Equity-Based Compensation and Earn-in Expenses

6 Months Ended

Jun. 30, 2024

Share-Based Payment Arrangement [Abstract]

Equity-Based Compensation and Earn-in Expenses

The Company grants equity-based compensation awards in the form of restricted share units (“RSUs”) or performance restricted share units (“PRSUs”) for Class A Common Stock to its management, employees, consultants, and independent members of the board of directors under its 2023 Stock Incentive Plan (the “Plan”). The total number of shares of Class A Common Stock that may be issued under the Plan is 11,788,132, of which 735,147 remain available as of June 30, 2024. To the extent that an award expires or is canceled, forfeited, terminated, surrendered, exchanged or withheld to cover tax withholding obligations, the unissued awards will again be available for grant under the Plan.

The Company recognizes equity-based compensation expenses at the Company’s stock price as of the grant date. As of June 30, 2024, the Company has an unrecognized equity-based compensation expense of $30.4 million, which is expected to be recognized over a weighted average period of 2.32 years.

The following table summarizes the equity-based compensation award activity for the six months ended June 30, 2024, and June 30, 2023:


	June 30, 2024			June 30, 2023
	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value
Restricted common stock
Restricted common stock awards outstanding at beginning of period	4,797,464	$	4.64	—	$	—
Restricted common stock granted	4,078,237	5.20		7,395,306	6.40
Restricted common stock forfeited	(356,918)	4.45		(80,095)	4.35
Restricted common stock vested	(1,823,811)	4.99		(2,534,202)	9.99
Restricted common stock awards outstanding at end of period	6,694,972	$	4.90	4,781,009	$	4.53

The following table summarizes the equity-based compensation recognized, which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations, during the three and six months ended June 30, 2024, and June 30, 2023:


	For the Three Months Ended				For the Six Months Ended
(Dollars in Thousands)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
RSUs	$	2,136	$	1,515	$	5,093	$	31,060
PRSUs	466		—		466		—
Earn-in expense	1,079		1,061		3,045		2,074

Revenue share	152		—		364		—
Deferred compensation	1,156		—		2,375		—
Total	$	4,989	$	2,576	$	11,343	$	33,134

RSUs

In connection with the Business Combination, certain of TWMH’s restricted units vested and the Company granted fully vested shares to Alvarium’s employees, resulting in compensation expense of $4.2 million and $24.6 million, respectively, during both the three and six months ended June 30, 2023. The $24.6 million consisted of $21.0 million related to the acceleration of 2.1 million of earn-out shares at closing and $3.6 million for 360,485 shares related to another transaction completed in contemplation of and for the benefit of the acquirer under Topic 805. None of these stock awards were outstanding after the Business Combination.

Upon completion of the Business Combination, the Company issued 60,800 shares of Class A Common Stock to employees of the Company. These awards vested in full immediately and had a fair value of $10.00 per share, resulting in compensation expense of $0.6 million for both the three and six months ended June 30, 2023.

On March 23, 2023, in connection with the Business Combination, the Company granted 65,554 RSUs to its board of directors, which vested over an approximate nine-month period and had a fair value of $12.56 per share. On March 1, 2024, the Company granted 138,564 RSUs to its board of directors, which vest over a four-month period and had a fair value of $5.87 per share. On June 26, 2024, the Company granted 123,732 RSUs to its board of directors, which vest over a twelve-month period and had a grant date fair value of $4.98 per share. These grants resulted in compensation expense of $0.6 million and $0.8 million for the three and six months ended June 30, 2024, respectively.

On May 31, 2023, the Company granted 4,697,317 RSUs to its employees, which, vest over a three-year period and had a fair value of $4.35 per share. On June 5, 2024, the Company granted 2,219,661 RSUs to its employees, which vest over a three-year period and had a fair value of $4.78 per share. These grants resulted in compensation expense of $1.4 million and $1.5 million for the three months ended June 30, 2024 and June 30, 2023, respectively, and $3.4 million and $1.5 million for the six months ended June 30, 2024 and June 30, 2023, respectively. Since the initial grant date of these awards, 539,545 shares have been forfeited.

On various dates throughout 2023, the Company granted 111,148 and 118,987 RSUs to employees, representative of buy-out equity awards as restricted units, vesting generally over a one to three year period, with a fair value of $7.66 and $8.72, respectively, per share. On February 6, 2024, the Company granted 29,154 shares of Class A Common Stock to employees, representative of buy-out equity awards as restricted units, vesting over a two year period, with a fair value of $5.36 per share. The Company recognized compensation expense of $0.1 million and $0.9 million for the three and six months ended June 30, 2024, respectively, related to these buy-out equity awards.

PRSUs

The Company grants PRSUs to selected members of AlTi’s executive team. Vesting of the PRSUs is based on meeting certain market conditions and the requisite service period. The PRSUs are eligible to vest on a graded basis at the end of each of three annual periods, subject to the employee’s continued service with the Company through the applicable performance period, and are only earned upon achievement of total shareholder return of the Company’s Class A Common Stock exceeding certain thresholds.

On June 5, 2024, the Company granted 1,567,125 PRSUs to participants and used a Monte Carlo simulation model to determine the average grant date fair value of $5.76 per share. Compensation expense associated with the PRSUs will be recognized over the longer of the expected achievement period for the service or market condition. These grants resulted in compensation expense of $0.5 million for both the three and six months ended June 30, 2024.

Earn-Ins

In connection with TWMH’s historical acquisition of Holbein Partners, LLP (“Holbein”), certain employees of Holbein are entitled to receive a combination of cash and shares of the Company based on Holbein revenues in 2023 and 2024 (the “Holbein Earn-Ins”). The Holbein Earn-Ins were measured at fair value using estimates of future revenues as of the closing date. The earn-ins are expected to be paid in a combination of 50% cash and 50% in shares of the Company’s Class A Common Stock on the second and third anniversaries of the closing date of January 7, 2022. On July 14, 2023, the Company amended the Holbein purchase agreement related to the Holbein acquisition. The amendment crystallized the contingent earn-in consideration amount by replacing the valuation of the Holbein Earn-Ins consideration of an estimate of future revenue. Additionally, the first payment date and second payment date are agreed as April 1, 2024, and April 1, 2025, respectively, replacing the original share purchase agreement payment dates of ten business days after the second and third anniversary of the acquisition of Holbein. The agreed upon first and second date payments are $7.1 million and $8.9 million, respectively. The selling shareholders remain required to maintain certain service agreements to receive the compensatory Holbein Earn-ins. The amount of shares awarded will be calculated based on the twenty day average volume weighted average price of the Company's Class A Common Stock preceding the first and second payment dates. The Company recognized an expense for the earn-ins of $0.5 million and $1.1 million for the three months ended June 30, 2024, and June 30, 2023, respectively, and $2.5 million and $2.1 million for the six months ended June 30, 2024, and June 30, 2023, respectively.

Separate from the compensatory Holbein Earn-Ins, the Holbein acquisition consideration included contingent consideration that was measured at fair value using estimates of future revenues as of the closing date. The

acquisition consideration was also amended to crystallize the non-compensatory earn-in amount and follows the same fact pattern as the above-described amendment for the compensatory earn-ins. As of June 30, 2024, and December 31, 2023, this contingent consideration is recorded as a liability of $1.0 million and $1.8 million in the Earn-in consideration payable line of the Condensed Consolidated Statement of Financial Condition and Consolidated Statement of Financial Condition, respectively.

In connection with the Company’s acquisition of EEA (see Note 3 Business Combinations and Divestitures), certain employees of EEA are entitled to receive a portion of the contingent consideration comprised of a combination of additional cash and shares of the Company (the “EEA Earn-Ins”) based on the future EBITDA performance targets between the closing date and the fifth anniversary of the closing date, which is April 1, 2024. The portion of the EEA Earn-Ins to be issued in shares was measured at fair value as of the closing date. The Company recognized compensation expense for the estimated shares in relation to the accrual of the EEA Earn-Ins of $0.3 million for both the three and six months ended June 30, 2024.

In connection with the Company’s acquisition of PW (see Note 3 Business Combinations and Divestitures), certain employees of PW are entitled to receive additional shares of the Company (the “PW Earn-Ins”). The PW Earn-Ins are payable in equity upon the achievement of certain integration milestones and are due for payment no later than March 1, 2025. The Company recognized compensation expense in relation to the accrual of the PW Earn-Ins of $0.2 million for both the three and six months ended June 30, 2024.

Revenue Share

During the three and six months ended June 30, 2024, the Company accrued $0.2 million and $0.4 million, respectively, in compensation expense related to various revenue share arrangements to its employees, which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations and in Accrued compensation and profit sharing in the Condensed Consolidated Statement of Financial Position.

Deferred Compensation Liability

In connection with the ALWP Acquisition, during the three and six months ended June 30, 2024, the Company accrued $1.2 million and $2.4 million, respectively, in shares of Class A Common Stock which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations and in Accrued compensation and profit sharing in the Condensed Consolidated Statement of Financial Position.