AllianceBernstein Holding L.P. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. AB Holding is a publicly traded partnership whose principal income and cash flow come from its investment in AllianceBernstein L.P. (AB); it accounts for that investment using the equity method. Accordingly, the figures below describe AB Holding unless otherwise noted.
Financial performance and position
- Income: Equity in AB net income attributable to AB unitholders was $88.9 million, up 27.2% from $69.9 million. After income taxes of $7.8 million, AB Holding net income was $81.1 million, up 30.2% from $62.3 million. Diluted net income per unit was $0.81 versus $0.63.
- Revenue and margins: AB Holding’s statements report equity-method income rather than operating revenue or operating margin. AB qualifying revenues used in AB Holding’s tax calculation were $706.4 million, up 0.6%; this is not presented as AB Holding revenue. AB Holding’s effective tax rate was 8.8%, compared with 10.9%.
- Cash flow and distributions: Operating cash flow was $104.1 million versus $83.0 million, primarily reflecting a $14.5 million increase in cash distributions received from AB. Investing cash use was $1.9 million; financing cash use was $102.2 million, including $98.0 million of distributions to unitholders. Cash and cash equivalents were zero at quarter-end. A $0.81-per-unit distribution for the quarter was declared April 29, payable May 27, 2021 to holders of record May 10.
- Balance sheet and debt: Investment in AB was $1.633 billion, versus $1.606 billion at year-end 2020. Total assets were $1.633 billion, liabilities $7.7 million, and partners’ capital $1.625 billion. The filing’s AB Holding balance sheet shows no debt balance; it does not provide a separate debt discussion for AB here.
Changes and notable items
- AB Holding’s net income rose primarily because AB’s net income attributable to its unitholders increased. AB Holding’s weighted-average equity ownership interest in AB was 36.4%, compared with 36.0% a year earlier.
- Cash distributions to unitholders increased to $98.0 million from $83.7 million. Quarter-end units outstanding were 100.5 million, versus 98.3 million at December 31, 2020.
- AB awarded 3.4 million restricted AB Holding units in Q1 2021, compared with 0.1 million a year earlier. AB purchased approximately 1.0 million AB Holding units for $37.4 million, including 0.6 million open-market purchases; the Q1 repurchase plan expired April 28.
Outlook, risks and contingencies
- Management expects AB Holding’s cash flow from its investment in AB to provide resources for its obligations, but that cash flow depends on AB’s operating performance and distributions, which are exposed to capital-market and other factors. No specific earnings or revenue guidance is provided.
- AB Holding generally distributes available cash flow to unitholders. Management said it expects the calculation to continue to be based on adjusted diluted net income per unit, subject to possible changes in adjustments with Board concurrence.
- AB is involved in regulatory, administrative and litigation matters. Losses are reasonably possible, but management cannot estimate them; management does not currently expect pending matters individually or in aggregate to materially harm results, financial condition or liquidity, while noting uncertainty.
- Risks highlighted include market and investment performance, economic and industry conditions, competition, regulation and tax changes, litigation, incentive-compensation costs, relocation execution, and potential continuing effects of COVID-19. Loss of AB Holding’s grandfathered publicly traded partnership tax status could materially reduce net income and distributions.
- Management reported effective disclosure controls, no material Q1 change in internal control over financial reporting, and no material change in risk factors from the 2020 Form 10-K.
Investor verification points
- Review AB’s accompanying Form 10-Q (Exhibit 99.1) for underlying operating revenue, margins, assets under management, debt, and detailed liquidity information; those figures are not fully presented in this AB Holding filing.
- Confirm the declared $0.81 distribution’s payment and how future available-cash distributions are determined.
- Monitor AB’s cash generation and distributions to AB Holding, the outcome of legal and regulatory matters, and the partnership’s continued qualification for its grandfathered tax treatment.