"Our globally diversified platform continued to drive balanced and consistent organic growth, in a dynamic market environment," said
(US $ Thousands except per Unit amounts) |
1Q 2021 |
1Q 2020 |
% Change |
4Q 2020 |
% Change |
||||||||||||
|
|||||||||||||||||
Net revenues |
$ |
1,007,266 |
$ |
874,156 |
15.2 |
% |
$ |
1,062,892 |
(5.2) |
% |
|||||||
Operating income |
$ |
260,584 |
$ |
178,223 |
46.2 |
% |
$ |
302,420 |
(13.8) |
% |
|||||||
Operating margin |
25.9 |
% |
23.3 |
% |
260 bps |
28.4 |
% |
(250 bps) |
|||||||||
AB Holding Diluted EPU |
$ |
0.81 |
$ |
0.63 |
28.6 |
% |
$ |
0.97 |
(16.5) |
% |
|||||||
Adjusted Financial Measures (1) |
|||||||||||||||||
Net revenues |
$ |
819,978 |
$ |
743,803 |
10.2 |
% |
$ |
879,801 |
(6.8) |
% |
|||||||
Operating income |
$ |
260,061 |
$ |
205,590 |
26.5 |
% |
$ |
301,170 |
(13.6) |
% |
|||||||
Operating margin |
31.7 |
% |
27.6 |
% |
410 bps |
34.2 |
% |
(250 bps) |
|||||||||
AB Holding Diluted EPU |
$ |
0.81 |
$ |
0.64 |
26.6 |
% |
$ |
0.97 |
(16.5) |
% |
|||||||
|
$ |
0.81 |
$ |
0.64 |
26.6 |
% |
$ |
0.97 |
(16.5) |
% |
|||||||
(US $ Billions) |
|||||||||||||||||
Assets Under Management ("AUM") |
|||||||||||||||||
Ending AUM |
$ |
697.2 |
$ |
541.8 |
28.7 |
% |
$ |
685.9 |
1.6 |
% |
|||||||
Average AUM |
$ |
688.5 |
$ |
602.0 |
14.4 |
% |
$ |
651.7 |
5.6 |
% |
(1) The adjusted financial measures represent non-GAAP financial measures. See page 11 for reconciliations of GAAP Financial Results to Adjusted Financial Results and pages 12-13 for notes describing the adjustments. |
Bernstein continued, "Retail channel gross sales were the second strongest ever, with net inflows driven by broad-based 17% organic growth in active equity services, positive for the 16th straight quarter, and 18% organic growth in municipals. Positive net flows in Institutional were led by taxable fixed income, while our institutional pipeline of
Bernstein concluded, "We are encouraged by broad-based interest in our differentiated ESG, alternative, and active offerings, the result of investments in our people, technology and distribution capabilities. We are executing on a diverse and robust pipeline of innovative new product offerings in 2021. While the market environment remains robust, reflecting expectations of a rebounding global economy driven by outsized fiscal stimulus, accommodative monetary policy and wider dissemination of COVID-19 vaccines, we recognize that market conditions may change. Our teams continue to position portfolios for the long-term, and are fully invested in seeking optimal client outcomes."
The firm's cash distribution per Unit of
Market Performance
S&P 500 Total Return |
6.2 |
% |
MSCI EAFE Total Return |
3.6 |
|
Bloomberg Barclays US Aggregate Return |
(3.4) |
|
Bloomberg Barclays Global Aggregate ex US Index Return |
(5.3) |
|
Bloomberg Barclays Global High Yield Index |
(1.0) |
|
Bloomberg Barclays |
0.9 |
Assets Under Management
($ Billions)
Total assets under management as of
Institutional |
Retail |
|
Total |
|||||||||
Assets Under Management |
|
|
|
|
||||||||
Net Flows for Three Months Ended 3/31/2021: |
||||||||||||
Active |
|
|
|
|
||||||||
Passive |
(1.6) |
(0.4) |
0.7 |
(1.3) |
||||||||
Total |
|
|
|
|
||||||||
Total net inflows were
1Q 2021 |
1Q 2020 |
4Q 2020 |
|||
(in billions) |
|||||
AXA redemptions |
$— |
|
|
||
Net Inflows (Outflows) excluding AXA redemptions |
|
|
|
Institutional channel first quarter net inflows of
Retail channel first quarter net inflows of
Private Wealth channel first quarter net inflows of
Our ending AUM at
First Quarter Financial Results
We are presenting both earnings information derived in accordance with accounting principles generally accepted in
US GAAP Earnings
Revenues
First quarter net revenues of
Sequentially, net revenues of
First quarter
Expenses
First quarter operating expenses of
Sequentially, operating expenses decreased 2% from
Operating Income, Margin and Net Income Per Unit
First quarter operating income of
Sequentially, operating income decreased 14% from
First quarter diluted net income per Unit was
Non-GAAP Earnings
This section discusses our first quarter 2021 non-GAAP financial results, compared to the first quarter of 2020 and the fourth quarter of 2020. The phrases "adjusted net revenues", "adjusted operating expenses", "adjusted operating income", "adjusted operating margin" and "adjusted diluted net income per Unit" are used in the following earnings discussion to identify non-GAAP information.
Revenues
First quarter adjusted net revenues of
Sequentially, adjusted net revenues decreased 7% from
Expenses
First quarter adjusted operating expenses of
Sequentially, adjusted operating expenses decreased 3% from
Operating Income, Margin and Net Income Per Unit
First quarter adjusted operating income of
Sequentially, adjusted operating income of
First quarter adjusted diluted net income per Unit was
Headcount
As of
Unit Repurchases
Three Months Ended |
||||||||
2021 |
2020 |
|||||||
(in millions) |
||||||||
Total amount of AB Holding Units Purchased (1) |
1.0 |
0.9 |
||||||
Total Cash Paid for AB Holding Units Purchased (1) |
$ |
37.4 |
$ |
19.8 |
||||
Open Market Purchases of AB Holding Units Purchased (2) |
0.6 |
0.8 |
||||||
Total Cash Paid for Open Market Purchases of AB Holding Units (2) |
$ |
24.2 |
$ |
17.3 |
(1) |
Purchased on a trade date basis. |
(2) |
The remainder related to purchases of AB Holding Units from employees to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards. |
First Quarter 2021 Earnings Conference Call Information
Management will review First Quarter 2021 financial and operating results during a conference call beginning at
Parties may access the conference call by either webcast or telephone:
- To listen by webcast, please visit AB's Investor Relations website at http://alliancebernstein.com/investorrelations at least 15 minutes prior to the call to download and install any necessary audio software.
- To listen by telephone, please dial (833) 495-0952 in the
U.S. or (409) 216-0498 outside theU.S. 10 minutes before the scheduled start time. The conference ID# is 7979259.
The presentation management will review during the conference call will be available on AB's Investor Relations website shortly after the release of First Quarter 2021 financial and operating results on April 29, 2021.
A replay of the webcast will be made available beginning approximately one hour after the conclusion of the conference call and will be available on AB's website for one week. An audio replay of the conference call will also be available for one week. To access the audio replay, please call (855) 859-2056 in the US, or (404) 537-3406 outside the US, and provide the conference ID #: 7979259.
Cautions Regarding Forward-Looking Statements
Certain statements provided by management in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions, and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. AB cautions readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made; AB undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see "Risk Factors" and "Cautions Regarding Forward-Looking Statements" in AB's Form 10-K for the year ended
The forward-looking statements referred to in the preceding paragraph include statements regarding:
- The pipeline of new institutional mandates not yet funded: Before they are funded, institutional mandates do not represent legally binding commitments to fund and, accordingly, the possibility exists that not all mandates will be funded in the amounts and at the times currently anticipated, or that mandates ultimately will not be funded.
- The possibility that AB will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of
AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.
Qualified Tax Notice
This announcement is intended to be a qualified notice under Treasury Regulation §1.1446-4(b)(4). Please note that 100% of
About
As of
Additional information about
AB ( |
|||||||||||||||||
US GAAP Consolidated Statement of Income |
|||||||||||||||||
(US $ Thousands) |
1Q 2021 |
1Q 2020 |
% Change |
4Q 2020 |
% Change |
||||||||||||
GAAP revenues: |
|||||||||||||||||
Base fees |
$ |
687,691 |
$ |
613,587 |
12.1 |
% |
$ |
656,334 |
4.8 |
% |
|||||||
Performance fees |
15,775 |
8,138 |
93.8 |
108,635 |
(85.5) |
||||||||||||
Bernstein research services |
119,021 |
129,223 |
(7.9) |
118,398 |
0.5 |
||||||||||||
Distribution revenues |
147,600 |
130,857 |
12.8 |
143,131 |
3.1 |
||||||||||||
Dividends and interest |
8,684 |
20,465 |
(57.6) |
8,696 |
(0.1) |
||||||||||||
Investments gains (losses) |
1,928 |
(44,306) |
n/m |
2,610 |
(26.1) |
||||||||||||
Other revenues |
27,711 |
25,511 |
8.6 |
26,517 |
4.5 |
||||||||||||
Total revenues |
1,008,410 |
883,475 |
14.1 |
1,064,321 |
(5.3) |
||||||||||||
Less: interest expense |
1,144 |
9,319 |
(87.7) |
1,429 |
(19.9) |
||||||||||||
Total net revenues |
1,007,266 |
874,156 |
15.2 |
1,062,892 |
(5.2) |
||||||||||||
GAAP operating expenses: |
|||||||||||||||||
Employee compensation and benefits |
406,059 |
362,272 |
12.1 |
424,468 |
(4.3) |
||||||||||||
Promotion and servicing |
|||||||||||||||||
Distribution-related payments |
162,254 |
140,145 |
15.8 |
155,080 |
4.6 |
||||||||||||
Amortization of deferred sales commissions |
7,899 |
5,526 |
42.9 |
7,773 |
1.6 |
||||||||||||
Trade execution, marketing, T&E and other |
46,678 |
55,610 |
(16.1) |
48,669 |
(4.1) |
||||||||||||
General & administrative |
120,223 |
122,267 |
(1.7) |
122,533 |
(1.9) |
||||||||||||
Contingent payment arrangements |
796 |
793 |
0.4 |
(558) |
n/m |
||||||||||||
Interest on borrowings |
1,294 |
2,834 |
(54.3) |
1,177 |
9.9 |
||||||||||||
Amortization of intangible assets |
1,479 |
6,486 |
(77.2) |
1,330 |
11.2 |
||||||||||||
Total operating expenses |
746,682 |
695,933 |
7.3 |
760,472 |
(1.8) |
||||||||||||
Operating income |
260,584 |
178,223 |
46.2 |
302,420 |
(13.8) |
||||||||||||
Income taxes |
16,745 |
9,474 |
76.7 |
15,704 |
6.6 |
||||||||||||
Net income |
243,839 |
168,749 |
44.5 |
286,716 |
(15.0) |
||||||||||||
Net (loss) income of consolidated entities attributable to non-controlling interests |
(292) |
(25,571) |
(98.9) |
381 |
n/m |
||||||||||||
Net income attributable to AB Unitholders |
$ |
244,131 |
$ |
194,320 |
25.6 |
$ |
286,335 |
(14.7) |
|
|||||||||||||||||
SUMMARY STATEMENTS OF INCOME |
|||||||||||||||||
(US $ Thousands) |
1Q 2021 |
1Q 2020 |
% Change |
4Q 2020 |
% Change |
||||||||||||
Equity in Net Income Attributable to AB Unitholders |
$ |
88,907 |
$ |
69,914 |
27.2 |
% |
$ |
101,415 |
(12.3) |
% |
|||||||
Income Taxes |
7,820 |
7,655 |
2.2 |
8,219 |
(4.9) |
||||||||||||
Net Income |
81,087 |
62,259 |
30.2 |
93,196 |
(13.0) |
||||||||||||
Additional Equity in Earnings of |
18 |
15 |
20.0 |
% |
25 |
(28.0)% |
|||||||||||
Net Income - Diluted |
$ |
81,105 |
$ |
62,274 |
30.2 |
$ |
93,221 |
(13.0) |
|||||||||
Diluted Net Income per Unit |
$ |
0.81 |
$ |
0.63 |
28.6 |
$ |
0.97 |
(16.5) |
|||||||||
Distribution per Unit |
$ |
0.81 |
$ |
0.64 |
26.6 |
$ |
0.97 |
(16.5) |
|||||||||
(1) To reflect higher ownership in the |
|||||||||||||||||
Units Outstanding |
1Q 2021 |
1Q 2020 |
% Change |
4Q 2020 |
% Change |
||||||||||||
|
|||||||||||||||||
Period-end |
272,675,165 |
269,981,431 |
1.0 |
% |
270,509,658 |
0.8 |
% |
||||||||||
Weighted average - basic |
272,332,476 |
270,497,710 |
0.7 |
% |
268,131,726 |
1.6 |
|||||||||||
Weighted average - diluted |
272,364,281 |
270,529,887 |
0.7 |
% |
268,169,320 |
1.6 |
|||||||||||
|
|||||||||||||||||
Period-end |
100,489,849 |
97,793,215 |
2.8 |
% |
98,322,942 |
2.2 |
% |
||||||||||
Weighted average - basic |
100,145,962 |
98,309,494 |
1.9 |
% |
95,944,280 |
4.4 |
|||||||||||
Weighted average - diluted |
100,177,767 |
98,341,671 |
1.9 |
% |
95,981,874 |
4.4 |
|
||||
ASSETS UNDER MANAGEMENT | |
||||
($ Billions) |
||||
Ending and Average |
Three Months Ended |
|||
|
|
|||
Ending Assets Under Management |
|
|
||
Average Assets Under Management |
|
|
Three-Month Changes By Distribution Channel |
||||||||||||||||
Institutions |
Retail |
|
Total |
|||||||||||||
Beginning of Period |
$ |
315.6 |
$ |
265.3 |
$ |
105.0 |
$ |
685.9 |
||||||||
Sales/New accounts |
4.9 |
23.0 |
5.4 |
33.3 |
||||||||||||
Redemption/Terminations |
(2.8) |
(17.7) |
(3.7) |
(24.2) |
||||||||||||
Net Cash Flows |
(1.3) |
(2.6) |
— |
(3.9) |
||||||||||||
Net Flows |
0.8 |
2.7 |
1.7 |
5.2 |
||||||||||||
Transfers |
(0.2) |
0.2 |
— |
— |
||||||||||||
Investment Performance |
(1.5) |
4.1 |
3.5 |
6.1 |
||||||||||||
End of Period |
$ |
314.7 |
$ |
272.3 |
$ |
110.2 |
$ |
697.2 |
Three-Month Changes By Investment Service |
||||||||||||||||||||||||||||
Equity Active |
Equity Passive(1) |
Fixed Income Taxable |
Fixed Income Tax-Exempt |
Fixed Income Passive(1) |
Alternatives/ Multi-Asset Solutions(2) |
Total |
||||||||||||||||||||||
Beginning of Period |
$ |
217.8 |
$ |
64.5 |
$ |
263.2 |
$ |
50.3 |
$ |
8.5 |
$ |
81.6 |
$ |
685.9 |
||||||||||||||
Sales/New accounts |
15.6 |
0.2 |
12.4 |
3.4 |
— |
1.7 |
33.3 |
|||||||||||||||||||||
Redemption/Terminations |
(9.3) |
(0.6) |
(12.2) |
(2.0) |
(0.1) |
— |
(24.2) |
|||||||||||||||||||||
Net Cash Flows |
(2.6) |
(1.6) |
(1.0) |
0.2 |
0.3 |
0.8 |
(3.9) |
|||||||||||||||||||||
Net Flows |
3.7 |
(2.0) |
(0.8) |
1.6 |
0.2 |
2.5 |
5.2 |
|||||||||||||||||||||
Investment Performance |
10.3 |
3.8 |
(10.2) |
(0.1) |
(0.4) |
2.7 |
6.1 |
|||||||||||||||||||||
End of Period |
$ |
231.8 |
$ |
66.3 |
$ |
252.2 |
$ |
51.8 |
$ |
8.3 |
$ |
86.8 |
$ |
697.2 |
Three-Month Net Flows By Investment Service (Active versus Passive) |
||||||||||||
Actively Managed |
Passively Managed (1) |
Total |
||||||||||
Equity |
$ |
3.7 |
(2.0) |
$ |
1.7 |
|||||||
Fixed Income |
0.8 |
0.2 |
1.0 |
|||||||||
Alternatives/Multi-Asset Solutions (2) |
2.0 |
0.5 |
2.5 |
|||||||||
Total |
$ |
6.5 |
$ |
(1.3) |
$ |
5.2 |
||||||
(1) Includes index and enhanced index services. |
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services. |
By Client Domicile |
||||||||||||||||
Institutions |
Retail |
Private Wealth |
Total |
|||||||||||||
|
$ |
212.4 |
$ |
152.2 |
$ |
107.9 |
$ |
472.5 |
||||||||
Non- |
102.3 |
120.1 |
2.3 |
224.7 |
||||||||||||
Total |
$ |
314.7 |
$ |
272.3 |
$ |
110.2 |
$ |
697.2 |
|
||||||||||||||||||||||||||||
RECONCILIATION OF GAAP |
||||||||||||||||||||||||||||
Three Months Ended |
||||||||||||||||||||||||||||
(US $ Thousands, unaudited) |
|
|
|
|
|
|
||||||||||||||||||||||
Net Revenues, GAAP basis |
$ |
1,007,266 |
$ |
1,062,892 |
$ |
900,038 |
$ |
871,449 |
$ |
874,156 |
$ |
987,304 |
||||||||||||||||
Exclude: |
||||||||||||||||||||||||||||
Distribution-related adjustments: |
||||||||||||||||||||||||||||
Distribution revenues |
(147,600) |
(143,131) |
(135,693) |
(120,099) |
(130,857) |
(127,553) |
||||||||||||||||||||||
Investment advisory services fees |
(22,553) |
(19,722) |
(20,120) |
(12,202) |
(14,814) |
(15,120) |
||||||||||||||||||||||
Pass through adjustments: |
||||||||||||||||||||||||||||
Investment advisory services fees |
(4,196) |
(3,999) |
(3,888) |
(3,331) |
(7,062) |
(6,717) |
||||||||||||||||||||||
Other revenues |
(10,531) |
(10,187) |
(9,344) |
(10,195) |
(9,607) |
(9,436) |
||||||||||||||||||||||
Impact of consolidated company-sponsored investment funds |
(311) |
(864) |
(765) |
(21,552) |
24,135 |
(8,567) |
||||||||||||||||||||||
Long-term incentive compensation-related investment (gains) losses |
(2,012) |
(4,270) |
(3,140) |
(5,257) |
7,099 |
(1,457) |
||||||||||||||||||||||
Long-term incentive compensation-related dividends and interest |
(85) |
(918) |
(91) |
(88) |
(106) |
(997) |
||||||||||||||||||||||
Write-down of investment |
— |
— |
— |
— |
859 |
— |
||||||||||||||||||||||
Adjusted Net Revenues |
$ |
819,978 |
$ |
879,801 |
$ |
726,997 |
$ |
698,725 |
$ |
743,803 |
$ |
817,457 |
||||||||||||||||
Operating Income, GAAP basis |
$ |
260,584 |
$ |
302,420 |
$ |
217,146 |
$ |
209,647 |
$ |
178,223 |
$ |
268,283 |
||||||||||||||||
Exclude: |
||||||||||||||||||||||||||||
Real estate |
(985) |
(985) |
(985) |
5,188 |
(339) |
2,623 |
||||||||||||||||||||||
Long-term incentive compensation-related items |
6 |
(337) |
(416) |
104 |
566 |
66 |
||||||||||||||||||||||
CEO's EQH award compensation |
142 |
205 |
205 |
209 |
184 |
217 |
||||||||||||||||||||||
Write-down of investment |
— |
— |
— |
— |
859 |
— |
||||||||||||||||||||||
Acquisition-related expenses |
22 |
1,614 |
356 |
805 |
526 |
3,459 |
||||||||||||||||||||||
Contingent payment arrangements |
— |
(1,366) |
— |
— |
— |
(3,051) |
||||||||||||||||||||||
Sub-total of non-GAAP adjustments |
(815) |
(869) |
(840) |
6,306 |
1,796 |
3,314 |
||||||||||||||||||||||
Less: Net (loss) income of consolidated entities attributable to non-controlling interests |
(292) |
381 |
81 |
20,940 |
(25,571) |
7,623 |
||||||||||||||||||||||
Adjusted Operating Income |
$ |
260,061 |
$ |
301,170 |
$ |
216,225 |
$ |
195,013 |
$ |
205,590 |
$ |
263,974 |
||||||||||||||||
Operating Margin, GAAP basis excl. non-controlling interests |
25.9 |
% |
28.4 |
% |
24.1 |
% |
21.7 |
% |
23.3 |
% |
26.4 |
% |
||||||||||||||||
Adjusted Operating Margin |
31.7 |
% |
34.2 |
% |
29.7 |
% |
27.9 |
% |
27.6 |
% |
32.3 |
% |
||||||||||||||||
|
||||||||||||||||||||||||||||
RECONCILIATION OF GAAP EPU TO |
||||||||||||||||||||||||||||
Three Months Ended |
||||||||||||||||||||||||||||
($ Thousands except per Unit amounts, unaudited) |
|
|
|
|
|
|
||||||||||||||||||||||
Net Income - Diluted, GAAP basis |
$ |
81,105 |
$ |
93,221 |
$ |
67,013 |
$ |
56,929 |
$ |
62,274 |
$ |
80,041 |
||||||||||||||||
Impact on net income of AB non-GAAP adjustments |
(289) |
(282) |
(289) |
2,533 |
326 |
1,234 |
||||||||||||||||||||||
Adjusted Net Income - Diluted |
$ |
80,816 |
$ |
92,939 |
$ |
66,724 |
$ |
59,462 |
$ |
62,600 |
$ |
81,275 |
||||||||||||||||
Diluted Net Income per Holding Unit, GAAP basis |
$ |
0.81 |
$ |
0.97 |
$ |
0.70 |
$ |
0.59 |
$ |
0.63 |
$ |
0.84 |
||||||||||||||||
Impact of AB non-GAAP adjustments |
— |
— |
(0.01) |
0.02 |
0.01 |
0.01 |
||||||||||||||||||||||
Adjusted Diluted Net Income per Holding Unit |
$ |
0.81 |
$ |
0.97 |
$ |
0.69 |
$ |
0.61 |
$ |
0.64 |
$ |
0.85 |
AB
Notes to Consolidated Statements of Income and Supplemental Information
(Unaudited)
Adjusted Net Revenues
Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected by us and passed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is passed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.
We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. These fees do not affect operating income, but they do affect our operating margin. As such, we exclude these fees from adjusted net revenues.
We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.
Also, adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments.
Lastly, during the first quarter of 2020, we wrote-down an investment that had been received in exchange for the sale of software technology; the write-down brought the investment balance to zero. Previously, we had been excluding the value of this investment from adjusted net revenues.
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, (3) our CEO's EQH award compensation, as discussed below, (4) the write-down of an investment, (5) acquisition-related expenses, (6) adjustments to contingent payment arrangements, and (7) the impact of consolidated company-sponsored investment funds.
Real estate charges (credits) incurred have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers. Real estate charge (credits) incurred during the fourth quarter of 2019 through the fourth quarter of 2020, while excluded in the period in which the charges (credits) were recorded, are included ratably over the remaining applicable lease term.
Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments is recorded within investment gains and losses on the income statement. Management believes it is useful to reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.
The board of directors of EQH granted to
The write-down of the investment in the first quarter of 2020 has been excluded due to its non-recurring nature and because it is not part of our core operating results.
Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers.
The recording of changes in estimates of contingent consideration payable with respect to contingent payment arrangements associated with our acquisitions are not considered part of our core operating results and, accordingly, have been excluded.
We adjusted for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation. We also excluded the limited partner interests we do not own.
Adjusted Operating Margin
Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period without the volatility noted above in our discussion of adjusted operating income and to compare our performance to industry peers on a basis that better reflects our performance in our core business. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenues.
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SOURCE
Mark Griffin, Investors, 629.213.5672, mark.griffin@alliancebernstein.com; Jennifer Casey, Media, 212.969.1157, jennifer.casey@alliancebernstein.com