AlTi Global, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 22, 2024. This is an annual report, not a standalone fourth-quarter report. AlTi completed its business combination on January 3, 2023, so FY2023 results include the combined business while FY2022 comparatives reflect only predecessor Tiedemann Wealth Management Holdings (TWMH); reported year-over-year changes are therefore not directly comparable.
Business context
AlTi is a global wealth and alternatives manager with two segments: Wealth Management and Strategic Alternatives. At year-end it reported $71.4 billion of combined assets under management or advisement (AUM/AUA), including $39.5 billion of AUM and $71.4 billion of AUA under the company’s reported metrics. Segment AUM/AUA was $51.0 billion in Wealth Management and $20.4 billion in Strategic Alternatives. The company had approximately 480 professionals, including employees expected to depart in connection with planned business exits.
Financial performance and condition
| Metric | FY2023 / December 31, 2023 |
|---|---|
| Revenue | $250.9 million: $184.8 million management/advisory fees, $43.4 million incentive fees, $17.2 million distributions from investments, and $5.5 million other income/fees. |
| Recurring revenue | Management said 77% of FY2023 revenue came from recurring management or advisory fees, including fees from external strategic managers. |
| Operating result | Operating loss of $94.1 million on operating expenses of $345.0 million. |
| Net result | GAAP net loss of $305.8 million, including a $206.5 million impairment charge and other significant items. Net loss attributable to AlTi Global, Inc. was $162.6 million; basic and diluted loss per share was $2.65. |
| Adjusted EBITDA | $28.6 million, a non-GAAP measure; the filing reports $16.9 million for FY2022, but the periods are not comparable. |
| Cash flow | Net cash used in operating activities was $81.7 million; investing activities used $132.9 million; financing activities provided $36.0 million. Cash and cash equivalents on the balance sheet were $15.3 million; cash-flow-statement ending cash, including cash in assets held for sale, was $18.2 million. |
| Debt and liquidity | Gross borrowings were $188.8 million ($95.0 million term loan and $93.8 million revolver); net carrying value was $186.4 million. The revolver had $16.3 million of unfunded commitments and a 9.0% weighted-average interest rate at year-end. |
| Balance sheet | Total assets of $1.267 billion, total liabilities of $478.5 million, and total shareholders’ equity of $788.0 million. Cash included $5.4 million of restricted balances for regulatory requirements. |
Material changes versus prior period
- FY2023 revenue increased from $76.9 million in FY2022, chiefly because the combined-company results included TIG and Alvarium; the predecessor comparison is not like-for-like.
- Total AUM/AUA increased 9.8% during 2023, according to management. Wealth Management AUM increased from $28.0 billion at the start of the year to $34.5 billion at year-end, reflecting new clients, net cash flows, market performance, and acquisitions.
- FY2023 compensation expense was $204.1 million, including $46.1 million of non-cash stock-based compensation. Non-compensation expenses were $363.2 million and included impairment, business-combination costs, and other items.
- The company recognized $153.6 million of Strategic Alternatives goodwill impairment and $52.9 million of intangible-asset impairment. Management linked the goodwill charge primarily to restructuring or exiting unprofitable, transaction-oriented businesses and reassessing the segment’s outlook.
- Operating cash flow turned negative, at $81.7 million used, compared with $6.9 million provided in FY2022. Management cited business-combination fees, payment of prior-year incentive compensation, and other operating costs.
Outlook, management commentary, and significant events
- Management said it expects operating expenses to continue trending downward in 2024 on an organic basis, with cost savings and growth initiatives expected to improve operating leverage and consistency in GAAP results and Adjusted EBITDA. This is qualitative commentary; the filing provides no numerical earnings or revenue guidance.
- Management stated that, based on its assessment as of March 22, 2024, it believed available funds were sufficient to support operations and continue as a going concern for at least the next 12 months. This assessment is subject to significant risks and uncertainties.
- A February 2024 credit-agreement amendment temporarily waived leverage and interest-coverage covenants for the March and June 2024 quarters, replacing them with minimum EBITDA and liquidity requirements. It also increased pricing during the waiver period and restricted revolver proceeds to general working capital.
- Subsequent to year-end, AlTi announced proposed investments of $250 million from Allianz and an initial $115 million from CWC/Constellation, with potential additional investments of up to $50 million and $35 million, respectively, subject to applicable conditions. The company said the capital could support strategic investments; verify closing status and final terms.
- The company agreed to sell Family Office Services (FOS) for approximately $20.1 million, subject to regulatory approval. It completed the sale of LXi REIT Advisors on March 6, 2024, for approximately $33.1 million fixed consideration plus potential contingent consideration estimated at up to $5.1 million. AlTi also gave notice to terminate its HLIF management contracts and was discussing a transition to a third-party manager.
- HLIF’s estimated underlying real estate portfolio value declined approximately 50% from June 30, 2022 through December 31, 2023, primarily amid slower rent collection and higher rates. A related external bridge-lending strategy experienced higher-than-expected loan non-payment and temporarily suspended redemptions.
Risks, contingencies, and unusual items
- Financial reporting controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving documented risk assessments, process-level controls, and IT controls. Remediation was in progress; the auditor did not provide an opinion on control effectiveness.
- Home REIT/HLIF matters: The filing describes shareholder allegations and a pre-action letter involving legacy Alvarium entities related to Home REIT. In February 2024, the UK FCA began investigations into historic services to Home REIT and/or HLIF. The company said outcomes and potential exposure cannot be reliably estimated and could be material; it recorded no loss contingency reserve at year-end.
- Debt and liquidity: Borrowings carry floating rates, substantially all borrower/guarantor assets secure the credit facility, and covenant compliance and access to liquidity remain important. The amended covenants and capital-raise conditions merit close monitoring.
- Other earnings variability: Fair-value changes in earn-out and tax receivable agreement liabilities, Level 3 investment valuations, incentive fees, and goodwill/intangible impairments can materially affect GAAP results. Management’s Adjusted EBITDA excludes various items and should not be viewed as a substitute for GAAP results.
- Concentration and business risks: One Strategic Alternatives client generated 12.4% of FY2023 revenue. Fee revenue is exposed to market levels, client retention, investment performance, redemptions, and management-contract terminations. The company also cites integration, talent, regulatory, cybersecurity, international, and valuation risks.
Most important facts for investors to verify
- Whether Allianz and CWC/Constellation investments closed, the net cash proceeds received, and how proceeds were used.
- Current debt balances, borrowing costs, liquidity, and compliance with the amended minimum EBITDA and liquidity covenants.
- Progress and independent validation of remediation of the disclosed material weaknesses in financial reporting controls.
- Developments, claims, potential penalties, and financial exposure relating to UK FCA investigations, Home REIT, and the HLIF management transition.
- Final sale proceeds and contingent consideration for LRA, regulatory completion of the FOS sale, and the impact of these exits on recurring revenue, AUM/AUA, and expenses.