)
|
|
5,111
|
|
Adjusted Operating
Income
|
|
$
231,947
|
|
$
204,380
|
|
$
225,769
|
|
$
285,049
|
|
$
394,363
|
|
$
947,197
|
|
$
1,214,310
|
|
Operating Margin,
GAAP basis
excl. non-controlling interests
|
20.0 %
|
|
18.3 %
|
|
22.6 %
|
|
24.7 %
|
|
30.8 %
|
|
21.5 %
|
|
27.3 %
|
|
Adjusted Operating
Margin
|
28.9 %
|
|
25.1 %
|
|
27.7 %
|
|
31.5 %
|
|
38.5 %
|
|
28.4 %
|
|
33.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AB Holding
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
GAAP EPU
TO ADJUSTED EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
($ Thousands except per
Unit
amounts, unaudited)
|
12/31/2022
|
|
9/30/2022
|
|
6/30/2022
|
|
3/31/2022
|
|
12/31/2021
|
|
2022
|
|
2021
|
|
Net Income -
Diluted, GAAP
basis
|
$
63,780
|
|
$
56,316
|
|
$
68,141
|
|
$
85,930
|
|
$
125,165
|
|
$
274,167
|
|
$
385,873
|
|
Impact on net income of
AB non-
GAAP adjustments
|
12,394
|
|
8,373
|
|
1,630
|
|
3,520
|
|
1,653
|
|
25,468
|
|
1,098
|
|
Adjusted Net Income
- Diluted
|
$
76,174
|
|
$
64,689
|
|
$
69,771
|
|
$
89,450
|
|
$
126,818
|
|
$
299,635
|
|
$
386,971
|
|
Diluted Net Income
per Holding
Unit, GAAP basis
|
$
0.59
|
|
$
0.56
|
|
$
0.69
|
|
$
0.87
|
|
$
1.27
|
|
$
2.69
|
|
$
3.88
|
|
Impact of AB
non-GAAP
adjustments
|
0.11
|
|
0.08
|
|
0.02
|
|
0.03
|
|
0.02
|
|
0.25
|
|
0.01
|
|
Adjusted Diluted Net
Income per
Holding Unit
|
$
0.70
|
|
$
0.64
|
|
$
0.71
|
|
$
0.90
|
|
$
1.29
|
|
$
2.94
|
|
$
3.89
|
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. Also, we adjust for certain
performance-based fees passed through to our investment advisors.
These fees do not affect operating income, 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.
Adjusted net revenues exclude investment gains and losses and
dividends and interest on employee long-term incentive
compensation-related investments. Also, we adjust for certain
acquisition related pass through performance-based fees and
performance related compensation.
During the fourth quarter of 2021, we wrote down an equity
method investment; this write down brought the investment balance
to zero.
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 compensation-related investments,
(3) the equity compensation paid by EQH to certain AB executives,
as discussed below, (4) the write-down of an investment, (5)
acquisition-related expenses and (6) 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 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 Seth P. Bernstein, our CEO, equity awards in
connection with EQH's IPO. Additionally, equity awards were granted
to Mr. Bernstein and other AB executives for their membership on
the EQH Management Committee. These individuals may receive
additional equity or cash compensation from EQH in the future
related to their service on the Management Committee. Any awards
granted to these individuals by EQH are recorded as compensation
expense in AB's consolidated statement of income. The compensation
expense associated with these awards has been excluded from our
non-GAAP measures because they are non-cash and are based upon
EQH's, and not AB's, financial performance.
The write-down of an investment during the fourth quarter of
2021 has been excluded due to its non-recurring nature and because
it's 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.
Acquisition-related expenses include professional fees and the
recording of changes in estimates to contingent payment
arrangements associated with our acquisitions. Beginning in the
first quarter of 2022, acquisition-related expenses also include
certain compensation-related expenses, amortization of intangible
assets for contracts acquired and accretion expense with respect to
contingent payment arrangements. During 2022 and 2021, these
expenses included an intangible asset impairment charge of
$5.6 million and $1.0 million, respectively, related to various
historical acquisitions. 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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SOURCE AllianceBernstein