Thank you for standing by, and welcome to the AllianceBernstein Holding L.P. First Quarter 2025 Earnings Review. At this time, participants are in a listen-only mode. After the remarks, 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 on our website shortly after the conclusion of this call. I would now like to turn the conference over to the host for this call, Head of Investor Relations for AllianceBernstein Holding L.P., Ioanis Jorgali. Please go ahead.

Good morning, everyone. And welcome to our first quarter 2025 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the Relations section of our website, www.alliancebernstein.com. With us today to discuss the company's results for the quarter are Seth Bernstein, President and CEO, and Tom Simone, CFO. Onur Erzan, Head of Global Client Group and Private Wealth, will join us for questions after our prepared remarks. Some of the information we'll 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 two of our presentation. You can also find our safe harbor language in the MD&A of our 10-Q, which we filed this morning. We base our distribution to unitholders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to results are in our presentation appendix, press release, and our 10-Q. Under Regulation FD, management only addresses questions of material nature from the investment community in a public forum. So please ask all such questions during this call. Now I'll turn it over to Seth.

Good morning, and thank you for joining us today. Against the backdrop of escalating uncertainty around trade policy and economic growth, AllianceBernstein Holding L.P. delivered another strong quarter. Our results highlight the strength of our franchise, the depth of our investment expertise, and the breadth of our globally diversified platform. On slide three, I'll review the key business highlights of our first quarter. First, all three of our distribution channels grew organically in the first quarter, generating $2.7 billion in firm-wide active net inflows. Our differentiated distribution platform gives us an edge in growing markets like Asia, US high net worth, and insurance, where we've consistently gained market share, including in the first quarter of 2025. Coupled with the extensive range of our investment capabilities that span across traditional and alternative assets, we're strategically positioned to help our clients navigate turbulent markets and benefit from rapidly emerging trends. Fixed income reallocation theme is a prime example of our ability to capture demand where it exists, having generated over $35 billion of active income inflows over the last two years. Even amidst the return of rates volatility and heightened policy risk, we successfully generated $1 billion in active fixed income inflows during the first quarter of 2025. Despite the downturn in overseas demand for our taxable fixed income strategies, largely driving a $1.4 billion in firm-wide taxable outflows, we continue to enjoy robust growth for our tax-exempt franchise, which generated $2.4 billion of inflows. Our industry-leading retail meeting platform has been a driving force of organic growth, achieving an impressive 19% annualized growth rate in the first quarter. Over the past five years, Retail Tax exempt has consistently grown at double-digit rates, reaching $46 billion in AUM, more than doubling in size since 2020. Secular growth and private alternatives is another…

Thank you, Seth. Good morning, everyone, and thank you for joining our call. During my twenty-year tenure at AB, I've had the privilege of serving in various roles across the organization. This has taught me what sets AB apart. I am enthusiastic about the future that lies ahead and excited to share our financial results with you today. Let's delve into the details. We continue to deliver strong financial performance in the first quarter, reflecting solid growth in asset management fees and focused expense discipline. First quarter adjusted earnings of 80¢ per unit were up 10% versus the prior year, benefiting from strong markets early in the quarter, sustained organic growth, a durable fee rate, and solid margin expansion. Distributions and EPU grew uniformly as we distribute 100% of our adjusted earnings to unitholders. On slide 10, we show our adjusted results, which remove the effect of certain items not considered part of our core operating business. For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix or our 10-Q. First quarter net revenues of $838 million were down 5% versus the prior year and up 6% on a like-for-like basis, excluding Bernstein Research. First quarter base fees increased 8% versus the prior year, in line with the growth in our firm-wide average AUM. Performance fees of $39 million increased by $12 million from the prior year period, reflecting sustained alpha generation from our international small cap and middle market lending strategies. Dividend and interest revenue, net of broker-dealer related interest expense, declined versus the prior year, which reflects lower cash and margin balances within private wealth. In the first quarter, we had an $11 million loss as compared to a gain in the prior year period related to our seed-like capital and other investments. Moving…

We will now begin the question and answer session. If you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Please limit your initial questions to two in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask follow-up questions. Your first question comes from the line of Alex Blostein with Goldman Sachs. Alex, please go ahead.

Hi. Good morning. Thank you. And, Tom, welcome to the call. Question to you guys starting maybe with asset allocation trends you guys are seeing so far in the second quarter. Obviously, super volatile backdrop, lots of uncertainty. Seems like the retail channel is starting to look a little bit softer, including on the fixed income side, which has been historically a source of strength for you guys. So how do you expect the retail channel, I guess, to behave as we kind of deal with the current backdrop? And, Seth, curious, in particular, when it comes to non-US retail, given your distribution footprint there, how that channel is performing and the outlook there? Thanks.

Sure. Hi, Alex. Onur here. I'll take the question. In terms of asset allocation, then switch to non-US retail. What we are seeing is driven by largely what's happening with the treasuries and the rates. Obviously, the continued Fed uncertainty with the rate cuts as well as the tariff policy uncertainty is creating some confusion in the market. As a result, we have seen, starting in Q1, some outflows out of retail taxable fixed income, particularly in the overseas markets, our flagships like Hong Kong, Taiwan. This is not a first-time or a new thing. We have seen this trend in the past. There were times like COVID or 2022. When the rate cuts happen, when the shape of the yield curve gets solidified with the steeper yield curve, our strategies go back to strong inflows. So as a result, although this current volatility is not going to help in the very short term, we believe it will continue to support us in the long term. And as you recall, when there was an asset rebalancing into taxable fixed income, we were one of the first beneficiaries of that, and we gathered close to $35 billion of net flows from taxable fixed income. So definitely, it will help us in the long term while it might partially hurt us along with others in the short term. However, balancing some of that is the strength of our tax-exempt franchise in the US as well as our growing ETF franchise, which obviously caters to a slightly different audience. With the active ETFs being 100% US today. So overall, we continue to see relative strength in our US unit business and overall we believe we're really confident about the long-term prospects for flexible and tax-exempt fixed income. In terms of the non-US geographies, I already touched on the fixed income. I'm not going to belabor further into that. In terms of equities, as you know, we run the largest active equity strategy in Japan. And that strategy delivered very strong flows in the first quarter. We continue to monitor what's happening not only with equity markets but also with the dollar-yen dynamics. However, even if, you know, the second quarter might be a bit softer with the, again, equity market and FX volatility. The structural trend in Japan is the growth of the retirement market. With the Nisei accounts. And we play well into that retirement money, which tends to be stickier, more long-term oriented, less short-term. And we expect to have strong growth in our Japan franchise leveraging that retirement trend.

Alex, I'd just add that as I've said in my earlier comments, we believe the fixed income thesis remains intact despite what has been remarkable volatility. And, you know, when you look at sort of yields of 8% out there, and they could get higher for sure, but they look pretty good relative to any kind of long-term expectations of equity returns right now. And I think risk aversion will probably remain present for a while. And so I think once the stability begins to reassert itself, I think there's pretty attractive opportunities out there for people who don't want to venture back into equities so quickly. But that will take some more time to figure out. But it's also worth noting that our own retail flows have certainly stabilized in recent days at a better level. So look, we are monitoring it just like everyone else is, and can't predict the future. But I like the mix of businesses we have and our emphasis on fixed income in a time like this.

Yep. Agree with you there. Thanks. A good great detail. For my follow-up question, I just wanted to ask you guys around the Equitable dynamics. Now with the tender results now and participation was relatively limited. And I was curious if you could expand on maybe some of the structural benefits to Equitable from having AllianceBernstein Holding L.P. as a public company? Do you ultimately see them, you know, willing to acquire more over time, or kind of how do you think that plays out over the next several years?

Thanks, Alex. Well, first thing I'd say is you all cover Equitable, and you should certainly ask them the question yourself. We took it I take it, as a vote of confidence in this business that they had decided to make such an endeavor to increase their holdings in AB in the manner that they did. I think the premium clearly didn't convince a ton of people to tender into it. And I think a part of that is the very high distribution yield we offer, remains pretty attractive, particularly in times like this. To clients. And so I do think and know that Equitable understands the logic of maintaining the independence of AB frankly, for several reasons. One, our employees like the clear alignment. And the recognition that a public security has for their endeavors. And we don't take that lightly from a deferred compensation as well as a clear understanding of the business and its goals. Secondly, Equitable sees this as a more attractive currency potentially as we continue to look for opportunities to supplement our product or distribution capabilities. And so we want that as do they as a potential option. As you know, we've used it before. Whether it was the purchase of CarVal or in other contexts. And I guess, finally, I would say to you that they get it's a pretty tax advantageous position that they have today. In their position as a private partner. As well as owner of public units. To have AB in the current status as a partnership. So there is no change in our view in that, and I don't believe there's a change in their view.

Right. That's super helpful. Thank you, guys. Next question comes from the line of Craig Siegenthaler with Bank of America. Craig, please go ahead.

Good morning, Seth, and I hope everyone's doing well. I had two follow-ups to Alex's last question. The first one is, is EQH taking a more active role in the management of AB, which I thought was run fairly autonomously over the last twenty years across three CEOs. And then the follow-up would be are there any limits in place to prevent EQH from buying more stock in the future.

There has been absolutely no change in the engagement or activities of Equitable versus the operations of AllianceBernstein Holding L.P. We continue to operate autonomously with its independent members board with independent members. We continue to set our own comp to revenue ratio in consultation, of course, with our board. And we intend to have that continue. So there's been absolutely no change, Craig, in that regard, and there's no change anticipated. Additionally, equitable there is no technical restriction that I'm aware of that precludes Equitable from potentially buying more units. And indeed, as you might have recognized that when we entered into the RGA transaction, we actually funded that acquisition through an investment Equitable made in units of private units of AB. To facilitate that. We raised $150 million to do that. I can see that ownership stake rising or falling depending on our acquisition activity. And I'd point out that it had fallen, as part of the acquisition of CarVal. So there isn't a limitation, Craig, that I'm aware of.

Thanks, Seth. Just a follow-up. Your retail muni SMA flows have been really, really strong. They might actually be the leading driver of organic growth at AB, but you can correct me there if I'm wrong. But we know US lawmakers now are discussing the removal or even cap of the tax exemptions on muni bond interest. So if enacted, do you see that as a headwind to flows, or do you think the secular drivers of munis in the SMA wrapper are so powerful that can sort of power right through that sort of issue.

Look. We spend a lot of time focusing as you might imagine, on what's going on in the reconciliation discussions in Washington. And as you know, muni deductibility has come up before. Our own view is that there won't be a repeal and that's what we hear from people we talk to in but it ain't over until it's over. So I recognize that. There may be areas within the high I'm sorry. Within the muni market that might see some sort of restriction. Or other ways, for example, limiting higher income individuals' ability to take that deduction. But our view is that the importance that muni financing has to states and municipalities is so critical and fundamental that we don't think that full repeal is on the table. But, obviously, we're watching it carefully. To answer your question more directly, I think in the event that such a change happened and it was repealed, I think you would certainly see a onetime reaction to that in the repricing of the sector to accommodate it. I think that would be a likely outcome, so there would be a shock to that market that would affect flows. But, ultimately, muni credit quality and credit migration is much slower as you know, I think, than corporate migration. It has been a very comfortable place for people to keep a portion of their retirement savings. And the need for income, if anything, is even greater than it's been before. And I don't see a better substitute for it. Now it may what constitutes a taxable American holdings may change to include nonmunicipal fixed income assets. That may well happen, but I think people are very comfortable investing in that space and will continue to be an important part of people's retirement.

And the also, the positive is in a scenario where there are no major changes, which is probably the best case scenario, you would expect, also some increased demand because there has been some volatility with some cautious overissuance of muni bonds in the first quarter. So there was a demand supply imbalance. That created a yield outlook that is even stronger than before, also relative to treasuries. So although negative, scenarios are out there and that there's definitely some risk, also, there is an upside when the markets normalize in terms of the tax-protected yield and high net worth and ultra-high net worth clients kind of using it as they always did over the last decades.

Thanks, Onur.

Your next question comes from the line of William Katz with TD Cowen. William, please go ahead.

Okay. Thank you very much. And, Tom, congratulations on the new role. Maybe start with on the expense side. I think if I heard you correctly, no change to the prior guide on non-comp of $600 million to $625 million. So is the first quarter just some delay of spend and that might accelerate into the back half of the year? Or what kind of flex would you have if the revenue backdrop were not to play out against your base assumptions?

Yeah. William, this is Tom. Thank you. You have it right there. $600 to $625 million, we're gonna remain sticking to that guide for now. Q1 is a bit lower. We do see some spend increasing throughout the remainder of the year. And based on that, if you annualize Q1, you'll see that we do have some flex. So we do have some levers that we can pull if we need to reduce expenses during the year. Look. If we don't see that base case roll forward, we're gonna need to take a more cautious route in spending.

Right. Is that what you're net?

Yeah. Yes. For sure. Thank you. And then maybe a big picture question. Doing very well on the all side. I think we're to unpack that a little bit. What's the allocation in the private wealth side now to all how much further do you think you have to sort of take that think last recollection was something around 10%, but just correct me on that. Then maybe you could unpack a little bit about some of the success factors you're having on the third-party side, which products you're seeing the most traction and where you see the greatest incremental distribution, connectivity. Thank you.

Sure. Yeah. Your recollection is right. We tend to have around 10% allocation in the client portfolios today. If you look at our overall AUM, particularly for certain client segments, like ultra network clients, obviously, family offices, that target allocation is much greater 20% or above. So there is definitely more upside, and, hence, we have a pretty robust product pipeline, not only to drive allocations from existing clients but use new products to acquire new clients. Mean, actually, if you look at our first quarter if I were to quote the net new assets, which is different than net flows. So if you were to look at it like a wealth manager, our annualized organic growth rate was 6.5% on a net new asset basis. So as a result, as the net new assets growth materializes, that will benefit alternatives. At the current rate, it is 10%. And with the ultra-high net worth and family office and even at a greater rate. In terms of the demand, it's broad-based. Obviously, private credit is a big part of the story. But, also, for our private wealth business, we onboard best-in-class managers that are additive in other adjacent asset classes, whether it's in real estate equity, venture capital, etcetera. So it's going to be relatively broad-based in our private wealth channel. But the trends in private credit strategies we offer, whether it's middle market lending, whether it's the CarVal strategies, the demands stayed strong in the first quarter, and expect it to remain that way for the rest of the year. In terms of other channels and where we are seeing the demand broadening, insurance definitely has been an uptick. As you know, we have been focusing on building on insurance capabilities globally. Leveraging some of the equitable synergy Equitable is…

Thank you very much for that.

Your next question comes from the line of Benjamin Budish with Barclays. Benjamin, please go ahead.

Hi, good morning and thanks for taking the question. I wanted to check on your private markets fee expectation. I guess, Tom, it sounds like you indicated that the expectation for this year was a guide up. When I was looking at the transcript from the last call, I think the commentary was $70 million to $75 million of recurring hurdle-based performance fees. Just want to make sure I have the sort of apples-to-apples comparison. And then the other piece I was curious about in the slides you indicate that AB PCI is the majority of private markets performance fees. Curious, could you remind us what were the other big pieces in 2023 and 2024 drove higher private markets fees? And is there potential for that to recur if conditions are correct? Or do you feel pretty good about the sort of 70% to 80% full year that you're looking at for '25?

So the other performance fees in 2024 were CarVal, PCI, and real estate. Is that what you're getting at there? Are you trying to understand the difference between '24 and projected '25?

Yeah. Just the commentary. So the or sorry. The it's the commentary for '25 for what you gave last quarter versus what you're saying today. So how does the 70 to 75 compare to what you're saying today of 90 to $105 million. Like, I assume the prior would not have included public markets, but

Yeah. We had some international SMID that resulted in about $19 million of performance fees in Q1. And that's why what that's what's leading to the revision upward. So the public markets forecast hasn't changed. The private markets forecast has not changed. But what increased it overall is because we had some public performance fees in Q1.

That's helpful. And then maybe a broader question on private markets. You talked a bit about investment-grade private credit. It's a huge theme we hear about from some of the other alternative managers. Just curious how much of your private markets activity today is investment grade? And when you talk about sort of expanding to other third-party insurance partners or other LPs sort of or even other wealth clients sort of outside your current your wealth business, how important is investment grade as part of that strategy? Thank you.

It's primarily an insurance story. When it comes to private wealth or third-party retail. Even the larger parts of the institutional markets that typically IG is not the dominant strategy, although it might be appealing in certain jurisdictions like Japan, etcetera, where they might be looking for some diversification from fixed income, but not the full risk exposure to the wider credit market. Within insurance, definitely, it's the highest growth part of our market. That's why we have been expanding our IG capabilities significantly either through team extensions as well as additional leadership talent. I mean, that was one of the reasons why we brought Jeff Cornell from a large insurance company who was the CIO there to lead our insurance efforts. That was back in May '24, as you might recall. And that has been a large part of our growth. In terms of specific percentages, I don't have it offhand, but again, in terms of net flows into private credit in insurance, IG has been the disproportionate amount, and I will expect it to remain that way.

Alright. Thank you very much. Very helpful.

Your next question comes from the line of Daniel Fannon with Jefferies. Daniel, go ahead.

Thanks. Good morning. Just wanted one more clarification on the performance fee outlook. Is the public markets numbers, this is just being conservative where you're assuming no performance fees because the performance is yet to be crystallized. Or is there a start of the year? Can you give us an update maybe on how those strategies are looking to give us a sense of what that might actually come to?

That's exactly right. The public markets don't forecast generally because they need to be crystallized.

Understood. And then just a follow-up on adviser productivity. And just within the private wealth. You talked about that improving. Can you talk about the mix of new advisers versus existing advisers and whether the newer ones coming onboard that you're actively recruiting more are the ones that are more productive or it's more broad-based?

It's more broad-based. Our strength in the private wealth channel has been the retention of our most tenured and most productive advisers. We have I think, above industry retention rates. And that has been a very strong contributor to productivity. And when we recruit, as you know, our recruiting mix tends to skew towards younger advisers, where we train. And developing our own model. Although we are adding more experienced advisers at a slow rate, consciously, right now, the recruiting mix remains heavily skewed towards younger advisers that we mold into our model. But there's definitely some upside from adding more experienced advisers over time. And we have a dedicated team effort to accelerate that in the coming quarters.

Again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of William Katz with TD Cowen. William, please go ahead.

Thanks. I just appreciate the follow-up. A couple of, sort of modeling nits just tracking too. Tom, just to follow-up on the public side of performance fees. Is there a way to give us a sense of either AUM that are eligible for performance fees and or how these those relative fund those funds are doing either relative or absolute return at the end of the Q1 versus maybe 12/31. As we think through, you know, sort of the incremental upside?

I think you're asking about the private side there, William, and those are very predictable. And those are recurring and consistent.

So that's why I'm very said comp. I'm sorry to interrupt. No. It's more on the public side. Just trying to get a sense of what how to think through the upside to that zero to 5 million guide here on page 12 of the slide deck. Think about just how is absolute relative performance sitting at three thirty-one versus twelve thirty-one, or are there any high watermark issues that we have to sort of contemplate?

With the volatility in the market, it's hard to respond to that one right now. From both an interest perspective and then just the equity markets and what they're doing.

Okay. And just you've mentioned in your commentary that there could be some pressure on the base fee rate given the market backdrop, if that makes sense. Is there a way that you could give us what the exit fee rate was on the base fee rate at three thirty-one maybe versus the average for the quarter at the prior actual number?

Know what else I have in front of me? And I'm sorry, William, is the fee rate for the quarter of 39.5 basis points.

Thank you very much. Your next question comes from the line of John Dunn with Evercore ISI. John? Please go ahead.

Thank you. Maybe the pipeline being up is great. Can you just get maybe give us a little more flavor of the temperature of different parts of the institutional side of the business, and also maybe kind of a look geographically if there's any different appetite for risk in different regions.

Yeah. Sure. Yeah. We feel very good about the continued strength in the pipeline. There has been definitely very strong kind of upside from particular fixed income. Insurance, as I mentioned earlier, was a big contributor. But we also had increased allocation to our systematic fixed income capabilities, which we launched relatively recent in the last several years, and it's great to see that that's opening a new type of opportunities for us. And we onboarded the in terms of the pipeline. We added a significant international client, a European client to that strategy. So feeling good about the momentum there. In terms of other areas of pockets of strength, I mean, definitely, the demand for asset-based finance is strong across different geographies. I'm talking at this point more prepipeline, but definitely terms if I look at the client conversations, what comes to the CRM, definitely, you would see a lot of asset-based finance type conversations. That is there. When it comes to equities, equities have been somewhat concentrated in the more under-allocated areas, whether it's emerging markets, whether it's value strategies, whether it's the small mid-cap. Right? Because it has been very dominated in the last several years with the large cap, with the mix, mega seven, etcetera. So those are the areas that we have seen more increased client interest, if you will.

Got it. And then US growth equities in Japan, so distributed in Japan, have been a nice tailwind for you guys. Are you seeing any kind of early signals of non-US investors avoiding business with the US?

Sorry. The last part of your question got muffled. Can you repeat the last part of your question, please?

Yeah. Sure. I used to use the Japanese or other non-U.S. investors avoiding investing in US stocks?

No. We have not seen that broad trend. My guess is gonna be a reaction more country by country. Definitely, we have not seen any major impact in our core geographies like Japan. Obviously, we need to monitor what happens over time. And maybe there could be some reaction to US exceptionalism. But so far, looking at the activity since the Liberation Day, we have not picked up anything dominant.

Thank you.

Hey, William. This is Tom. Let me just get back to you on that one thing. While we don't look at the exit fee rate, I will say the 39.5 basis points that we experienced for Q1 that ticked down a little bit in the later half of the quarter. So if that helps you in any way there.

That concludes the conference call. You may now disconnect.