Key Highlights

  • Adjusted EPU was $0.88, up 2.3% from $0.86; GAAP EPU was $0.79, flat with a year earlier.
  • Firmwide net inflows were $6.6 billion, against net outflows of $2.3 billion a year earlier.
  • Ending assets under management were $900.4 billion, up 4.7% year over year and down 0.6% from June.
  • Adjusted net revenues were $904.3 million, up 2.2%, with an adjusted operating margin of 33.5%.
  • The cash distribution is $0.88 per unit, payable November 19.

AllianceBernstein Earnings: Did Record Inflows Offset Margin Pressure?

AllianceBernstein Holding (NYSE:AB) reported third-quarter results on Tuesday, October 27, before the open, with adjusted EPU of $0.88 on a non-GAAP basis, up 2.3% from $0.86 a year earlier and 7.3% from $0.82 in the second quarter. GAAP EPU was $0.79, flat with the prior year. The screen listed a $0.85 estimate, a 2.96% surprise as screened.

Management described the $6.6 billion of firmwide net inflows as the strongest quarterly result in four years, against $0.8 billion in the second quarter. The margin, however, narrowed: the adjusted operating margin was 33.5% against 34.2% a year earlier, and the GAAP margin fell to 21.9% from 24.3%.

Flows and Mix: Where Did the $6.6 Billion Come From?

Institutional net inflows were $15.7 billion on gross sales of $21.5 billion. Retail had net outflows of $8.4 billion, mainly active equity redemptions, and Private Wealth had outflows of $0.7 billion.

By service, alternatives and multi-asset added $15.0 billion, tax-exempt fixed income added $1.6 billion and passive equity added $2.5 billion, while active equity lost $12.5 billion. Private markets assets under management were $105 billion, up 33% year over year, a growth area for recurring fee income.

The awarded but unfunded institutional pipeline was $13.1 billion, down from $25.8 billion in the second quarter, and excludes a $100 billion mandate from a life insurer.

Revenue and Costs: Why Did GAAP Operating Income Fall 12.0%?

Adjusted net revenues were $904.3 million, up 2.2%, and GAAP net revenues were $1.23 billion, up 7.8%. Ending assets under management were $900.4 billion, up 4.7% year over year, and average assets were $908.3 billion, up 8.0%.

GAAP operating income fell 12.0% to $249.5 million as GAAP expenses rose 14.3% to $976.0 million, with compensation and benefits up 25.2% to $564.2 million. Adjusted operating income was flat at $302.7 million, and adjusted expenses rose 3% to $601 million.

AB Holding GAAP net income was $73.1 million, down 0.8%. The firm repurchased 1.1 million units for $38.4 million, and headcount was 4,416. Market returns were mixed, with the S&P 500 up 2.3% and the US aggregate bond index down 3.5%, which pressured fixed income valuations.

Distribution and Leadership: What Should Be Watched Next?

The $0.88 cash distribution is payable on November 19 to holders of record on November 6, up from $0.82 last quarter. AB Holding owns about 31.1% of the operating partnership, and its parent holds about 68.3% economically. The company named a new president and chief executive on September 25.

Investors will watch conversion of the $13.1 billion pipeline, the October assets update, retail redemption trends in active equity, private markets growth and whether adjusted margins recover from 33.5%.