AlTi Global, Inc. — Q1 2023 Form 10-Q
Reporting period: The statements cover January 3–March 31, 2023, following the January 3 business combination. The 2022 comparison covers only predecessor Tiedemann Wealth Management Holdings (TWMH), excludes Alvarium and TIG, and is not comparable. Amounts below are in U.S. dollars unless indicated.
Business context
AlTi is a global wealth and asset management business. At quarter-end, it reported approximately $36.1 billion of AUM and $66.7 billion of AUA. Wealth Management accounted for $30.4 billion of AUM and $45.6 billion of AUA; Asset Management reported $5.7 billion of AUM and $21.1 billion of AUA. The company acquired 51% of Umbrella in the business combination; historical TWMH and TIG holders retained a 49% economic interest.
Financial results and liquidity
| Metric | Q1 2023 | Prior comparable period |
|---|---|---|
| Total revenue | $58.0 million | $20.0 million |
| Operating loss | $43.4 million | Operating income of $1.2 million |
| Net loss | $90.3 million | Net income of $0.9 million |
| Net loss attributable to AlTi | $68.7 million; $1.19 basic and diluted loss per share | $0.9 million income |
| Operating cash flow | $(68.2) million | $(3.6) million |
| Cash and cash equivalents at period-end | $17.8 million | $7.1 million at December 31, 2022 |
| Debt, net of financing costs | $133.3 million | $21.2 million at December 31, 2022 |
| Adjusted EBITDA (non-GAAP) | $10.8 million | $4.7 million |
Revenue comprised $46.5 million of management/advisory fees, $0.6 million of incentive fees, $10.0 million of investment distributions, and $1.0 million of other fees and income. The reported operating loss was approximately 75% of revenue; the net loss included substantial fair-value and transaction-related items.
At March 31, total assets were $1.42 billion and total liabilities were $455.4 million. Assets included $541.2 million of intangible assets and $530.8 million of goodwill. The company reported $960.7 million of total equity, including $590.2 million of non-controlling interests.
Operating cash use included compensation and benefits outflows of approximately $33.9 million and payment of approximately $26.5 million of accrued business-combination professional fees. Investing cash use was $114.1 million, including $100.0 million paid for acquired historical equity. Financing activities provided $4.9 million, as $145.7 million of new borrowings largely funded $136.3 million of debt repayments.
Changes, unusual items and management commentary
- The business combination added Alvarium and TIG to the reporting group and drove much of the increase in revenue and expenses. Management attributed approximately $25.9 million of the increase in management/advisory fees to their inclusion.
- Q1 expenses included approximately $30.5 million of one-time, non-cash compensation-related charges, including legacy Alvarium incentive awards, and $17.8 million of business-combination costs. Fair-value losses included $12.9 million on warrant liabilities and $29.2 million on earn-out liabilities; the latter reflected share-price appreciation.
- Management reported adjusted EBITDA of $10.8 million, a non-GAAP measure with significant exclusions, including transaction costs, stock-based compensation, and warrant and earn-out fair-value changes.
- The company’s $250 million senior secured credit facility comprises a $100 million term loan and a $150 million revolver. At quarter-end, $98.8 million of term loans and $36.3 million of the revolver were outstanding. Borrowings are variable-rate, with SOFR-based margins of 2%–3% or base-rate margins of 1%–2%; the facilities mature in January 2028.
- Management described volatile markets, banking-sector stress, tighter lending standards and possible recession as risks that could affect fees, investment values, liquidity and future results. It provided no specific financial guidance in the supplied filing text.
- The $121.0 million earn-out liability is tied to share-price milestones or a change of control. The $13.3 million Tax Receivable Agreement (TRA) liability reflects estimated future payments; the agreement generally requires payment of 85% of specified tax benefits to former owners. Both valuations depend on estimates and can affect GAAP earnings.
- AlTi disclosed ineffective disclosure controls as of March 31 and material weaknesses inherited from Alvarium and TWMH, involving financial-statement review, staffing and technical accounting, and controls for equity compensation, business combinations and income taxes. Remediation is underway; management said it could not estimate its cost or assure successful remediation.
- UK media allegations concerning Home REIT and its adviser were identified as a potential litigation and regulatory risk. No litigation had been commenced against Home REIT or AFM UK as of the filing’s stated assessment; the company said potential claims could be material, while their likelihood and amount could not be reliably assessed.
Outlook and subsequent events
On April 6, 2023, AlTi completed its acquisition of Singapore-based AWLP, which had approximately $971 million of AUM at March 31. It paid $15.5 million at closing, with additional payments due on the third and fifth anniversaries based on recurring revenue; accounting for the acquisition was still in progress. On May 5, AlTi launched an offer to exchange warrants for shares and sought consent for a possible mandatory exchange of remaining warrants. These events occurred after quarter-end.
Important facts for investors to verify
- How much of ongoing revenue and adjusted EBITDA is recurring, and how the acquired businesses perform on a comparable, full-period basis.
- Cash conversion and liquidity needs after acquisition spending, compensation and professional-fee payments; also review variable-rate debt exposure and facility terms.
- The assumptions and potential earnings volatility behind the earn-out, warrant and TRA valuations, along with final purchase-price allocation and measurement-period adjustments.
- Progress in remediating the disclosed material weaknesses and whether any additional accounting or reporting issues emerge.
- Developments in the Home REIT-related allegations and any resulting legal, regulatory, financial or reputational exposure.