47 slides from Alliancebernstein Holding L.p's earnings presentation, Feb 13, 2015
Slide 1: Fourth Quarter 2014 Review
February 12, 2015 FOURTH QUARTER 2014 REVIEW Peter S. Kraus Chairman & Chief Executive Officer John C. Weisenseel Chief Financial Officer
Slide 2: Cautions Regarding Forward-Looking Statements
Cautions Regarding Forward-Looking Statements Certain statements provided by management in this presentation 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 fac
Slide 3: Peter S. Kraus
Peter S. Kraus Chairman & Chief Executive Officer
Slide 4: Firmwide Overview: Fourth Quarter and Full Year 2014
Firmwide Overview: Fourth Quarter and Full Year 2014 In US § Billions; scales are different $725 Ce $188 Gross Sales G2 | 4ais 3014 2014 2013, $54 $28 Net Flows* = —_ L neal | ~ Outflows $(1.8) $(12.3) related to AXA 4014 3014 2014 2013, dispositions $474.0 $473.0 $474.0 eran —_— i | | | 4ai4 3014 2
Slide 5: Asset Flows by Distribution Channel: Quarterly Trend
Asset Flows by Distribution Channel: Quarterly Trend InlOS $ Eslions) =Gross Sales Gross Redemptions » Net Flows 99 03. Alike ae 92 78 a5 5.5 a0 47 15 . 22 17 14 a 13 Eiko | Ee Gee A Hoary (23) a (1.7) 22) (30) (13) te) (1.4) (3.9) 8 (3.7) (6.0) Co) (66) (4.4) (14.7) (11.0) (e4) a1 (10.4) ‘otal 1Q14
Slide 6: Institutional Highlights
Institutional Highlights First Net Flow Positive Year Since 2007 RFP Activity: Double-Digit Increases Across Asset Classes (s8) FY14 / FY13 % Change 19.2 173 213 24.9 23.9 kl na _— = (44.8) (259) (18.4) 5 (429) ray p (66.1) (62.1) 2010 2011 2012 2013 2014 |_| Ea ‘=Gross Sales ™Gross Redemptions =AXA
Slide 7: Fixed Income Investment Performance
Fixed Income Investment Performance Relative Performance Through 12/31/14 (%) 1 Year 3 Year Year US Strategic Core Plus 41.2 14 1.2 Core Fixed Income 0.2 0.6 07 High Yield 15 1.8 1.0 Diversified Yield Plus 3.3 4.0 3.9 Insurance — US Bond 0.7 1.0 07 TIPS — Plus 0.9 1.4 18 Unconstrained Bond 2.4 45 N/
Slide 8: Fixed Income: Benefits of a Diverse Platform and Careful Credit Selection
Fixed Income: Benefits of a Diverse Platform and Careful Credit Selection Dispersed Global Fixed Income Absolute Retums in 2014 AB Fixed Income Platform Diverse, Global & Credit-Focused | sector | Return | Sector | Return | Utilities. 11.3% Pan Euro High Yield 5.9% ; US Multi-sector Non US Govt. 92
Slide 9: Equities Investment Performance
Equities Investment Performance Relative Performance Through 12/31/14 (%) 1 Year Year US US Small Cap Value 6.2 6.4 5.0 US Strategic Value (0.2) 1.4 (1.6) US Strategic Core Equity* 4.6 (0.5) NA US Small Cap Growth (6.2) (1.0) 3.0 US Large Cap Growth 2.0 28 (0.6) Select US Equity 0.6 0.6 24 Concentra
Slide 10: Equities: Active Management, High Conviction and Selectivity
Equities: Active Management, High Conviction and Selectivity Concentrated, High Active Share Portfolios Outperformed Median Alpha Performance of Large/Mid-Cap Strategies 2003-2013 (Percent)! 24 (02) +35 or Fewer 36-200 Passive High Active Share Moderate Active Share No Active Share Flows to the Most
Slide 11: Retail Highlights
Retail Highlights Net Flow Improvement as Redemptions Slowed Ge) 563 33.2 31.0 ” in (40.6) (41.9) (40.1) (42.6) (66.6) 2010 2011 2012 2013 2014 = Gross Sales = Gross Redemptions “Net Flows Newer* Retail Offerings Growing as % of Total Gross Sales Newer" Offerings Gross Sales CAGR 2010-2014: +50% 26
Slide 12: Private Wealth Management Highlights
Private Wealth Management Highlights Significant Year-Over-Year Flow Improvement (SB) 76 73 65 el “ mE a (9.5) (10.2) (14.1) (13.3) 2010 2011 2012 2013 2014 = Gross Sales ‘Net Flows Higher US Equity Allocation Benefited Clients US Equity Weightings: Global Equity Performance: Bernstein vs. Peer Aver
Slide 13: Bernstein Research Services Highlights
Bernstein Research Services Highlights Bernstein Research Revenues Higher... ...As Trading Volumes Increased Across Most Markets... sm : Industry Trading Volumes* (% Change) % Change 32 4Q14/4Q13:+13% 128 4014/3014: +14% ae 483 414 % 20 ' 113 12 " | " i | UJ : (10) 26 413 -3Q14.«4Q14 2012 20132014 U
Slide 14: Progress on Our Strategy in 2014
Progress on Our Strategy in 2014 Firmwide Initiative Progress Improve investment performance and deliver for clients “+ 88% of Fixed Income assets in outperforming services for 3-yr period and 95% for 5-yr + Unconstrained Bond and Diversified Yield Plus outperformed by 4+ ppts for 3-yr + US HY top q
Slide 15: John C. Weisenseel
John C. Weisenseel Chief Financial Officer 18 Fouth Qtr cot¢Revow |
Slide 16: Financial Highlights: Fourth Quarter and Full Year 2014
Financial Highlights: Fourth Quarter and Full Year 2014 In US § Millions; scales are different $2,506 Adjusted Revenues 2014 $1,898 Adjusted Expenses 2014 ae 24.2% Adjusted Operating Margin 2014 57¢ ie $1.86 Adjusted EPU | a 4Q14 3Q14 2014 Please refer to pages 41-45 for adsitional information on th
Slide 17: Fourth Quarter 2014 GAAP to Adjusted Reconciliation
Fourth Quarter 2014 GAAP to Adjusted Reconciliation InUS $ Milfons Adjustments Distribution- Pass Venture Real Contingent Acquisition Won Related Through Long-Terminc. Capital Estate Payment Related Controling Adjusted GAAP _Payments__Expenses_ Compensation __Fund Credits __Arrangements_ _ Expenses
Slide 18: Full Year 2014 GAAP to Adjusted Reconciliation
Full Year 2014 GAAP to Adjusted Reconciliation InUS $ Mion Adjustments Distribution. Pass Venture Real Contingent Acquisition Won Related Through Long-Term Inc. Capital Estate Payment Related Controlling Adjusted GAAP. Payments Expenses Compensation __ Fund Charges__Arrangements__Expenses__Interests
Slide 19: Fourth Quarter and Full Year 2014 Adjusted Income Statement
Fourth Quarter and Full Year 2014 Adjusted Income Statement 4a 3a In US $ Millon (except EPU) 2014 2014 hs FY 2014 FY 2013, %A Adjusted Net Revenues $ 655 $ 626 5% $ 2506 $ 2,384 5% Adjusted Operating Expenses 472 47 (1%) 1,898 1,809 5% Adjusted Operating Income 183 149 23% 608 575 6% Adjusted Opera
Slide 20: Fourth Quarter and Full Year 2014 Adjusted Revenues
Fourth Quarter and Full Year 2014 Adjusted Revenues + The sequential decline in Base Fees is due to lower average AUM in both Retail and Institutional; the 6% increase versus the prior year is due primarily to higher average AUM across all three channels (Retail, Institutional, Private Wealth Manage
Slide 21: Fourth Quarter and Full Year 2014 Adjusted Operating Expenses
Fourth Quarter and Full Year 2014 Adjusted Operating Expenses + Adjusted Compensation Ratio was 46.5% in 4Q14 vs. 49.5% in 314, and 49.1% for full year 2014 compared to 48.7% in 2013 + Total Compensation & Benefits decreased 2% sequentially due to the lower comp ratio, but increased 5% versus the pr
Slide 22: Fourth Quarter and Full Year 2014 Adjusted Operating Results
Fourth Quarter and Full Year 2014 Adjusted Operating Results ++ Adjusted Operating Income improved 23% sequentially due to revenue growth paired with lower operating expenses; the 6% increase versus 2013 is due to revenue growth outpacing expense growth + Adjusted Margin was 27.9% in 4Q14, up from 2
Slide 23: Global Real Estate Consolidation Update
Global Real Estate Consolidation Update + Over 900K sq. ft. of office space has been vacated and made available for sublease since 2010 + Space sublet to date: 100% of Phase #1 and 90% of Phase #2 + Total write-offs recorded to date of $351M + Currently excluded from adjusted (or non-GAAP) operating
Slide 24: Q&A
Q&A Fourth Quarter 2014 Review | 23
Slide 25: Appendix
APPENDIX Fourth Quarter 2014 Review | 24
Slide 26: Institutional Equity: Relative Performance
Institutional Equity: Relative Performance Institutional Equity Composites vs. Benchmarks Periods Ended December 31, 2014 4Q One Three Five Ten Service 2014 Year Years Years Years Benchmark Value Emerging Markets Value 0.9 4.0 (0.7) (1.8) (1.3) MSCI EM Global Value 44 1.2 22 (2.0) (1.5) MSCI World G
Slide 27: Institutional Fixed Income: Relative Performance
Institutional Fixed Income: Relative Performance Institutional Fixed Income Composites vs. Benchmarks* Periods Ended December 31, 2014 4Q One Three —Five Ten Service 2014 Year _—Years_~—‘Years__—‘Years Benchmark Barclays Global High Yield Index (Gross) Global High Income 16 3.6 1.0 1.0 16 Unhedged t
Slide 28: Retail Equity: Relative Performance
Retail Equity: Relative Performance Retail Mutual Funds vs. Lipper Averages Periods Ended December 31, 2014 4Q One Three Five —‘Ten Service 2014 Year Years Years Years Lipper Average Value International Value 13 (0.1) (05) (29) (2.5) International Multi-Cap Value Growth & Income 06 (25) 06 16 (0.5)
Slide 29: Retail Fixed Income: Relative Performance
Retail Fixed Income: Relative Performance Retail Fixed Income Funds vs. Lipper Averages Periods Ended December 31, 2014 4Q One Three Five Ten Service 2014 Year Years Years Years Lipper Average Global High Yield Portfolio 24 5.8 14 24 26 Bond Global High Yield American Income Portfolio 0.4 3.3 1.9 25
Slide 30: Private Wealth Management: Absolute Performance
Private Wealth Management: Absolute Performance Periods Ended December 31, 2014 4Q One Three Five Ten Service 2014 Year Years Years Years Fully Diversified Simulation* 1.2 48 9.2 65 4.0 S&P 500 49 13.7 20.4 15.5 77 MSCI World Index - Net 1.0 49 15.5 10.2 6.0 Lipper Short/Int Blended Muni Fund Avg 03
Slide 31: Assets Under Management: 4Q14
Assets Under Management: 4Q14 (US $ Billions) At December 31, 2014 At Sept 30, 2014 Private Wealth Institutions Retail Management Total Total Equity Actively Managed $ 2 $ 45 § 38 O$ 120=«§ 112 Passive” 22 28 4 51 50 Total Equity 51 73 39 163 162 Fixed Income Taxable 148 61 10 219 221 Tax-Exempt F 1
Slide 32: Three Months Ended 12/31/14: AUM Roll-Forward by Distribution Channel
Three Months Ended 12/31/14: AUM Roll-Forward by Distribution Channel InUS $ Billions Beginning Sales/New Redemptions/ Net Cash Net AUM Transfers Investment Net End Investment Service: __of Period __ Accounts _Terrrinations. Flows, Flows __ Adjustment"? Performance Change _of Period Institutions us
Slide 33: Twelve Months Ended 12/31/14: AUM Roll-Forward by Distribution Channel
Twelve Months Ended 12/31/14: AUM Roll-Forward by Distribution Channel InUS$ Biions Beginning Sakes!New Redemptions) Net Cash Net Acquisitons Transfers AUM Investment Net End Investment Service: of Period _Accounts_Terminaions Flows Flows ‘Adustment”” Performance Change _of Period Institutions us 10
Slide 34: Three Months Ended 12/31/14: AUM Roll-Forward by Investment Service
Three Months Ended 12/31/14: AUM Roll-Forward by Investment Service InUS $ Bilfons SalosINow Redemptions! Net Cash Net AUM Transfers _Investment Not End Investment Service: ‘Accounts Terminatons Flows Flows __Adustmert Performance Change _of Period Equty Active us 504 19 as 8) @s) 1 : a1 25 s19 {Glo
Slide 35: Twelve Months Ended 12/31/14: AUM Roll-Forward by Investment Service
Twelve Months Ended 12/31/14: AUM Roll-Forward by Investment Service nS Bitons Beginning SalesNew Regergtons/ Net Cash Net Acauistons AUN sors investment Net Ena Investment Service: otPeriod __Accourts__Terminatons Flows Fone ‘Agustment” Perfomance change _of Period Equity Active us sr7 92 aa oo as)
Slide 36: AUM by Region
AUM by Region Institutions NA ex US 4% Asia ex Japan 6% Japan US 58% $237.0B ‘As of December 31, 2014; by client domicile Retail Other 3% $161.5B Fourth Quarter 2014 Review | 35
Slide 37: Fourth Quarter and Full Year 2014 Adjusted Advisory Fees
Fourth Quarter and Full Year 2014 Adjusted Advisory Fees 4Q 3a 2014 2014 %A FY2014 FY 2013 %A Ending AUM ($ Billions) $474 $473 0% $474 $450 5% Average AUM ($ Billions) $476 $479 (1%) $468 $442 6% By Fee Type ($ Millions): Adjusted Base Fees $486 $492 (1%) $1,902 $1,795 6% Adjusted Performance Fees
Slide 38: Fourth Quarter and Full Year 2014 GAAP Income Statement
Fourth Quarter and Full Year 2014 GAAP Income Statement In US § Millions (except EPU) aoa 2014 %A FY2014 FY 2013 %A Net Revenues $ 787 = $ 750 5% $3,005 $ 2,915 3% Operating Expenses 596 605 (1%) 2,396 2,351 2% Operating Income 191 145 32% 609 564 8% Net Income Attributable to AB Unitholders 477 140
Slide 39: Consolidated Balance Sheet
Consolidated Balance Sheet InUS $ Millions Assets December 31, 2014 December 31, 2013 Cash and cash equivalents 6 ~C~«*S 510 Cash and securities, segregated 476 980 Receivables, net 1,915 1,550 Investments: Long-term incentive compensation-related 99 118 Other 664 662 Goodwill 3,045 2,987 Intangible
Slide 40: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows In US $ Milions. ‘Twelve Months Ended Dec. 31, 2014 Dec. 31, 2013 Net Income $s ms 527 Non-cash items: Amortization of deferred sales commissions 42 a ‘Amortization of non-cash long-term incenfive compensation ad 159 Depreciation and other amortization 63 o Unrea
Slide 41: AB Holding Financial Results
AB Holding Financial Results InlUS $ Nilions (exkcuding per Unit amounts) ona _ %A FY2014 FY2013, —%A AB Net Income Attributable to AlianceBernstein $177 $140 26% $570 $518 10% Weighted Average Equity Ownership Interest soe TH. ee. seo ‘AB Holding Meee $64 $50 28% $203 $186 2% Income Taxes 6 6 7 22
Slide 42: AB Adjusted Earnings Reconciliation
AB Adjusted Earnings Reconciliation ‘Three Months Ended US $ Thousands, unaudited asia eBONa——es04—SIStt4 FSIS ROHS Net Revenues, GAAP basis $ 767,352 $ 749,748 $ 753648 $ 714618 $ 765572 $ 706,078 Exclude: Long-term incentive compensation related investment (gains) losses m2 16483415) (1297) TI) 6.
Slide 43: AB Adjusted Earnings Reconciliation
AB Adjusted Earnings Reconciliation ‘Twelve Months Ended mber 31, US $ Thousands, unaudited 2014 2013 Net Revenues, GAAP basis $ 3,005,366 $ 2,915,047 Exclude: Long-term incentive compensation-related investment (gains) (2,184) (16,842) Long-term incentive compensation-related dividends and interest
Slide 44: AB Holding Adjusted Earnings Reconciliation
AB Holding Adjusted Earnings Reconciliation ‘Three Months Ended US $ Thousands except per Unit amounts, unaudited 42314 9804 gO 34 1213413913013 Net Income - Diluted, GAAP basis S 58107 $ 44543 $ 43,230 $ 36455 $ 87,853 $ 29,706 Impact on net income of AB non-GAAP adjustments (1,564) 106 415 1,008 (
Slide 45: AB Holding Adjusted Earnings Reconciliation
AB Holding Adjusted Earnings Reconciliation ‘Twelve Months Ended December 31, US $ Thousands except per Unit amounts, unaudited 2014 2013 Net Income - Diluted, GAAP basis $ 182,350 $ 166,668 Impact on net income of AB non-GAAP adjustments (20) 6,837 Adjusted Net Income - Diluted 182,330 173,505 Dilu
Slide 46: AB Adjusted Financial Results Reconciliation
AB Adjusted Financial Results Reconciliation 18 ‘Notes to Condensed Consolidated Statements of Income and Supplemental Information (Unaudited) ‘Adjusted Net Revenues ‘Adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-rel
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