AB Holding’s principal source of income and cash flow is attributable to its investment in AB Units. AB Holding’s interim condensed financial statements and notes and management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with those of AB included as an exhibit to this Form 10-Q. They also should be read in conjunction with AB’s audited financial statements and notes and MD&A included in AB Holding’s Form 10-K for the year ended December 31, 2025.
Results of Operations
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 % Change 2026 2025 % Change
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders $ 255,222 $ 210,467 21.3 % $ 550,707 $ 431,266 27.7 %
Weighted average equity ownership interest 31.3 % 37.5 % 31.3 % 37.5 %
Equity in net income attributable to AB Unitholders 79,997 78,830 1.5 172,252 161,583 6.6
Income taxes 8,280 8,582 (3.5) 15,297 17,301 (11.6)
Net income of AB Holding $ 71,717 $ 70,248 2.1 $ 156,955 $ 144,282 8.8
Net income per AB Holding Unit $ 0.77 $ 0.64 20.3 $ 1.69 $ 1.31 29.0
Distribution per AB Holding Unit (1) $ 0.82 $ 0.76 7.9 $ 1.65 $ 1.56 5.8 %
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(1)Distributions reflect the impact of AB’s non-GAAP adjustments.
AB Holding's net income for the three and six months ended June 30, 2026 increased $1.5 million and $12.7 million, respectively, compared to the corresponding periods in 2025, primarily due to higher net income attributable to AB Unitholders, partially offset by lower weighted average equity ownership interest in AB.
AB Holding’s partnership gross income is derived from its interest in AB. AB Holding’s income taxes, which reflect a 3.5% federal tax on its partnership gross income from the active conduct of a trade or business, are computed by multiplying AB qualifying revenues by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate. AB qualifying revenues are primarily U.S. investment advisory fees. AB Holding's effective tax rate was 10.4% during the three months ended June 30, 2026, compared to 10.9% during the three months ended June 30, 2025. AB Holding's effective tax rate was 8.9% during the six months ended June 30, 2026, compared to 10.7% during the six months ended June 30, 2025. See Note 7 to the condensed financial statements in Item 1 for the calculation of income tax expense.
Management Operating Metrics
As supplemental information, AB provides the performance measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin,” which are additional operating metrics management uses in evaluating and comparing the period-to-period operating performance of AB. Management uses these additional metrics in evaluating performance because they present a clearer picture of AB's operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense and other adjustment items. Similarly, management believes that these management operating metrics help investors better understand the underlying trends in AB's results and, accordingly, provide a valuable perspective for investors. Such measures are not based on generally accepted accounting principles (“non-GAAP measures”).
We provide the non-GAAP measures "adjusted net income" and "adjusted net income per unit" because our quarterly distribution per unit is typically our adjusted net income per unit (which is derived from adjusted net income).
These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both GAAP and non-GAAP measures in evaluating the company’s financial performance. The non-GAAP measures alone may pose limitations because they do not include all of AB’s revenues and expenses. Further, adjusted net income per AB Holding Unit is not a liquidity measure and should not be used in place of cash flow measures. See AB’s MD&A contained in Exhibit 99.1.
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The impact of these adjustments on AB Holding’s net income and net income per AB Holding Unit is as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in thousands, except per Unit amounts)
AB non-GAAP adjustments (1) $ 13,877 $ 39,228 $ (15,800) $ 79,364
AB income tax benefit (expense) on non-GAAP adjustments 190 (2,836) 2,615 (5,248)
AB non-GAAP adjustments, after taxes 14,067 36,392 (13,185) 74,116
AB Holding’s weighted average equity ownership interest in AB 31.3 % 37.5 % 31.3 % 37.5 %
Impact on AB Holding’s net income of AB non-GAAP adjustments $ 4,409 $ 13,630 $ (4,124) $ 27,769
Net income, GAAP basis $ 71,717 $ 70,248 $ 156,955 $ 144,282
Impact on AB Holding’s net income of AB non-GAAP adjustments 4,409 13,630 (4,124) 27,769
Adjusted net income $ 76,126 $ 83,878 $ 152,831 $ 172,051
Net income per AB Holding Unit, GAAP basis $ 0.77 $ 0.64 $ 1.69 $ 1.31
Impact of AB non-GAAP adjustments 0.05 0.12 (0.05) 0.25
Adjusted net income per AB Holding Unit $ 0.82 $ 0.76 $ 1.64 $ 1.56
(1)Includes all AB non-GAAP adjustments to pre-tax income.
The degree to which AB's non-GAAP adjustments impact AB Holding's net income fluctuates based on AB Holding's ownership percentage in AB.
Cash Distributions
AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to its Unitholders (including the General Partner). Available Cash Flow typically is the adjusted net income per Unit for the quarter multiplied by the number of Units outstanding at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted net income per Unit. If management determines, with the concurrence of the Board of Directors, that certain adjustments to Available Cash Flow are necessary or unnecessary, such adjustments will be made in future periods. See Note 2 to the condensed financial statements in Item 1 for a description of Available Cash Flow.
Capital Resources and Liquidity
During the six months ended June 30, 2026, net cash provided by operating activities was $165.4 million, compared to $203.9 million during the corresponding 2025 period. The decrease primarily resulted from lower cash distributions received from AB of $43.2 million.
During the six months ended June 30, 2026, net cash used in financing activities was $165.4 million, compared to $203.9 million during the corresponding 2025 period. The decrease was primarily due to lower cash distributions to Unitholders of $38.3 million.
Management believes that AB Holding will have the resources it needs to meet its financial obligations as a result of the cash flow AB Holding realizes from its investment in AB. AB Holding’s cash inflow is comprised entirely of distributions from AB. These distributions are subsequently distributed (net of taxes paid) in their entirety to AB Holding’s Unitholders. As a result, AB Holding has no liquidity risk as it only pays distributions to AB Holding’s Unitholders to the extent of distributions received from AB (net of taxes paid).
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Commitments and Contingencies
See Note 8 to the condensed financial statements in Item 1.
CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements provided by management in this report and in the portion of AB’s Form 10-Q attached hereto as Exhibit 99.1 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 factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately managed accounts, general economic conditions, the impact of tariffs and potential disruptions in international trade on financial markets, product and account performance, asset levels and economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see “Risk Factors” in Part I, Item 1A of our Form 10-K for the year ended December 31, 2025 and Part II, Item 1A in this Form 10-Q. Any or all of the forward-looking statements that we make in our Form 10-K, this Form 10-Q, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in “Risk Factors” and those listed below could also adversely impact our revenues, financial condition, results of operations and business prospects.
The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB and may also affect AB Holding because AB Holding’s principal source of income and cash flow is attributable to its investment in AB, include statements regarding:
•Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations: AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.
•Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs: Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.
•The outcome of litigation: Litigation is inherently unpredictable and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant and could have such an effect.
•The possibility that we will engage in open market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, for incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.
•Our determination that adjusted employee compensation expense, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues on an annual basis: Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.
•Our initiative to replace our investment management technology: While we believe that our initiative to replace our existing investment management technology will result in long term savings to the business based on reasonable assumptions as of the date of this report, the duration and complexity of the project creates a significant risk that our current assumptions may not be realized.
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