Business context and reporting period
AllianceBernstein Holding L.P. (AB Holding) filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. AB Holding’s principal source of income and cash flow is its investment in AllianceBernstein L.P. (AB), an investment manager. AB Holding accounts for that investment using the equity method; its results therefore primarily reflect its share of AB’s income and distributions.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Equity in AB net income | $97.4 million | $63.2 million | $186.3 million | $133.1 million |
| AB Holding net income | $90.9 million | $56.9 million | $172.0 million | $119.2 million |
| Diluted net income per unit | $0.91 | $0.59 | $1.72 | $1.23 |
| Distribution per unit | $0.91 | $0.61 | $1.72 | $1.25 |
For the six months, operating cash flow was $178.9 million, versus $144.6 million a year earlier, mainly reflecting $34.0 million more cash distributions received from AB. Financing cash outflow was $175.5 million, including $179.3 million of distributions to unitholders; investing cash outflow was $3.4 million. AB Holding reported no cash or cash equivalents at either period end.
At June 30, 2021, total assets were $1.605 billion, including a $1.605 billion investment in AB. Total liabilities were $0.8 million; the presented financial condition statement reports no debt. Partners’ capital was $1.604 billion. AB Holding’s reported statements do not provide revenue or operating-margin measures; the filing directs readers to AB’s separate financial statements and MD&A for operating detail.
Changes versus prior comparable periods
Q2 net income increased 59.7% and diluted earnings per unit increased 54.2% year over year. For the first six months, net income rose 44.3% and diluted earnings per unit rose 39.8%. The filing attributes the income increases to higher AB net income and a slightly higher average ownership interest in AB. Distributions per unit also increased. AB Holding’s effective tax rate declined to 6.7% from 9.9% for Q2 and to 7.7% from 10.5% for the six-month period.
Outlook, risks and notable items
The general partner declared a $0.91-per-unit distribution on July 29, 2021, payable August 19 to holders of record August 9. AB Holding is generally required to distribute available cash flow. Management believes cash flow from its AB investment will meet its obligations, but this depends on AB’s distributions and, in turn, AB’s operating cash flow and market conditions.
AB reported various legal and regulatory matters for which losses are reasonably possible, but management could not estimate losses. Management did not expect pending matters individually or collectively to have a material adverse effect, while cautioning that outcomes remain uncertain. AB Holding’s grandfathered publicly traded partnership tax status is important: losing it could subject the partnership to corporate income tax and materially reduce net income and distributions. Forward-looking risks include financial-market performance, investment results, client assets, competition, regulation and tax changes, and potential COVID-19-related economic disruption. No material changes to previously disclosed risk factors were reported.
AB repurchased 0.9 million AB Holding units during Q2 for approximately $38.3 million, including open-market purchases and employee tax-withholding purchases. The Q2 repurchase plan expired July 28, 2021. Disclosure controls were concluded effective, with no material Q2 change in internal control reported.
Key facts for investors to verify
- Review AB’s accompanying Form 10-Q (Exhibit 99.1) for underlying revenue, margins, assets under management, operating performance and detailed risk disclosures; those figures are not included in this supplied filing text.
- Assess how AB’s future earnings and cash distributions support AB Holding’s income, liquidity and unitholder distributions.
- Monitor the uncertain legal and regulatory matters and the potential consequences of any change to AB Holding’s partnership tax status.
- Check subsequent distribution declarations and any further unit repurchase activity.