Q3 2023 AlTi Global Inc Earnings Call
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Speaker 1: Good afternoon, my name is Rocco and I will be your conference operator today.
Good afternoon.
My name is Rocco and I will be conference operator today.
Speaker 1: At this time, I would like to welcome everyone to the Altitude and Global third quarter 2023 earnings conference call.
At this time I would like to welcome everyone to the L. P. Global's third quarter 2023 earnings conference call.
Speaker 1: During the call, your lines will remain in a listen-only mode.
During the call your lines will remain in a listen only mode.
Speaker 1: After the speaker's remarks, there will be a question and answer session.
After the Speakers' remarks, there will be a question and answer session.
Speaker 1: I'd like to advise all parties that this conference call is being recorded and a replay of the webcast is available on Altie Tiedemann Global's Investor Relations website.
I would like to advise all parties that this conference call is being recorded and a replay of the webcast is available on our P. Peterman Globals Investor Relations website.
Speaker 2: I will now turn the call over to Lili Arteaga, Head of Investor Relations for Alti Tiedemann Global. Please go ahead. Good afternoon to everyone on the call today. Joining me this afternoon are Michael Tiedemann, our CEO , and Steve Jarage, 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 will now turn the call over to Thiago head of Investor Relations for OTT demand Global. Please go ahead. Good afternoon to everyone on the call today. Joining me. This afternoon are Michael <unk>, our CEO and Steve Jarrett, our CFO, we invite you to visit the Investor Relations section of our website at Ww.
W. Dot all cheap gas global Dotcom did you our earnings materials, including our updated investor presentation I.
I would like to remind everyone that certain statements made during the call maybe 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.
Speaker 2: 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.
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. All she assumes no obligation or responsibility to update any forward looking statements.
Speaker 2: also assumes no obligation or responsibility to update any forward-looking statement.
Speaker 2: During this call, some comments may include references to non-GAAP financial measures. Full GAAP reconciliations can be found in our earnings presentations and related SEC filings. With that, I'll turn it over to you.
During this call. Some comments may include references to non-GAAP financial measures full GAAP reconciliations can be found in our earnings presentation and related SEC filings.
With that I'll turn the call over to Mike.
Speaker 3: Good afternoon, everyone, and thank you for joining us today for our third quarter 2023 earnings.
Good afternoon, everyone and thank you for joining us today for our third quarter 2023 earnings call.
Speaker 3: In the quarter, we continue to make progress on our strategic initiatives to set ourselves up for a strong 2024 and beyond.
In the quarter, we continued to make progress on our strategic initiatives to set ourselves up for a strong 2024 and beyond.
Speaker 3: Some of these initiatives, particularly the work to restructure and reposition certain businesses.
Some of these initiatives, particularly the work to restructure and reposition certain businesses have impacted our GAAP earnings this quarter.
Speaker 3: have impacted our gap earnings this quarter, but are consistent with our stated 2023 goal of simplifying the business with a focus on recurring revenue.
Consistent with our stated 2023 goal.
The business with a focus on recurring revenues.
Speaker 3: We've continued to right-size the organization, simplify our business lines, and initiate processes to reduce the number of regulated entities.
We are continuing to right size the organization simplifying our business lines and initiated processes to reduce the number of regulated entities.
Speaker 3: We've done this while securing important client wins and adding key revenue-generating talent.
We've done this while securing important client wins and adding key revenue generating Charlie.
Speaker 3: Since the listing, we've reported healthy AUM-AUA growth amidst a pressured market environment, particularly in the third quarter.
Since the listing we reported healthy AUM growth amidst a pressured market environment, particularly in the third quarter.
Speaker 3: We firmly believe that the combination of wealth management and asset management differentiates us from pure play firms in both sectors and provides a growing base of recurring diversified revenue.
We firmly believe that the combination of wealth management and asset management differentiates us from pure play firms in both sectors and provides a growing base of recurring diversified revenues.
Speaker 3: On a trailing 12-month basis, total assets under management and advisement increased 13%. And within wealth management, these have grown 23% in the last year, validating the attractiveness of our global holistic wealth proposition in the eyes of our target client.
On a trailing 12 month basis total assets under management and advisement increased 13%.
And within wealth management.
Our own 23% in the last year.
Elevating the attractiveness of our global holistic wealth proposition in the eyes of our target clients.
And speaking about wealth management I'd be remiss not to mention our first all see family retreat held in Lisbon at the end of September.
Speaker 3: The event was attended by nearly 50 clients and prospects from 11 countries.
Event was attended by nearly 50 clients and prospects from 11 countries.
Speaker 3: This demonstrates our unique ability to build connections and a global community amongst our families and to provide differentiated cross-border services in the process.
Demonstrates our unique ability to build connections at a global community amongst our families.
And to provide differentiated cross border services in the process. What our clients. Appreciate is that we are a global platform with sophisticated institutional quality solutions that operates with the attention care and customization of our specialized boutique fairly office.
Speaker 3: What our clients appreciate is that we are a global platform with sophisticated institutional quality solutions that operates with the attention, care, and customization of a specialized boutique family office.
Turning now to our Q3 performance.
Speaker 3: All T-generated revenues of $49 million, 97% of which were recurring revenues, essentially flat to the second quarter when removing revenues from AHRA that were included in Q2, but we exited the business effective June .
<unk> generated revenues of 49 million, 97% of which were recurring revenues essentially flat to the second quarter when removing revenues from HRA that were included in Q2, but we exited the business effective June 30th.
Speaker 3: Year-to-date, we've generated revenues of nearly $160 million.
Year to date, we've generated revenues of nearly $160 million.
Speaker 3: We believe these results generated largely through organic client wins are starting to reflect the power of our franchise, which will continue to flow to an improved bottom line as we look forward to 2020.
We believe these results generated largely through organic client wins are starting to reflect the power of our franchise, which will continue to flow to an improved bottom line as we look forward to 2024.
Speaker 3: Despite these top-line results, we reported GAAP-met loss of $171 million for the quarter, primarily due to non-cash goodwill impairment charges, that is largely related to decisions taken this year to restructure or exit unprofitable transaction-oriented business lines in our asset management system.
Despite these top line results, we reported GAAP net loss of $171 million for the quarter, primarily due to non cash goodwill impairment charge.
That is largely related decisions taken this year to restructure or exit unprofitable transaction oriented business lines in our asset management segment.
Speaker 3: The results also include several other non-cash items that negatively impacted Capra.
The results also include several other noncash items that negatively impacted GAAP earnings.
Speaker 3: In addition, adjusted EBITDA was negative $3 million in the quarter, resulting in a year-to-date EBITDA of $19 million. However, as noted...
In addition, adjusted EBITDA was negative $3 million in the quarter, resulting in a year to date EBITDA 19 million. However, as noted previously.
Speaker 3: Our reported financials for GAAP and adjusted EBITDA include certain line items that we do not believe reflect the underlying performance and, importantly, do not impact the cash flows generated by the business.
Our reported financials for GAAP and adjusted EBITDA include certain line items that we do not believe reflect the underlying performance and importantly, do not impact the cash flows generated by the business Steve yard, who recently joined US as our CFO will provide more details in his remarks.
Speaker 3: Steve Yarad, who recently joined ALSE as our CFO , will provide more details in his remarks.
Turning now to our enterprise strategy.
Speaker 3: We've been focused on continuing the execution of two principal initiatives for 2023, which will carry on to the next calendar year, leveraging our competitive advantages to accelerate organic growth and execute disciplined and creative acquisition.
We've been focused on continuing the execution of two principal initiatives for 2023, which will carry on to the next calendar year, leveraging our competitive advantages to accelerate organic growth and execute disciplined accretive acquisitions.
Speaker 3: And secondly, simplifying the organization, which will in turn enhance the cost-saving initiatives mentioned in the previous slide.
Secondly, simplifying the organization, which will in turn enhance the cost saving initiatives mentioned in the previous calls.
Speaker 3: Now, I want to offer more detail about the ways we're executing these initiatives across both of our business.
Now I want to offer more detail about the ways, we're executing those initiatives across both of our business segments.
Speaker 3: The wealth management segment results reflect our ability to capitalize on our competitive advantages.
The wealth management segment results reflect our ability to capitalize on our competitive advantages.
Speaker 3: and we've achieved strong organic and inorganic growth since the beginning of the year. Our wealth management business is well integrated, sharing best practices, leveraging expertise and services across offices, and collaborating on global opportunities.
We've achieved strong organic and inorganic growth since the beginning of the year, our wealth management business is well integrated sharing best practices, leveraging expertise and services across offices and collaborating on global opportunities.
Speaker 3: as a result of this collaboration and expanded service offer.
As a result of this collaboration and the expanded service offering.
Speaker 3: Net new client flows have been $1.6 billion year-to-date.
Net new client flows have been $1 6 billion year to date.
Speaker 3: This reflects significant contributions from the U.S. business, as well as solid performance internationally.
This reflects the significant contributions from the U S business as well as solid performance internationally.
Speaker 3: The majority of our client wins in 2023 have invested on the average over 60 million in billable assets for this clients, which range from all.
The majority of our client wins in 2023 have invested on average over $60 million in billable assets with us.
Clients, which range from ultra high net worth individuals.
Speaker 3: family offices, nonprofits, and foundations.
Family offices, nonprofits and foundations specifically.
Speaker 3: specifically cited all these ability to offer holistic wealth management as a deciding factor.
Specifically cited <unk> ability to offer holistic wealth management is the deciding factor.
Speaker 3: Our range of comprehensive services includes investment advisory, trust planning, family office services.
Our range of comprehensive services includes investment Advisory Trust planning family Office services Cross border wealth advice and unique access to impact and value based investment opportunities.
Speaker 3: cross-border wealth advice, and unique access to impact and value-based investment.
Speaker 3: Notably, 40% of the assets received in the quarter were related to impacts.
Notably 40% of the assets received in the quarter were related to impact sensors.
Speaker 3: As I mentioned in our last call, in the third quarter, we purchased the remaining ownership stake of the Lugano-based multifamily office that had been part of the legacy All-T Wealth Management Platform since 2019.
As I mentioned on our last call in the third quarter, we purchased the remaining ownership stake in Lugano based multifamily office that had been part of the legacy all T wealth management platform. Since 2019. This firm has approximately $1 billion in assets and offers exposure to the northern Italian market, an important region for our global platform.
Speaker 3: firm has approximately $1 billion in assets and offers exposure to the northern Italian market, an important region for our global economy.
Speaker 3: This transaction, paired with our acquisition of AL Wealth Partners in Singapore earlier this year, have resulted in nearly $2 billion of net flows to the public.
This transaction paired with our acquisition of ill wealth partners in Singapore earlier, Peter have resulted in nearly $2 billion of net flows to the platform.
Speaker 3: We will look to replicate this momentum as we evaluate additional opportunities to broaden and densify our platform in key U.S. and international markets.
We will look to replicate this momentum as we evaluate additional opportunities to broaden and densify our platform in key U S and international wealth markets.
Speaker 3: We've identified a robust pipeline of strategic opportunities within wealth management that align with our competitive advantage.
We've identified a robust pipeline of strategic opportunities within wealth management.
And with our competitive advantages.
Speaker 3: Our platform continues to be the destination of choice for ultra-high net worth firms that are looking for a comprehensive global solution set to appeal to their current climate.
Our platform continues to be the destination of choice for Ultra high net worth firms that are looking for a comprehensive global solution set to appeal to their current client base.
Speaker 3: These firms are also seeking the ability to accelerate their growth by leveraging the capability of the Altis unique.
These firms are also seeking the ability to accelerate their growth by leveraging the capability of <unk> unique platform.
Speaker 3: Turning now to asset management, since our listing in January , we've made great strides in positioning our asset management segment for the long term.
Turning now to asset management since our listing in January we've made great strides in positioning our asset management segment for the long term that said this.
Speaker 3: That said, this progress and the solid underlying performance of the business in the corridor was partially offset by the impacts of our efforts to strategically reposition.
This progress and the solid underlying performance of the business for the quarter was partially offset by the impacts of our efforts to strategically reposition the business.
Speaker 3: We have concentrated on growing our core asset management businesses, which produce strong, predictable management fees from alternative asset classes, where we have a clear advantage. We've also changed the strategy of the real estate co-investment platform to make the business more scalable and profitable by right-sizing the team, exiting and restructuring certain deals and entities, as well as simplifying the fee structure of the business.
We have concentrated on growing our core asset management businesses, which produced strong predictable management fees from alternative asset classes, where we have a clear advantage. We've also changed the strategy of the real estate co investment platform to make the business more scalable and profitable by right sizing the team exiting and restructuring certain deals and entities.
As well as simplifying the fee structure of the business.
Additionally, we scaled down our strategic advisory business and exited our UK broker dealer business given their transactional nature.
Speaker 3: Our uncorrelated strategies that make up our alternatives platform are performing well. This includes our European Long Short Equities Manager and Asia Credit and Special Situations Fund, both of which outperform their respective benchmarks by more than 5%.
Our uncorrelated strategies that make up our alternatives platform are performing well. This includes our European long short equities manager at Asia credit and special situations funds, both of which outperformed their respective benchmarks by more than 5% in the period.
Speaker 3: Additionally, the event-driven strategy exhibited strong performance, almost up nearly 5% in the quarter.
Additionally, the event driven strategy exhibited strong performance almost up nearly 5% in the quarter.
Speaker 3: These core strategies are the foundation of our alternatives platform, which is positioned to preserve capital specifically in the face of volatile capital.
These core strategies are the foundation of our alternatives platform, which is positioned to preserve capital specifically in the face of volatile capital markets.
Despite this strong underlying business performance revenues were down due to a decrease in <unk> levels, reflecting primarily the impact of high interest rates on the global real estate market and strategy specific pressures in the first half of the year.
We are confident that continued execution of our diversified strategies combined with the restructuring the business and the launch of new strategies.
And our strong fundraising opportunities in asset management going forward in.
Speaker 3: In particular, we have some important new fundraising initiatives underway that will leverage our track record of providing capital and services to asset management firms in exchange for equity stakes in our business.
In particular, we have some important new run from raising initiatives underway that will leverage our track record of providing capital and services asset management firms in exchange for equity Stakes in their business.
I'll now highlight a few strategic initiatives.
Speaker 3: Subsequent to Quarter End, we signed a definitive agreement for the sale of LJ Fiduciary, our Isle of Man and Switzerland-based trust and corporate administration services business, as well as our London-based business.
Subsequent to quarter end, we signed a definitive agreement for the sale of Lj fiduciary, our Isle of man in Switzerland, based trusted corporate administration services business as well as our London based private office services business.
Speaker 3: We're pleased with this transaction as it's an important step in streamlining the operations and focusing on more profitable core recurring revenue businesses.
We're pleased with this transaction as it is an important step in streamlining the operations and focusing on more profitable core recurring revenue businesses.
Speaker 3: And I look forward to reporting more about this sale on our fourth quarter.
And I look forward to reporting more about this sale or our fourth quarter call.
Speaker 3: We are on track to achieve our stated goal of at least $16 million in total net savings on an annualized basis following the strategic review announced during our first quarter.
We are on track to achieve our stated goal of at least 16 million and total net savings on an annualized basis. Following the strategic review announced during our first quarter call.
Speaker 3: As a result of this review, we restructured certain businesses across both asset and wealth management, consolidating our facility footprint, initiated SG&A cost reduction.
As a result of this review, we restructured certain businesses across both asset and wealth management consolidating our facility footprint Ines.
Initiated SG&A cost reductions.
Speaker 3: Rationalize certain vendors and reduce professional fees, including those associated with a public
<unk> certain vendors and reduced professional fees, including those associated with our public listing.
Speaker 3: We expect the impact of these cost-saving initiatives to be fully reflected in our second quarter of 2024.
We expect the impact of these cost saving initiatives be fully reflected in our second quarter 2024 results.
Speaker 3: Further, we kicked off our 2024 budget and capital planning process.
Further we kicked off our 2020 for budget and capital planning process.
Speaker 3: We're going to take the opportunity to build on the progress made this summer to further streamline and improve our operating level.
We're going to take the opportunity to build on the progress made this summer to further streamline and improve our operating leverage.
Speaker 3: in addition to driving our organic and inorganic growth.
In addition to driving organic and inorganic growth initiatives.
Speaker 3: The budget-free process will be laser-focused on further cost rationalization and continued right-sizing, particularly in professionals.
Budgetary process will be laser focused on further cost rationalization and continued right sizing, particularly in professional fees.
Speaker 3: We believe there's a significant opportunity to further meaningfully reduce professional fee spend as we move past the listing process and reach maturity as a public sector.
There's a significant opportunity to further meaningfully reduced professional fee spend as we move past the listing process and reach maturity as a public company.
Speaker 3: close, Alti is executing against the strategies discussed in previous calls. Our core platform is performing well and continues to navigate current market
To close I'll see is executing against the strategy as discussed on previous calls our core platform is performing well.
<unk> to navigate current market conditions, we are confident that the steps we've taken to date in 2023 and going forward our positioning the firm for long term growth over the next decade.
Speaker 3: We are confident that the steps we've taken to date in 2023 and going forward are positioning the firm for long-term growth over the next decade.
Speaker 3: With that, I want to turn the call over to Steve Yarad, our CFO , for further details of our financial performance in the quarter. As most of you know, Steve joined our management team in mid-September. He has extensive financial services expertise and has been a public company CFO for over a decade.
With that.
I want to turn the call over to Steve <unk>, our CFO for further details of our financial performance in the quarter as most of you know Steve joined our management team in mid September. He has extensive financial services expertise and there's been a public company CFO for over a decade.
Speaker 3: Steve has already been a major contributor to our financial efforts. Steve, I hand it over.
Steve has already been a major contributor to our financial efforts, Steve I'll hand, it over.
Thank you Mike.
Speaker 4: This is an exciting time at Alty, and I couldn't be more enthusiastic to hit the ground running as we execute against our strategy.
This is an exciting time at LT and I couldnt be more enthusiastic to hit the ground running as we execute against that strategy.
Speaker 4: Before we review the results, I want to note that the results in our regulatory filings are presented as a comparison between predecessor and successor company, as required by the accounting guidelines.
Before we review the results I want to note that the results of that regulatory filings presented as a comparison between predecessor and successor company.
As required by the accounting GAAP guidelines.
Speaker 4: In our case, Tiedemann Wealth Management Holdings is the predecessor company and Ulti is the successor.
Okay Tito.
In wealth management holdings.
The company and LTE is the successor.
Such year over year results are not directly comparable and my comments will be focused on quarterly performance.
Speaker 4: As Mike discussed, underlying business fundamentals remain strong as Alti executes against its strategic priorities to achieve top line growth and organisational efficiency.
As Mike discussed underlying business fundamentals remain strong.
He executes against its strategic priorities to achieve topline growth and organizational efficiencies.
Speaker 4: both of which will accelerate our path to margin expansion and enduring shareholder value.
Both of which will accelerate our path to margin expansion and doing share holder value.
Speaker 4: We are executing various initiatives that we expect will reflect the platform's growth potential going forward.
We are executing various initiatives that we expect will reflect platform growth potential going forward.
Speaker 4: We generated revenues of $49 million in the third quarter and we are pleased to report that 97% of our revenue was generated from recurring fees.
Altra generated revenues of $49 million in the third quarter and we are pleased to report that 97%, but that revenue was generated from occurring chase.
Speaker 4: Revenues in our wealth management segment, which consists entirely of management and advisory fees, were $35 million in the third quarter. This represents a 2% increase compared to the second quarter.
Revenues in our wealth management segment, which consists entirely of management and advisory fees of $35 million in the third quarter.
This represents a 2% increase compared to the second quarter.
And asset management revenue was $15 million 90.
Speaker 4: 90% of this top-line performance is from recurring management and advisory fees, including the distributions from our alternatives platform.
90% of this top line performance is from recurring management and advisory fees, including the distributions from our alternatives platform.
Sequentially asset management revenues reflected lower asset levels, consistent with backhaul environment pressures impacting the real estate sector, generally and Ademption and Youll Kennedy's platform, resulting in lower management case.
This impact was particularly evident in our rate business as management teams, which are calculated based on average market capitalization declined 7% quarter over quarter.
Speaker 4: management fees, which are calculated based on average market capitalisation, decline 7% quarter over quarter.
Speaker 4: Incentive fees were higher, reflecting the crystallisation of fees related to redemptions in the event-driven strategy in the quarter.
Incentive fees were higher reflecting the crystallization piece related to redemptions and the event driven strategy in the quarter.
Speaker 4: Slightly higher distributions from the alternatives platform were offset by lower other...
Slightly higher distributions from the alternative platform were offset by lower other income.
Speaker 4: prior quarter included fees from two closed transactions, while no transactions closed in the third quarter.
Prior quarter included case through to close transactions, while no transactions closed in the third quarter.
Speaker 4: Our GAAP results for the quarter were significantly impacted by the $154 million goodwill impairment charge related to the asset management segment.
Our GAAP results for the quarter was significantly impacted by the $154 million goodwill impairment charge related to the asset management segment.
Speaker 4: As mentioned earlier, the charge reflects changes in strategy and repositioning of certain businesses within the segment.
As mentioned earlier charge reflects changes in strategy and repositioning of certain businesses within this segment.
Speaker 4: These decisions, combined with ongoing conditions impacting markets, including the prevailing interest rate environment, resulted in the need to test goodwill for impairment.
These decisions combined with ongoing conditions impacting markets, including the prevailing interest rate environment.
Resulting in the need to test goodwill for impairment.
Speaker 4: Normalised operating expenses, which exclude non-recurring compensation expenses related to severance and the previously completed whole bond acquisition.
Normalized operating expenses, which exclude nonrecurring compensation expenses related to severance and the previously completed <unk> acquisition foreign currency translation impacts.
Speaker 4: foreign currency translation impacts, and certain transaction and deal-related expenses were $48 million.
Certain transaction and deal related expenses of 48 million.
Speaker 4: As mentioned earlier, adjusted EBITDA was negative $3 million.
As mentioned earlier adjusted EBITDA was negative $3 million.
Speaker 4: We do not believe that adjusted EBITDA reported this quarter accurately depicts the fundamental performance of the business.
We do not believe that adjusted EBITDA reported this quarter accurately depicts the fundamental performance of the business.
Speaker 4: To put this into context, our results this quarter include several items driven by gap accounting, most of which are not expected to be recurring and do not reflect business fundamentals or significantly impact cash flows.
Putting this into context our results. This quarter include several items driven by GAAP accounting most of which are not expected to be recurring and then did not reflect the business fundamentals.
It can really impact cash flows.
Speaker 4: For example, this quarter includes a $4 million foreign currency translation loss related to intercompany financing arrangements between certain entities in our corporate structure.
For example, this quarter includes a $4 million foreign currency translation losses related to intercompany financing arrangements between certain entities in our corporate structure.
Speaker 4: Based on the way these arrangements were structured as part of the business combination, GAP requires this loss to be included in earnings.
Based on the way. These arrangements restructuring is part of the business combination GAAP requires this loss to be included in earnings.
Speaker 4: However, we recently restructured these arrangements to eliminate this non-economic currency exposure, and it will not reoccur going forward.
However, we recently restructured these arrangements to eliminate non economic coxey exposure and it will not reoccur going forward.
Speaker 4: In addition, the strong underlying performance of the asset management event-driven strategy for the quarter is not captured in Q3 earnings or EBITDA. This gap only permits recognition of incentive fees when they are fully crystallised.
In addition, our strong underlying performance of the asset management event driven strategy for the quarter is not captured in Q3 earnings or EBITDA.
I only mentioned recognition of incentive fees when they are fully crystallized.
Speaker 4: As Mike noted, we expect to recognise these fees in the fourth quarter should current market conditions be sustained through year-end.
As Mike noted, we expect to recognize these fees in the fourth quarter should current market conditions be sustained through year end.
But the core businesses are performing well.
Speaker 4: Based on the initiatives already undertaken this year and those that we expect to embark on in connection with the 2024 budgeting process that was recently kicked off, we expect operating expenses to continue to trend downward in 2023 and throughout 2024.
Based on the initiatives already undertaken machine and notice that we expect to embark on in connection with the 2020 full budgeting process that was recently kicked off.
We expect operating expenses to continue to trend downward in 2023 and throughout 2024.
Speaker 4: As these cost savings and other growth initiatives take hold during 2024, we expect to see the impact of operating leverage drive improvements and greater consistency in our gap results and adjusted EBITDA.
These cost savings and other gross initiatives take hold during 2024, we expect to see the impact of operating leverage driving improvements and greater consistency in our GAAP results and adjusted EBITDA.
Speaker 4: With that, we'd like to now open up the call for questions. Operator?
With that we'd like to now open up the call for questions operator.
Speaker 1: Thank you. To ask a question, please press star then 1. To remove yourself from queue, please press star then 2.
Thank you.
I'll ask a question. Please press Star then one to remove yourself from two please first star then two.
Speaker 1: Today's first question comes from Wilma Burtis with Raymond James. Please go ahead.
Today's first question comes from will <unk> with Raymond James. Please go ahead.
Speaker 5: First question, could you go into just a little bit more detail on the impairment?
Hey, good evening.
First question could you go into just a little bit more detail on the impairment.
Speaker 5: I know you went into some detail, but maybe just help us understand what it relates to specifically.
And then.
Some detail, but maybe just help us understand when it relates to that.
Quickly.
Speaker 6: Thanks, Wilma. This is Steve Yarrow. Nice to talk to you.
Sure. Thanks, Paul This is Steve.
Steve here.
I can talk to you.
Speaker 6: So the impairment was the result of a review that we were required to do as a result of some strategic decisions we made at the end of the second quarter.
So the impairment.
The result of a review that we were required to do.
As a result of some strategic decisions, we made at the end of the second quarter.
Speaker 6: So we went through and did an exercise to review the reforecasted cash flows for the reportable segment for asset management. And as we discussed on the call, we did exit a couple of businesses within that segment.
We went through and did an exercise to review the repo cash flows for the reportable segment for asset management.
And as you can as I.
Scott on the on the call we did exit a couple of businesses within that segment.
Speaker 6: and we scaled down and repositioned and right-sized another one of those businesses.
We scaled Dan reposition right side, another one of those businesses.
Speaker 6: So specifically, our private real estate business, we made some adjustments to the scaling and size of that business. And there were two other businesses that were effectively...
So specifically private real estate business, we made some adjustments to the scaling and sizing of that business and there were two other businesses.
They quickly exited.
Speaker 6: So, as you can imagine, the reforecast cash flows were different than what we originally forecasted when we did the combination back at the beginning of the year.
So as you can imagine the cash.
Cash flows.
With different than what we originally forecasted when we did the combination back at the beginning of the year.
Speaker 6: And as a result of that, the updated valuation of effectively the market value of the segment was lower than it was at the time we did the combination. And that's what's driving the growth.
And as a result of that.
The updated valuation of the effectively the market value of the segment was lower than it was commented the combination and that's what's driving.
The goodwill impairment.
Speaker 5: I guess, could you talk about how much of it's related to the specific, you know, divestitures versus just the.
Can you talk about how much of it related to a specific.
Divestitures persons.
Just kind of ongoing piece.
Speaker 5: It's really, that makes sense, but maybe just maybe quantify it a little.
Yeah.
That makes sense, but maybe just maybe quantify it a little bit.
Speaker 6: Sure. So I don't have this specific attribution in front of me, but probably about 70% of it relates to the exited businesses, and maybe the remaining 30% of it relates to the rescaling of the private real estate business.
Sure. So I don't have the specific attribution in front of me, but the.
Probably about 70% of it relates to the exited businesses.
And.
Maybe the remaining 30% of it relates to the scaling of the private real estate business.
Speaker 6: So that, you know, I think it's a $153 million charge. You know, probably, these numbers are just sort of directional, about 70% would relate to exited businesses, and the remaining 30% related to private, the private real estate business.
So I think it's $153 million charge.
Probably.
These numbers are just some directional that 70% relate to exited businesses and the remaining 30% related to private the private real estate business.
And women importantly, it's consistent with our.
Speaker 3: strategy to really orient the business towards recurring revenues. And so the two businesses were more transaction oriented in nature.
Strategy, it's really Orient the business towards recurring revenues. So the two businesses were more transaction oriented in nature.
Speaker 3: So in our strategic review, that was that plus cost initiatives were the overwhelming.
So in our strategic review that was about plus cost.
Initiatives, where we're the overwhelming.
Deciding factor when making the decision.
Speaker 5: Gotcha. Is there going to be any, I guess, cash component?
Gotcha is there going to be any.
Cash cash component of.
Speaker 5: Are those pieces of business, they were sold or how should we think about that?
Are those pieces of business. They were they were sold or how should we how should we think about that.
Speaker 6: So the businesses were actually now effectively wound down. They weren't sold. OK, so wound down. OK.
Sorry, the businesses were exited now effectively wound down they want to sell.
<unk>.
Okay. So wound down okay. Okay got you.
Speaker 5: Great. Thank you. And then, how should we think about the run rate expenses? So, I think $73 million, that was about $10 million higher than we modeled.
Great. Thank you.
How should we think about the run rate expenses.
Thank God 73 million that was about 10 million higher than we had modeled.
Speaker 5: We're kind of expecting the mid-40 range by mid-2024, so is that how we should think about that trajectory? Okay. Great.
We're kind of expecting the mid 40 range by mid 2024, or so is that how we should think about that trajectory.
So.
We.
Speaker 6: Why don't we go through that with you a bit offline. When you're looking at $73 million, are you looking at GAAP or modified or normalized?
Well have to get go through that with you a bit offline when youre looking at $73 million or you're looking at GAAP or modified or normalized.
Speaker 5: Well, maybe, I guess, maybe just comment on where expenses came in, where you expected
Well, maybe I guess, maybe just comment on where expenses came in where you expected.
Speaker 5: versus what you would expect it and then how should we think about it going forward.
Versus what you would expect it and then and how should we think about it going forward.
Speaker 6: Sure. No, actually, I'm looking at our income statement. I could see where you get in the 73 number. So, look, I think overall, the trend line in many of the expenses was actually pretty good in the second quarter. So, as far as professional fees goes, you saw a decrease there.
Sure.
Im looking at our income statement I could see where you get into 73 number so look I think overall the the <unk>.
<unk> and many of the expenses, where it was actually pretty good in the second quarter.
As far as professional phase guys, who saw it decrease there and you can see this from the face of our income statement, but the actual underlying salary compensation expenses were down relative to the prior quarter, what you're seeing there.
Speaker 6: We can't see this from the face of our income statement, but the actual underlying salary compensation expenses were down relative to the prior quarter. What you're seeing though there quarter over quarter in compensation is the impact of a
For every quarter in compensation is the impact of a.
Speaker 6: a non-recurring sort of compensation charges, more of a purchase accounting adjustment related to a prior acquisition. And so that's increasing that expense in this quarter compared to the run rate. And across the board, you're also seeing
A nonrecurring could've compensation charge was that more of a purchase accounting adjustment related to a prior acquisition.
And so that's increasing that expense in this quarter.
Compared to the run rate.
And across the board Youre also saying it.
The.
Speaker 6: The other G&A and other expenses in that section, they were inflated by about 4.5 million in the quarter due to this FX charge. So when you adjust for some of these items, the more normalized, what we consider normalized expenses, which as we talked about on the call, backs out the FX and the other, what we consider non-recurring adjustments and some other items.
Other G&A and other expenses in that section they are inflated by about $4 5 million.
In the quarter due to this FX charge.
When you adjust for some of these items the more normalized.
What we consider normalized expenses.
As we talked about on the.
The call backs out the FX and the other what we consider nonrecurring.
Adjustments and some other items, that's about 48 million that's closer to what we think out longer term run rate would be and then as we move forward from that as I as I as I mentioned in my remarks, we're really getting into the 2020 for budgeting process right now.
Speaker 6: And that's closer to what we think our longer term run rate would be. And then as we move forward from there, as I mentioned in my remarks...
Speaker 6: We're really getting into the 2024 budgeting process right now and we see some significant opportunity to work on certain expense items, in particular professional fees.
And we see significant opportunity to work on certain certain expense items in particular professional fees.
Speaker 6: And and so as we as we work through that process over the next few months, we'll be setting the baseline for for 2024 But as we move away
And so as we as we work through that process over the next few months, we'll be setting the baseline for 2024, but as we move away from it.
Speaker 6: the listing and all the expenses associated with the listing and sort of get to a more normal maturity as a public company, we definitely see opportunities for the professional fee spend in particular to decrease.
The listing all the expenses associated with the listing and.
And sort of get to a more normal.
Maturity as a public company.
We definitely see opportunities for the professional fee spend in particular could be great.
Speaker 5: I guess if, you know, maybe I think your prior guidance or what you guys were indicating was implying around, you know, like,
I guess just you know.
Maybe.
I think your prior guidance or what what you guys are indicating.
I'm flying around and like I said mid forties.
Speaker 5: uh toward the end of 2024 and that also included about 16 million of annual cost saves I think.
Toward the end of 2024 and that also included about $60 million in annual cost saves I think.
Speaker 5: Is that, I mean, is this kind of wind down of the business, does that have any impact? Has that improved the run rate or how should we think about that?
Is that.
I mean is this kind of wind down of the business does that have any impact as that improve the run rate or how should we think about that.
Speaker 6: Yeah, I'd say once we get through, you know, we talked about that $16 million, the full impact of that won't be fully recognised in our results until the second quarter of 2024. So once we get to that point, and we also are working on sort of the next round of
Yes, I'd say once we once we get through we talked about that $6 million to $8 million the full impact of that won't be fully recognized in our results until.
The second quarter of 2024, so once we get to that point and and we also are working on sort of the next round of <unk>.
Speaker 6: I guess, rationalization of things like professional fees. I think that's when you're really looking at.
This rationalization of things like professional fees I think that's when you're really looking at.
Speaker 6: you know, the mid-40s run rate as a real estate.
You know the.
The mid Forty's.
Run rate is.
Is it realistic goal.
Speaker 5: Gotcha, and it doesn't, it's not going to be, have any benefits from the wind down.
Got you and it doesn't it's not going to be have any benefits from the <unk>.
Wind down.
Speaker 6: Yeah, that's included in that, and some of those things relate to severance costs and the like, and just because of the way severance law or employment law works in certain jurisdictions, it's not like it comes off your books straight away. So it takes a little bit of time for some of those things to come through. In addition, we have benefits coming through from facilities, changes.
Or.
Yes, that's included in that.
Some of those things relate to <unk>.
Severance costs and the like and just because of the way severance will it pulls it all works in certain jurisdictions, it's not like it comes off the books shied away. So it takes a little bit of time for some of those things to come through.
In addition, we have benefits coming through from facilities.
Speaker 6: and changing the footprint of our facilities. And so that takes a little bit of a time to come through and there's some trailing expenses associated with that in the third quarter. And there'll be a little bit of that in the fourth quarter as well. But once we get into the beginning of 2024, we'll start to see the benefits of those changes come through as well.
Changes in.
And we are changing the footprint of their facilities and so that takes a little bit of a time to come through and some trailing expenses associated with that in the third quarter and there'll be a little bit of that in the fourth quarter as well, but once we get into the beginning of 2024, you'll start to see the benefits of those changes come through as well.
Speaker 5: Could you talk a little bit about the global real estate market? It seems like the AUM was down a little bit on interest rates. Any –
Gotcha.
You have a little bit about the global real estate market. It seems like the E. R M.
A little bit on interest rates.
Any areas or any.
Speaker 5: regions you're concerned on, or I guess, on the other side of that coin, any places where there's opportunities.
Regions, you're concerned on or I guess on the other side of that coin any any places where there's opportunities.
Speaker 3: Yeah, that's a great question. And I'll start with the real estate, private real estate and equity side, i.e. equity investments into private real estate. For starters, the market was for the better part of a year, very challenged, core frozen. And so there was a pricing gap between sellers and buyers that has begun to unlock. We in the fourth quarter just to
Yes, that's a great question.
I'll start with the real estate private real estate equity.
So I E.
Equity investments into private real estate.
For starters the.
Market was for the better part of a year very challenged core frozen and so there was a pricing gap between sellers and buyers.
That has begun to unlock.
In the fourth quarter adjusted.
Speaker 3: Really, we think it's an excellent transaction in London by our team.
Really really we think excellent transaction in London, but our team.
Speaker 3: which is the first transaction we've done in quite some time. There is more interest in capital now freeing up and assets are beginning to clear. So you're also seeing that reflected, you know, in this quarter, not Q3, but in Q4, you're beginning to see inflationary pressures globally abate and you're starting to see the publicly listed.
Oh. This is the first transactions we've done.
And quite some time.
There is more interest in comparable now freeing up.
<unk> assets are abusing the clear so you.
Youre also seeing that reflected in this quarter Q3, but in Q4, you are beginning to see inflation.
Inflationary pressures globally.
Abates.
Youre starting to see the publicly listed.
Speaker 3: REITs, in particular the one that we own, recover quite quickly. So the underlying fundamentals of these REITs and underlying fundamentals of these yielding assets and the assets themselves
Right.
In particular, the one that we own recover quite quickly so the underlying fundamentals of lease rates and underlying fundamentals.
These yielding assets and the assets themselves.
Speaker 3: you know, the mark to market value has been all over the place. And there was obviously immediate pricing in the public markets and a pricing gap in private markets that now has really begun to close. But in general, the directionally is positive and capital flows are beginning to really pick up a meaningful way in our.
The mark to market value has been all over the place and there was obviously immediate pricing in the public markets.
Pricing in private markets that now has really begun to close but in general.
Directionally is positive.
Capital flows are beginning to really pick up meaningful way.
Got you thanks.
And then just maybe give a little bit more color into the wealth management pipeline. It seems like there's been a few really nice wins in the last couple of quarters.
Speaker 5: Anything in the in the pipeline or are there attractive deals there?
Anything in the pipeline or are there attractive deals there.
Speaker 3: Yeah, so the I'll answer that organically, which is client pipeline, because the client pipeline is terrific. We.
Yes, so the.
I'll answer that organically wishes client pipeline because the client pipeline.
Terrific.
Speaker 3: We have a really robust and collaborative team working across.
We have a really robust and collaborative team working across the jurisdictions.
Speaker 3: the jurisdictions, across offices, and it is really bearing fruit in terms of how we're presenting ourselves, the ways in which we can engage with families and foundations, what have you. So on the organic side, we're very optimistic about our future and really feel we have a very competitive model.
Cross offices.
Really bearing fruit.
In terms of how we're presenting ourselves the ways in which we can engage with families and foundations what have you.
So on the organic side.
We're very optimistic about our future.
We really feel we have a very competitive.
Speaker 3: On the inorganic side there, we are a destination as we mentioned.
Model.
Inorganic side, there we are a destination as we mentioned.
Speaker 3: We're a firm that has a unique platform, our global footprint, our range of services. These are, you know, in the industry, it is a unique structure with breadth that most do not have. So when a firm that deals with the ultra high net worth client is evaluating, making a strategic...
Uh huh.
Firm that has a unique platform our global footprint are a range of services. These are.
In the industry. It has a unique structure with breath, but most do not have so when a firm that deals with the ultra high net worth client is.
Is evaluating making a strategic decision.
Speaker 3: We are a very credible counterparty because as they evaluate that, the first thing they're going to think about is, will my clients be well served?
They're very credible counterparty.
As they evaluate that the first thing they're going to think about it is we'll might want us to be well served.
Speaker 3: merging into or being acquired by this firm. And ultimately, the determination, more often than not, is yes, with our.
Emerging into or being acquired by this firm.
Ultimately.
The determination more often than not is yes with our firm.
Speaker 3: So we do have a pipeline. There are less firms, it's not a high volume opportunity set, but there are some high, high quality firms that have been competitors of ours for years that are willing to engage and see us as a viable long-term option for them.
So we have a we do have a pipeline there or less firms not a high volume opportunities, but there are some high high quality firms that have been competitors of ours for years.
Or are willing to engage in and see us as a viable long term option for them.
Got you. Thank you very much.
Speaker 1: Thank you. And ladies and gentlemen this concludes our question and answer session. I'd like to turn the conference back over to Michael Tiedemann for any closing remarks.
Thank you ladies and gentlemen, this concludes our question and answer session.
The conference back over to Michael <unk> for any closing remarks.
Speaker 3: Okay, thank you operator. We invite you to contact us with any questions you have or schedule follow-up calls.
Okay. Thank you operator.
Got you to contact us with any questions you have or schedule follow up calls.
Speaker 3: As mentioned on the call, we are positioning the ALTI platform for the long-term, and we see a lot of exciting opportunities in both wealth and asset management as we close 2023 and enter 2024.
As mentioned on the call we are positioning the platform for the long term and we see a lot of exciting opportunities in both wealth and asset management as we close 2023 and enter 2024.
Speaker 3: I'm immensely proud of our team, who are all fellow shareholders and working diligently to execute our strategic priorities.
Immensely proud of our team, we're all fellow shareholders and working diligently to execute our strategic priorities.
Speaker 3: Our talent is what will make Alti the leading platform across wealth and asset management in the years to come.
Our talent is what make real what.
Our talent is what will make all three of the leading platform across wealth and asset management in the years to come.
Speaker 3: We look forward to connecting with you in the new year and wish you all a happy, healthy holiday season.
And we look forward to connecting with you in the new year and wish you all happy healthy holiday season.
Thank you.
Speaker 1: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation.
You may now disconnect your lines and have a wonderful day.