AlTi Global, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter ended June 30, 2023. AlTi is a global wealth and asset management business. The January 3, 2023 business combination brought together Tiedemann, TIG and Alvarium; consequently, 2023 results include the combined business only from the transaction date, while 2022 comparative results reflect Tiedemann Wealth Management Holdings alone and are not directly comparable.
Key financial metrics
| Metric | Q2 2023 | Jan. 3–June 30, 2023 |
|---|---|---|
| Total revenue | $51.9 million | $109.9 million |
| Operating income (loss) | $(41.1) million | $(84.6) million |
| Consolidated net income (loss) | $29.4 million | $(60.8) million |
| Net income (loss) attributable to AlTi | $43.4 million | $(25.3) million |
| Adjusted EBITDA, non-GAAP | $11.1 million | $21.9 million |
| Cash flow from operations | Not presented separately | $(66.5) million |
| Cash flow from investing | Not presented separately | $(128.5) million |
| Cash flow from financing | Not presented separately | $29.7 million |
Q2 revenue included $47.4 million of management/advisory fees, $0.5 million of incentive fees, $2.2 million of investment distributions and $1.8 million of other income/fees. Compensation and employee benefits were $32.6 million; total operating expenses were $93.0 million. Q2 basic and diluted EPS were $0.73 and $0.26, respectively. Six-month basic and diluted loss per share were both $0.43.
At June 30, cash and cash equivalents were $24.1 million on the balance sheet, plus $3.0 million classified within assets held for sale. Total assets were $1.406 billion, total liabilities $382.7 million and shareholders’ equity $1.023 billion. Debt was $170.8 million gross and $169.1 million net of financing costs: $97.5 million of term loans and $73.3 million drawn on the revolving facility. The credit facility totals $250 million, including a $150 million revolver; the filing does not report a separate available-liquidity figure.
AlTi reported approximately $68.9 billion of combined assets under management or advisement: $37.6 billion AUM and $68.9 billion AUA. Wealth Management reported $32.8 billion AUM and $48.6 billion AUA; Asset Management reported $4.8 billion AUM and $20.3 billion AUA.
Changes and notable items
- Q2 revenue was $32.989 million above the Tiedemann-only 2022 comparison, primarily reflecting the inclusion of TIG and Alvarium; the comparison is not like-for-like.
- Reported Q2 net income benefited from a $66.1 million non-cash gain on remeasurement of the earn-out liability, while operating results included a $29.4 million AHRA intangible-asset impairment and $11.9 million of transaction expenses. Six-month results also included a $12.9 million loss on warrant-liability remeasurement.
- The company used $66.5 million in operating cash during the successor period, citing transaction costs and accrued incentive compensation among the drivers. Investing outflows included the business combination, investments and the AL Wealth Partners acquisition.
- Warrants were exchanged or exercised during the period; none remained outstanding at June 30. The company had 62.96 million Class A and 55.03 million Class B shares outstanding at quarter-end.
Outlook, risks and contingencies
- No quantified revenue, earnings or cash-flow guidance was provided. Management said restructuring is intended to prioritize recurring management-fee revenue and profitability; severance costs and possible intangible-asset or goodwill effects may be material.
- FOS was classified as held for sale, with disposal expected within 12 months. In August, AlTi closed its purchase of the remaining 70% of AIMS for estimated consideration of $14.4 million; the acquisition accounting was to be completed in Q3. A proposed sale of a UK subsidiary was also disclosed, subject to consents.
- The company disclosed UK media allegations concerning Home REIT and its former adviser AHRA. No letter before action had been received by AFM UK and no litigation had been commenced as of the report date; the potential claim amount could be material, but could not be reliably assessed.
- Disclosure controls and procedures were deemed ineffective at June 30 due to material weaknesses inherited from Alvarium and TWMH involving financial reporting review, technical accounting, business combinations, equity compensation and income taxes. Remediation was underway; management could not estimate its cost or assure successful remediation.
- Key sensitivities include market movements affecting AUM-linked fees and investment values, interest-rate exposure on variable-rate debt, foreign exchange, and fair-value estimates. The $15.1 million TRA liability is contingent on tax benefits and taxable income; future exchanges could increase payments. Management also noted that Home REIT-related legal or regulatory developments could entail significant legal expense.
Investor verification points
- Assess underlying operating performance separately from large fair-value gains, impairment charges, transaction costs and other adjustments; review the company’s non-GAAP reconciliations.
- Confirm recurring-fee growth, asset flows and the composition of reported AUM/AUA, including the effects of the AHRA deconsolidation and pending or completed business disposals and acquisitions.
- Evaluate liquidity and debt-service capacity against operating cash outflows, variable-rate borrowings, acquisition payments and restructuring costs.
- Monitor remediation of the disclosed material weaknesses and any subsequent filings or developments concerning Home REIT, AFM UK and potential claims.
- Track final purchase-accounting adjustments, goodwill and intangible-asset impairment assessments, and possible TRA payments or earn-out remeasurement effects.