ALTI - NASDAQ

Good afternoon. My name is Matt, and I will be your conference operator for today. At this time, I would like to welcome everyone to AlTi Global, Inc.'s Fourth Quarter 2024 Earnings Conference Call. During the call, your lines will remain in a listen-only mode. After the speakers' remarks, there will be a question and answer session. I would like to advise all parties that this conference call is being recorded and a replay of the webcast is available on AlTi Global, Inc.'s Investor Relations website. Now, at this time, I will turn things over to Louis Ortega, Head of Investor Relations. Please go ahead.

Good afternoon to everyone on the call today. Joining me this afternoon are Michael Tiedemann, our CEO, Kevin Moran, our President and CEO, Mike Harrington, our CFO, and Patrick Keenan, our CAO. We invite you to visit the investor relations section of our website at www.alti-global.com to view our earnings materials, including our 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, planned, 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 Global, Inc. 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 presentation and our related SEC filings. With that, I would like to turn the call over to Michael Tiedemann.

Good afternoon, everyone, and thank you for joining us this afternoon. I am excited to share the significant progress we have made in 2024 as we advance towards our goal of becoming the world's leading independent ultrahigh net worth wealth management firm, with targeted expertise in alternatives and impacts. Additionally, I am pleased to introduce Mike Harrington, our CFO. We are thrilled to have him on board, bringing deep experience across key sectors and a proven ability to scale organizations while driving cost efficiency and strategic growth. 2024 has been a transformative year for AlTi Global, Inc. We established groundbreaking strategic partnerships, advanced our growth strategy, streamlined non-core assets, and restructured our segments to focus on stable recurring revenue businesses. Importantly, we strengthened our cost-cutting and efficiency initiatives to optimize our operations. As a result, we are at a critical inflection point poised for significant profitable growth and value creation in 2025 and beyond. Before diving into the results, it is worth noting that year-over-year comparisons are impacted by a one-time $41 million incentive fee recorded in Q4 2023, which skews direct comparisons.

On a consolidated basis, our assets under management and advisement grew 6% year over year. In our core wealth and capital solutions segment, however, assets increased 15%, driven by the inclusion of East End and Envoy, along with solid portfolio performance. For 2024, AlTi Global, Inc. generated $207 million in revenues, with 96% of that coming from recurring management fees, a significant increase from 77% in 2023. This shift is a key indicator of the stability and sustainability of our revenue base. Consolidated adjusted EBITDA was $17 million for the year, while our core wealth management and capital solutions segment delivered adjusted EBITDA of $37 million with a 19% margin, reflecting the stronger profitability of this key segment. I would like to highlight the key accomplishments of 2024, which I mentioned earlier, and are just beginning to be reflected in our financials.

Early in 2024, we announced a strategic partnership with AllianzX and Constellation Wealth Capital, which includes a combined investment of up to $450 million and supports our ambition to become the go-to global multifamily office for ultrahigh net worth individuals with a specialized focus on alternative investments. Importantly, these partnerships bring more than just growth capital. They offer strategic collaboration, which has already proven instrumental in executing on our strategic acquisitions in key markets globally, such as our recently announced acquisition of Kontoora, expanding our reach, fortifying our team, and enhancing our service offerings. A great example of the latter is our recently announced partnership with Allianz, which provides unprecedented private market access to the ultrahigh net worth segment by enabling clients to invest alongside Allianz's balance sheet.

This partnership facilitated through a joint venture with Allianz X is a game changer for our clients, opening doors to exclusive investment opportunities. Through this unique private market investment program, AlTi Global, Inc. clients, both existing and prospective, will benefit from Allianz's extensive network and scale. As an Allianz, they gain access to leading third-party managers with exceptional track records, significant cost savings, and expanded investment opportunities, including secondaries and co-investments. In November, we announced the first fund under the program focused on the global private credit market, which is estimated at $1.5 trillion. Allianz, with approximately $150 billion allocated to the sector, is one of the largest private debt investors worldwide, further underscoring the strength and potential of this collaboration. We are excited by the Fund's progress since its December launch. The joint venture launched solely from AlTi Global, Inc.'s international wealth management clients for the January 1st close and is on track to secure at least an additional $50 million in April. We expect robust ongoing growth, including from the US client launch scheduled in the second half of the year. In 2024, we made significant strides in executing our growth strategy. We achieved 15% asset growth in our core wealth management and capital solutions segment, fueled by both inorganic and organic growth.

This success stems from strategic acquisitions, enhanced business development efforts, a growing team, and a unique global offering designed for the expanding ultrahigh net worth market. With a $102 trillion addressable market, growing at 7% compounding, the ultrahigh net worth segment is wealth management's fastest-growing market. During the year, our assets under management and advisement also benefited from the strong performance of our diverse portfolio exposures. Our platform success in 2024 has been recognized with several prestigious awards, including Best Multifamily Office over $25 billion, for the second consecutive year, as well as Best Outsource CIO. These accolades from the WI

We take a disciplined approach to our acquisition pipeline, carefully evaluating the prospective profile, footprint, service offerings, and fit within AlTi Global, Inc. In 2024, we actively executed on this strategy with notable activity in the U.S. and Europe. In April, we completed the acquisition of East End Advisors, a New York-based independent advisory firm. This acquisition added nearly $6 billion of assets under management to the AlTi Global, Inc. wealth and capital solutions platform, positioning us to better compete in the growing outsourced chief investments or OCIO market. Since closing, the teams have been collaborating on investment analysis and client portfolio development, and we have a strong pipeline of potential new clients. At the start of the third quarter, we successfully completed the acquisition of Envoy, a Minneapolis-based wealth manager, with $3 billion in assets under management. This acquisition expands our footprint to the Midwest and positions us to serve the needs of ultrahigh net worth families and foundations in the region through a distinctive offering which combines Envoy's local expertise with our comprehensive wealth management services and global platform. Over the past few months, we have been integrating the business into our platform and leveraging our combined expertise to strengthen our business development efforts in the region. Last year, we also fortified our European presence. In May, we completed the acquisition of Pointwise Partners, a London-based wealth management firm, increasing our ownership to 100%. This transaction, which enabled us to deepen our operations in the UK, demonstrates our ability to offer tailored services while benefiting from the backing of the global platform. As referenced earlier in the call, with the acquisition of Comtura, this momentum has carried us into 2025. Last week, we announced the acquisition of this leading Hamburg-based multifamily office with €14 billion under management, marking our entry into Germany, the third-largest ultrahigh net worth market in the world. This strategic transaction, the first European deal post-investment from our partners, will boost our assets in the wealth management and capital solutions segment to approximately $76 billion, a 62% increase since our listing. For the transaction, which we expect will be accretive to our EBITDA this year, we are leveraging the funding from Allianz X, earmarked for AlTi Global, Inc.'s expansion into this attractive market. From the onset, we saw strong cultural alignment with Contura's independent and entrepreneurial founder-run team. With nearly 20 years offering a range of services, including family office and investment solutions to ultrahigh net worth clients in Germany and Austria, Contura is an ideal fit as we expand our international platform. We look forward to supporting its growth by leveraging the significant scale benefit of AlTi Global, Inc.'s global platform, including our superior access to world-class investment opportunities at attractive terms. Going forward, we will continue to focus on complementary domestic and international markets with attractive characteristics, including markets of significant size, which remain underserved by the independent wealth model. Our expansion plans will build on AlTi Global, Inc.'s existing presence, as well as the relationships and footprints of our partners. As part of our ongoing focus on enhancing our core recurring revenue businesses, in 2024, we also took important steps to divest nonstrategic businesses. In the first quarter, we closed the sale of LRA, the advisor to the UK publicly traded fund LXI, for $33 million plus a contingent consideration. In May, we completed the sale of our European Trust and Private Office Service, which primarily served third-party clients, for approximately $20 million. As we mentioned last quarter, following a strategic review, we determined the business currently reported in our international real estate segment was not additive to our long-term strategy. We are currently in advanced stages of negotiating to exit this business and expect to provide an update next quarter. With these divestitures, we are sharpening our focus on the wealth management and capital solutions segments, which will drive long-term recurring revenues and profitability.

I will now hand the call over to Kevin to discuss our cost-cutting initiatives and provide a deeper dive into our financials, giving Mike Harrington, who is today celebrating his second week at AlTi Global, Inc., the opportunity to acquaint himself with our business and financials in more depth.

Thank you, Michael Tiedemann. I would like to join you in welcoming Mike Harrington to the team. We are excited to leverage his deep expertise as we embark on this catalytic year and look forward to his valuable insights on future calls. To drive long-term profitable growth and maximize operating leverage, we kicked off a bold set of initiatives in late 2024 aimed at aggressively reducing costs and boosting efficiency and productivity. While we have made progress on our cost control since the listing, our cost base remains very elevated relative to the scale of our current business. This is a direct result of the costs tied to becoming a public company, integrating three companies in the business combination, and adding several acquisitions in distinct geographies. As a result, we recognize the need for a more comprehensive approach. In November, we introduced zero-based budgeting, or

Thank you, Kevin. In conclusion, we are making significant progress in repositioning the business to focus on recurring revenues and in streamlining and rightsizing the organization to align with our strategic goals. With a large addressable market and our unique position in the wealth management space, particularly with ultrahigh net worth clients and expertise in alternatives, we are well equipped to compete. Our strong strategic partnerships further enhance our capabilities. We are confident in our ability to execute on our strategy, drive profitable growth, and create long-term shareholder value. With that, I would like to open up the call for questions.

Great. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Wilma Burdis from Raymond James. Please go ahead.

Hey, good evening. Could you talk a little bit more about the acquisition in Germany and why it makes strategic sense? Thank you.

Yes. Hi, Wilma. How are you? For starters, Germany, as a market, is the third largest in the world. So it is clearly a strategic market to enter. It is a very challenging market to enter from the outside. Contura was established as one of the premier independent operators dealing with families of very large quantums and also a very specific range of sophisticated manner. So they were a perfect fit for the types of clients and also services that we provide globally for our families and that our families need. So it was a terrific fit, founder-led, and obviously, the association with Allianz was very helpful in the conversations and, obviously, the future of how we will approach that marketplace.

Makes a lot of sense. And then following the deal in Germany, can you talk about where you are on deploying capital? What amount of capital do you have that remains to be deployed, and just if you can give us some color on the pipeline.

Yes. As you saw, we do not currently have a debt facility. So we have $65 million as of December 31st AMC. Roughly $65 million of available cash. And we will pair that with acquisitions. So we do have an active pipeline of organic growth, which is critically important, a very good pipeline both in the US, Europe, and the Middle East. And then team lift-outs, and obviously, we are always evaluating great fits for organic larger opportunities.

Okay. Makes a lot of sense. And then is there anything else that we should expect from the strategic review on real estate? I guess, financial impact-wise, or is that behind us?

The review was complete, and we are in the final stages of the divestment process.

Okay. So no additional financial impact in the following quarters? Or I guess...

No. We expect that to really be complete and behind us.

Great. And then could you talk a little about the normalized operating expenses? Is this a good run rate going forward, or is there a lot more that can be done on the expenses?

I am going to let Kevin, who has been leading the

I will. I think we met a while ago. Yeah. Happy to answer the question. So we know, as I said in my remarks, we have undertaken, doing the budgeting process of 2025 using the

Okay. Thank you. And then what are you seeing on the M&A, arbitrage, pipeline? Understand the M&A environment is a bit choppy. Just want to see if there is anything you are, I guess, expecting this year in terms of that connectivity.

I presume you were referring to the not the company's M&A, but the actual funds M&A? Exactly. Yeah. Yes. Well, clearly, the past or the prior years leading up to 2025 were arguably the most challenging regulatory environment for M&A-focused traders in recent history. So that has changed. And the tone from, obviously, from the top, but also from the new regulators that are taking seats and taking leadership positions, the communication has all been quite constructive. So we do, you know, till the beginning part of the year, there is volatility. This is an environment that actually will set up well for increased M&A activity. And by all accounts, there is a big pipeline that bankers are working on. So we are very constructive on with the forward view of that strategy.

Okay. Thank you guys very much. Have a great evening.

You too, Wilma.

This concludes the question and answer session. I would like to turn the floor back to management for any closing comments.

Great. Thank you all for listening in, and we look forward to updating you on our progress in May. Thank you.