ALLIANCEBERNSTEIN HOLDING L.P. 10-Q

Item 1. Financial Statements ALLIANCEBERNSTEIN HOLDING L.P. Condensed Statements of Financial Condition (in thousands, except unit amounts) (unaudited) March 31, 2021 December 31, 2020 ASSETS Investment in AB $ 1,632,943 $ 1,605,941 Other assets — 92 Total assets $ 1,632,943 $ 1,606,033 LIABILITIES AND PARTNERS’ CAPITAL Liabilities: Other liabilities $ 7,654 $ 1,876 Total liabilities 7,654 1,876 Commitments and contingencies ( See Note 8 ) Partners’ capital: General Partner: 100,000 general partnership units issued and outstanding 1,395 1,410 Limited partners: 100,389,849 and 98,222,942 limited partnership units issued and outstanding 1,712,801 1,656,816 AB Holding Units held by AB to fund long-term incentive compensation plans ( 51,973 ) ( 20,171 ) Accumulated other comprehensive loss ( 36,934 ) ( 33,898 ) Total partners’ capital 1,625,289 1,604,157 Total liabilities and partners’ capital $ 1,632,943 $ 1,606,033 See Accompanying Notes to Condensed Financial Statements. 1 Index ALLIANCEBERNSTEIN HOLDING L.P. Condensed Statements of Income (in thousands, except per unit amounts) (unaudited) Three Months Ended March 31, 2021 2020 Equity in net income attributable to AB Unitholders $ 88,907 $ 69,914 Income taxes 7,820 7,655 Net income $ 81,087 $ 62,259 Net income per unit: Basic $ 0.81 $ 0.63 Diluted $ 0.81 $ 0.63 See Accompanying Notes to Condensed Financial Statements. 2 Index ALLIANCEBERNSTEIN HOLDING L.P. Condensed Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Net income $ 81,087 $ 62,259 Other comprehensive (loss) income: Foreign currency translation adjustments, before tax ( 2,732 ) ( 7,627 ) Income tax (expense) benefit ( 30 ) 6 Foreign currency translation adjustments, net of tax ( 2,762 ) ( 7,621 ) Changes in employee benefit related items: Amortization of prior service cost ( 2 ) 3 Recognized actuarial (loss) gain ( 274 ) 169 Changes in employee benefit related items ( 276 ) 172 Income tax benefit (expense) 2 ( 28 ) Employee benefit related items, net of tax ( 274 ) 144 Other comprehensive (loss) ( 3,036 ) ( 7,477 ) Comprehensive income $ 78,051 $ 54,782 See Accompanying Notes to Condensed Financial Statements. 3 Index ALLIANCEBERNSTEIN HOLDING L.P. Condensed Statements of Changes in Partners’ Capital (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 General Partner’s Capital Balance, beginning of period $ 1,410 $ 1,402 Net income 83 62 Cash distributions to Unitholders ( 98 ) ( 84 ) Balance, end of period 1,395 1,380 Limited Partners’ Capital Balance, beginning of period 1,656,816 1,619,200 Net income 81,004 62,197 Cash distributions to Unitholders ( 97,947 ) ( 83,621 ) Retirement of AB Holding Units ( 29,847 ) ( 14,220 ) Issuance of AB Holding Units to fund long-term incentive compensation plan awards 100,861 8,458 Exercise of compensatory options to buy AB Holding Units 1,914 147 Balance, end of period 1,712,801 1,592,161 AB Holding Units held by AB to fund long-term incentive compensation plans Balance, beginning of period ( 20,171 ) ( 27,436 ) Change in AB Holding Units held by AB to fund long-term incentive compensation plans ( 31,802 ) ( 1,566 ) Balance, end of period ( 51,973 ) ( 29,002 ) Accumulated Other Comprehensive (Loss) Income Balance, beginning of period ( 33,898 ) ( 40,628 ) Foreign currency translation adjustment, net of tax ( 2,762 ) ( 7,621 ) Changes in employee benefit related items, net of tax ( 274 ) 144 Balance, end of period ( 36,934 ) ( 48,105 ) Total Partners’ Capital $ 1,625,289 $ 1,516,434 See Accompanying Notes to Condensed Financial Statements. 4 Index ALLIANCEBERNSTEIN HOLDING L.P. Condensed Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income $ 81,087 $ 62,259 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income attributable to AB Unitholders ( 88,907 ) ( 69,914 ) Cash distributions received from AB 106,091 91,562 Changes in assets and liabilities: Decrease in other assets 92 — Increase (decrease) in other liabilities 5,778 ( 901 ) Net cash provided by operating activities 104,141 83,006 Cash flows from investing activities: Investments in AB with proceeds from exercise of compensatory options to buy AB Holding Units ( 1,914 ) ( 147 ) Net cash used in investing activities ( 1,914 ) ( 147 ) Cash flows from financing activities: Cash distributions to Unitholders ( 98,045 ) ( 83,705 ) Capital contributions (to) from AB ( 6,096 ) 699 Proceeds from exercise of compensatory options to buy AB Holding Units 1,914 147 Net cash used in financing activities ( 102,227 ) ( 82,859 ) Change in cash and cash equivalents — — Cash and cash equivalents as of beginning of period — — Cash and cash equivalents as of end of period $ — $ — See Accompanying Notes to Condensed Financial Statements. 5 Index ALLIANCEBERNSTEIN HOLDING L.P. Notes to Condensed Financial Statements March 31, 2021 (unaudited) The words “we” and “our” refer collectively to AllianceBernstein Holding L.P. (“AB Holding”) and AllianceBernstein L.P. and its subsidiaries (“AB”), or to their officers and employees. Similarly, the word “company” refers to both AB Holding and AB. Where the context requires distinguishing between AB Holding and AB, we identify which of them is being discussed. These statements should be read in conjunction with the audited consolidated financial statements included in the Form 10-K for the year ended December 31, 2020. 1. Business Description, Organization and Basis of Presentation Business Description AB Holding’s principal source of income and cash flow is attributable to its investment in AB limited partnership interests. The condensed financial statements and notes of AB Holding should be read in conjunction with the condensed consolidated financial statements and notes of AB included as an exhibit to this quarterly report on Form 10-Q and with AB Holding’s and AB’s audited financial statements included in AB Holding’s Form 10-K for the year ended December 31, 2020. AB provides diversified investment management, research and related services globally to a broad range of clients. Its principal services include: • Institutional Services – servicing its institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as Equitable Holdings, Inc. ("EQH") and its subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles. • Retail Services – servicing its retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles. • Private Wealth Management Services – servicing its private clients, including high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds, mutual funds and other investment vehicles. • Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options. AB also provides distribution, shareholder servicing, transfer agency services and administrative services to the mutual funds it sponsors. AB’s high-quality, in-depth research is the foundation of its business. AB’s research disciplines include economic, fundamental equity, fixed income and quantitative research. In addition, AB has expertise in multi-asset strategies, wealth management, environmental, social and corporate governance ("ESG"), and alternative investments. AB provides a broad range of investment services with expertise in: • Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities; • Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies; • Alternative investments, including hedge funds, fund of funds, direct lending and private equity; • Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds; and 6 Index • Some passive management, including index and enhanced index strategies. Organization As of March 31, 2021, EQH owned approximately 4.0 % of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AB Holding (“AB Holding Units”). AllianceBernstein Corporation (an indirect wholly-owned subsidiary of EQH, “General Partner”) is the general partner of both AB Holding and AB. AllianceBernstein Corporation owns 100,000 general partnership units in AB Holding and a 1 % general partnership interest in AB. As of March 31, 2021, the ownership structure of AB, expressed as a percentage of general and limited partnership interests, was as follows: EQH and its subsidiaries 62.8 % AB Holding 36.5 Unaffiliated holders 0.7 100.0 % Including both the general partnership and limited partnership interests in AB Holding and AB, EQH and its subsidiaries had an approximate 64.3 % economic interest in AB as of March 31, 2021. Basis of Presentation The interim condensed financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The condensed statement of financial condition as of December 31, 2020 was derived from audited financial statements. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under principles generally accepted in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission. AB Holding records its investment in AB using the equity method of accounting. AB Holding’s investment is increased to reflect its proportionate share of income of AB and decreased to reflect its proportionate share of losses of AB and cash distributions made by AB to its Unitholders. In addition, AB Holding's investment is adjusted to reflect its proportionate share of certain capital transactions of AB. 2. Cash Distributions AB Holding is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of Limited Partnership of AB Holding (“AB Holding Partnership Agreement”), to its Unitholders pro rata in accordance with their percentage interests in AB Holding. Available Cash Flow is defined as the cash distributions AB Holding receives from AB minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB Holding for use in its business (such as the payment of taxes) or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow. On April 29, 2021, the General Partner declared a distribution of $ 0.81 per unit, representing a distribution of Available Cash Flow for the three months ended March 31, 2021. Each general partnership unit in AB Holding is entitled to receive distributions equal to those received by each AB Holding Unit. The distribution is payable on May 27, 2021 to holders of record at the close of business on May 10, 2021. 7 Index 3. Long-term Incentive Compensation Plans AB maintains several unfunded, non-qualified long-term incentive compensation plans, under which the company grants awards of restricted AB Holding Units to its employees and members of the Board of Directors, who are not employed by AB or by any of AB’s affiliates (“Eligible Directors”). AB funds its restricted AB Holding Unit awards either by purchasing AB Holding Units on the open market or purchasing newly-issued AB Holding Units from AB Holding, and then keeping these AB Holding Units in a consolidated rabbi trust until delivering them or retiring them. In accordance with the AB Holding Partnership Agreement, when AB purchases newly-issued AB Holding Units from AB Holding, AB Holding is required to use the proceeds it receives from AB to purchase the equivalent number of newly-issued AB Units, thus increasing its percentage ownership interest in AB. AB Holding Units held in the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AB. Repurchases of AB Holding Units for the three months ended March 31, 2021 and 2020 consisted of the following: Three Months Ended March 31, 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. Each quarter, AB considers whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker selected by AB has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on AB’s behalf. Repurchases are subject to regulations promulgated by the SEC as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the first quarter of 2021 expired at the close of business on April 28, 2021. AB may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under its incentive compensation award program and for other corporate purposes. During the first three months of 2021 and 2020, AB awarded to employees and Eligible Directors 3.4 million and 0.1 million restricted AB Holding Unit awards, respectively. AB used AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these restricted AB Holding Unit awards. During the first three months of 2021 and 2020, AB Holding issued 0.1 million and 5,182 AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $ 1.9 million and $ 0.1 million, respectively, received from award recipients as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units. 8 Index 4. Net Income per Unit Basic net income per unit is derived by dividing net income by the basic weighted average number of units outstanding for each period. Diluted net income per unit is derived by adjusting net income for the assumed dilutive effect of compensatory options (“Net income – diluted”) and dividing by the diluted weighted average number of units outstanding for each period. Three Months Ended March 31, 2021 2020 (in thousands, except per unit amounts) Net income – basic $ 81,087 $ 62,259 Additional allocation of equity in net income attributable to AB resulting from assumed dilutive effect of compensatory options 18 15 Net income – diluted $ 81,105 $ 62,274 Weighted average units outstanding – basic 100,146 98,309 Dilutive effect of compensatory options 32 32 Weighted average units outstanding – diluted 100,178 98,341 Basic net income per unit $ 0.81 $ 0.63 Diluted net income per unit $ 0.81 $ 0.63 Three Months Ended March 31, 2021 2020 (amounts as shown) Anti-dilutive options excluded from diluted net income — 29,056 5. Investment in AB Changes in AB Holding’s investment in AB during the three-month period ended March 31, 2021 are as follows (in thousands): Investment in AB as of December 31, 2020 $ 1,605,941 Equity in net income attributable to AB Unitholders 88,907 Changes in accumulated other comprehensive income ( 3,036 ) Cash distributions received from AB ( 106,091 ) Additional investments with proceeds from exercise of compensatory options to buy AB Holding Units 1,914 Capital contributions to AB 6,096 AB Holding Units retired ( 29,847 ) AB Holding Units issued to fund long-term incentive compensation plans 100,861 Change in AB Holding Units held by AB for long-term incentive compensation plans ( 31,802 ) Investment in AB as of March 31, 2021 $ 1,632,943 9 Index 6. Units Outstanding Changes in AB Holding Units outstanding during the three-month period ended March 31, 2021 are as follows: Outstanding as of December 31, 2020 98,322,942 Options exercised 79,108 Units issued 2,847,552 Units retired ( 759,753 ) Outstanding as of March 31, 2021 100,489,849 7. Income Taxes AB Holding is a “grandfathered” publicly-traded partnership (“PTP”) for federal tax purposes and, accordingly, is not subject to federal or state corporate income taxes. However, AB Holding is subject to the 4.0 % New York City unincorporated business tax (“UBT”), net of credits for UBT paid by AB, and to a 3.5 % federal tax on partnership gross income from the active conduct of a trade or business. AB Holding’s partnership gross income is derived from its interest in AB. AB Holding’s federal income tax is computed by multiplying certain AB qualifying revenues (primarily U.S. investment advisory fees, research payments and brokerage commissions) by AB Holding’s ownership interest in AB, multiplied by the 3.5 % tax rate. AB Holding Units in AB’s consolidated rabbi trust are not considered outstanding for purposes of calculating AB Holding’s ownership interest in AB. Three Months Ended March 31, 2021 2020 % Change (in thousands) Net income attributable to AB Unitholders $ 244,131 $ 194,320 25.6 % Multiplied by: weighted average equity ownership interest 36.4 % 36.0 % Equity in net income attributable to AB Unitholders $ 88,907 $ 69,914 27.2 AB qualifying revenues $ 706,392 $ 702,340 0.6 Multiplied by: weighted average equity ownership interest for calculating tax 30.6 % 30.6 % Multiplied by: federal tax 3.5 % 3.5 % Federal income taxes 7,572 7,515 State income taxes 248 140 Total income taxes $ 7,820 $ 7,655 2.2 Effective tax rate 8.8 % 10.9 % In order to preserve AB Holding’s status as a “grandfathered” PTP for federal income tax purposes, management ensures that AB Holding does not directly or indirectly (through AB) engage in a substantial new line of business. If AB Holding were to lose its status as a “grandfathered” PTP, it would be subject to corporate income tax, which would reduce materially AB Holding’s net income and its quarterly distributions to AB Holding Unitholders. 10 Index 8. Commitments and Contingencies Legal and regulatory matters described below pertain to AB and are included here due to their potential significance to AB Holding's investment in AB. With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable and the amount of the loss can be reasonably estimated, we record an estimated loss for the expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we can determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss. AB may be involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which may allege significant damages. It is reasonably possible that AB could incur losses pertaining to these matters, but management cannot currently estimate any such losses. Management, after consultation with legal counsel, currently believes that the outcome of any individual matter that is pending or threatened, or all of them combined, will not have a material adverse effect on our results of operations, financial condition or liquidity. However, any inquiry, proceeding or litigation has the element of uncertainty; management cannot determine whether further developments relating to any individual matter that is pending or threatened, or all of them combined, will have a material adverse effect on our results of operations, financial condition or liquidity in any future reporting period. 11 Index