Thank you for standing by and welcome to the AllianceBernstein Second Quarter 2019 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for 1 week. I would now like to turn the conference over to the host for this call, the Head of Investor Relations for AB, Ms. Hallie Elsner. Please go ahead.

Thank you, Carol. Good morning, everyone and welcome to our second quarter 2019 earnings review. This conference call is being webcast and accompanied by a slide presentation that’s posted in the Investor Relations section of our website, www.alliancebernstein.com. Seth Bernstein, our President and CEO; John Weisenseel, our CFO; and Jim Gingrich, our COO, will present our results and take questions after our prepared remarks. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So, I would like to point out the Safe Harbor language on Slide 2 of our presentation. You can also find our Safe Harbor language in the MD&A of our second quarter 2019 10-Q which we filed this morning. Under Regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call. Now, I will turn it over to Seth.

Good morning. Thank you for joining us today. Our second results reflect momentum in several areas of our business. Firm-wide active flows were positive $10.2 billion in the second quarter bringing year-to-date active net inflows to $12.3 billion, which translates to a 5.4% active annualized organic growth rate. Flows are driven by the continuing rebound in fixed income, particularly in Asia ex-Japan region and ongoing success of our revitalized active equity platform, which attracted another $1 billion in net new flows during the quarter and in an environment of declining fee rates, AB’s second quarter average fee rate was stable year-on-year and increased slightly sequentially. Now, let’s get into the specifics. Starting with the firm-wide overview on Slide 4, second quarter gross sales $27.3 billion increased 44% year-on-year and 18% sequentially. Total firm-wide net flows were positive $9.5 billion versus net outflows in the prior year period and net inflows of $1.1 billion in the first quarter. Total assets under management of $580.8 billion at quarter end increased 8% year-on-year and 5% sequentially and average AUM was up 4% versus the prior year period and 5% sequentially. Slide 5 shows our quarterly flow trend by channel. Firm-wide net inflows were driven by retail and institutional while private wealth was turned negative. In retail, gross sales of $18.8 billion increased versus both prior periods and net inflows of $5.9 billion compared to outflows in the year ago period and were higher sequentially. In the bottom left chart, you can see the institutional gross sales of $5.5 billion also increased versus both periods and redemptions improved following an elevated first quarter that was the result for a variety of factors in the aftermath of the late 2018 market dislocation. This resulted in institutional net inflows of $4.2 billion. In private wealth, gross…

Thank you, Seth. Let’s start with the GAAP income statement on Slide 15. Second quarter GAAP net revenues of $858 million increased 2% for the prior year period. Operating income of $184 million decreased 3% and the 20.6% operating margin decreased by 180 basis points. GAAP EPU of $0.54 compared to $0.59 in the second quarter of 2018. As always, I will focus our remarks from here on our adjusted results which remove the effects of certain items that are not considered part of our core operating business. We base our distribution to unit holders our adjusted results, which we provided in addition to and not as substitutes for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results are in our presentations appendix, press release and Type 2. Our adjusted financial highlights are included on slide 16. Second quarter revenues of 715 million, operating income of 180 million and a margin of 25.1% all decrease year-on-year. We earned and we will distribute to our unit holders $0.56 per unit compared to $0.62 for last year’s second quarter. Lower performance fees combined with higher compensation and G&A expenses primarily drover the weaker results. Revenues operating income and margin all increased from the first quarter primarily due to higher base performance fees. Bernstein Research services revenues which will partly offset by higher compensation and promotion servicing expenses. We delve into these items in more detail on our adjusted income statement on Slide 17. Beginning with revenues, second quarter net revenues of $715 million decreased 1% year-on-year. Second quarter base fees increased 3% from the same prior period due to higher average AUM across the retail and private wealth distribution channels. Compared to the second quarter of 2018, total average AUM increased 4.4%, the portfolio fee rate…

[Operator Instructions] Our first question this morning comes from Alex Blostein from Goldman Sachs. Please go ahead.

Great thanks hi good morning everybody first question just maybe start with the dynamic around fee rates in the quarter you guys are seeing significant traction on flows on these are higher free flows but the base fee felt a little bit light I am not sure whether just the average in dynamic something else going on so may be flush that out for us a little bit more and as you think on go forward basis given a mix of business and of course you guys are seeing how should we think about the blended fee rate over the coming quarters?

Alex it’s John the fee rate for the quarter was actually 41.4 basis points which was up 0.2 basis points from the first quarter and I think it was essentially almost flat versus the prior year so I think we are very pleased as its hung in the way it has been with strength of in the retail sector particularly the high yield instruments and strategies and the continued strength in the active equities is really what’s keeping it either flat or slightly higher I think you know longer term when we think out for the rest of this year I would expect to remain somewhat around the level as currently at and as we look forward into future years as we continue to build out our alternatives platform those are higher fee rate products I think we are positioned to see potential increases going forward in future years.

Got it thanks for that and I guess on the business side of things clearly significant turn around in fixed income flows for you guys over the last couple of quarters this quarter in particular can you talk a little bit sustainability of that I know Asia ex-Japan could be fairly lumpy so as you think about the macro conditions today and the kind of the appetite on the ground for consistency of these flows going forward I guess how should we think about that over the near term thanks?

I think you are right it is that fixed income business is exposed to Asia and well that is a very positive story over the long haul it does tend to have ups and down for the time being we continue to see that momentum and we will just have to see how that plays that over time. I think the other thing though that is interesting is that we have had some nice results in both the U.S. with AB income and Europe with things like European income all of which are quite positive.

Great. Alright, thanks very much for taking the questions.

Our next question comes from Mike Carrier from BAML. Please go ahead.

Hi good morning and thanks for taking the questions. Maybe first question just given the strength in diversification in the flow and then particularly you guys mentioned I think it was 52 products that were over $1 billion be at scale, how should we be thinking about the operating leverage and margins ahead. John, I know you mentioned the comp ratio in the second half heading a bit lower to that, that’s going to help. And then I know this year has been Nashville cost, but even as we think beyond this given the momentum that you are seeing and I think in the past you guys have said if the flows in revenue that we should expect some margin improvement over time?

John?

Why don’t I start off and I think Jim may add some comments as well, but again regarding the margin targets we still are targeting 30% and we think we definitely believe it’s achievable. There is a couple of headwinds currently that we have for example for this year. So we are dealing with the real occasion to Nashville and that’s going to continue for couple of more years. We also are dealing with the performance fees where last year we had $195 million of performance fees, $130 million of them were from the two funds that have been liquidated or in the process of being liquidated that I mentioned earlier. And then of course we have the sell side which is the revenues were down year-on-year I think in fact year-to-date excluding Autonomous, they are down about 15%. So we are dealing with these items in the short run and then of course we have the markets that were very much dependent upon as well. So this all factors into obviously when we get to that 30%. We definitely believe we are going to get there just a question of when.

I would just add that we have always talked about the operating leverage to the incremental margin in this business being 45% to 50% and there is no reason that, that doesn’t continue on a go forward basis.

Okay, thanks. And maybe the second question just given the strength in the flows particularly on the active side and particularly in the retail relative to what we are seeing in the industry, what do you like attribute driving the strength given the industry backdrop and the performance in some of the products and also how did the fixed income stream is sensing that demand, but is it more a product differentiation, the distribution, is it some challenged competition out there, but just seeing that the magnitude is much different than what we are seeing across the industry?

I think it is different. But Jim, why don’t you go?

Go ahead, Seth.

I think it is different. The performance that we have been generating I think is differentiated, but I also think it’s the relevance of the products that we have designed and have introduced that I think resonate with clients, particularly in equities where our focus and whether it’s large cap growth or a concentrate growth have been very well received and the audience has been broadening in both retail and in the institutional for that matter. So I think that’s been there. I also think that relative to some of our competitors, we are relatively under penetrated. So I think people are interested in seeing our products and are giving us a shot. And we have been delivering. So I don’t know, Jim, do you want to add something?

I think you are right. I mean, we have – if I look at the quarters obviously strength that we saw in the Asia ex-Japan was a big contribution, but that said we were positive in retail in all geographies with particular strength in the U.S. and Japan in addition to Asia ex. So as you just said Seth, I think it is a pretty broad-based positive story that’s happening.

Okay. Thanks a lot.

[Operator Instructions] Our next question comes from Bill Katz from Citi. Please go ahead.

Okay, thank you. Good morning and thanks for taking my questions. My calculations might be little quick, but as I look at your fee rate in the institutional bucket, it looks like it came down over 1 basis point sequentially, how much of that was due to maybe some particular strength in the first quarter and I guess I am surprised just given your commentary about what’s coming in the door versus what’s going out the door? That was for you to pickup rather than what looks to be a pretty substantial sequential decline?

Bill, it’s John. We did move some fixed income mandates which would help bring that rate down somewhat. So, it’s really – it’s the mix of the business. There is nothing specific really we can point to or nothing specifically that we are worried about there. In our other bucket, our fee rates actually have increased which is offsetting, which is seeing an institutional side in keeping the fee rate on the portfolio actually up 0.2 basis points sequentially. What’s going on there is just that as we build out the alternative platforms that’s in that other bucket there, those are higher fee rate by products.

So just to clarify, John, fixed income is accretive to your institutional bucket as it stands today versus equity and alternatives?

Well, it depends upon with which – again, which products we are losing and which we are gaining.

Okay. Another question on the comp ratio just in terms of your guidance, let me make sure I am just apples-to-apples here, when you say your comp ratio are you including fringe and relocation charges in that and if so, can you bifurcate between those?

Yes, they are included. And as I mentioned, the part that will bifurcate is what I mentioned in the comments as far as the part that falls within the comp ratio. So I think I mentioned that in my prepared remarks.

Okay. And then just one last one, I think I read in the supplement that part of your expense increase was continued payment on Autonomous. I may have missed it in prepared commentary did you quantify the size of that? If not, could you?

No. And we will, because there is also – in that bucket there is also other acquisitions, but we do mentioned in terms of the 10-Q in terms of the discount rate that’s being used to discount the payments. And so of course that will the rate that’s being used to accrete it. And the rate being used for that acquisition and again I don’t have it in front of me is in the Q, but it is higher than some of the other acquisitions that was done.

Okay, thank you.

And we have no further questions in queue at this time.

Alright. Well, thank you everyone for participating in today’s call. Feel free to contact Investor Relations with any further questions. Great day.