AllianceBernstein Holding L.P. Units

Thank you for standing by, and welcome to the Alliance Bernstein First 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 one week. I would now like to turn the conference over to your host for the call, the Head of Investor Relations for AB, Ms. Hallie Eldner. Please go ahead.

Thank you, Jack. Good morning, everyone, and welcome to our first 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 Wiesenseel, 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'd like to point out the safe harbor language on slide one of our presentation. You can also find our safe harbor language in the MD&A of our first quarter 2019 10Q, 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'll turn it over to Seth.

Thank you, Hallie. Good morning, and thank you for joining us today. We maintained strong underlying momentum in many areas of our business in the fourth quarter. Our results reflect continued success of our revitalized active equity platform, which attracted $1 billion in net new flows and a rebound in Asia X Japan taxable fixed income flows. Firm-wide active flows were positive $2.2 billion, translating to a 2% active annualized organic growth rate. And while adjusted revenues, operating income, and margin were lower year on year, we remained focused on expense management. Now let's get into the specifics, starting with a firm-wide overview on slide three. First quarter gross sales of $23.1 billion declined 32% from last year's first quarter sales of $34.1 billion. which included $10.1 billion of CRS funding and $1.3 billion of sales related to option advantage and private wealth. Excluding these lumpy fundings, growth sales were slightly higher year over year. On a sequential basis, firm-wide growth sales increased 9%. Total firm-wide net flows were positive $1.1 billion and represent our third straight quarter of net inflows. The strong market recovery in the quarter and net inflows increased total assets under management to $554.7 billion at quarter end. That's an increase of 1% year on year and 7% sequentially. Average AUM was down 4% versus the prior year period, but increased 1% versus the fourth quarter of 2018. Slide four shows our quarterly flow trend by channel. On the right side of the chart, you can see that firm-wide flows were driven by retail and private wealth. In retail, gross sales of $16.4 billion increased versus both prior periods, and net inflows of $5.3 billion increased significantly, driven by a resurgence in fixed income in Asia ex-Japan region and continued positive active equity flows. In private wealth, both growth sales and redemptions improved sequentially. leading to positive net flows of $500 million. In the bottom left chart, you can see the institutional funding slowed, and we were hit hard with redemptions, largely in taxable fixed income, due to a variety of factors and decisions made by our clients during the market dislocation in the prior quarter. This resulted in institutional net outflows of 4.7 billion. Now let's turn to investment performance, beginning on slide five. Our near-term fixed income performance has been challenged, though we saw some improvement in the one-year number this quarter as year-to-date performance has been generally quite good. More importantly, our three- and five-year track records remain strong, with 85% and 90% of our assets outperforming, respectively. In equities, our investment performance was solid, with 64% of assets outperforming for the one year, 59% for the three-year, and 87% for the five-year. Slide six and seven provide more insight on retail fixed income and equity investment performance. The fixed income table on slide six reflects our near-term performance challenges, but also shows that long-term track records remain compelling. Performance in our income portfolios have been particularly strong. American income is top decile for the one year and top quartile for the five years. European income is top quartile for the one and three year periods and top decile for five year. Mortgage income remains top quartile for the three and five year periods. And AB income remains top decile for the three and five year periods. What's more, every eligible fund on this page was top half for the five year period. In equities, on slide seven, why we've seen our most notable underperformance in our value and emerging market strategies. Our concentrated growth, low vol, global core, large cap growth, and small and mid-cap strategies have been notable performers. Solid long-term track records like these have been a major driver of our continued active equity net inflows. Let's move on to our client channels beginning with retail on slide eight. We've spent years investing in our retail product offerings to better serve clients so that our business is more diversified and less reliant on a single offering. And while we've been successful reducing our leverage to the Asia X Japan fixed income market, the outlook for a steadier rate environment attracted those investors back to the market. The top left chart shows the resurgence in industry-wide retail bond fund sales in the region. Industry sales for just January and February were up in all three categories compared to the entire fourth quarter. The rebound in sales positively affected our overall sales and flows in the quarter. AB's Asia X Japan sales were up 18% year-on-year and more than doubled versus the fourth quarter of 2018. Because of the increased diversity of our offering, we also saw noteworthy sales strength in other regions during the quarter. including sequential and year-on-year sales growth in U.S. retail, which had its best sales quarter since the second quarter of 2007, and sequential increases in EMEA and Latin America. Channel net inflows of $5.3 billion were our best in 19 years. And our sources of flows are diverse. Thirteen funds attracted net flows of $100 million or more in the first quarter, with seven of them fixed income and six of them active equity. American income portfolio and global high yield were each net flow positive during the quarter. The first time we've seen that since the third quarter of 2017. Our innovation efforts are paying off too. Today, 14 retail services launched since 2009 have a billion or more in assets under management. and we continue to educate the marketplace on flex fee. Clients both understand and are embracing this concept thanks to continued outreach and success of new digital tools that help calculate fees. We added $100 million in assets during the quarter to bring our total external assets to $240 million, all before these funds hit their three-year track records. Now I'll talk about institutional on slide nine. Like in retail, we're seeing the benefits today of years we've spent rebuilding our active equity franchise. The top left chart shows continued active equity sales and flow momentum. Active equity gross sales of $2.2 billion represent our seventh straight billion-dollar-plus equity sales quarter, and our active equity net flows of $900 million were positive for the fifth straight quarter. This is impressive, especially considering the industry-wide contraction. While total channel sales were down versus both prior periods and $4.7 billion of net outflows increased driven by taxable fixed income redemptions, we're encouraged by our quarter end pipeline of $11.4 billion, an 18% increase versus the fourth quarter. Our actively managed pipeline of $9.7 billion, which excludes CRS, is the highest it's been since tracking began more than seven years ago. This bodes well for our future revenues and fee rate. In fact, 50% of our $4.2 billion in new pipeline ads in the first quarter were in active equity strategies. Plus, ads in taxable munis, emerging markets debt, REA partners, and U.S. Treasury short duration resulted in the pipeline's annualized fee base exceeding $30 million for the sixth consecutive quarter. Moving to private wealth management on slide 10. After the volatility of the fourth quarter, the value of our advice came through for our clients as both sales and redemptions improved. Excluding inflows from last year's first quarter option advantage launch, Growth sales of $3.3 billion were our best first quarter sales in 10-plus years. And net flows returned to positive territory with $500 million. We continued to make progress appealing to a broader and more affluent client base and added $700 million in commitments to our suite of alternative and focused equity services during the quarter, bringing total deployed and committed assets to $9.8 billion at quarter end. That's the bottom left chart. Clients are increasingly attracted to our responsible and impact investing portfolio offerings. Assets in a diverse array of responsible equity and fixed income services totaled $1.9 billion at quarter end, a 23% increase since year end. We're seeing strong client engagement as well, with the number of client meetings up 5% compared to the first quarter of 2018. and we've had a positive response to our Women in Wealth content campaign, podcast, and microsite, plus traction with other focused Bernstein Insight podcasts, including The Pulse and Inspired Investing. I'll finish our business overview with the sell side on slide 11. After holding up well in 2018 as the industry adopted to the implementation of MIFID II, Bernstein Research had a challenging first quarter, as did many of our peers in the equity trading business. Revenues of $90 million were down 21% year on year and 22% sequentially, driven by significantly lower client trading volumes across all three regions and lower volatility in the U.S., shown on the bottom left chart. While disappointing, we're playing the long game in this business and know that a differentiated offering was what will ultimately drive client activity. We continued building our offering in other promising areas around the world, particularly in Asia. In the first quarter, we launched on three new sectors, hired a new Asia quant analyst, and hired and promoted three analysts to cover China A shares. And we added access to three new dark pools in Japan and expect Indian trading to go live later this year. While not a first quarter event, we closed our acquisition of Autonomous Research on April 1. We're now covering approximately 230 financial stocks across the US and Europe and added 26 analysts globally. I'll close by highlighting some of our first quarter accomplishments on slide 12. We continue to deliver differentiated returns for our clients with our diverse products. and we further scaled and commercialized our offering with momentum in active equities and in diverse regions. We remain focused on expense management and executing our relocation to Nashville. We're proud of what we've achieved during the quarter despite the presence of some headwinds. Now I'll turn it over to John to review our financials.