Earnings Call Transcript - ALTI Q4 2025

Operator, Operator

Good morning. At this time, I would like to welcome everyone to AlTi's Fourth Quarter 2025 Earnings Conference Call. Operator provided instructions. I would like to advise all parties that this conference call is being recorded, and a replay of the webcast is available on AlTi's Investor Relations website. Now at this time, I will turn things over to Lily Arteaga, Head of Investor Relations for AlTi. Please go ahead.

Lily Arteaga, Head of Investor Relations

Good morning to everyone on the call today. Today, we will hear from Michael Tiedemann, Nancy Curtin and Mike Harrington. Nancy and Mike Harrington, along with Kevin Moran, our President and COO, will be available to take questions during Q&A. 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. These forward-looking statements include, but are not limited to, comments made during the prepared remarks and in response to questions. 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 terms. 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 statements. For a discussion of the risks and uncertainties that could cause actual results to differ, please refer to AlTi's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. AlTi 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'd like to turn the call over to Michael Tiedemann.

Michael Tiedemann, CEO

Thank you, Lily, and good morning, everyone. Before we begin, I would like to reflect on where AlTi stands today, three years since our listing. In early 2023, we entered the public markets with a clear ambition to build the premier global wealth management platform focused on the fastest-growing segment of the wealth landscape, the ultra-high net worth segment. I feel immense pride in what we've accomplished over this period and believe our team has created the most complete high-end investment solution set for large and complex families that exists. Today, AlTi delivers full-service global wealth management solutions in 19 cities across 9 countries. Since our listing, we've grown our AUM in our wealth platform by 70% while maintaining industry-leading client retention rates above 95%. We are established in the highest end of the wealth market with clients that average assets in excess of $50 million, a number that continues to rise as our prospects grow in size over time. Our team and the platform we have built is positioned to perform over both the near and long term. Now I want to turn to an important update, which also was announced earlier this morning with our earnings press release. After more than 25 years leading the company, I will be stepping down as CEO and Nancy Curtin, our Global Chief Investment Officer, will become Interim CEO. I've known Nancy for many years, and her leadership has been pivotal to the success of our business. I am confident the company is in capable hands and will continue to be supporting Nancy to ensure a smooth transition. Importantly, we've built a world-class team uniquely able to serve the most sophisticated client base in wealth management. I have immense respect and admiration for my colleagues all over the world for the dedication they have to serving our clients. Their relentless collaboration defines our corporate culture as a firm. And lastly, I would be remiss not to thank our incredible and loyal client base who've placed their trust in AlTi over the years, allowing us to serve their families across generations. With that, I will turn the call over to Nancy and the leadership team for their prepared remarks and today's subsequent Q&A session. Thank you.

Nancy Curtin, Interim CEO and Global Chief Investment Officer

Thank you, Michael. I'm grateful for the opportunity to step into this role and to work with our talented professionals and global leadership team as we continue to drive the business forward. I also want to personally thank Michael for his many years of dedication and focus, which has laid an excellent foundation to advance the company into its next chapter. As he mentioned, AlTi was built to serve the most sophisticated segment of the wealth market. This segment is looking for what we can deliver: a holistic and independent approach to complex wealth management where client needs span family governance and education, tax and structuring, and multiple generations and jurisdictions. We've been doing this for over two decades and are one of the few firms truly able to deliver customized solutions on a global basis. We're proud of what we've built. The same investment discipline and long-term client-centric approach also underpins how we serve clients on the platform today. Alongside our work with families, we have leveraged our institutional capabilities to build a leading global endowment and foundation, or E&F, business, using our institutional investment management platform and capabilities. This complementary and growing practice has grown to more than $8 billion in assets under management at year-end 2025, largely serving private and family foundations, and we view it as a natural extension of our wealth management business. Building on that foundation, growth across the platform has been strong. Since our listing, organic growth has been driven by both new client additions and continued expansion of existing relationships as families, endowments and foundations increase the scope of their engagement with AlTi over time. Over the past three years, we've generated over $9 billion of projected billable assets, including nearly $4 billion added in 2025 alone, reflecting sustained demand from ultra-high net worth and institutional clients across our U.S. and international businesses. At the same time, we've been deliberate in where we focus the business. Over the past three years and especially in 2025, we have remained firmly focused on our core Wealth and Institutional Management business with continued emphasis on delivering excellence in client service. In parallel, we've taken meaningful steps to simplify the organization and address noncore costs, actions that are enabling continued investment in our platform and positioning earnings to scale over time as these initiatives progress. As part of that focus, a comprehensive strategic assessment led to the exit of our noncore international real estate business in 2025, eliminating the future costs and obligations associated with that platform. Complementing these efforts, we have adopted a zero-based budgeting process as our budget methodology. Through the 2025 and 2026 process, ZBB has enabled us to identify approximately $20 million of recurring annual gross savings, with the majority expected to be realized by year-end 2026. Separately, our investments in alternative strategies continue to strengthen our capital and liquidity position and made a meaningful contribution to our results in 2025. Our interest in these internally and externally managed strategies provide a complementary source of cash flow to our core wealth and institutional management businesses and support future growth initiatives within that segment. With that context, I want to turn to our results highlights for the year. In 2025, AlTi generated $255 million in total revenues, representing 29% growth compared to 2024. Total revenues benefited from contributions from our alternative interests, while the core of our revenue base remained anchored in nearly $200 million of predictable recurring management fees. Adjusted EBITDA reached $35 million for the year. As we look ahead, we are increasingly excited by the opportunities to continue to grow organically while continuing to streamline the cost basis of the firm. With the platform now simplified following the restructuring of our noncore international real estate business, we expect our results to increasingly reflect the strong fundamentals of the company. In closing, I want to provide an update on our strategic review. As announced in December, a special committee was formed to review strategic options to maximize long-term value for shareholders. To date, the special committee has not received a proposal that it believes encapsulates the long-term value of the business, and it continues to evaluate a full range of alternatives with a clear focus on enhancing shareholder value informed by our clear strategy, strong management team and simplified platform. If any proposal is received from any party, the committee will evaluate it consistently with its fiduciary duties. With that, I'll turn it over to Mike Harrington to walk through the financials. Mike?

Michael Harrington, CFO

Thanks, Nancy. We made significant progress in 2025, and we expect to see the benefits of that progress in 2026. The exit of noncore activities is now complete and the impact of zero-based budgeting is beginning to show; we believe the strength of our business will become increasingly evident in the years ahead. Total assets under management reached $50 billion at year-end, up 10% year-over-year, driven by strong investment performance and the acquisition of Kontora. That growth was achieved despite a more muted market impact in the international business stemming from foreign exchange headwinds related to the U.S. dollar depreciation, given that growth assets within these portfolios are typically unhedged. For the full year 2025, AlTi generated approximately $255 million of total revenue, representing a 29% year-over-year growth. The increase was driven by robust AUM expansion, along with meaningful contributions from incentive fees, reflecting the strong investment performance throughout the year across the alternatives managers in which we hold ownership stakes. Fourth quarter revenue totaled $88 million, up 71% from the prior quarter, reflecting continued AUM growth and a $29 million contribution from incentive fees associated with the strong performance of the arbitrage strategy in 2025, which generated an 11.3% return for the year. Stepping back from the contribution of incentive fees in the year, the underlying strength of our business continues to be reflected in the growth of our recurring management fees. Management fees totaled nearly $200 million in the year, up 9% year-over-year and $53 million in the fourth quarter, up 14% compared to the same period in 2024, supported by sustained asset growth. Before turning to expenses, I want to highlight some important nuances in our financials. The results we're presenting today continue to reflect the lag in actions taken and costs incurred in 2025. As a result, the operating leverage of the business is not yet visible. That said, revenue growth remains strong, and we are seeing benefits from zero-based budgeting in areas such as occupancy, systems and marketing. At this stage, however, those benefits are being offset in our reported results by discrete one-time items, including temporary costs associated with the strategic review process. We expect these costs to subside in the coming periods and allow the underlying expense trends to become clearer. For the full year, reported operating expenses increased by $72 million to $329 million. The increase was largely driven by higher compensation costs, inclusive of an approximately $14 million bonus accrued associated with the arbitrage incentive fee recorded in Q4, the integration of Kontora in 2025 and other one-time items related to the strategic review process, zero-based budgeting program and the exit of the international real estate business. On a normalized basis, excluding nonrecurring and noncash items as well as the arbitrage incentive fee bonus accrual, full year operating expenses were $205 million compared to $182 million in 2024. The increase primarily reflects higher compensation costs, including the effect of the Kontora acquisition, increased professional fees and G&A expenses driven partially by the strategic review process as well as foreign exchange and VAT. Beneath these temporary and noncore items, our cost structure is improving as zero-based budgeting initiatives continue to progress and noncore items roll off. We expect these improvements to become increasingly visible in our reported results. For the full year, adjusted EBITDA increased 45% to approximately $35 million, reflecting the contribution from incentive-related performance during the year. Adjusted EBITDA for the quarter was $11 million, nearly doubling sequentially, largely driven by the net contribution from the incentive fee. Adjusted EBITDA margins were 14% for the year and 13% for the quarter. On a GAAP basis, we reported a net loss of $155 million for the year and a net loss of $15 million for the quarter, driven largely by noncash nonrecurring items. For the full year, other loss was $31 million, primarily attributable to a $35 million impairment charge of the arbitrage fund recorded in Q3. In the fourth quarter, we recorded a loss of $8 million, reflecting fair value adjustments on certain items. Looking ahead, we expect 2026 to mark a turning point for the business. As initiatives continue to take hold, progress should become increasingly evident in our normalized results, supported by additional savings from optimizing office occupancy and completing the wind down of legacy technology and vendor contracts. As revenues continue to grow and the platform scales, the impact of zero-based budgeting and platform efficiencies should become clear, allowing the financial profile of the business to reflect its underlying strength. With a focused strategy, durable client relationships and a simplified operating model, we believe AlTi is well positioned to deliver sustained growth and increased profitability over time. And with that, I'll turn it back to Nancy Curtin for her closing remarks.

Nancy Curtin, Interim CEO and Global Chief Investment Officer

Thank you, Mike. 2025 was a critical year for AlTi. While we continue to grow our business and deliver for our clients, we also made necessary decisions to simplify the business, sharpen our focus and position the firm for long-term value creation. As a result, we entered 2026 with a cleaner structure, a stronger operating model and a platform aligned around recurring revenue wealth and investment management. Thank you for your continued interest and support. We look forward to updating you on our progress in the quarters ahead. I'm now turning it over to the operator for questions.

Operator, Operator

Operator provided instructions. And our first question will come from Wilma Burdis with Raymond James.

Wilma Jackson Burdis, Analyst, Raymond James

Could you provide a little bit more color on the decision to transition CEOs and just talk about what the search process looks like from here?

Nancy Curtin, Interim CEO and Global Chief Investment Officer

Well, first of all, thank you very much for your support of the company. I think it was a thoughtful discussion between the Board and management as part of AlTi's ongoing focus and next phase of growth. We decided it was the right time to appoint a new leader for AlTi's next chapter of growth ahead and to continue executing our strategy. I want to say upfront that while there's a change in leadership, our overall strategy of being a preeminent ultra-high net worth firm operating on a global basis with excellent client service and independent advice remains unchanged. There is continuity and momentum, and the strategy that's already in place is what we aim to continue to deliver on. It might be helpful just to turn to Kevin, who's sitting next to me, and he can comment on it. Kevin and I are working side by side, and we look forward to the partnership together.

Wilma Jackson Burdis, Analyst, Raymond James

Yes.

Nancy Curtin, Interim CEO and Global Chief Investment Officer

It was a thoughtful discussion, and we believe this is the right next step for the company as we continue to execute our strategy.

Kevin Moran, President and COO

Thanks, Nancy. Will, I've spoken to you in the past on some of these calls. As I think you know, Nancy, Mike and I, the management team here at the firm has been together for a very long time. I've been with the firm for about 18 years, and that's the case for many at the management level. So as Nancy says, we believe in the strategy. There will be continued execution on the go-forward strategy that Mike Tiedemann put in place 25 years ago when he launched what was at that point Tiedemann Advisors. We, as the management team, are a very cohesive, long-tenured team, and we remain absolutely focused on continuing to grow and execute the business strategy that Nancy and Mike laid out in their remarks.

Wilma Jackson Burdis, Analyst, Raymond James

Great. And I think you made a few comments on the process on the call, but can you just give us an update? It sounds like is this more of a pivot towards focusing on operating. Can you just talk a little bit more about how that all fits together?

Nancy Curtin, Interim CEO and Global Chief Investment Officer

The strategy of being the preeminent global leader in the ultra-high net worth market, addressing intergenerational wealth transfer and serving our existing clients remains unchanged. A core part of that is growing our business organically and, from time to time, opportunistically and strategically looking at inorganic opportunities. There's nothing on the horizon at the moment. We remain mindful of ZBB, which is a core part of our cost discipline and process, and we continue to think about how we scale the business. I'll turn to Kevin because he's led that over the last couple of years.

Kevin Moran, President and COO

Sure. We're very focused on further optimizing our cost structure to allow us to continue to scale the business. We're focused on both the cost structure and growth. Organic growth for us is the hallmark of a healthy business, so we're focused on continuing to win business and bring on clients and service them well. Nancy said we're uniquely positioned to also execute inorganic growth, both in the United States and elsewhere, and we have a terrific opportunity set in terms of both growing organically and inorganically. At the same time, we are not taking our eye off the ball on expenses. We're making investments, particularly on the technology side, and those investments should drive efficiencies over time in the mid and back office and even on the front office side through AI and technology initiatives. Simultaneously, we're streamlining non-comp costs: proactively managing occupancy, technology spend, and professional fees. As some onetime contracts expire, you'll see continued improvement in tech spend and professional fees. It's a management team that's very focused on both top line growth and bottom line improvement on the expense side.

Wilma Jackson Burdis, Analyst, Raymond James

Great. And then it looks like you had pretty solid merger arbitrage performance in the quarter. Maybe give us a little bit more color on that.

Kevin Moran, President and COO

The merger arbitrage strategy has been operating for a very long time. 2025 was a strong year; performance was up a little over 11% for the year, and that correlated to improving management fees based upon improving AUM growth as well as a strong incentive fee. As you know, the incentive fees for that are crystallized at the end of the year, so based on performance for the full year, we earned a pretty strong incentive fee for 2025. We don't have a view on 2026 because we don't know what performance will be for the strategy, but the strategy has a very long track record of doing pretty well in most market environments.

Nancy Curtin, Interim CEO and Global Chief Investment Officer

I'll just add that we'll have to see what happens with the conflict in the Middle East, but M&A activity is broadly picking up both in the volume and value of transactions, and this represents a ripe opportunity for the arbitrage strategy. We'll see what happens this year, but the strategy has a good track record; the manager has produced performance in all sorts of years, and M&A activity looks like it could be strong in 2026.

Wilma Jackson Burdis, Analyst, Raymond James

Okay. Great. And it looks like there were some pretty solid additions in AUA. Can you just touch on that a little bit?

Kevin Moran, President and COO

On the AUA growth, we did add the Kontora acquisition, which was a German multifamily office we completed last April. That transaction increased our revenue and AUA. Kontora has a multifamily office business with both AUM and AUA, and part of the strategy behind that acquisition was over time to convert their AUA assets to AUM assets, a conversion we have a successful track record of doing with the rest of the business. That was the main driver in the AUA uptick in 2025.

Wilma Jackson Burdis, Analyst, Raymond James

So I guess drilling into that a little bit more. I think there was some AUA that was added in 4Q. Just was curious on that.

Kevin Moran, President and COO

What you're seeing is the typical movement of client assets in and out of portfolios. We provide holistic services across a client's entire network, covering real assets like real estate as well as investment assets. Particularly when we bring on large clients, they may have very large AUA versus AUM assets. AUA captures nonfinancial assets—real estate, collectibles, and so forth—and those will flow into AUA rather than AUM. It's core to our service model to oversee, report and advise on both AUA and AUM.

Wilma Jackson Burdis, Analyst, Raymond James

Could you give us a little more color on the 13D that was filed by Allianz?

Nancy Curtin, Interim CEO and Global Chief Investment Officer

As you know, Allianz has been a strategic partner of the firm for the last 18 months, and they filed a 13D. We have no further insight into their intentions or plans. From a regulatory perspective, if they have any plans to increase their engagement, they are required to file a 13D. They've been a trusted and excellent partner, and if they decide to move forward, we don't have visibility into that at this point, but it could be welcome. In any event, we have a special committee of the Board of Directors—the independent directors—who will evaluate any strategic proposal consistently with their fiduciary duties and in the best interests of shareholders. That's all I can say at the moment, but thank you for the question.

Wilma Jackson Burdis, Analyst, Raymond James

And then could you just give us a little bit more detail on ZBB, where you stand with that? What's to come? What else you're doing there?

Kevin Moran, President and COO

Zero-based budgeting is the budgeting approach we're taking going forward. The $20 million number we discussed was identified using the zero-based budgeting approach for the 2025 budget. That $20 million was across the scope of non-comp expenses and is expected to be realized over about nine quarters into the first quarter of 2027. The extended timeframe reflects that many of those expenses are subject to contracts—leases and technology vendors—that must run to expiration. What we saw in 2025 were noncontractual expenses: marketing, travel and entertainment, and tech expenses where contracts were expiring. We also made significant improvements in reducing occupancy expense. In 2026 you'll see continued cost reductions around technology and occupancy as we move through leases and contracts that expire over the next four to five quarters.

Wilma Jackson Burdis, Analyst, Raymond James

Just following up on the earlier question on Allianz. Can you just remind us, it seems like I thought Allianz had a multiyear standstill. Can you just remind us where that stands?

Nancy Curtin, Interim CEO and Global Chief Investment Officer

Kevin, would you like to take that?

Kevin Moran, President and COO

Yes. When Allianz invested, they did have a standstill, so they would need Board approval or Board consent for us to waive the standstill. The standstill can be waived, and they would discuss that with the special committee if they wish to move forward.

Wilma Jackson Burdis, Analyst, Raymond James

Makes a lot of sense. And then could you just give us a quick reminder of where you stand with capital and potential to grow, acquire new advisers or new platforms?

Nancy Curtin, Interim CEO and Global Chief Investment Officer

That's a core part of our strategy. It's both organic, which is the priority, and inorganic when appropriate. I'll turn to Kevin so he can discuss funding and sources we have to pursue inorganic opportunities.

Kevin Moran, President and COO

On the organic side, we don't see a need for additional funding to continue to execute our organic growth initiatives. We have a strong group of advisers, support staff and business development teams globally. If we identify an attractive M&A opportunity or a larger lift-out that requires capital, we've had discussions with capital providers and believe capital is readily available. We can execute on an idea and show any capital provider how accretive the transaction will be. To sum up: for organic growth, we don't see a need for capital at this time; if we identify an inorganic opportunity, we are confident we can raise capital to fund and execute it.

Operator, Operator

Operator provided instructions. And this now concludes our question-and-answer session. I would like to turn the floor back over to Nancy Curtin for closing comments.

Nancy Curtin, Interim CEO and Global Chief Investment Officer

Thank you very much for joining us on the call this morning. We look forward to sharing updates on our progress on our first quarter call, and thank you for the excellent questions. Very much appreciated, and thank you for your time.

Operator, Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.