Alti Global Inc Stock

Thank you. earnings conference call. like to advise all parties that this conference is being recorded and a replay of the webcast is available on altis investor relations website now at this time I will turn things over to Jeff Shane born without the investor relations please go ahead.

Good afternoon and welcome to Altie Global's second quarter 2026 earnings conference call. On today's call, we will hear prepared remarks from Nancy Curtin, Interim Chief Executive Officer and Global Chief Investment Officer, as well as Pat Keenan, Chief Financial Officer. They will be joined by Kevin Moran, our President and Chief Operating Officer for the Q&A session. Before we begin, 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 include, but are not limited to, comments made during the prepared remarks and in response to questions. Word 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 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 Nancy Kurtzman.

Thank you, Jeff, and good afternoon, everyone. I want to begin with what we believe is one of the most important aspects of the ALTI story, strength, rarity, and long-term relevance of our franchise. Globally, the creation of private wealth continues to be supported by powerful secular tailwinds. Wealth creation is expanding not only in the United States, but increasingly across Europe, Asia, the Middle East, other markets. At the same time, the needs of ultra-high net worth families are becoming more complex, more global, and more interconnected. Our focus remains squarely on serving ultra-high net worth families, family offices, and institutions. The number of independent firms capable of advising families with hundreds of millions, or indeed billions of dollars of assets, across geographies, generations, and asset classes is remarkably small.

We believe this scarcity value creates substantial long-term benefits. franchise value. Importantly, we do this as an independent advisor. Our is designed around the needs of the client rather than proprietary product distribution. We believe that alignment, combined with our global capabilities and highly collaborative culture, differentiates us in the marketplace and contributes to the exceptionally high client retention rates that we enjoy. In fact, recent research we conducted among family offices globally reinforces what we hear from our clients daily. Nearly half of respondents said they have begun to formally define the purpose of wealth and the role it should play across generations. yet many have not fully engaged the next generation in those discussions. We view this as a powerful validation of the work we do to help families navigate governance, security, accession planning, stewardship, education, and long-term legacy objectives, alongside our sophisticated investment management, planning, and wealth advice expertise.

Increasingly, our role is helping to prepare future generations for the responsibilities that come with wealth. We believe that distinction is becoming more important to families around the world and represents a significant opportunity for ALTI to create meaningful long-term value for clients and shareholders. As we look ahead, our strategic priorities remain clear. First is organic growth. We believe strong net organic growth is the clearest indication of the health of a wealth management business. Our focus is on attracting new clients, deepening existing relationships, expanding advisor capacity, and continuing to earn referrals through exceptional service and client outcomes. Second, we continue to invest in our core wealth management franchise. We remain focused on expanding advisor capacity in key markets, intensifying offices where we already have scale, and selectively adding talent and teams that align with our culture.

A recent example is our continued investment in Miami, which has emerged as one of the fastest growing wealth hubs in the United States, benefiting from both domestic migration and increasing international wealth flows. In the second quarter, we announced that César Pachon joined Alti to lead our Miami office, bringing decades of ultra-high net worth client experience, enhancing our strength in serving globally connected families and family offices. Internationally, we remain disciplined in allocating resources to markets that demonstrate strong growth potential and attractive long-term economics. Our global footprint is intentional, reflecting where internationally mobile families increasingly live, invest, and conduct businesses. In addition, investments in our already substantial private endowments business continued with the recent addition of Mike Cagnina, who brings decades of experience to ALTI, including many years at SCI's global institutional group, where he co-founded its endowment and foundations practice. A third strategic priority remains our laser focus on improving profitability and operating efficiency. We've undertaken a comprehensive effort to streamline the organization, simplify operations, reduce complexity, and improve scalability.

We are in the early stages of seeing the benefits, and we believe the organization is becoming leaner and better positioned for long-term growth. While reported numbers do not yet fully reflect that progress, our underlying expense trajectory is improving. These efforts are aimed at better aligning the business with its core strengths and ensuring our financial results more accurately reflect Alty's long-term earnings power. Turning to our second quarter financial results, assets under management grew to 51 billion. wealth management business, AUM growth reflected gross client inflows of nearly 800 million in the second quarter of 2026, while net flows totaled about 700 million. Market appreciation also had a positive impact on AUM, supported by staying the course in more difficult markets and our positioning in technology, energy, and power infrastructure, all benefiting from longer-term secular demand tailwinds. AUM growth was achieved even as we maintain a significant portion of the portfolio in alternatives which do not price at quarter end. Our external strategic managers run with low net market exposure, so they tend to have a more muted performance when markets move higher in short bursts, but continue to provide both diversification and downside protection.

During the second quarter, one of these three external managers, the Asian Credit and Special Situations Strategy, experienced an extraordinary circumstance. Unfortunately, its founder and chief investment officer experienced a sudden and serious health event. Our thoughts are with him, as well as his family and colleagues, and he has our very best wishes for a full recovery. Following this event, this external manager and his board made the unexpected decision to unwind the fund within a 12-month time horizon. As a result, for the second quarter, we recorded an unrealized investment loss on our stake in the strategy. This was an extraordinary event, unrelated to investment performance, and importantly, our stakes in the two other external strategic managers are performing solidly as expected. Turning to the top line, ALTI generated $58 million in total revenue, representing 11% growth compared to the same period of last year.

Recurring management and advisory fees totaled $54 million, up 11% year over year, and continue to represent the majority of our revenue base, reflecting the stability and recurring nature of our business model. We're also pleased to report that adjusted EBITDA for the second quarter of 2026 was over $5 million, up 9% compared to the prior year quarter, largely driven by the revenue increase, along with early improvements in our operating expenses, which we expect to accelerate in 2026. 2027 as cost controls and vendor rationalization take hold. Finally, with respect to the ongoing strategic review process, the Committee continues its work. As of today, there is nothing further to report. We will provide updates as appropriate. Now with that, I'll turn the call over to our CFO, Pat Keenan, to walk through the financials in more detail.

Thank you, Nancy, and good afternoon, everyone. Assets under management on June 30, 2026 were $51 billion, up 8% year over year and 6% from March 31, 2026, driven by strong investment performance and net positive client inflows. In the second quarter of 2026, Palti generated $58 million of total revenue, representing an 11% increase versus the same period last year. Recurring management and advisory fees total $54 million of 11% year-over-year and 5% sequentially, primarily due to approximately $700 million of net organic growth in AUM in the second quarter of 2026. Distributions from investments increased 28% year-over-year without performance by our external strategic managers, as reflected in higher distributions related to management fees in the European Equity Strategy and the Real Estate Bridge Lending Strategy. As discussed during our last earnings call, the incentive portion of investment distributions tend to be most significant in the first quarter of each year, which accounted for their contribution in the first three months of 2026. These distributions can play an important role in diversifying cash flows and contributing to results across different market environments.

Due to the unexpected decision by the Asian Credit and Special Situations Manager to unwind the fund within a 12-month time horizon, we anticipate diminishing contributions to ALTI revenues from this fund. For context, this year to date, this strategy represented about 75 basis points of ALTI recurring management fees and about 650 basis points of ALTI recurring management fees. points of the incentive portion of distributions. Also, as a result of the manager's decision to unwind, we recorded an unrealized investment loss of nearly $19 million on our stake in the fund. Turning to operating expenses, we are beginning to see the early benefits of ALTI's comprehensive effort to streamline the organization, simplify operations, reduce complexity, and improve scalability. We expect these benefits to accelerate in 2027 as cost controls and vendor rationalization takes hold. Over the quarter, reported operating expenses totaled $69 million, improving 12% from $78 million in the year-ago period. with reductions in both compensation and non-compensation expenses. Total compensation and benefits expense improved to $41 million, down 5% from the year-ago period, reflecting our expense reduction efforts.

Comp and benefits declined 26% sequentially, given elevated first quarter expenses associated with ALTI's management restructuring earlier this year. as well as our focus on cost controls. Non-compensation expenses improved by 20% from the year-ago period, reflecting progress under our zero-based budgeting initiatives. Missing included a 40% reduction in professional fees compared to the second quarter of 2025 as well as lower technology occupancy and marketing expenses these These reductions also reflect our focus on cost controls, as did the 8% decrease in non-compensation expenses for the first half of 2026 compared to the same period last year. For the second quarter of 2026, adjusted EBITDA was over $5 million, up 9% from the prior year period, driven by growth in total revenue and recurring management fees, as well as lower operating expenses. Adjusted EBITDA margin was 9.3% in the second quarter of 2026, compared to 9.5% in the prior year period. adjusted EBITDA margin of 20% in the first three months of 2026 reflect the impact of the incentive fees from investment holdings and external managers, which as discussed are primarily a first quarter compliment to recurring management fee revenues. Other expense for the quarter was $20 million, including the effect of the unrealized investment loss on the Asian Credit and Special Situations snake compared to other expense of $5 million in the year-ago period. On a GAAP basis, we reported an operating loss of $11 million, a 58% year-over-year improvement reflecting growth in total revenue and recurring management fees, as well as lower compensation and non-compensation expenses.

We also improved year-to-date GAAP operating loss by 37% in 2026 compared to the first half of 2025, driven largely by revenue loss revenue growth as well as reductions in non-compensation expenses that resulted from our efficiency initiatives. And finally, on a GAAP basis, we reported a net loss from continuing operations of $31 million for the quarter compared to $26 million in the prior year period. With that, I'll turn it back to Nancy for her closing remarks.

Thank you, Pat. As you've heard today, we continue to make meaningful progress across the areas that we have prioritized for our business. We remain focused on organic growth, thoughtful investment in our wealth management platform, strong and diversifying market gains, and operating efficiency improvement across the organization. We believe the secular trend supporting the growth of ultra-high net worth market remains firmly intact, and we continue to see increasing demand for the comprehensive advice, family office capabilities, and global perspective that distinguish Alty and the marketplace. I would like to thank our clients for their trust, our advisors and employees for their commitment, and our shareholders for their continued support. I'll turn the call back to the operator for questions. Thank you.

We will now 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 then indicate your line is in the question queue. You may press star two if you would like to remove your question 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. And our first question comes from Wilma Burtis with Raymond James.

Please go ahead.

Hey, good afternoon. Reported operating expenses seem to improve considerably. Can you give us some color on where you are as far as rolling on the ZBB benefits and.

should we expect that to trend in the coming quarters? Wilma, excellent question, and thanks for participating today. Let me turn to Kevin, who's really spearheaded that initiative, but we're really pleased with the beginning results we're seeing this year and the ongoing expense reductions that we think will come through in 2027. Kevin? Hi, Wilma. Thanks, Nancy.

Yes, the zero-based budgeting, I think as we talked about on prior calls, is the budgeting methodology that we're using at Alti. So we've now used it, I think this is the second year that we've used it. We used it for the 2025 and now the 2026 budgeting process. So I think as Nancy and management spoke about on prior calls, we're laser focused on reducing our cost structure of the business to improve profitability, combine that with revenue growth, which leads us to be really confident about the future of the business. So we would expect and certainly are very focused on continuing the cost discipline and continuing to drive down all elements of our cost structure, both comp and non-comp.

you've seen that in the Q2 numbers. Thank you. And can you talk a little about the net flows in the quarter and how you guys are thinking about organic growth going forward? Thanks.

So, organic growth is a clear priority for our business, and it was, I think, quite pleasing. It's been a volatile year, to say the least, in markets, et cetera, but it was quite pleasing to see about 700 million of net flows in the second quarter. That combined. with market performance, I said, led to a very pleasing result. And part of the market performance, I would We stayed invested during the more turbulent first quarter. We felt our positioning was rightly aligned for what longer term clients were looking for, and that bounced back quite nicely. So the combination of positive net flows and reaping the benefits of market performance.

I think characterized quite nicely the second quarter thank you and can you talk about the appetite for further M&A deals and which maybe just touch on which geographies would be interesting to all P Following Contour, does it make sense to expand the European footprint or are.

Are domestic opportunities more attractive? Maybe just talk about that. Thank you. Thanks, Wilma. We always are open to acquisition opportunities in the core and strategic markets that we think are most attractive. Of course, the United States has been a very successful market for us, and the recent acquisition, Contour in Germany, has also been really a great foothold to expand our presence there. So we will continue to look opportunistically. It is not something we're trying as a sort of roll-up strategy. That's not what we do. We look strategically for management teams and companies that align from a philosophy, a target client, client-first mentality. and the type of independent, integrated, holistic advice that we provide. And that's really important that we find those companies, and if we do, in strategic markets that we can integrate them.

So nothing to comment on at the moment, but always part of our longer.

term strategy. Okay, thank you. And then I realize you may not be able to say too much about this, but is there any update on the strategic review or how, you know, just maybe just give an update of what you guys are thinking there. Thanks.

Yes, of course, as you can imagine, as a public company, there's not too much that we can comment on and we don't comment on rumor and speculation. What I would say is the special committee, as you would expect, will continue to review any and all opportunities that will enhance the value of the company. for shareholders, of course, our clients, employees, and the long-term franchise value of the firm. So, we're guided by the those principles. The special committee is still in place, but that's really all I can comment on today.

Okay, thank you. And then maybe just last one for me. Can you talk a little bit about the event-driven platform and the trends there that you're seeing? Thanks.

So, on the event-driven side, first of all, I would say that generally our external and hedge fund strategies tend to run with a much lower level of net exposure. So they're not strategies that are going to move with the market going down violently and then going up. So they protected capital quite nicely in the first quarter. But the second quarter, when you see a robust recovery of markets, is really not the environment. for those strategies. And ARM, in particular, is going to be very, very deal-specific. It doesn't invest in speculative transactions. It has only announced deals where there's complexity and a spread that Drew thinks is worth the sort of the risk-return payoff is. appropriate.

So I would say a little bit more muted performance, but again, these things can change quite quickly as the M&A environment changes, and often the fourth quarter tends to be a much better quarter generally for hedge fund strategies.

Okay, thank you. And at this time, we have no further questions. I'd like to hand the call back to Nancy Curtin for closing remarks. Nancy?.

I'd like to thank everyone for participating today. We look forward to updating you on our progress in the quarters ahead as we remain laser-focused on organic growth and cost discipline. We appreciate your interest and look forward to speaking with you again next quarter. So thank you, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good afternoon. At this time, I would like to welcome everyone to AlTi's First Quarter 2026 Earnings Conference Call. [Operator 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.

Good afternoon, and welcome to AlTi Global's First Quarter 2026 Earnings Conference Call. On today's call, we will hear prepared remarks from Nancy Curtin, Interim Chief Executive Officer and Global Chief Investment Officer; and Mike Harrington, Chief Financial Officer. Nancy and Mike, along with Kevin Moran, our President and Chief Operating Officer, will be available to answer questions during the Q&A session.

Before we begin, 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 these 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 Nancy Curtin. Nancy?

Thank you, Lily, and good afternoon, everyone. As I reflect on my first 6 weeks as Interim CEO, what stands out most is the strength of our platform and the opportunity ahead. AlTi operates at the high end of the wealth management market, serving ultra-high net worth families and institutions whose needs are increasingly global, complex and long term in nature. That positioning is differentiated, highly relevant and well aligned with the needs of clients, navigating these clients that are navigating generational change and a more uncertain market environment.

During these first few weeks, my focus has been on working with the leadership team to maintain execution, sharpen priorities and ensure the organization remains aligned. While we continue to refine how we deliver against our plans, our strategic priorities remain unchanged, driving organic growth, pursuing inorganic opportunities where they are strategic to our goals, operating as one global firm, building capacity for our people and importantly, improving profitability in a disciplined and sustainable way.

The first quarter of 2026 unfolded against a volatile market backdrop, geopolitical uncertainty, sharp increases in energy prices, lower equity markets, currency fluctuations and shifting expectations around interest rates. These factors all contributed to heightened dispersion and pressure on asset values across the industry. In that environment, the resilience of our client base and investment approach is especially important. Our clients are ultra-high net worth families and institutions with long-term investment horizons, well-diversified balance sheets and generally limited near-term liquidity needs, which support our disciplined decision-making through periods of market stress.

At the portfolio level, our allocations are designed with diversification and downside awareness in mind and typically exhibit lower beta relative to the broader markets. In addition, our positioning in energy and energy infrastructure and technology, both in the United States and emerging markets allowed us to outperform more volatile markets. While market movements can affect reported AUM quarter-to-quarter as we saw during this past quarter, the underlying client relationships, engagement levels and long-term strategies remain fundamentally resilient.

As we look forward, our job is to continue to strengthen our firm by investing in capacity and growth while streamlining complexities and costs. We are investing thoughtfully in this platform, improving how we operate, removing inefficiencies, creating more capacity for advisers to serve our clients and thus drive organic growth. With that context, let me briefly highlight a few points from our first quarter results. AlTi generated $73 million in total revenue, representing 28% growth compared to the same period last year. Recurring management and advisory fees totaled $52 million, up 16% year-over-year and continue to represent the majority of our revenue base, reflecting the stability and recurring nature of our business model.

We also saw meaningful contributions from investment distributions of $21 million. The incentive portion of those distributions was $19 million in Q1 2026 compared to $10 million in Q1 2025. Adjusted EBITDA for the quarter was $15 million, up 21% compared to the prior year quarter, largely driven by the revenue increase. Overall, revenue in the quarter held up well, particularly given, as mentioned, the heightened geopolitical uncertainty and market volatility. Our results benefited from the stability of our core revenue streams, and we also saw a contribution from the incentive income driven by the strong performance of our external managers.

That said, we are very clear about where improvement is needed. Meaningfully increasing organic revenue growth is critical and is a primary focus across the organization. We are intent on driving stronger, more consistent momentum as we move forward. We also continue to review inorganic opportunities in our core strategic markets to catalyze further growth and help us scale the business.

On the expense side, costs remain too high and addressing that is a near-term priority. We are laser-focused on reducing and simplifying our cost structure. While the reported numbers do not yet fully reflect the progress through the ongoing strategic review, our underlying expense trajectory is improving. These efforts are aimed at better aligning the business with its core strengths and ensuring our financial results more accurately reflect its long-term earnings power.

Finally, with respect to the strategic review process, the committee continues its work. As of today, there's nothing further to report. We will provide updates as appropriate.

With that, I'll turn the call over to Mike to walk through the financials in more detail. Mike?

Thanks, Nancy, and good afternoon, everyone. As Nancy outlined, the quarter was shaped by a challenging market environment with asset values impacted by volatility. I'll walk through the financials in more detail, focusing on the composition of revenue, the dynamics affecting expenses and the contribution for our investment interest. Assets under management ended the quarter at $49 billion, up 9% year-over-year, driven by strong investment performance and the acquisition of Kontora. This growth was achieved despite market-driven depreciation during the quarter, reflecting the geopolitical uncertainty, higher energy prices, currency movements and shifting interest rate expectations referenced earlier.

In the first quarter, AlTi generated $73 million of total revenue, representing a 28% increase versus the prior year. Recurring management and advisory fees totaled $52 million, up 16% year-over-year, reflecting the Kontora acquisition and higher average billable AUM, partially offset by market volatility during the first quarter. Distributions from investments were also a meaningful contributor, totaling $21 million in the first quarter, up 75% year-over-year. The incentive portion, which reflects performance earned by external managers in the prior year, totaled $19 million in the first quarter 2026. Of that amount, approximately $18 million was attributable to Zebedee, the European long/short strategy, which generated a 15.3% return in 2025.

As we've discussed previously, these distributions play an important role in diversifying our cash flow and supporting results in periods where market-driven AUM pressure impacts recurring revenues. Before turning to expenses, I want to briefly level set on the dynamics this quarter. As noted last quarter, actions we've taken are resulting in improved cost control and underlying expense reductions. However, that progress is being obscured by temporary and nonoperational items, including costs associated with the strategic review and the recent management restructuring. As Nancy noted, we remain intensely focused on driving further cost reductions, lowering the expense base is central to improve the financial profile of the business, and we expect the benefits of these efforts to be demonstrated in the second half of the year.

For the quarter, reported operating expenses increased by $18 million year-over-year to $84 million, driven primarily by higher compensation costs related to the recent management restructuring, acquisition-related earn-outs and the Kontora acquisition. In addition, operating expenses reflected non-compensation costs driven primarily by increased professional fees and G&A expenses, including costs associated with the strategic review process as well as foreign exchange and other nonrecurring operational costs. These impacts were partially offset by lower bad debt expense compared to the prior year, along with reduced spending in areas such as technology, occupancy and marketing, reflecting progress under our zero-based budgeting initiatives.

On a normalized basis, excluding nonrecurring and noncash items, operating expenses were $58 million compared to $45 million in the first quarter of 2025, reflecting many of the items mentioned above. Importantly, on a sequential basis, normalized expenses declined by $19 million, primarily due to lower compensation costs from the absence of the arbitrage incentive bonus, alongside continued progress in simplifying the organization and lowering the cost base.

As our zero-based budgeting initiatives continue to advance, we expect these benefits to become more visible in reported results. However, as noted earlier, we continue to incur strategic review-related costs, primarily reflected in professional fees, which are expected to persist until the process is complete. For the quarter, adjusted EBITDA was $15 million, up 21% compared to the prior period and up $4 million sequentially or 32%. The sequential improvement primarily reflects lower costs as well as the impact of higher margin incentive fees from our investment holdings in external managers.

Adjusted EBITDA margin was 20% compared to 13% in the prior quarter. Other income for the quarter was $19 million, driven primarily by valuation-related items, including gains on investments and liabilities. And finally, on a GAAP basis, we reported net income from continuing operations of $8 million for the quarter, an increase of $4 million from the prior period.

With that, I'll turn it back to Nancy for her closing remarks.

Thank you, Mike. As Interim CEO, I've had the opportunity to step even more deeply into the business over the past several weeks. And what stands out most to me is the strength and resilience of AlTi's platform and client base. In a dynamic and uncertain market environment, our clients have remained highly engaged, grounded in long-term objectives and focused on partnering with us across wealth and investment management solutions. Building on the important work completed in 2025, we enter 2026 with a simpler organization, improving cost discipline and a business model anchored in high recurring revenues and long-duration client relationships.

I'm encouraged by the momentum we're seeing across the firm and excited about the opportunities ahead, particularly as we build the foundation to drive organic growth while continuing to execute on cost efficiency with focus and discipline. Thank you for your continued interest and support, and we look forward to updating you on our progress in the quarters ahead.

I'll now turn the call back to the operator for questions.

[Operator Instructions] first question comes from Wilma Burdis from Raymond James.

This is Chris on for Wilma. Can you provide any updates on the AUM given the market rebound in recent weeks?

It's Nancy. Yes, I think we did not sell during the period of the conflict and war. So we maintained our positioning, which had a combination of energy infrastructure and energy-related positioning plus technology. And as the markets have turned around, we've been able to nicely participate in the recovery. I don't have an exact AUM figure. We could certainly follow up and give that to you. But I would say, overall, just as we did last year, we did not panic during the particular event in crisis but we're continuing to live through in a world and we remain invested. So that's been a good thing to, as I said, participate in the recovery.

Great. And do you expect this level of incentive income from third-party managers to be a good run rate? Or should it normalize in a less volatile environment?

It's hard to say because remember, their strategies are not just beta market-oriented or either, I should say, because we have quite a lot of alternative expertise. But in a long/short manager, it's hard to say. Obviously, Zebedee had very good performance in Q1, and we'll have to see how it comes out in Q2. It's hard to say at this point. The numbers we've seen initially look encouraging, but we need to see how the quarter ends.

Okay. Makes sense. And then one more question. When -- do you have any idea of when we could expect the strategic review and therefore, elevated expenses to come down to a more normalized level?

I think on the strategic review, a large amount of those expenses hopefully are probably behind us. Obviously, if any proposal comes to the company, to the Board, the Board will need to evaluate it consistent with its fiduciary responsibilities. So it's hard to be sure that all the costs are behind us. But broadly, we have a very laser-focused really just evaluating opportunities that come as opposed to a strategic review process in place at the moment.

Chris, this is Mike. I would just say and I stated specifically, just I think we should expect those costs to continue in the second quarter at least and maybe bleed into the third. But when we get into the back half of this year, that should be behind us, contingent on the process being complete. But the costs we're incurring right now should start to diminish back half of the year.

Thank you very much. We have no further questions. At this time, I'd like to hand the call to Nancy for closing remarks. Thank you so much.

I just want to thank everyone for listening to the earnings call today, participating and asking such excellent questions. We look forward to seeing you next quarter as we continue to implement our strategy focused on both cost discipline and organic growth ahead. So thank you for your time today.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.

Good morning. At this time, I would like to welcome everyone to AlTi's Fourth Quarter 2025 Earnings Conference Call. [Operator 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.

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.

Thank you, Lily, and good morning, everyone. Before we begin, I would like to reflect on where AlTi stands today, 3 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.

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, 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 2 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 3 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 3 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 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 continues 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 interest, 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 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?

Thanks, Nancy. We made significant progress in 2025, and we expect to see the benefits that progress in 2026. The exit of noncore activities now complete and the impact of zero-based budgeting 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. And 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 onetime 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 onetime 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 come 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 $10 million, $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.

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 '26 with a cleaner structure, a stronger operating model the 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 Instructions] And our first question will come from Wilma Burdis with 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?

Well, first of all, well, it's Nancy, and thank you very much for your support of the company. I think it was a bit broken up, but I think you asked the question, can we give a little more color on the transition process? Is that right?

Yes.

Yes. Okay. Great. So it was a thoughtful discussion, as you can imagine, between the Board and management as part of AlTi's ongoing focus and next phase of growth. And I think we just decided it was the right time to appoint a new leader for AlTi's next chapter in growth ahead and continuing to execute our strategy.

But I want to say upfront that while there's a change in leadership, obviously, myself our overall strategy of being a preeminent ultra-high net worth firm operating on a global basis with excellent client service, independent advice and all those characteristics that both Mike and I spoke to, that remains continuity, momentum and the strategy that's already in place is absolutely what we aim to continue to deliver on.

And it might be helpful just to turn to Kevin, who's sitting next to me as well, and he can comment on it. Kevin and I are working side by side, and we look forward to the partnership together.

Thanks, Nancy. Will, I've joined -- I've spoken to you in the past on some of these calls. So as I think you know myself, Nancy, Mike and Tied, like 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. 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. And we, as the management team, it's a very cohesive, long-tenured team, and we remain absolutely focused on continuing to grow and execute the business strategy that Nancy and Mike Tiedemann laid out in their remarks.

Great. And I think you made a few comments on the process on the call, but can you just give us an update? I mean 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?

So let me take. I think what you're saying again, straight line. I think the strategy of being the preeminent global leader executing in a marketplace that is growing with ultra-high net worth, huge intergenerational wealth transfer and our already existing excellent clients that we have in place remains unchanged. But let me turn to Kevin because a core part of that is, of course, growing our business organically and from time to time, opportunistically and strategically looking at inorganic, but there's nothing on the horizon at the moment. But also continuing to be mindful of ZBB, which is a core part of our cost discipline and process and continuing to think about how we scale the business. So let me turn to Kevin to pick up on that because he's really led that over the last couple of years.

Sure. Thanks, Nancy. So we're very focused, as we've talked about on previous calls, I think I'd like to talk again about today on further optimizing our cost structure. What we're really looking to do is make sure that our cost structure is as optimized as possible to allow us to continue to scale the business.

So we're very focused on the cost structure. But at the same time, we're very focused on growth. So organic growth for us is really the hallmark of a really healthy business. So we're very focused on continuing to -- we think we have a terrific service model and one of the best platforms for servicing the ultra-high net worth client base that exists globally, certainly in the United States and elsewhere. So we're very confident in our ability to win business and bring on clients and service them in the best way possible in the industry. So that's on the growth side. Nancy said, we're uniquely positioned to also execute inorganic growth, both in the United States and elsewhere.

So we have a just a terrific opportunity set in terms of both growing organically and inorganically. At the same time, we are really not taking our eye off the ball on the expense side. We're going to make investments. We're seeing that on the technology side. So we're making technology investments that we think will drive efficiencies over time.

I think everything from mid to back office and even on the front office side, there's a lot to do in AI and technology initiatives. At the same time, looking to really streamline the rest of our non-comp costs. So we've been really proactive around occupancy as an example, and you're seeing that in the numbers.

We're going to continue to make sure that we're rightsizing our occupancy expense. And then the major -- where you're going to see continued improvements is on tech spend. So I mentioned we're investing into technology. We are also actively managing the technology spend.

So as some contracts were off, you'll see a continued improvement on the tech spend. And then professional fees, again, that's where Mike Harrington remarks talking about some of the noise that we've seen through from costs related to the strategic initiatives and elsewhere, as those onetime expenses come off, you also see improvement on the professional fees.

So it's management team that's very focused on both the top line growth as well as bottom line improvement on the expense side.

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

So the merger arbitrage strategy has been operating for a very long time. 2025 had a strong year. So I think performance was up a little over 11% for the year, and that correlated to the improving management fees, which took 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 those -- based on the performance for the full year, we earned a pretty strong incentive fee for 2025. We don't have a view on 2026 because again, we don't know what performance will be for the strategy, but that strategy has a very long track record of doing pretty well in most market environments.

I guess I would just add to that, Wilma I mean, we'll have to see what happens, of course, with the conflict in the Middle East, but M&A activity is broadly picking up both the volume and value of transactions, and this represents a pretty ripe opportunity for the arbitrage strategy. So we'll see what happens this year, but it's a good [indiscernible] he manages to produce performance in all sorts of years, but I would say M&A activity, it looks like, again, assuming we get through the conflict will be a strong year in 2026.

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

So I think you're seeing on the AUA growth, we did add Kontora acquisition, so was the acquisition of the German multifamily office that we completed last April that led to increased -- obviously, revenue -- our revenue numbers increased as a result of that transaction.

But also, they have their business -- multifamily office, they have AUM and AUA. So you're seeing the uptick in the AUA really from that acquisition. Part of the business strategy behind that acquisition was over time to convert their AUA assets to AUM assets, which we have had a very long successful track record of be able to do with the rest of the business. That was really the main driver in the AUA uptick in 2025.

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.

I think what you're seeing there is just the typical sort of movement of client assets in and out of their portfolios. We provide holistic services across a client's entire network. So everything from real assets like real estate to investment assets. And again, Nancy and the investment team have done a terrific job of managing client portfolios.

So I think there's nothing unusual. It's just as we -- particularly if we can bring on large clients, they may have at times very large AUA as opposed to AUM assets. Just think of AUA is really nonfinancial assets, just anything else in ultra-high net worth clients could own.

So real estate, hardware collectibles, those would all be flowing into our AUA as opposed to our AUM. But it's really core to the service model for us to be able to oversee and report and manage and advise on both the AUA and the AUM.

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

Yes. Thank you for that question, Wilma. So 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 what their intentions or plans are. But 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, and we don't have any visibility into that at this point, that would -- could be welcome.

Of course, in any event, as you're well aware, we have a special committee of the Board of Directors -- and any kind of proposal about the company strategically would go into our special committee who is committed of the independent directors to delivering the value for shareholders and representing all shareholders of the company.

So that's all I can say at the moment, but thank you for the question.

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?

Wilma, it's Kevin again. I can take that one, and Nancy or Mike may want to jump in. So zero-based budgeting is, I think, primarily one is the budgeting approach we're taking going forward. So the numbers -- the $20 million number that we talked about was based upon the zero-based budgeting approach that we used for the 2024 -- sorry, the 2025 budget.

So of the $20 million, right, it's really -- it was across the entire scope of non-comp expenses. The expenses that we identified were expected to be realized over about 9 quarters going into the first quarter of 2027. The reason it's an extended period of time it's a lot of those expenses are subject to contracts.

So think of anything from leases to technology vendors that as we identify and then we just don't renew the contract, we have to wait until the contract itself runs out. So what we saw in 2025 is really the noncontractual expenses.

So what Nancy talked about or Mike Harrington we talked about things like marketing, travel and entertainment and tech expenses where we have contracts expiring in 2025. So that's what we've seen so far. Same thing with occupancy, we made a significant improvement in reducing our occupancy expense.

So what we'll see in 2026 is continued cost reductions around technology and occupancy as we continue to move through leases and contracts that are expiring over the next 4 to 5 quarters.

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, I guess, no pun intended.

Kevin take that, Kevin?

Yes. So when Allianz invested, they did have a standstill, so they would need Board approval or Board consent for us to waive the standstill. So standstill can be waived. They do have one in place. So they will discuss that with the special committee in terms of how to move forward if they wish to do so.

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?

So that's a core part of our strategy. It's both organic, which is the priority, but of course, inorganic as well. Let me turn to Kevin on that. It's -- so he can talk about the funding that we have and sources we have to continue to allow us to pursue inorganic opportunities. Kevin?

Thanks, Nancy. So on the organic side, we don't see a need for funding to allow us to continue to execute on the organic growth initiatives. We have a terrific group of advisers and support staff business development teams globally to allow us to continue to pursue organic growth.

We have -- in the event we identify an attractive sort of M&A opportunity or a larger lift out that would require capital. We have had discussions with capital providers and think that capital is readily available. For us, we can execute on a great idea, and we can show any capital provider, how accretive that transaction will be.

So to sum it up on the organic side, we have -- we don't see a need for capital at this time to continue to execute. If and when we identify an inorganic opportunity, we are confident we'll be able to raise capital to fund and execute on that.

[Operator 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.

Thank you very much for joining us on the call this morning. Of course, 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.

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

Good afternoon. My name is Irene, and I will be your conference operator for today. At this time, I would like to welcome everyone to AlTi's Third Quarter 2025 Earnings Conference Call. [Operator 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.

Good afternoon to everyone on the call today. Joining me are Michael Tiedemann, our CEO; and Mike Harrington, our CFO. We invite you to visit the Investor Relations section of our website to view our earnings materials, including today's presentation. I would like to remind everyone that certain statements made during this 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 are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. For a discussion of these risks and uncertainties, please refer to AlTi's filings with the SEC, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. AlTi assumes no obligation to update any forward-looking statements.

During this call, we may refer to non-GAAP financial measures. Reconciliations to the most comparable GAAP measures can be found in our earnings materials and related filings. Lastly, please note that the recast financial results referenced in the presentation for the second quarter of 2025 reflect preliminary unaudited statements with respect to such results based solely on currently available information, which is subject to change. With that, I'll turn the call over to Michael.

Thank you, Lily, and good's afternoon, everyone. The third quarter reflects continued execution of the strategy that we have laid out, focusing the firm on our core wealth management business, simplifying the organization and reducing structural costs so that earnings scale directly with revenue. As previously disclosed, we placed our international real estate business in administration this quarter. The business has been a drag on margins as discussed in prior calls. The charges associated with placing under administration will be our final restructuring charges related to it, and the business will no longer take management attention going forward. This results in cleaner financials and bottom line improvements as we move ahead. We also moved to a single reporting segment, which provides cleaner transparency into performance and supports a more direct evaluation of operating leverage. We continue to operate from a position of strength.

Our platform is global, integrated, purpose-built to serve the complex needs of ultra-high net worth families, foundations and endowments. By combining institutional investment capabilities, deep access to alternatives and impact and the infrastructure of a multifamily office, we deliver seamless solutions to teams across 9 countries and 19 cities. Our business remains anchored in long-duration advisory and OCIO relationships with ultra-high net worth families since 2021, having approximately 96% client retention with an average tenure of 10 years and an average AUM per client above $50 million. These long-standing relationships are built on a foundation of trust and their wealth compounds over time through market cycles with diversified exposures to both public and private markets. A core differentiator is our ability to deliver independent advice at scale, particularly in private markets. We leverage our platform to negotiate preferred access and pricing with leading managers.

A perfect example of this is our partnership allocating capital alongside our largest shareholder, Allianz, within the private credit space. This joint venture continues to grow, outperform and accrue to the benefit of our client base. Consolidated revenue for the quarter was $57 million, with approximately 95% generated by recurring management fees and adjusted EBITDA was $6 million. Our results this quarter also include a noncash valuation adjustment related to our interest in the arbitrage strategy. This adjustment is accounting-driven, reflecting valuation at a single point in time during a period of lower AUM. Despite this valuation adjustment, the strategy is performing well, up 7.5% through September, driven by an improved regulatory environment and strong market backdrop. At AlTi, our cost base is structurally lower and continues to decline as the efforts of our zero-based budget program come into effect.

Once completed near the end of 2026, these initiatives are expected to generate approximately $20 million in recurring annual gross savings across non-compensation categories. This disciplined approach to cost complements the robust organic growth we're seeing across our wealth business. Internationally, we added more than $600 million in assets in the quarter alone, including a $240 million mandate secured through collaboration between our Miami and Singapore offices and $130 million mandate driven by our impact investing team in Zurich, working with specialists from Kontora in Germany. Year-to-date, the international growth has been substantial with over $1.2 billion added from both new clients and expanded relationships with existing ones. In the U.S., growth continues to accelerate as we strengthen relationships with large, sophisticated families and broaden our presence in priority markets. Through September, we secured nearly $1.1 billion in new and expanded mandates, reflecting strong demand for our capabilities.

Our pipeline remains exceptionally robust, featuring significant OCIO opportunities. And while onboarding time lines vary, our consistent execution and improved expertise give us confidence in converting these prospects into enduring client partnerships. Building on this progress, we are sharpening our growth focus through 4 distinct segments: women who manage wealth, family offices, endowments and foundations and established wealth. By tailoring our investment and service strategies to these segments, we aim to foster stronger internal alignment and create clear differentiation in the marketplace. Early indicators are positive, collaboration is accelerating. And after a brief slowdown last year, our prospect win rate is returning to normal levels. In parallel, we have built and continue to invest in operational centers of excellence, Lisbon for international operations and Delaware for U.S. operations. These hubs are selected for strategic positioning and cost effectiveness, enabling us to create meaningful operating leverage as we scale.

We are also refining our pricing models with a particular focus on international wealth management. These enhancements will drive greater consistency across our global platform, align pricing with the complexity and value of services we deliver and strengthen operating margins, all while ensuring fair and transparent experience for clients. Alongside these efforts, we're positioned to fully realize the benefits of substantial investments made over the past few years. These projects have strengthened our platform through a unified global tech infrastructure, consolidated investment capabilities, service and more robust finance function, leveraging best-in-class systems. Taken together, these strengths, combined with our singular focus on serving global ultra-high net worth segment, positions AlTi as a truly differentiated firm with a scalable control environment that is uncommon in our industry. While these investments have weighed on our short-term profitability, they were made with a clear long-term vision, creating a solid foundation for growth.

To summarize, the restructuring of the international real estate business is complete. The cost base is structurally lower and continuing to decline, and the platform is simplified and scalable. As new mandates and assets move into billing, revenue growth will convert into margin expansion. With the firm now squarely focused on organic and strategic growth within our core segment, we expect results to reflect this clearly as we move forward. With that, I'll turn it over to Mike Harrington to walk through the results for the quarter.

Thank you, Michael, and good afternoon, everyone. Let me begin with 2 important structural changes that shaped our third quarter results. First, our international real estate business being placed under administration in July qualified it to be presented as discontinued operations. As such, we have restated prior periods to isolate continued operations in accordance with U.S. GAAP. Second, in line with this presentation, we have unified our financial reporting into a single segment. These changes reflect our strategy to streamline and focus on our core wealth management franchise and the enhanced transparency, improve comparability and better reflect the business we are building and scaling.

Now turning to the quarter. Revenues for the third quarter were $57 million, up 10% year-over-year and 9% sequentially, reflecting continued momentum in our Wealth Management business. Growth was led by management fees of $52 million, up 7% versus last year, driven by robust asset growth. Additionally, revenues benefited from a year-over-year increase in incentive fees in the arbitrage fund. Importantly, 95% of revenues this quarter were recurring, underscoring the durability and predictability of our model. Assets under management reached $49 billion at quarter end, up 6% year-over-year, fueled by strong underlying portfolio performance and the acquisition of Kontora last quarter. Sequentially, AUM increased 4%, reflecting both portfolio performance and meaningful net new asset growth, clear evidence of the momentum Michael highlighted as a core driver of future earnings power.

Operating expenses for the quarter were $86 million, up from $61 million in the prior year period. The increase was largely driven by nonrecurring noncash charges, including a $4 million client redress provision and a $16 million write-off of receivables due from our disposed international real estate business that were formerly intercompany balances. The year-on-year increase also reflects the acquisition of Kontora. Excluding the onetime items, normalized operating expenses were $51 million versus $43 million in the third quarter of 2024. Normalized compensation expenses totaled $32 million compared to $28 million, primarily reflecting the inclusion of Kontora and the bonus provision associated with the arbitrage incentive fee recorded this quarter.

Normalized non-compensation expenses were $19 million compared to $15 million in the prior year period, driven by Kontora's consolidation and higher professional fees and G&A expenses. Sequentially, normalized compensation expenses rose by $3 million, primarily driven by the bonus provision. In sharp contrast, non-compensation expenses decreased approximately $600,000 from the prior quarter, even after absorbing an additional month of Kontora, which contributed nearly $500,000 in cost. Excluding Kontora, the quarter-over-quarter reduction exceeds $1 million, underscoring the tangible impact of our zero-based budgeting initiative. This disciplined approach is delivering measurable savings across multiple categories, including technology, professional fees, marketing and travel and entertainment.

Building on these results, the initiatives implemented in these categories are delivering tangible benefits and will continue to contribute meaningfully to the quarters ahead. Importantly, additional savings are expected to come online soon as we begin to realize the impact of occupancy optimization across key offices and the wind down of legacy technology and vendor contracts. Together, these efforts represent the next phase of our zero-based budgeting strategy and are central to our trajectory, reinforcing our commitment to operational discipline and positioning the company for sustained margin expansion.

Other loss for the quarter was $28 million, primarily driven by $35 million noncash impairment of the arbitrage fund. This was partly offset by gains from fair value adjustments on certain investments. Consolidated adjusted EBITDA in the quarter was $6 million compared to $12 million in the prior year period. The 2024 quarter benefited from nearly $3 million in interest income, while the third quarter of 2025 reflects the full impact of Kontora, adding approximately $3 million in normalized costs alongside higher professional fees and G&A expenses. Importantly, nearly all of the $93 million in EBITDA adjustments, approximately $87 million are noncash in nature. Of the cash add-backs, only $1 million were nontransaction related. This is notable as it points to the normalization of the business operations going forward.

The tax line this quarter reflects a noncash charge of $30 million, including the impact of the 100% valuation allowance related to our deferred tax asset. This adjustment was necessary due to uncertainty around future realization. Finally, on a GAAP basis, we reported a net loss of $107 million for the quarter, primarily reflecting the noncash nonrecurring charges related to the exit of the international real estate business, the impairment of the arbitrage intangible and the valuation allowance against our deferred tax asset. Adjusted net income, which excludes nonrecurring items, was $1 million. The net loss from discontinued operations was $20 million for the quarter, reflecting the full impact of placing the International Real Estate division in administration. Upon deconsolidation, intercompany balances were reclassified as third-party receivables and payables.

As part of its commitment to an orderly wind-down, AlTi will provide financial support and transactional services through the wind-down period ending December 31, 2027. The support will be reflected as an adjustment to the payable balance and reported under continuing operations. While this quarter includes significant charges, these nonrecurring costs should not mask the encouraging quarter-over-quarter trends on a normalized basis. The positive impact of our efficiency and productivity initiatives is starting to come through. As we enter the final quarter of 2025, AlTi stands on a stronger, leaner platform with a normalizing expense base driven by organizational streamlining, zero-based budgeting implementation and the real estate exit. Combined with the robust organic growth outlook and pricing initiatives Michael outlined, we believe the business is well positioned for sustainable margin expansion.

With that, I'll hand it back to Michael for his closing remarks.

Thank you, Mike. Before we open the line for questions, I want to reiterate what sets AlTi apart. Our platform is purpose-built for the world's most sophisticated families, combining global reach, deep expertise and a cultural partnership that endures across generations. The resilience of our business anchored in long-standing relationships, high client retention and a commitment to independent best-in-class advice gives us confidence as we navigate periods of change.

As we sharpen our focus on our core wealth management business, we're investing in what matters most, our clients, our people and the capabilities that drive sustainable long-term growth. We believe the actions we've taken this quarter position AlTi to deliver on our mission, helping families manage wealth with purpose and building lasting legacies. Thank you for your trust and partnership. Operator, let's open the line for questions.

[Operator Instructions] The first question we have is from Wilma Burdis of Raymond James.

Maybe you could help me just think a little bit more about normalized EBITDA versus the $6.2 million that you guys posted in the quarter. I think you mentioned that normalized expenses were around $35 million lower than the operating expenses on a reported basis. So I don't know, should we add that back to the EBITDA? How should we think about that?

Yes, I'll take that. Yes, yes, you should add that back. I mean going to my comments around the adjusted EBITDA, I think that's what you should focus on. That's what's been normalized. Yes. So we definitely add the $35 million back, that's going to be nonrecurring. I'm not sure I'm answering your question. Wilma, could you be more specific?

Yes, I think what I'm trying to get into a little bit more is just how we should think about a normalized level of EBITDA. So I guess you've done some of the ZBB work. You've had different charges. Just any way you could help bridge me to a more normalized level of EBITDA on a go-forward basis would be helpful.

Well, we're avoiding providing guidance. So I think our commentary is trying to point in that direction. We got a lot of confidence in terms of how we're managing cost and the direction that those costs are headed. So as I noted in my comments, we feel good about what's coming online in terms of savings. So any increases we might have, for example, like when you get to the end of the year in Q1, you have merit increases that we should be able to mute that because we're going to have offsets to that in terms of -- to keep that from rising. And then as Michael noted, the pipeline activity is very strong. The last couple of quarters, you've seen our management fees really grow. We were up 15% from Q1. And the combination of those 2 and some other initiatives we have going on like the pricing initiative that Michael referenced should really lead to an expanding margin. And I think we have a high degree of confidence around that outcome.

Is that helpful?

It is helpful. I guess if I think about this year, what you guys have posted probably for the first 3 quarters, something in the 40 -- maybe a little bit more than that, $40-ish million range for adjusted EBITDA. And then you've got the ZBB coming on board as well and then some growth. So is that -- does that kind of give us a good decent type run rate to build off of without giving...

Well, if I was tilting off, I'd build off the $6 million number we were providing as adjusted and then expand off of that number.

Okay. So that's a good number as kind of a run rate then you think and then you're adding ZBB and growth. Okay. Got you. That helps.

And then you made a commentary about just noncash versus cash. Is there any way -- I don't think that this is something that you guys have provided a lot of detail in the way that I can recall historically, but is there a way to back into cash flows or anything along those lines?

When our filings made, we don't provide that in this material we have here, but when our filings made, you'll be able to see the cash, change in cash for the period. So we did consume some cash this period. So you'll see that when we file our 10-Q. But on a go-forward basis, I expect cash to -- our cash and our cash flow to improve just based on the performance of the business improving.

Okay. Got you. Could you just go a little bit -- into a little bit more detail on the impairment in the arbitrage fund, which was -- I think it was around $35 million.

Sure. Yes. So the valuation that was used last September was a function of certain projections, certain assumptions that are made around the business and its performance. And part of those assumptions were certain growth rates are applied to the business. And so as you can see, the results for the year, the assets haven't grown are actually down from 9/30 of '24. So that caused us to have to take a look at the assumptions that we have made around the valuation last year. And so we've refreshed all that with new assumptions around the go-forward growth rates. And that -- when we did the math, that have to earn an impairment on the business. As Michael noted, from a performance standpoint, the strategy is doing very well. It just didn't grow last year, actually shrank. So in terms of AUM, but it's doing very well. It's having one of its best years in a number of years. So that's the reason for the impairment.

Got it. Makes sense. And then I think you guys touched on this in the opening comments, but just to confirm, should we consider the restructuring to be complete?

U.K. Yes, the U.K., yes, we're -- that's behind us. With this quarter, there won't be additional charges related to that business. And as we noted in the commentary, we'll provide support for the orderly wind down, but that will be done. We'll be making cash payments to support that, but there won't be any P&L impact going forward. It will just be a reduction of the payable that we have to the administrator.

Got you. But I just mean generally, is there a lot more restructuring needs to be done outside of that piece as well? Or maybe just give us a little bit of an indication.

You mean the entire business?

Yes.

Not that I'm aware of, no.

Okay. And then any plans for a buyback or anything like that?

Michael, do you want to answer that? -- you'd like me to answer that question?

The buyback -- I mean, buyback Share repurchases on the list of topics to be discussed with the Board in our next meeting. So we are always evaluating that in the share count and the [ dilution ] as part of our strategy conversations.

Okay. Makes sense. And are there any additional noncore parts of the business that could be divested potentially hopefully for a day, but is there anything that you're considering pruning at this point?

Again, we are always looking at the optimization of the balance sheet in terms of asset values, core segments of growth, utilization of cash from any asset sales or just reduction of costs as we've been more focused on previously in terms of putting a segment under administration. So these are all parts of evaluations that are ongoing and continuous. So the answer is yes, always, but nothing to be announced.

Okay. Great. And then, Mike, maybe you could talk a little bit about the pipeline for deals and other opportunities to grow.

Yes, there's -- so the advantage I believe we have or certainly one of the benefits of being a global business is the fact that there are opportunities, there are cities that we do not operate in, and there are obviously opportunities globally for us to evaluate. As we've maturing as a public company and as we've been growing and executing and successfully integrating teams, we have more and more proof points to explain to any prospective team, individual or firm that might be a great strategic fit for us. So the pipeline is global.

We -- obviously, we expanded within Germany. At this point, internationally, we would like to focus on densifying the existing jurisdictions and areas in which we operate. And there's a lot of business growth pipeline opportunities in the Middle East. So that is an obvious area for us that we're evaluating quite seriously. And then throughout the U.S., there are a few cities and major cities that we do not currently have a presence where there are either teams to bring into the firm or potentially firms to add that we're evaluating as well.

Great. And then hopefully, I'm okay to ask another question. But are there any other strategic conversations that are ongoing that we should be aware of?

We -- again, as a firm, we are always having internal strategic conversations about the firm, the stock price, acquisitions. And so just as a firm, we are always evaluating the business at whole, but there is nothing to comment on.

The next question we have is from Chris Kotowski of Oppenheimer & Co.

I was just wondering, the impairment that you said, I was a little fuzzy on that. Do we see that on the intangible asset line on the balance sheet? It's like not a part of an investment that was written down. It's the intangible, right?

Correct. That's right. Intangible related to the investment management contract.

Okay. And then I was also wondering the -- you had, I think, in the past, talked about Kontora that had a fairly large headcount, a lot of service and that you were trying to recruit more wealth management people there. And I'm just wondering if you can update us on how that's going.

The integration is going very well. There is -- we have everything from tech investment team, marketing team, all working on integration plans fully agreed by all teams. And the -- obviously, the marketplace of Germany is a very exciting one for us. So there have been some big -- actually some collaborations already and some early wins that were meaningful.

So it's important for us to, number one, evaluate the talent within any firm or team that joins us to make sure that we understand where that talent resides within the organization. There are times where a single office or someone working within a firm and a single office can actually become elevated and be part of the global firm. And so we're also evaluating investment portfolios. There's a lot of integration that occurs in the first year. It's going very well. And the team on the ground is very excited about it, and they're very happy to be integrated. And also, we're evaluating opportunities jointly.

Okay. And then I was wondering about the 2-year time frame. I thought I heard you say December 31, 2027, is kind of the final. Should I understand that is that like the final liquidation of all the U.K. assets? And does that settle any -- does that time frame incorporate any settlement of any litigation issues that might still be outstanding?

Why don't -- the December of 2027 is just -- that's the administrator's time line. That's what they're targeting is to complete their work in terms of resolving all the matters related to the liquidation of the assets and the repayment to creditors. We're not involved in that and don't have any influence on the timing of that. That's just their kind of standard operating plan. We will provide support through December of 2027 and then thereafter, we will not. So if the administration continues after that, we will not be obliged to. We will have provided all of our support that we're going to provide at that point.

And the nature...

I'm sorry, go ahead.

Yes, I was going to ask what's the nature of the support that you have to provide?

We'll put in a funding agreement between us, and we're in the final stages of negotiating that. But that funding agreement will be consistent with the payable that's on our balance sheet now that's due to a third party when you get to read our 10-Q, this is described in a lot of detail in there. And you'll see we have a payable to a third party. That third party is the administrator, and we will relieve that payable by sending cash to the administrator over -- on a set schedule, which we're, again, in the final stages of negotiating that schedule. So it will be over the time of the administration, which is the next -- look -- think about it in the next 8 quarters because the first payment won't be due until the first quarter of 2026.

And from a legal perspective, the matters that were related to the international real estate business, they are now the responsibility of the administrator. So part of the reason we took the action we did was to have those matters be then transferred to the administration. So on a go-forward basis, we mitigated that exposure.

There are no further questions at this time. And I would like to turn the floor back over to Michael Tiedemann for closing comments.

Thank you all for dialing in today for your interest and support. And if there are any further questions, please do contact Lily Arteaga and our IR department. I wish everyone a happy Thanksgiving and happy holidays in the month...

That concludes today's conference. Thank you for joining us. You may now disconnect your lines.