AllianceBernstein L.P.(AB) - 2025 Q2 - Quarterly Results

Financial and Operating Highlights CEO's Market and Performance Overview AllianceBernstein achieved a record AUM of $829 billion amid improved investor sentiment, though firm-wide net flows turned negative while the institutional pipeline grew significantly - Assets Under Management (AUM) reached a record high of $829 billion, with private wealth comprising 17% of the total[2] - Firm-wide net flows turned negative, with active net outflows of $4.8 billion, breaking the positive momentum of recent quarters, though flows improved from April to June[2] - The institutional pipeline of awarded but unfunded mandates grew to nearly $22 billion, the highest in almost three years, indicating strengthening client relationships[3] - A cash distribution of $0.76 per Unit was declared, payable on August 14, 2025[3] Key Financial and Operating Metrics The company reported mixed Q2 2025 results with YoY GAAP operating income growth but a decline in EPU, while adjusted figures showed modest gains and AUM reached a record high Q2 2025 Financial Performance Summary (US $ Thousands except per Unit amounts) | Metric | 2Q 2025 | 2Q 2024 | % Change (YoY) | 1Q 2025 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | U.S. GAAP Measures | | | | | | | Net revenues | $1,088,907 | $1,027,943 | 5.9% | $1,080,607 | 0.8% | | Operating income | $222,094 | $199,289 | 11.4% | $236,369 | (6.0%) | | Operating margin | 20.7% | 19.0% | 170 bps | 21.8% | (110) bps | | AB Holding EPU | $0.64 | $0.99 | (35.4)% | $0.67 | (4.5%) | | Adjusted Measures | | | | | | | Net revenues | $844,434 | $825,833 | 2.3% | $838,214 | 0.7% | | Operating income | $272,964 | $254,186 | 7.4% | $282,748 | (3.5%) | | Operating margin | 32.3% | 30.8% | 150 bps | 33.7% | (140) bps | | AB Holding EPU | $0.76 | $0.71 | 7.0% | $0.80 | (5.0%) | | AUM (US $ Billions) | | | | | | | Ending AUM | $829.1 | $769.5 | 7.7% | $784.5 | 5.7% | Market Performance Global equity and fixed income markets posted positive returns in the second quarter of 2025, with equity markets showing particularly strong performance Q2 2025 Market Index Returns | Index | 2Q 2025 Return | | :--- | :--- | | S&P 500 Total Return | 10.9% | | MSCI EAFE Total Return | 12.1% | | Bloomberg Barclays US Aggregate Return | 1.2% | | Bloomberg Barclays Global High Yield Index - Hedged | 3.4% | Assets Under Management (AUM) AUM Overview and Net Flows Total assets under management reached $829.1 billion, an 8% year-over-year increase, though the quarter experienced total net outflows of $6.7 billion - Total AUM increased to $829.1 billion, up 6% from March 31, 2025, and up 8% from June 30, 2024[6] - The second quarter saw total net outflows of $6.7 billion, compared to net inflows of $2.4 billion in Q1 2025 and $0.9 billion in Q2 2024[7] AUM by Distribution Channel All three distribution channels experienced net outflows in Q2 2025, with the Retail channel seeing the largest outflow at $4.8 billion, ending a seven-quarter streak of inflows Net Flows by Distribution Channel (Three Months Ended 6/30/2025) | Channel | Net Flows ($ Billions) | | :--- | :--- | | Institutional | ($1.5) | | Retail | ($4.8) | | Private Wealth | ($0.4) | | Total | ($6.7) | - Institutional channel net outflows of $1.5B compared to $0.7B inflows in Q1 2025, while the pipeline of unfunded mandates increased to $21.9B[8] - Retail channel net outflows of $4.8B compared to $0.9B inflows in Q1 2025, halting seven consecutive quarters of inflows[3][9] - Private Wealth channel net outflows of $0.4B compared to $0.8B inflows in Q1 2025, impacted by seasonal tax-related factors[3][9] AUM by Investment Service Net outflows were concentrated in Equity services, while Alternatives/Multi-Asset Solutions was a bright spot, attracting $1.6 billion in net inflows Net Flows by Investment Service (Three Months Ended 6/30/2025) | Investment Service | Net Flows ($ Billions) | | :--- | :--- | | Equity - Active | ($6.0) | | Equity - Passive | ($1.9) | | Fixed Income - Taxable | ($1.5) | | Fixed Income - Tax Exempt | $1.2 | | Fixed Income - Passive | ($0.1) | | Alternatives/Multi-Asset Solutions | $1.6 | | Total | ($6.7) | - Total actively managed strategies saw net outflows of $4.8 billion, while passively managed strategies had net outflows of $1.9 billion[44] AUM by Client Domicile As of June 30, 2025, approximately 73% of assets under management were from clients domiciled in the United States, with 27% from non-U.S. clients AUM by Client Domicile as of 6/30/2025 ($ Billions) | Domicile | Institutional | Retail | Private Wealth | Total | | :--- | :--- | :--- | :--- | :--- | | U.S. Clients | $262.4 | $203.7 | $141.4 | $607.5 | | Non-U.S. Clients | $77.6 | $141.0 | $3.0 | $221.6 | | Total | $340.0 | $344.7 | $144.4 | $829.1 | Financial Results US GAAP Financial Results Q2 2025 GAAP net revenues increased 6% year-over-year to $1.1 billion and operating income rose 11%, but net income per unit fell to $0.64 - Q2 net revenues increased 6% YoY to $1.1 billion, mainly due to higher investment advisory base fees and lower investment losses[14] - Q2 operating expenses increased 5% YoY to $867 million, driven by higher promotion, servicing, compensation, and G&A expenses, including a $14.3 million AB Funds reimbursement[16] - Q2 operating income rose 11% YoY to $222 million, with the operating margin expanding by 170 basis points to 20.7%[18] - Q2 net income per Unit was $0.64, a decrease from $0.99 in Q2 2024 and $0.67 in Q1 2025[19] Non-GAAP Financial Results Adjusted Q2 2025 results showed a 7% year-over-year increase in both operating income and EPU, with a margin expansion to 32.3% - Q2 adjusted net revenues increased 2% YoY to $844 million, driven by higher investment advisory base fees and investment gains[22] - Q2 adjusted operating expenses were flat YoY at $571 million, as lower G&A was offset by higher compensation and promotion expenses[24] - Q2 adjusted operating income increased 7% YoY to $273 million, with the adjusted operating margin expanding 150 basis points to 32.3%[26] - Q2 adjusted net income per Unit was $0.76, up from $0.71 in Q2 2024 but down from $0.80 in Q1 2025[27] Headcount and Unit Repurchases The company's headcount increased slightly to 4,380 employees, and AB repurchased 0.4 million Holding Units for $13.2 million during the quarter - As of June 30, 2025, employee headcount was 4,380, an increase from 4,264 a year prior and 4,369 in the previous quarter[28] Unit Repurchases (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total AB Holding Units Purchased (millions) | 0.4 | 0.9 | | Total Cash Paid for Units Purchased ($ millions) | $13.2 | $29.0 | Detailed Financial Statements US GAAP Consolidated Statement of Income (Operating Partnership) The Operating Partnership's Q2 2025 GAAP operating income was $222.1 million, with net income attributable to AB Unitholders at $210.5 million Q2 2025 GAAP Statement of Income Highlights (US $ Thousands) | Line Item | 2Q 2025 | 2Q 2024 | % Change | | :--- | :--- | :--- | :--- | | Base fees | $805,319 | $774,017 | 4.0% | | Total net revenues | $1,088,907 | $1,027,943 | 5.9% | | Total operating expenses | $866,813 | $828,654 | 4.6% | | Operating income | $222,094 | $199,289 | 11.4% | | Net income attributable to AB Unitholders | $210,467 | $309,572 | (32.0)% | AB Holding L.P. Summary Statement of Income (Publicly-Traded Partnership) The publicly-traded partnership reported Q2 2025 net income of $70.2 million, or $0.64 per unit, a 35.4% decrease in EPU from Q2 2024 Q2 2025 AB Holding L.P. Income Summary (US $ Thousands except per Unit) | Line Item | 2Q 2025 | 2Q 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $70,248 | $113,523 | (38.1)% | | Net Income per Unit | $0.64 | $0.99 | (35.4)% | | Distribution per Unit | $0.76 | $0.71 | 7.0% | Reconciliation of GAAP to Non-GAAP Measures Explanation of Non-GAAP Measures Management uses non-GAAP measures to provide a clearer view of core operating performance by excluding certain non-recurring or non-core items - Management believes non-GAAP measures present a clearer picture of operating performance by removing distortions from items like incentive compensation adjustments and acquisition-related expenses[11] - Adjusted Net Revenues are calculated by excluding distribution revenues and other pass-through costs to reflect the nature of these payments to third parties[48] - Adjusted Operating Income excludes various items such as real estate charges, acquisition-related expenses, and interest on borrowings to better reflect core business performance[53] Reconciliation Summary Q2 2025 GAAP operating income of $222.1 million was adjusted by a net $50.9 million to arrive at an adjusted operating income of $273.0 million Q2 2025 GAAP to Adjusted Reconciliation Summary (US $ Thousands except per Unit) | Metric | GAAP Basis | Total Adjustments | Adjusted Basis | | :--- | :--- | :--- | :--- | | Net Revenues | $1,088,907 | ($244,473) | $844,434 | | Operating Income | $222,094 | $50,870 | $272,964 | | AB Holding Net Income | $70,248 | $13,630 | $83,878 | | AB Holding EPU | $0.64 | $0.12 | $0.76 | Notes on Adjustments Significant adjustments include excluding acquisition-related expenses, a $14.3 million fund reimbursement, and income from non-core equity method investments - Acquisition-related expenses, including professional fees, accretion expense, and amortization of intangibles, are excluded as they are not considered part of core operating results[59] - A $14.3 million reimbursement to AB mutual funds for a third-party service provider's billing error was excluded from adjusted operating income due to its non-core nature[61] - Income or loss from equity method investments, including joint ventures with Societe Generale, is excluded from adjusted results as this activity is not considered part of core business operations[52][60] Other Information Conference Call Information Management will host a conference call to discuss Q2 2025 results on Thursday, July 24, 2025, at 9:00 a.m. (CST) - The earnings conference call is scheduled for Thursday, July 24, 2025, at 9:00 a.m. (CST)[30] - Participants can join via webcast at the AB Investor Relations website or by dialing (888) 440-3310 in the U.S. (ID 6072615)[31] About AllianceBernstein & Forward-Looking Statements AllianceBernstein is a global investment firm in which Equitable Holdings holds an approximate 68.6% economic interest as of June 30, 2025 - The report contains forward-looking statements subject to risks and uncertainties as detailed in the company's Form 10-K and 10-Q filings[34] - As of June 30, 2025, Equitable Holdings (EQH) owned an approximate 68.6% economic interest in AllianceBernstein[37] - A qualified tax notice states that 100% of AB Holding's distributions to foreign investors are attributable to income effectively connected with a U.S. trade or business and are subject to withholding[35]