AlTi Global, Inc. (NASDAQ:ALTI) Q4 2023 Earnings Call Transcript

AlTi Global, Inc. (NASDAQ:ALTI) Q4 2023 Earnings Call Transcript March 15, 2024

AlTi Global, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon. My name is Boah and I will be your conference operator for today. At this time, I would like to welcome everyone to AlTi’s Fourth Quarter and Full Year 2023 Earnings Conference Call. During the call, your lines will remain in a listen-only mode. After the speaker’s remarks, there will be a question-and-answer session. I’d like to advise all parties that this conference call is being recorded and a replay of the webcast is available on AlTi’s Investor Relations website. Now, at this time, I’ll turn things over to Lily Arteaga, Head of Investor Relations for AlTi. Please go ahead, ma’am.

Lily Arteaga: Good afternoon to everyone on the call today. Joining me this afternoon are Michael Tiedemann, our CEO; and Stephen Yarad, our CFO. We invite you to visit the Investor Relations section of our website at www.alti-global.com to view our earnings materials, including our updated investor presentation. I would like to remind everyone that certain statements made during the call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as anticipate, believe, continue, estimate, expect, future, intend, may, plan, and will, or similar words. Because these forward-looking statements involve both known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

AlTi assumes no obligation or responsibility to update any forward-looking statements. During this call, some comments may include references to non-GAAP financial measures. Full reconciliations can be found in our earnings presentations and our related SEC filings. As I mentioned, we filed an updated investor presentation earlier today. With that, I’d like to turn the call over to Mike.

Michael Tiedemann: Thank you, Lily. Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2023 earnings call. 2023 was a pivotal year for the AlTi team. In January of last year, we completed our business combination, which brought three companies together and culminated in our listing as a public company. Concurrent with the closing, we secured a $250 million credit facility and in the second quarter we increased our share liquidity and float through the registration of the PIPE shares as well as the successful completion of a warrant exchange. We also conducted a comprehensive strategic review of the newly combined operating structure. Through that process, we identified and actioned $16 million in annualized run rate cost savings initiatives.

We expect that these cost savings will be fully realized in our Q3 2024 results. As a firm, we completed key transactions across both of our business segments, Wealth Management and Strategic Alternatives. This included expanding our footprint in key markets like Singapore and Northern Italy, and increasing our stake in managers of uncorrelated alternative strategies, which have continuously outperform their benchmarks. A few weeks ago we announced a strategic investment from Allianz X and Constellation Wealth Capital or CWC. Upon closing, this transaction will provide AlTi with up to $450 million to execute on our strategic priorities. We have a robust, actionable, M&A pipeline, and believe these relationships will lead to significant momentum.

See also  25 Countries with the Least Access to Safe Drinking Water and 15 States with the Highest Homeless Population in the US.

Q&A Session

We have a clear path to organic growth through new client wins, given the expanded depth of resources, network, and talent, which these partners bring. I’ll expand more on this transaction after we review our operational and financial results. In 2023, we grew our total assets under management and advisement by 10%, mostly driven by portfolio performance and organic client growth in Wealth Management. Total assets in that business segment grew by nearly 20% in the year. In the fourth quarter, AlTi generated revenues of $92 million and for the full year, we recorded revenues of $251 million. Notably, 77% of revenues in the year were recurring for management and advisory fees. The fourth quarter reflected incentive fees primarily from the robust performance of the event-driven strategy in our Strategic Alternatives segment.

Despite these strong topline results, our GAAP results were impacted primarily by decisions taken to restructure or exit unprofitable transaction-oriented businesses in our Strategic Alternatives segment. Consequently, we reported loss of $319 million for the full year of 2023. We do not anticipate further significant impairments in 2024 as much of the work to streamline non-core operations is behind us, and our focus is to further invest in core operations that demonstrate strong recurring revenue fundamentals. Normalized for one-off items, our adjusted net loss was $8 million for the year. Quarter-over-quarter adjusted EBITDA improved $13 million to $10 million for the fourth quarter and for the full year adjusted EBITDA was $29 million. We believe our performance in the fourth quarter demonstrates the power of our diversified platform across Wealth Management and Strategic Alternatives.

In Wealth Management, we had a record year of growth in the U.S., driven by market performance where we had a risk on bias given our view that the U.S. would achieve an economic soft landing, as well as organic asset growth resulting from a combination of our business development efforts and asset increases from our existing clients. Internationally, the Wealth Segment benefited from the integration of the legacy businesses as well as the Singapore acquisition and the increased stake in the Lugano-based multi-family office. As anticipated, our Strategic Alternatives segment generated robust incentive fees in the fourth quarter, resulting from the strong performance of the event-driven strategy, which is up 5.4% in the quarter and 10.5% for the year.

This marked the 30th consecutive year of positive performance for the strategy, a remarkable achievement. This healthy performance not only benefits 2023 results, but also creates positive momentum for fundraising in 2024. We are encouraged by indications of investor interest in the event-driven strategy as well as our Asia credit strategy. Our credit strategy is gaining traction because of its strong relative performance compared to the Asia High Yield Index, initial expectations of a recovery in that region, and the growing depth of the Asia credit markets. Additionally, after several quarters of abated activity in real estate given the rising rate environment, I’m very pleased to report that our private real estate team arranged the purchase of the GlaxoSmithKline Corporate Headquarters in London by an investor group, which will be an important restoration and repurposing project.

For our role in structuring the deal, we are on the origination fee in the quarter and importantly, we will receive recurring management fees going forward. To summarize, last year we achieved several operational milestones as the year was centered on inward strategic initiatives. This included the integration of our legacy businesses, reinforcing our focus on recurring revenues, streamlining entities, improving core operations, and establishing best practices throughout the organization. With those initiatives taking hold in 2024, our focus will be on external action. We are confident that our solid foundations will enable us to accelerate momentum through profitable organic and inorganic growth globally across both of our segments. Another key priority this year will be raising AlTi’s profile in the capital markets.

This will include evaluating opportunities to increase our floats, driving investor community interests and ultimately attracting long-term institutional investors. To that end, we were pleased to recently announce a strategic relationship with Allianz X and CWC, a transformative transaction for AlTi. These investments, which totaled up to $450 million will support our strategy to become the leading global independent multi-family office for the ultra-high net worth segment with a targeted expertise in Alternatives. Importantly, the relationships enable AlTi to establish long-term partnerships with experienced and well-respected players in the global financial services sector. We believe we can expand and fortify AlTi’s global footprint in key markets and execute on strategic acquisitions through disciplined deployment of this gross capital.

We plan to deepen AlTi’s reach and expand within our current markets. We also seek to enter new markets in the United States, Europe, and Asia where we can grow our client base as well as enhance our service offering to existing clients across multiple jurisdictions. As a global operation with local presence across 21 financial centers, AlTi is uniquely positioned to serve single-family offices. Our platform provides significant benefits to the investment and administrative teams, who serve large families by enabling them to leverage our global infrastructure, scale, resources, deal flow, while significantly reducing overall costs. These benefits will only be enhanced by the partnerships with Allianz and Constellation. Additionally, we will capitalize on our organic growth initiatives.

There is a clear opportunity to expand revenue and lead generation opportunities across a larger and more globally diverse client base. AlTi can expand its tailored solution set through the co-investment opportunities across alternatives, impact investment strategies, and when appropriate, partnering with Allianz to structure bespoke solutions. Finally, accretive M&A will be fundamental to our go-forward strategy. We anticipate future transaction will be a significant driver of topline growth and margin expansion, as we build off the existing platform. As I mentioned, we’ve identified a robust M&A pipeline. This infusion of growth capital positions us to continue our track record of attractive, profitable deals across both Alternatives and Wealth.