AllianceBernstein Holding L.P. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. AB Holding is a publicly traded partnership whose principal source of income and cash flow is its investment in AllianceBernstein L.P. (AB). Accordingly, the figures below are for AB Holding unless noted otherwise.
Financial results and position
| Metric | Q1 2022 | Q1 2021 / comparator |
|---|---|---|
| Equity in AB net income attributable to AB unitholders | $94.4 million | $88.9 million; up 6.1% |
| AB Holding net income | $85.9 million | $81.1 million; up 6.0% |
| Diluted net income per unit | $0.87 | $0.81; up 7.4% |
| Operating cash flow | $127.1 million | $104.1 million |
| Cash distributions received from AB | $136.7 million | $106.1 million |
| Cash distributions paid to unitholders | $127.7 million | $98.0 million |
| Total assets / investment in AB, March 31 | $1,588.2 million | $1,623.8 million at Dec. 31, 2021 |
| Total liabilities, March 31 | $1.0 million | $2.1 million at Dec. 31, 2021 |
| Partners’ capital, March 31 | $1,587.2 million | $1,621.6 million at Dec. 31, 2021 |
Net cash used in financing was $127.1 million; investing activities used no cash. Cash and cash equivalents were zero at quarter-end. The filing reports no debt balance for AB Holding. AB Holding’s standalone statements do not present conventional revenue, operating profit, or operating margin; the filing refers readers to AB’s separate Form 10-Q for AB’s operating results and margins.
Changes and distributions
- Higher AB income drove the increase in AB Holding net income, partly offset by a slightly lower average ownership interest in AB (36.2% versus 36.4%).
- Operating cash flow increased by $23.0 million, primarily because distributions received from AB rose by $30.6 million. Financing cash use increased mainly because unitholder distributions were higher.
- The distribution for Q1 was $0.90 per unit, compared with $0.81 in Q1 2021. On April 29, 2022, the general partner declared $0.90 per unit, payable May 26 to holders of record May 9. Distributions reflect AB non-GAAP adjustments.
- AB Holding’s GAAP diluted net income per unit was $0.87; adjusted diluted net income per unit, reflecting AB’s non-GAAP adjustments, was $0.90. These adjusted measures are not GAAP and are not substitutes for cash-flow measures.
Outlook, risks, and unusual items
- AB Holding expects cash flow from its investment in AB to provide resources for its obligations, but its distributions and liquidity depend on AB’s operating cash flow and market conditions. Management identifies no separate numerical earnings guidance.
- On March 17, AB Holding and AB agreed to acquire CarVal Investors. The approximately $750 million upfront consideration is to include AB Holding units and cash for certain business expenses and obligations; additional units may be issued based on performance hurdles over 2022–2027. The transaction was expected to close in Q3 2022, subject to closing conditions, including regulatory and client approvals. Integration, retention, execution, and transaction-benefit risks are noted.
- AB may incur losses from litigation or regulatory matters, but management said it could not estimate possible losses. Management did not expect pending matters, individually or together, to materially adversely affect results, financial condition, or liquidity; outcomes remain uncertain.
- Key forward-looking risks include financial-market performance, investment results, client assets, competition, regulation and taxes, COVID-19 effects, and acquisition execution. The filing reports no material change in market-risk disclosures or risk factors from the 2021 Form 10-K.
- AB Holding is a partnership for federal tax purposes. Losing that status could materially reduce net income and distributions. Its Q1 effective tax rate was 8.9%, versus 8.8% a year earlier.
- AB retained 296,193 units from employees for statutory tax withholding; no open-market repurchase plan was adopted in Q1. The filing reports effective disclosure controls and no material Q1 change in internal control over financial reporting.
Important facts for investors to verify
- Review AB’s accompanying Form 10-Q (Exhibit 99.1) for underlying revenues, operating margins, assets under management, and business trends; AB Holding’s results principally reflect its ownership share of AB.
- Track AB’s distributions to AB Holding and the resulting per-unit cash distribution, which depends on available cash flow and non-GAAP adjustments.
- Check whether the CarVal acquisition closed as expected, its final consideration and unit dilution, and whether performance-based payments or anticipated benefits materialize.
- Monitor litigation and regulatory developments, market-sensitive client assets and investment performance, and any change in AB Holding’s partnership tax status.