Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
Entity Registrant Name | Focus Financial Partners Inc. | |
Entity Central Index Key | 1,651,052 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 42,529,651 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 22,823,272 |
Condensed consolidated balance
Condensed consolidated balance sheets - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 98,378 | $ 51,455 |
Accounts receivable less allowances of $505 at 2017 and $1,208 at 2018 | 101,570 | 73,513 |
Prepaid expenses and other assets | 70,127 | 37,423 |
Fixed assets-net | 22,407 | 21,397 |
Debt financing costs-net | 13,014 | 13,278 |
Deferred tax assets-net | 70,232 | |
Goodwill | 693,160 | 515,489 |
Other intangible assets-net | 672,060 | 522,282 |
TOTAL ASSETS | 1,740,948 | 1,234,837 |
LIABILITIES: | ||
Accounts payable | 8,621 | 5,752 |
Accrued expenses | 48,588 | 23,626 |
Due to affiliates | 40,537 | 33,698 |
Deferred revenue | 7,811 | 6,094 |
Other Liabilities | 148,929 | 99,077 |
Borrowings under credit facilities (stated value of $1,000,012 and $00 at December 31, 2017 and September 30, 2018) | 798,481 | 980,502 |
Tax receivable agreements obligation | 39,156 | |
TOTAL LIABILITIES | 1,092,123 | 1,148,749 |
MEZZANINE EQUITY: | ||
TOTAL MEZZANINE EQUITY | 864,749 | |
COMMITMENTS AND CONTINGENCIES (Note 12) | ||
MEMBERS' DEFICIT | (778,661) | |
Additional paid-in capital | 389,830 | |
Accumulated deficit | (10,198) | |
Accumulated other comprehensive loss | (245) | |
Total members' deficit / shareholders' equity | 380,040 | (778,661) |
Non-controlling interests | 268,785 | |
Total deficit/equity | 648,825 | (778,661) |
TOTAL LIABILITIES, MEZZANINE EQUITY, AND MEMBERS' DEFICIT/SHAREHOLDERS' EQUITY | 1,740,948 | 1,234,837 |
Class A common stock | ||
MEZZANINE EQUITY: | ||
Common stock | 425 | |
Class B common stock | ||
MEZZANINE EQUITY: | ||
Common stock | $ 228 | |
Redeemable common and incentive units | ||
MEZZANINE EQUITY: | ||
TOTAL MEZZANINE EQUITY | 166,249 | |
Convertible preferred units | ||
MEZZANINE EQUITY: | ||
TOTAL MEZZANINE EQUITY | $ 698,500 |
Condensed consolidated balanc_2
Condensed consolidated balance sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Accounts receivable, allowances | $ 1,208 | $ 505 |
Borrowings under credit facilities, stated value | $ 800,993 | $ 1,000,012 |
Class A common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 0 |
Common stock, issued shares | 42,529,651 | 0 |
Common stock, outstanding shares | 42,529,651 | 0 |
Class B common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 0 |
Common stock, issued shares | 22,823,272 | 0 |
Common stock, outstanding shares | 0 | 0 |
Condensed consolidated statemen
Condensed consolidated statements of operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
REVENUES: | ||||
Total revenues | $ 235,701 | $ 180,254 | $ 663,365 | $ 473,030 |
OPERATING EXPENSES: | ||||
Compensation and related expenses | 107,382 | 90,524 | 262,004 | 196,037 |
Management fees | 62,487 | 43,100 | 169,346 | 115,898 |
Selling, general and administrative | 43,832 | 32,230 | 121,612 | 100,174 |
Intangible amortization | 23,616 | 18,530 | 65,400 | 46,020 |
Non-cash changes in fair value of estimated contingent consideration | 10,564 | 5,130 | 28,879 | 7,227 |
Depreciation and other amortization | 2,077 | 1,749 | 6,121 | 4,826 |
Total operating expenses | 249,958 | 191,263 | 653,362 | 470,182 |
INCOME (LOSS) FROM OPERATIONS | (14,257) | (11,009) | 10,003 | 2,848 |
OTHER INCOME (EXPENSE): | ||||
Interest income | 432 | 32 | 809 | 74 |
Interest expense | (12,996) | (14,296) | (45,480) | (27,338) |
Amortization of debt financing costs | (828) | (1,344) | (2,716) | (2,726) |
Gain on sale of investment | 5,509 | |||
Loss on extinguishment of borrowings | (7,060) | (8,106) | (21,071) | (8,106) |
Other (expense) income-net | (525) | (2,959) | (229) | (3,206) |
Income from equity method investments | 55 | 358 | 208 | 1,066 |
Total other expense-net | (20,922) | (26,315) | (62,970) | (40,236) |
LOSS BEFORE INCOME TAX | (35,179) | (37,324) | (52,967) | (37,388) |
INCOME TAX EXPENSE | (3,745) | (557) | (5,667) | (1,281) |
NET LOSS | (38,924) | (37,881) | (58,634) | (38,669) |
Non-controlling interest | 28,726 | 48,436 | ||
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | (10,198) | (10,198) | ||
Wealth management fees | ||||
REVENUES: | ||||
Total revenues | 220,235 | 168,967 | 620,886 | 438,184 |
Other | ||||
REVENUES: | ||||
Total revenues | $ 15,466 | $ 11,287 | $ 42,479 | $ 34,846 |
Class A common stock | ||||
Loss per share of Class A common stock: | ||||
Basic | $ (0.24) | $ (0.24) | ||
Diluted | $ (0.24) | $ (0.24) | ||
Weighted average shares of Class A common stock outstanding: | ||||
Basic | 42,351,043 | 42,351,043 | ||
Diluted | 42,351,043 | 42,351,043 |
Condensed consolidated statem_2
Condensed consolidated statements of comprehensive loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Condensed consolidated statements of comprehensive loss | ||||
Net loss | $ (38,924) | $ (37,881) | $ (58,634) | $ (38,669) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments, net of tax | (318) | 947 | (1,824) | 2,549 |
Comprehensive loss | (39,242) | $ (36,934) | (60,458) | $ (36,120) |
Less: Comprehensive loss attributable to noncontrolling interest | 28,799 | 50,015 | ||
Comprehensive loss attributable to common stockholders | $ (10,443) | $ (10,443) |
Condensed consolidated statem_3
Condensed consolidated statements of cash flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (58,634) | $ (38,669) |
Adjustments to reconcile net loss to net cash provided by operating activities-net of effect of acquisitions: | ||
Intangible amortization | 65,400 | 46,020 |
Depreciation and other amortization | 6,121 | 4,826 |
Amortization of debt financing costs | 2,716 | 2,726 |
Noncash equity compensation expense | 31,612 | 31,399 |
Non-cash changes in fair value of estimated contingent consideration | 28,879 | 7,227 |
Income from equity method investments | (208) | (1,066) |
Distributions received from equity method investments | 739 | 694 |
Other noncash items | 787 | (223) |
Loss on extinguishment of borrowings | 19,001 | 8,106 |
Changes in cash resulting from changes in operating assets and liabilities: | ||
Accounts receivable | (30,172) | (25,824) |
Prepaid expenses and other assets | (6,035) | 5,861 |
Accounts payable | 1,219 | (1,437) |
Accrued expenses | 21,382 | 19,963 |
Due to affiliates | 7,503 | 5,803 |
Other liabilities | (6,315) | (4,905) |
Deferred revenue | 2,223 | 1,228 |
Net cash provided by operating activities | 86,218 | 61,729 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Cash paid for acquisitions and contingent consideration-net of cash acquired | (296,821) | (361,765) |
Purchase of fixed assets | (6,326) | (8,514) |
Investment and other | (24,300) | (500) |
Net cash used in investing activities | (327,447) | (370,779) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings under credit facilities | 250,000 | 1,181,936 |
Repayments of borrowings under credit facilities | (449,019) | (640,000) |
Proceeds from issuance of common stock, net | 565,160 | |
Proceeds from issuance of convertible preferred units, net | 643,272 | |
Payments of preferred dividends | (3,063) | |
Payments in connection with unit redemptions, net | (61,539) | (795,638) |
Contingent consideration paid | (10,286) | (5,499) |
Payments of debt financing costs | (4,612) | (32,612) |
Payments on capital lease obligations | (147) | (171) |
Distributions for unitholders | (1,308) | (2,168) |
Net cash provided by financing activities | 288,249 | 346,057 |
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (97) | 146 |
CHANGE IN CASH AND CASH EQUIVALENTS | 46,923 | 37,153 |
CASH AND CASH EQUIVALENTS: | ||
Beginning of period | 51,455 | 16,508 |
End of period | $ 98,378 | $ 53,661 |
Condensed consolidated statem_4
Condensed consolidated statements of changes in equity - USD ($) $ in Thousands | Total Members' Deficit/ Shareholders Equity | Common StockClass A common stock | Common StockClass B common stock | Additional Paid-In Capital | Accumulated Earnings (Deficit) | Accumulated Other Comprehensive (Loss) | Common Units | Non-controlling Interest | Total |
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Stockholders' Equity (Deficit) | $ (778,661) | ||||||||
Beginning balance at Dec. 31, 2017 | $ (778,661) | $ 30,731 | $ (805,470) | $ (8,269) | $ 4,347 | (778,661) | |||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | Predecessor | (47,821) | (47,821) | (47,821) | ||||||
Issuance of restricted common units in connection with acquisitions | Predecessor | 40,389 | 40,389 | 40,389 | ||||||
Non-cash equity compensation expense | Predecessor | 24,987 | 24,987 | 24,987 | ||||||
Currency translation adjustment, net | Predecessor | (1,398) | (1,398) | (1,398) | ||||||
Retirement of treasury stock | Predecessor | (2,909) | (2,067) | (842) | (2,909) | |||||
Distributions for unitholders | Predecessor | (2,224) | (2,224) | (2,224) | ||||||
Reorganization of equity structure | Predecessor | 550,445 | $ 239 | $ 225 | (271,307) | 855,515 | 9,667 | (43,894) | $ 258,670 | 809,115 |
Reorganization of equity structure (in shares) | Predecessor | 23,881,002 | 22,499,665 | |||||||
Ending balance at Jul. 30, 2018 | (217,192) | $ 239 | $ 225 | (217,656) | 258,670 | 41,478 | |||
Ending Balance (in shares) at Jul. 30, 2018 | 23,881,002 | 22,499,665 | |||||||
Beginning balance at Dec. 31, 2017 | (778,661) | 30,731 | (805,470) | (8,269) | $ 4,347 | (778,661) | |||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | (10,198) | ||||||||
Currency translation adjustment, net | (1,824) | ||||||||
Ending Balance (in shares) at Sep. 30, 2018 | 42,529,651 | 22,823,272 | |||||||
Beginning balance at Jul. 30, 2018 | (217,192) | $ 239 | $ 225 | (217,656) | 258,670 | 41,478 | |||
Beginning balance (in shares) at Jul. 30, 2018 | 23,881,002 | 22,499,665 | |||||||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | (10,198) | (10,198) | (615) | (10,813) | |||||
Non-cash equity compensation expense | 4,409 | 4,409 | 4,409 | ||||||
Currency translation adjustment, net | (245) | (245) | (181) | (426) | |||||
Issuance of common stock | 565,160 | $ 186 | 564,974 | 565,160 | |||||
Issuance of common stock (in shares) | 18,648,649 | ||||||||
Issuance of common stock in connection with acquisition | 3 | $ 3 | 3 | ||||||
Issuance of common stock in connection with acquisition (in shares) | 323,607 | ||||||||
Change in noncontrolling interest allocation | 1,522 | 1,522 | 10,911 | 12,433 | |||||
Adjustment of deferred tax assets, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | 36,581 | 36,581 | 36,581 | ||||||
Ending Balance (in shares) at Sep. 30, 2018 | 42,529,651 | 22,823,272 | |||||||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Stockholders' Equity (Deficit) | $ 380,040 | $ 425 | $ 228 | $ 389,830 | $ (10,198) | $ (245) | $ 268,785 | $ 648,825 |
GENERAL
GENERAL | 9 Months Ended |
Sep. 30, 2018 | |
GENERAL | |
GENERAL | 1. GENERAL Organization and Business— The Company was formed as a Delaware corporation on July 29, 2015 for the sole purpose of completing the IPO and Reorganization Transactions in order to carry on the business of Focus LLC. On July 30, 2018, the Company became the managing member of Focus LLC and operates and controls the businesses and affairs of Focus LLC and its subsidiaries. Accordingly, the unaudited condensed consolidated financial statements reflect the historical results of operations and financial position of Focus LLC (predecessor) prior to July 30, 2018. Focus LLC is a Delaware limited liability company that was formed in November 2004. Focus LLC’s subsidiaries commenced revenue-generating and acquisition activities in January 2006. Focus LLC’s activities were governed by its Third Amended and Restated Operating Agreement, as amended, through July 30, 2018 and then its Fourth Amended and Restated Operating Agreement (the “Operating Agreement”), effective on July 30, 2018. Focus LLC is in the business of acquiring and overseeing independent fiduciary wealth management and related businesses. |
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF ACCOUNTING POLICIES | |
SUMMARY OF ACCOUNTING POLICIES | 2. SUMMARY OF ACCOUNTING POLICIES Basis of Presentation —The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been included. The unaudited condensed consolidated financial statements include the accounts of the Company and its majority and wholly owned subsidiaries. The Company consolidates Focus LLC and its subsidiaries’ consolidated financial statements and records the interests in Focus LLC that the Company does not own as non-controlling interests. Non-controlling interests were measured initially at the proportionate share of Focus LLC’s identifiable net assets at the date of the IPO. Intercompany transactions and balances have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s prospectus dated July 25, 2018, as filed with the SEC on July 27, 2018. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. Use of Estimates —The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. L oss Per Share— Loss per share is computed in accordance with Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share . Basic loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for that period. Diluted loss per share is calculated by dividing the net loss attributable to common stockholders by the diluted weighted average shares outstanding for that period. Diluted loss per share includes the determinants of the basic loss per share and, in addition, if the effect is dilutive, reflects the dilutive effect of shares of common stock related to the Company’s share based compensation plans, with no adjustments to net loss attributable to common stockholders for dilutive potential common shares. Revenue Recognition— Wealth Management Fees —The Company, solely through its subsidiaries, recognizes revenue from wealth management fees, which are primarily comprised of fees earned for advising on the assets of clients, financial and tax planning fees, consulting fees, tax return preparation fees, fees for family office services, and fees for wealth management and operational support services provided to third‑party wealth management firms. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Fees are primarily based either on a contractual percentage of the client’s assets, a flat fee, an hourly rate or a combination of such fees and are billed either in advance or arrears on a monthly, quarterly, or semiannual basis and such fees earned as the services are performed over time. Revenue for wealth management and operational support services provided to third‑party wealth management firms is presented net since these services are performed in an agent capacity. Wealth management fees are recorded when: (i) an arrangement with a client has been identified; (ii) the performance obligations have been identified; (iii) the fee or other transaction price has been determined; (iv) the fee or other transaction price has been allocated to each performance obligation; and (v) the Company has satisfied the applicable performance obligation. Other — Other revenue primarily includes fees earned for recordkeeping and administration services provided to employee benefit plans as well as commissions and distribution fees and outsourced services. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Recordkeeping and administration revenue, in accordance with the same five criteria above, is recognized over the period in which services are provided. Commissions and distribution fees and outsourced services, in accordance with the same five criteria above, are recognized when earned. Deferred Revenue —Fees collected in advance are deferred and recognized in revenue over the period earned with the unrecognized portion of fees collected in advance recorded as deferred revenue in the accompanying consolidated balance sheets. The Company disaggregates revenue based on the above two categories. The Company does not allocate revenue by the type of service provided in connection with providing holistic wealth management client services. The Company generally manages its business based on the operating results of the enterprise taken as a whole, not by geographic region. The following table disaggregates the revenues based on the location of the partner firm that generates the revenues and therefore may not be reflective of the geography in which clients are located. Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018 Domestic revenue $ 174,624 $ 230,286 $ 458,887 $ 646,805 International revenue 5,630 5,415 14,143 16,560 Total revenue $ 180,254 $ 235,701 $ 473,030 $ 663,365 Segment Reporting —Management has determined that the Company operates in one operating segment, as a wealth management focused organization, which is consistent with our structure and how we manage the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and our businesses are subject to a similar regulatory framework. Furthermore, the Company’s Chief Operating Decision Maker, which is the Company’s Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources. Income Taxes — Subsequent to the Reorganization Transactions and the IPO, the Company is subject to federal, state and local income taxes on its allocable portion of taxable income from Focus LLC. Focus LLC is principally structured as a limited liability company treated as a partnership for U.S. income tax purposes and therefore does not pay income taxes on its taxable income in most jurisdictions in which it operates. Focus LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, such as the New York City Unincorporated Business Tax, and on the taxable income of its U.S. corporate subsidiaries. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. Among other things, the Tax Act reduced the U.S. federal corporate income tax rate from a maximum rate of 35%, to a flat rate of 21%, effective January 1, 2018. Income tax expense for the three and nine months ended September 30, 2018 reflects the reduction in the U.S. corporate income tax rate imposed on the Company and its U.S. corporate subsidiaries owned by Focus LLC. The Tax Act also requires companies to pay a one‑time repatriation tax on previously unremitted earnings of certain non‑U.S. corporate subsidiaries. All of the Company’s operations outside the U.S. are conducted by entities that are either disregarded entities or partnerships for U.S. income tax purposes, and, as a result, the deemed repatriation transition tax does not apply to these entities or their earnings. In accordance with the guidance provided by Staff Accounting Bulletin No. 118 (“SAB No. 118”), the Company recognized an income tax benefit of $2,653 during the three months ended December 31, 2017 related to the remeasurement of its U.S. corporate deferred tax assets and liabilities. The Company has completed its assessment of the impact of the Tax Act and no measurement period adjustments, as permitted under SAB No. 118, are expected. The Company applies the asset and liability method for deferred income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Valuation allowances, if any, are recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized. The Company reviews and evaluates tax positions in its major tax jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition. Based on this review, no reserves for uncertain tax positions at December 31, 2017 and September 30, 2018 were recorded. Recent Accounting Pronouncements —In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, “ Revenue from Contracts with Customers”, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015‑14, “ Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date”. ASU No. 2015‑14 defers the effective date of ASU No. 2014‑09 by one year for public companies. ASU No. 2015‑14 applies to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. ASU No. 2014‑09 replaced most existing revenue recognition guidance in U.S. GAAP when it became effective for the Company on January 1, 2018. The standard permits the use of either the retrospective or modified retrospective transition method. Additionally, ASU No. 2014‑09 requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The Company adopted ASU No. 2014‑09 using the retrospective transition method. The adoption of ASU No. 2014‑09 did not have a material effect on the Company’s consolidated financial statements and no adjustments were required to prior periods because there were no changes to the Company’s recognition of revenues or presentation of revenues in the consolidated statements of operations. In January 2016, the FASB issued ASU No. 2016‑01, “ Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities ”. The amendments in this update address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016‑01 was effective for the Company beginning January 1, 2018. The adoption of ASU No. 2016‑01 did not have a material effect on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016‑02, “ Leases (Topic 842) ” and in July 2018, the FASB issued ASU 2018-10 " Codification Improvements to Topic 842, Leases " and ASU 2018-11 " Leases (Topic 842) Targeted Improvements" (collectively "ASC Topic 842"). ASC Topic 842 requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASC Topic 842 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right‑to‑use asset for the right to use the underlying asset for the lease term. ASC Topic 842 is effective for the Company for interim and annual periods beginning January 1, 2019 and early adoption is permitted. The Company expects that most of the Company’s operating lease commitments will be subject to ASC Topic 842 and recognized as operating lease liabilities and right of use assets upon adoption, resulting in a significant increase in assets and liabilities on the consolidated balance sheet. The Company is in the process of implementing lease administration software, changing business processes and internal controls in preparation for the adoption of ASC Topic 842. The Company is continuing its assessment of ASC Topic 842 which may identify additional impacts on the Company’s consolidated financial statements and disclosures. The Company will adopt ASC Topic 842 using the transition relief provided by ASU 2018-11. In March 2016, the FASB issued ASU No. 2016‑09, “ Improvements to Employee Share‑Based Payment Accounting , which amends ASC Topic 718, Stock Compensation ”. The objective of this amendment is part of the FASB’s Simplification Initiative as it applies to several aspects of the accounting for share‑based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU No. 2016‑09 was effective for the Company on January 1, 2017. The adoption of ASU No. 2016‑09 did not have a material effect on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU No. 2016‑15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ”. ASU No. 2016‑15 made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted ASU No. 2016‑15 on January 1, 2017. The adoption of ASU No. 2016‑15 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017‑01, “ Business Combinations (Topic 805) Clarifying the Definition of a Business”, which amends the guidance of FASB Accounting Standards Codification Topic 805, “ Business Combinations ”, adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU No. 2017‑01 was effective for the Company prospectively on January 1, 2018. The adoption of ASU No. 2017‑01 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017‑04, “ Simplifying the Test for Goodwill Impairment ”, which removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU No. 2017‑04 is effective for interim and annual reporting periods beginning after December 15, 2019 and will be applied prospectively, early adoption is permitted. ASU No. 2017‑04 is not expected to have a material effect on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU No. 2017‑09, “ Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” . ASU No. 2017‑09 provides guidance that clarifies when changes to the terms or conditions of a share‑based payment award require the application of modification accounting under ASC 718. ASU No. 2017‑09 will allow for certain changes to be made to awards without accounting for them as modifications. The Company early adopted ASU No. 2017‑09 during the year ended December 31, 2017. The adoption of ASU No. 2017‑09 did not have a material effect on the Company’s consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, “ Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. ASU No. 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted after adoption of ASU No. 2014-09. The Company has not yet determined the effect of ASU No. 2018-07 on its ongoing financial reporting. Subsequent Events — The Company has conducted a review for and evaluated subsequent events from October 1, 2018 through November 13, 2018, the date the unaudited condensed consolidated financial statements were available to be issued. Refer to Notes 5 and 9 for further information regarding subsequent events. |
IPO, REORGANIZATION TRANSACTION
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS | 9 Months Ended |
Sep. 30, 2018 | |
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS | |
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS | 3. IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS Initial Public Offering On July 30, 2018, the Company completed its IPO of 18,648,649 shares of its Class A common stock, par value $0.01 per share, including 2,432,432 shares of Class A common stock sold in connection with the full exercise of the option to purchase additional shares granted to the underwriters, at a price to the public of $33.00 per share. The shares began trading on the NASDAQ Global Select Market on July 26, 2018 under the ticker symbol “FOCS.” Reorganization Transactions In connection with the IPO, Focus LLC completed the Reorganization Transactions. The equity interests in Focus LLC at the date of the IPO consisted of convertible preferred units, common units and incentive units, each incentive unit having a hurdle amount similar to the exercise price of a stock option. The owners of Focus LLC units immediately prior to the IPO (“Existing Owners”) primarily included (i) affiliates of Focus LLC’s private equity investors (“Private Equity Investors”), (ii) members of management of Focus LLC, (iii) current and former principals of independent fiduciary wealth management and related businesses acquired by Focus LLC and (iv) current and former employees of Focus LLC. The following steps were implemented in connection with the Reorganization Transactions: · Focus LLC purchased, utilizing existing working capital, all common units held by Existing Owners who were not accredited investors, as defined by Rule 501 of Regulation D, at a purchase price per unit equal to 1.25 times the IPO price of $33.00 per share (“Gross IPO Price”). Focus LLC accelerated the vesting of all unvested incentive units held by Existing Owners who were not accredited investors and converted the incentive units of each such holder into a number of common units equal to (i) the number of such incentive units times the Gross IPO Price, minus the aggregate hurdle amount of such incentive units, divided by (ii) the Gross IPO Price (the “Appropriate Conversion Number”). Focus LLC then purchased all common units issued upon such conversion at a purchase price per unit equal to 1.25 times the Gross IPO Price. Focus LLC paid a total of $26,001 to Existing Owners who were not accredited investors. · Existing Owners who were accredited investors and held fewer than 85,000 common units and incentive units in the aggregate are referred to as “Mandatorily Exchanging Owners.” Focus LLC converted all vested and unvested incentive units of Mandatorily Exchanging Owners into the Appropriate Conversion Number of vested and unvested common units, respectively. Mandatorily Exchanging Owners were given an election to sell up to 100% of their vested common units (after giving effect to such conversion) to the Company at the Gross IPO Price less the underwriting discount (the “Net IPO Price”), subject to cut‑backs depending on the proceeds available from the IPO. The vested and unvested common units of a Mandatorily Exchanging Owner not sold were exchanged for an equal number of shares of vested Class A common stock and unvested Class A common stock of the Company. Mandatorily Exchanging Owners of vested common units issued upon conversion of vested incentive units and not sold received (i) vested non‑compensatory stock options of the Company to purchase a number of shares of Class A common stock of the Company equal to (A) the number of vested incentive units that were converted into such vested common units minus (B) the number of shares of vested Class A common stock issued in such exchange and (ii) cash in an amount equal to 65% of the fair market value of such non‑compensatory stock options. Mandatorily Exchanging Owners of unvested common units issued upon conversion of unvested incentive units and not sold received unvested compensatory stock options of the Company to purchase a number of shares of Class A common stock of the Company equal to (i) the number of unvested incentive units that were converted into such unvested common units minus (ii) the number of shares of unvested Class A common stock issued in such exchange. · Existing Owners who were accredited investors and held 85,000 or more common units and incentive units in the aggregate were given an election to sell up to 100% of their vested common units and vested incentive units (after conversion into the Appropriate Conversion Number of common units) to the Company at the Net IPO Price, subject to cut-backs depending on the proceeds available from the IPO. These Existing Owners were also given an election to exchange all or a portion of their remaining common units and incentive units for vested and unvested Class A common stock of the Company. These Existing Owners continue to hold their common units and incentive units of Focus LLC remaining after any such sale or exchange. · All outstanding convertible preferred units of direct or indirect owners of Focus LLC's convertible preferred units that are treated as corporations for U.S. federal income tax purposes were converted into Focus LLC common units on a one‑for‑one basis and each common unit was exchanged for one share of Class A common stock of the Company. All outstanding convertible preferred units of direct or indirect owners of Focus LLC’s convertible preferred units that are not treated as corporations for U.S. federal income tax purposes were converted into Focus LLC common units on a one-for-one basis and certain of these common units were exchanged for shares of Class A common stock of the Company. Existing Owners who hold common units of Focus LLC after the Reorganization Transactions ("continuing owners") received shares of Class B common stock of the Company. Shares of Class B common stock do not entitle their holders to any economic rights. Holders of Class A common stock and Class B common stock of the Company vote together as a single class on all matters presented to the shareholders of the Company for their vote or approval, except as otherwise required by applicable law. Each share of Class B common stock entitles its holder to one vote. In connection with the Reorganization Transactions, the Company issued an aggregate of 23,881,002 shares of Class A common stock, non-compensatory stock options to purchase an aggregate of 386,832 shares of Class A common stock, compensatory stock options to purchase an aggregate of 348,577 shares of Class A common stock and an aggregate of 22,499,665 shares of Class B common stock. Due to certain post-closing adjustments, the Company cancelled 240,457 shares of Class A common stock and issued 240,457 shares of Class B common stock effective as of the closing date of the IPO. Use of Proceeds The Company received $565,160 of net proceeds from the sale of the Class A common stock in the IPO including $74,651 in connection with the full exercise of the option to purchase additional shares granted to the underwriters . The Company used $11,137 of the net proceeds to pay Mandatorily Exchanging Owners who elected to sell their units of Focus LLC and $24,400 to pay other Existing Owners who elected to sell their units of Focus LLC. The Company contributed $529,623 of the net proceeds from the IPO to Focus LLC in exchange for 17,583,947 common units of Focus LLC. Focus LLC used $392,535 of such contribution to reduce indebtedness under its Credit Facility (as defined below). The remaining $137,088 of such contribution has been and will be used by Focus LLC for acquisitions and general corporate business purposes. |
NON-CONTROLLING INTERESTS AND L
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | |
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | 4. NON-CONTROLLING INTERESTS AND LOSS PER SHARE Historical loss per share information is not applicable for reporting periods prior to the consummation of the IPO. Net loss attributable to common stockholders is the net loss recorded by the Company based on its interest in Focus LLC during the respective period after the IPO. The calculation of controlling and non-controlling interest is as follows as of September 30,2018: Focus LLC common units held by continuing owners 22,823,272 Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners (1) 9,810,779 Total common units and common unit equivalents attributable to non-controlling interest 32,634,051 Total common units and common unit equivalents of incentive units outstanding 75,163,702 Non-controlling interest allocation 43.4 % Company’s interest in Focus LLC 56.6 % (1) Focus LLC common units issuable upon conversion of 16,842,170 (see Note 9)vested and unvested Focus LLC incentive units was calculated using the common unit equivalent of vested and unvested Focus LLC incentive units based on the closing price of the Company’s Class A common stock on the last trading day of the period. The below table contains a reconciliation of net loss to net loss attributable to common stockholders: Three months Nine months ended ended September 30, 2018 September 30, 2018 Net loss $ (38,924) $ (58,634) Net loss attributable to members of Focus LLC (for the respective period through the IPO) 28,111 47,821 Non controlling interest subsequent to the IPO 615 615 Net loss attributable to common stockholders $ (10,198) $ (10,198) The calculation of basic and diluted loss per share is described below: Basic loss per share is calculated utilizing net loss attributable to common stockholders from July 30, 2018 through September 30, 2018 divided by the weighted average number of shares of Class A common stock outstanding during the same period: Period July 30, 2018 through (in thousands, except for shares and per share amounts) September 30, 2018 Basic loss per share: Net loss attributable to common stockholders $ (10,198) Weighted average shares of Class A common stock outstanding 42,351,043 Basic loss per share $ (0.24) Diluted loss per share is calculated utilizing net loss attributable to common stockholders from July 30, 2018 through September 30, 2018 divided by the weighted average number of shares of Class A common stock outstanding during the same period plus the effect, if any, of the potentially dilutive shares of the Company’s Class A common stock from stock options and unvested Class A common stock as calculated using the treasury stock method. Period July 30, 2018 through (in thousands, except for shares and per share amounts) September 30, 2018 Diluted loss per share: Net loss attributable to common stockholders $ (10,198) Weighted average shares of Class A common stock outstanding 42,351,043 Effect of dilutive stock options — Effect of dilutive unvested Class A common stock — Total 42,351,043 Diluted loss per share $ (0.24) Diluted loss per share excludes incremental shares of 89,378 and 41,033 related to time-based stock options and unvested Class A common stock, respectively, since the effect would be antidilutive. Diluted loss per share also excludes shares related to 155,000 market-based stock options that vest on the fifth anniversary of the pricing of the IPO if the volume weighted average per share price for any ninety calendar day period within such five year period immediately following the pricing of the IPO reaches at least $100. Such market-based criteria were not met at September 30, 2018. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | 5. ACQUISITIONS Business Acquisitions Business acquisitions are accounted for in accordance with ASC Topic 805: Business Combinations . The Company has incorporated contingent consideration, or earn out provisions, into the structure of its acquisitions. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in the exchange. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. The purchase price associated with business acquisitions and the allocation thereof during the nine months ended September 30, 2018 is as follows: Number of business acquisitions closed 17 Consideration: Cash due at closing and option premium $ 292,373 Cash due subsequent to closing at net present value 14,525 Fair market value of Focus LLC common units issued 51,456 Fair market value of estimated contingent consideration 32,196 Total consideration $ 390,550 Allocation of purchase price: Total tangible assets $ 3,317 Total liabilities assumed (2,079) Customer relationships 186,685 Management contracts 22,380 Goodwill 179,852 Other intangibles 395 Total allocated consideration $ 390,550 Management believes approximately $317,246 of tax goodwill and intangibles related to business acquisitions completed during the nine months ended September 30, 2018 will be deductible for tax purposes. Additional tax goodwill may be deductible when estimated contingent consideration is earned and paid. The accompanying unaudited condensed consolidated statement of operations for the nine months ended September 30, 2018 includes revenue and income from operations for the business acquisitions that are new subsidiary partner firms from the date they were acquired of $68,292 and $10,426, respectively. Asset Acquisitions The Company also separately purchased customer relationships and other intangible assets. These purchases are accounted for as asset acquisitions as they do not qualify as business acquisitions pursuant to ASC Topic 805, Business Combinations . Total purchase consideration for asset acquisitions during the nine months ended September 30, 2018 was $4,557 in cash at closing and in installments plus contingent consideration as additional purchase consideration when the outcome is determinable. The weighted‑average useful lives of intangible assets acquired during the nine months ended September 30, 2018 through business acquisitions and asset acquisitions are as follows: Number of Years Management contracts 20 Customer relationships 9 Other intangibles 5 Weighted-average useful life of all intangibles acquired 11 From October 1, 2018 to November 13, 2018, the Company completed wealth management business acquisitions for cash at closing of $20,250, plus contingent consideration. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 6. GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the change in the goodwill balances for the year ended December 31, 2017 and the nine months ended September 30, 2018: December 31, September 30, 2017 2018 Balance beginning of period: Goodwill $ 339,129 $ 538,113 Cumulative impairment losses (22,624) (22,624) 316,505 515,489 Goodwill acquired 198,546 179,852 Other 438 (2,181) 198,984 177,671 Balance end of period: Goodwill 538,113 715,784 Cumulative impairment losses (22,624) (22,624) $ 515,489 $ 693,160 The following table summarizes the amortizing acquired intangible assets at December 31, 2017: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 713,966 $ (270,629) $ 443,337 Management contracts 103,316 (25,976) 77,340 Other intangibles 3,436 (1,831) 1,605 Total $ 820,718 $ (298,436) $ 522,282 The following table summarizes the amortizing acquired intangible assets at September 30, 2018: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 904,306 $ (329,172) $ 575,134 Management contracts 125,485 (30,315) 95,170 Other intangibles 4,140 (2,384) 1,756 Total $ 1,033,931 $ (361,871) $ 672,060 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2018 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 7. FAIR VALUE MEASUREMENTS ASC Topic 820, Fair Value Measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows: Level 1 —Unadjusted price quotations in active markets for identical assets or liabilities. Level 2 —Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 —Significant unobservable inputs that are not corroborated by market data. The implied fair value of the Company’s First Lien Term Loan (as defined below) and Second Lien Term Loan (as defined below) based on Level 2 inputs at December 31, 2017 and September 30, 2018 are as follows: December 31, 2017 September 30, 2018 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan $ 793,012 $ 799,952 $ 800,993 $ 804,997 Second Lien Term Loan 207,000 208,811 — — For business acquisitions, the Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on Level 3 inputs. The following table represents changes in the fair value of estimated contingent consideration for business acquisitions for the year ended December 31, 2017 and the nine months ended September 30, 2018: Balance as of January 1, 2017 $ 26,188 Additions to estimated contingent consideration 37,551 Payments of contingent consideration (9,435) Non-cash changes in fair value of estimated contingent consideration 22,294 Other 79 Balance as of December 31, 2017 76,677 Additions to estimated contingent consideration 32,196 Payments of contingent consideration (20,397) Non-cash changes in fair value of estimated contingent consideration 28,879 Other (173) Balance at September 30, 2018 $ 117,182 Estimated contingent consideration is included in other liabilities in the accompanying unaudited condensed consolidated balance sheets. In determining fair value of the estimated contingent consideration, the future performance is estimated using financial projections for the acquired businesses. These financial projections, as well as alternative scenarios of financial performance, are measured against the performance targets specified in each respective acquisition agreement. The fair value of the Company’s estimated contingent consideration is established using the Monte Carlo Simulation model. The significant unobservable input used in the fair value measurement of the Company’s estimated contingent consideration is the forecasted growth rates over the measurement period. Significant increases or decreases in the Company’s forecasted growth rates over the measurement period would result in a higher or lower fair value measurement. Inputs used in the fair value measurement of estimated contingent consideration at December 31, 2017 and September 30, 2018 are summarized below: Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2017 Techniques Input Range $ 76,677 Monte Carlo Simulation model Forecasted growth rates (0.8)% - 24.9 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable September 30, 2018 Techniques Input Range $ 117,182 Monte Carlo Simulation model Forecasted growth rates (19.9)% - 90.1 % |
CREDIT FACILITY
CREDIT FACILITY | 9 Months Ended |
Sep. 30, 2018 | |
CREDIT FACILITY | |
CREDIT FACILITY | 8. CREDIT FACILITY As of December 31, 2016, Focus LLC had a credit facility of approximately $1,067,000 consisting of term and revolving loans, inclusive of an accordion feature of $255,000 (the “Old Credit Facility”). The Old Credit Facility had a June 2020 maturity date. In July 2017, Focus LLC entered into new credit facilities (collectively, the “Credit Facility”). The Credit Facility initially consisted of a $795,000 first lien term loan (the “First Lien Term Loan”), a $250,000 first lien revolving credit facility (the “First Lien Revolver”), and a $207,000 second lien term loan (the “Second Lien Term Loan”). In connection with the Credit Facility, Focus LLC repaid all amounts outstanding under the Old Credit Facility with the proceeds from the Credit Facility and wrote off all deferred financing costs related to the Old Credit Facility resulting in a $8,106 loss on extinguishment of borrowings in the unaudited condensed consolidated statement of operations during the three months ended September 30, 2017. The First Lien Term Loan has a maturity date of July 2024 and initially required quarterly installment repayments of $1,988. The First Lien Term Loan was issued at a discount of 0.125% or $994 that Focus LLC is amortizing to interest expense over the term of the First Lien Term Loan. The First Lien Revolver initially had a maturity date of July 2022 and has no required quarterly installment repayments. Up to $30,000 of the First Lien Revolver is available for the issuance of letters of credit, subject to certain limitations. The First Lien Term Loan (up to January 2018 as noted below) and First Lien Revolver bore interest (at Focus LLC's option) at: (i) LIBOR plus a margin of 3.25% with the First Lien Revolver having step downs to 3.00% and 2.75% based on achievement of a specified First Lien Leverage Ratio (as defined below) or, (ii) the lender’s Base Rate (as defined in the Credit Facility) plus a margin of 2.25% with the First Lien Revolver having step downs to 2.00% and 1.75% based on achievement of a specified First Lien Leverage Ratio. The Credit Facility also included an unused commitment fee of 0.50% of the outstanding commitments under the First Lien Revolver, with a stepdown to 0.375% based on achievement of a specified First Lien Leverage Ratio. In January 2018, Focus LLC amended its First Lien Term Loan to reduce its interest rate to LIBOR plus a margin of 2.75% or the lender’s Base Rate plus a margin of 1.75%. As a result of the amendment, Focus LLC recognized in January 2018 a loss on extinguishment of borrowings of $14,011, representing the write‑off of $13,094 and $917 in deferred financing costs and unamortized discount related to the First Lien Term Loan, respectively. In April 2018, Focus LLC expanded its First Lien Term Loan by $200,000 and incurred $1,347 in debt financing costs. In addition, the quarterly installment repayments increased to $2,490 beginning in June 2018. The Second Lien Term Loan had a maturity date of July 2025 and bore interest (at Focus LLC's option) at: (i) LIBOR plus a margin of 7.50% or (ii) the lender’s Base Rate plus a margin of 6.50%. The Second Lien Term Loan had no required installment repayments due prior to the maturity date. The Second Lien Term Loan was issued at a discount of 1.00% or $2,070 that Focus LLC amortized to interest expense over the term of the Second Lien Term Loan. The Second Lien Term Loan required a prepayment penalty of 1.00% of the then outstanding principal amount of the Second Lien Term Loan if prepaid prior to July 2019. In June 2018, Focus LLC entered into an amendment to the Credit Facility that became effective upon closing of the IPO. The First Lien Term Loan was reduced to $803,000 and was amended to reduce Focus LLC’s interest rate to LIBOR plus a margin of 2.50% or the lender’s Base Rate plus a margin of 1.50%, effective in July 2018 upon obtaining certain credit ratings. The First Lien Revolver was amended to increase Focus LLC’s borrowing capacity to $650,000 and extend the maturity date to 5 years from July 30, 2018. The First Lien Revolver was also amended such that it bears interest at LIBOR plus a margin of 2.00% with step downs to 1.75%, 1.50% and 1.25% or the lender’s Base Rate plus a margin of 1.00% with step downs to 0.75%, 0.50% and 0.25%, based on achievement of a specified First Lien Leverage Ratio. The First Lien Revolver unused commitment fee is 0.50% with step downs to 0.375% and 0.25% based on achievement of a specified First Lien Leverage Ratio. The First Lien Term Loan also requires a prepayment penalty of 1% of the then outstanding principal amount of the First Lien Term Loan if repaid prior to January 2019. The Credit Facility was also amended to require quarterly First Lien Term Loan installment repayments of approximately $2,007 and for Focus LLC to maintain a First Lien Leverage Ratio of not more than 6.25:1.00 , as of the last day of each fiscal quarter. Focus LLC repaid the $207,000 Second Lien Term Loan in July 2018. In connection with these amendments, Focus LLC incurred debt financing costs of $4,990 and recognized a loss of extinguishment of debt of $7,060 during the three months ended September 30, 2018. Focus LLC’s obligations under the Credit Facility are collateralized by the majority of Focus LLC’s assets. The Credit Facility contains various customary covenants, including, but not limited to: (i) incurring additional indebtedness or guarantees, (ii) creating liens or other encumbrances on property or granting negative pledges, (iii) entering into a merger or similar transaction, (iv) selling or transferring certain property and (v) declaring dividends or making other restricted payments. At September 30, 2018, Focus LLC's First Lien Leverage Ratio was 3.19:1.00, which satisfied the maximum ratio of 6.25:1.00. First Lien Leverage Ratio means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). Focus LLC is also subject to contingent principal payments based on excess cash flow (as defined in the Credit Facility) commencing with and including the fiscal year ending December 31, 2018. The Company defers and amortizes its debt financing costs over the respective terms of the First Lien Term Loan, First Lien Revolver and Second Lien Term Loan. The debt financing costs related to the First Lien Term Loan and Second Lien Term Loan are recorded as reduction of the carrying amounts of the First Lien Term Loan and Second Lien Term Loan in the unaudited condensed consolidated balance sheet. The debt financing costs related to the First Lien Revolver are recorded in debt financing costs-net in the unaudited condensed consolidated balance sheet. The following is a reconciliation of principal amounts outstanding under the Credit Facility to borrowings under the Credit Facility recorded in the unaudited condensed consolidated balance sheets at December 31, 2017 and September 30, 2018: December 31, September 30, 2017 2018 First Lien Term Loan $ 793,012 $ 800,993 Second Lien Term Loan 207,000 — Unamortized debt financing costs (16,646) (2,512) Unamortized discount (2,864) — Total $ 980,502 $ 798,481 In connection with the First Lien Revolver closing in July 2017 and the amendment effective in July 2018, Focus LLC incurred $14,735 and $1,904, resepectively, in deferred financing costs. At December 31, 2017 and September 30, 2018, unamortized debt financing costs associated with the First Lien Revolver of $13,278 and $13,014, respectively, were recorded in debt financing costs‑net in the consolidated balance sheets. There were no First Lien Revolver amounts outstanding at December 31, 2017 and September 30, 2018. Weighted‑average interest rates for outstanding borrowings was approximately 5% for each of the year ended December 31, 2017 and the three months ended September 30, 2018, and 6% for the nine months ended September 30, 2018. As of December 31, 2017 and September 30, 2018, the First Lien Revolver available unused commitment line was $247,768 and $645,793, respectively. As of December 31, 2017 and September 30, 2018, Focus LLC was contingently obligated for letters of credit in the amount of $2,232 and $4,207, respectively, each bearing interest at an annual rate of approximately 3% and 2%, respectively. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
EQUITY | |
EQUITY | 9. EQUITY 2018 Omnibus Incentive Plan On July 30, 2018, the Board of Directors of the Company (the “Board”) adopted the Focus Financial Partners Inc. 2018 Omnibus Incentive Plan (the “Omnibus Plan”) for the employees, consultants and the directors of the Company and its affiliates who perform services for it. The Omnibus Plan provides for potential grants of the following awards with respect to shares of the Company’s Class A common stock, to the extent applicable: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) non-qualified stock options or any other form of stock options; (iii) restricted stock awards; (iv) phantom stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) annual cash incentive awards; (ix) any of the foregoing award types (other than incentive stock options) as awards related to Focus LLC’s units; and (x) incentive units in Focus LLC. The maximum aggregate number of shares of the Company's Class A common stock that may be issued pursuant to awards under the Omnibus Plan shall not exceed 6,000,000 shares (including such number of Focus LLC's units or other securities which can be exchanged or converted into shares of Class A common stock). The reserve pool is subject to adjustment due to recapitalization or reorganization, or related to forfeitures or the expiration of awards, as provided under the Omnibus Plan. If the shares or units subject to any award are not issued or transferred, or cease to be issuable or transferable for any reason, including (but not exclusively) because shares or units are withheld or surrendered in payment of taxes or any exercise or purchase price relating to an award or because an award is forfeited, terminated, expires unexercised, is settled in cash or is otherwise terminated without a delivery of shares or units, those shares or units will again be available for issue, transfer or exercise pursuant to awards under the Omnibus Plan to the extent allowable by law. The Omnibus Plan also contains a provision that will add an additional number of shares of Class A common stock equal to the lesser of (a) 3,000,000 shares, (b) 5% of the outstanding (vested and unvested) shares of Class A common stock and Focus LLC units on the last day of the previous year, and (c) an amount determined by the Board, each year between 2019 and 2028. In connection with IPO and Reorganization Transactions described in Note 3, the Company granted: (i) fully vested non-compensatory stock options to purchase an aggregate of 386,832 shares of Class A common stock, (ii) compensatory stock options to purchase an aggregate of 348,577 shares of Class A common stock which vest in three equal installments on December 31, 2018, 2019 and 2020, (iii) 178,608 shares of unvested Class A common stock which vest in three equal installments on December 31, 2018, 2019 and 2020 and (iv) market-based stock options to purchase an aggregate of 155,000 shares of Class A common stock that vest on the fifth anniversary of the pricing of the IPO if the volume weighted average per share price for any ninety calendar day period within such five year period immediately following the pricing of the IPO reaches at least $100. The following table provides information relating to the status of, and changes in, the Company's stock options granted during the nine months ended September 30, 2018: Weighted Average Stock Options Exercise Price Outstanding—January 1, 2018 — $ — Granted 890,409 33.00 Forfeited — — Outstanding—September 30, 2018 890,409 33.00 Vested—September 30, 2018 386,832 33.00 The following table provides information relating to the status of, and changes in, the Company's unvested Class A common stock granted during the nine months ended September 30, 2018: Unvested Class A Grant Common Date Stock Fair Value Outstanding—January 1, 2018 — $ — Granted 178,608 33.00 Forfeited — — Outstanding—September 30, 2018 178,608 33.00 Vested—September 30, 2018 — — For the purpose of calculating equity-based compensation expense for time-based stock option awards, the grant date fair value was determined through the application of the Black-Scholes model with the following weighted average assumptions: Expected term 7.3 years Expected unit price volatility 33 % Risk-free interest rate 2.90 % Expected dividend yield — % Weighted average grant date fair value $ 12.90 For the purpose of calculating equity-based compensation expense for market condition-based awards, the grant date fair value was determined through the application of the Monte Carlo Simulation model with the following weighted average assumptions: Expected term 5.0 years Expected unit price volatility 30 % Risk-free interest rate 2.78 % Expected dividend yield — % Weighted average grant date fair value $ 3.97 The Company recognized $6,098 of compensation expense in relation to the stock options and unvested Class A common stock issued during the three months ended September 30, 2018 inclusive of a one-time noncash equity compensation expense of $4,504 in connection with the IPO and Reorganization Transactions. Focus LLC Incentive Units Focus LLC’s Operating Agreement provides for the granting of incentive units. Grants are designed as profits interests, which entitle a holder to receive distributions in excess of a specific hurdle amount, subject to the provisions of Focus LLC’s Operating Agreement. Incentive unit vesting provisions are either time-based or market-based. In connection with IPO and Reorganization Transactions described in Note 3, Focus LLC (i) granted 3,845,000 market-based incentive units that vest on the fifth anniversary of the pricing of the IPO if the average per share price for any ninety calendar day period within such five year period immediately following the pricing of the IPO reaches at least $100, (ii) amended, effective on pricing of the IPO, 3,000,000 incentive units such that the first fifty percent vest if the Company’s weighted average price per share is at least $35.00 for the first ninety days following the pricing of the IPO. Following that ninety day period, all incentive units that remain unvested will be eligible to vest on the three year anniversary of the IPO if the weighted average per share price for the ninety day period immediately preceding the third anniversary of the IPO is: (i) less than $42.00, then no remaining unvested incentive units will vest; (ii) greater than $63.00, then all remaining unvested incentive units will become vested; and (iii) if between $42.00 and $63.00, then (x) fifty percent of the remaining unvested incentive units will vest and (y) the remaining fifty percent of the remaining unvested incentive units will vest linearly based on where the price falls within the range of $42.00 and $63.00. The weighted average price of the Company’s Class A common stock for the ninety days following the pricing of the IPO exceeded the $35.00 threshold, accordingly, the first fifty percent or 1,500,000 incentive units vested in October 2018. For the purpose of calculating equity-based compensation expense for these market condition-based incentive units, the grant date fair value was determined through the application of the Monte Carlo Simulation model with the following weighted average assumptions: Expected term 4.1 years Expected unit price volatility 30 % Risk-free interest rate 2.74 % Expected dividend yield — % Weighted average grant date fair value $ The following table provides information relating to the status of, and changes in, Focus LLC incentive units granted during the nine months ended September 30, 2018: Incentive Weighted Average Units Hurdle Price Outstanding—January 1, 2018 15,229,039 $ 15.53 Granted 4,671,411 31.57 Redeemed (2,746,655) 15.79 Forfeited (311,625) 22.26 Outstanding—September 30, 2018 16,842,170 19.81 Vested—September 30, 2018 7,747,920 12.34 Incentive units outstanding and vested at September 30, 2018 were as follows: Number Vested Incentive Hurdle Rates Outstanding Units $1.42 175,421 175,421 5.50 97,798 97,798 6.00 56,702 56,702 7.00 514,609 514,609 9.00 2,129,341 2,129,341 11.00 1,422,779 1,422,779 12.00 520,000 520,000 13.00 933,821 831,737 14.00 80,205 58,268 16.00 180,552 180,552 17.00 80,000 65,000 19.00 920,213 720,213 21.00 3,975,500 975,500 22.00 1,368,417 — 23.00 524,828 — 27.00 29,484 — 33.00 3,832,500 — 16,842,170 7,747,920 The Company has recorded $10,108 and $13,655 of noncash equity compensation expense for employees and nonemployee incentive units during the three and nine months ended September 30, 2017, respectively. The Company has recorded $17,903 and $25,383 of noncash equity compensation expense for employee and nonemployee incentive units during the three and nine months ended September 30, 2018, respectively. Noncash equity compensation expense for the three months ended September 30, 2018 includes one-time noncash equity compensation expense of $14,756 related to certain time-based incentive units that were modified and vested or exchanged for Focus LLC common units in connection with the IPO and Reorganization Transactions described in Note 3. Cash compensation expense In connection with the payment of cash of 25% in excess of the Gross IPO Price to Existing Owners who were not accredited investors and the payment of cash of 65% of the fair market value of non-compensatory stock options to Mandatorily Exchanging Owners in the Reorganization Transactions described in Note 3, the Company recognized a one-time cash compensation expense of $5,926 during the three months ended September 30, 2018. Other noncash compensation expense During the three and nine months ended September 30, 2017 the Company recognized other noncash equity compensation expense of $17,512 and $17,744, respectively. During the three and nine months ended September 30, 2018, the Company recognized other noncash equity compensation expense of $56 and $131, respectively. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | 10. INCOME TAXES Subsequent to the Reorganization Transactions and the IPO, the Company is subject to federal, state and local income taxes on its allocable portion of taxable income from Focus LLC. Focus LLC is principally structured as a limited liability company treated as a partnership for U.S. income tax purposes and therefore does not pay income taxes on its taxable income in most jurisdictions in which it operates. Focus LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, such as the New York City Unincorporated Business Tax, and on the taxable income of its U.S. corporate subsidiaries. Income tax expense for the three and nine months ended September 30, 2018 is primarily related to federal, state and local income taxes imposed on the Company’s allocable portion of taxable income from Focus LLC subsequent to the IPO and Reorganization Transactions. The allocable portion of taxable income primarily differs from the net loss attributable to the Company due to permanent differences such as non-deductible equity-based compensation expense of Focus LLC. During the nine months ended September 30, 2018, there were no changes to the Company’s uncertain tax positions. |
TAX RECEIVABLE AGREEMENTS
TAX RECEIVABLE AGREEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
TAX RECEIVABLE AGREEMENTS | |
TAX RECEIVABLE AGREEMENTS | 11. TAX RECEIVABLE AGREEMENTS In connection with the Reorganizaton Transactions and the closing of the IPO, the Company entered into two Tax Receivable Agreements ("TRAs"): one with certain entities affiliated with the Private Equity Investors and the other with certain other continuing and former owners of Focus LLC (the “TRA holders”). The agreements generally provide for the payment by the Company to each TRA holder of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in connection with the Reorganization Transactions and in periods after the IPO, as a result of certain increases in tax bases and certain tax benefits attributable to imputed interest. The Company will retain the benefit of the remaining 15% of these cash savings. As a result of the Reorganizaton Transactions and the exchange of certain units of Focus LLC in connection with the IPO, the Company recorded a deferred tax asset of $72,146 principally attributable to the difference between the outside tax basis and the financial statement amount of the Company’s investment in Focus LLC. In addition, the Company recorded a liability of approximately $39,156 relating to the TRA obligations. The Company recorded a corresponding increase in additional paid-in capital for the difference between the deferred tax asset recorded in connection with the Reorganization Transactions and the IPO and the related TRA obligations. Future payments under the TRAs in respect of subsequent exchanges will be in addition to the amount recorded in connection with the IPO. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 12. COMMITMENTS AND CONTINGENCIES Credit Risk —The Company’s broker‑dealer subsidiaries clear all transactions through clearing brokers on a fully disclosed basis. Pursuant to the terms of the agreements between the Company’s broker‑dealer subsidiaries and their clearing brokers, the clearing brokers have the right to charge the Company’s broker‑dealer subsidiaries for losses that result from a counterparty’s failure to fulfill its contractual obligations. This right applies to all trades executed through its clearing brokers, and therefore, the Company believes there is no maximum amount assignable to the right of the clearing brokers. Accordingly, at December 31, 2017 and September 30, 2018, the Company had recorded no liabilities in connection with this right. In addition, the Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. The Company monitors the credit standing of the clearing brokers and counterparties with which they conduct business. The Company is exposed to credit risk for accounts receivable from clients. Such credit risk is limited to the amount of accounts receivable. The Company is also exposed to credit risk for changes in the benchmark interest rate (LIBOR or Base Rate) in connection with its Credit Facility. The Company maintains its cash in bank depository accounts, which, at times, may exceed federally insured limits. The Company selects depository institutions based, in part, upon management’s review of the financial stability of the institution. At December 31, 2017 and September 30, 2018, a significant portion of cash and cash equivalents were held at a single institution. Contingent Consideration Arrangements —Contingent consideration is payable in the form of cash and/or Company or Focus LLC equity. Since the contingent consideration to be paid is based on the growth of forecasted financial performance levels over a number of years, the Company cannot calculate the maximum contingent consideration that may be payable under these arrangements. Legal and Regulatory Matters —In the ordinary course of business, the Company is involved in lawsuits and other claims. The Company has insurance to cover certain losses that arise in such matters; however, this insurance may not be sufficient to cover these losses. Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability, if any, arising out of any existing legal matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows. From time to time, the Company’s subsidiaries receive requests for information from governmental authorities regarding business activities. The Company has cooperated and will continue to cooperate fully with all governmental agencies. The Company continues to believe that the resolution of any governmental inquiry will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. Indemnifications —In the ordinary course of business, the Company enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined. Management believes that the likelihood of any liability arising under these indemnification provisions is remote. Management cannot estimate any potential maximum exposure due to both the remoteness of any potential claims and the fact that items that would be included within any such calculated claim would be beyond the control of the Company. Consequently, no liability has been recorded on the unaudited condensed consolidated balance sheets. Succession Program —The Company has a succession program to provide wealth management firms a succession planning solution for their businesses. Pursuant to the program, the wealth management firm enters into an agreement with one of the Company’s subsidiaries that provides the firm the ability (subject to certain terms and conditions) to sell substantially all of its assets to the Company’s subsidiary at a future date for an acquisition price based on a predetermined formula. |
CASH FLOW INFORMATION
CASH FLOW INFORMATION | 9 Months Ended |
Sep. 30, 2018 | |
CASH FLOW INFORMATION | |
CASH FLOW INFORMATION | 13. CASH FLOW INFORMATION Nine Months Ended September 30, 2017 2018 Supplemental disclosures of cash flow information—cash paid for: Interest $ 24,172 $ 45,484 Income taxes $ 2,440 $ 4,680 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 37,101 $ 32,196 Fair market value of restricted common units in connection with acquisitions and contingent consideration $ 64,852 $ 53,877 Accretion of senior preferred units return $ 6,249 $ — Accretion of senior preferred units to estimated redemption value $ 17,463 $ — Accretion of junior preferred units return $ 672 $ — Accretion of junior preferred units to estimated redemption value $ 8,452 $ — Net tangible assets (liabilities) acquired in connection with business acquisitions $ (6,178) $ 1,238 Discount on proceeds from credit facilities $ 3,064 — Purchase price installment related to acquisitions $ — $ 14,525 Deferred taxes and tax receivable agreements $ — $ 36,581 Other $ 188 $ 228 |
RELATED PARTIES
RELATED PARTIES | 9 Months Ended |
Sep. 30, 2018 | |
RELATED PARTIES | |
RELATED PARTIES | 14. RELATED PARTIES The Company reimburses the Company’s Chief Executive Officer for certain costs and third‑party payments associated with the use of his personal aircraft for Company‑related business travel. The Company also pays pilot fees for such business travel flights. During the three and nine months ended September 30, 2017, the Company recognized expenses of $231 and $481, respectively, related to these reimbursements. During the three and nine months ended September 30, 2018, the Company recognized expenses of $325 and $1,222, respectively, related to these reimbursements. At September 30, 2018, affiliates of certain holders of the Company’s Class A common stock and Class B common stock were lenders under the Credit Facility. |
OTHER
OTHER | 9 Months Ended |
Sep. 30, 2018 | |
OTHER | |
OTHER | 15. OTHER In March 2018, the Company recognized a gain on sale of investment of $5,509 related to an investment in a financial service company previously carried at cost. The gain on sale of investment is presented in other income (expense) in the Company’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2018. In June 2018, the Company completed a minority cost method investment of $20,000 in a financial technology company that connects prospective clients with financial advisors and provides tools to help individuals make financial decisions. |
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation —The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been included. The unaudited condensed consolidated financial statements include the accounts of the Company and its majority and wholly owned subsidiaries. The Company consolidates Focus LLC and its subsidiaries’ consolidated financial statements and records the interests in Focus LLC that the Company does not own as non-controlling interests. Non-controlling interests were measured initially at the proportionate share of Focus LLC’s identifiable net assets at the date of the IPO. Intercompany transactions and balances have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s prospectus dated July 25, 2018, as filed with the SEC on July 27, 2018. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. |
Use of Estimates | Use of Estimates —The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Loss Per Share | L oss Per Share— Loss per share is computed in accordance with Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share . Basic loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for that period. Diluted loss per share is calculated by dividing the net loss attributable to common stockholders by the diluted weighted average shares outstanding for that period. Diluted loss per share includes the determinants of the basic loss per share and, in addition, if the effect is dilutive, reflects the dilutive effect of shares of common stock related to the Company’s share based compensation plans, with no adjustments to net loss attributable to common stockholders for dilutive potential common shares. |
Revenue Recognition | Revenue Recognition— Wealth Management Fees —The Company, solely through its subsidiaries, recognizes revenue from wealth management fees, which are primarily comprised of fees earned for advising on the assets of clients, financial and tax planning fees, consulting fees, tax return preparation fees, fees for family office services, and fees for wealth management and operational support services provided to third‑party wealth management firms. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Fees are primarily based either on a contractual percentage of the client’s assets, a flat fee, an hourly rate or a combination of such fees and are billed either in advance or arrears on a monthly, quarterly, or semiannual basis and such fees earned as the services are performed over time. Revenue for wealth management and operational support services provided to third‑party wealth management firms is presented net since these services are performed in an agent capacity. Wealth management fees are recorded when: (i) an arrangement with a client has been identified; (ii) the performance obligations have been identified; (iii) the fee or other transaction price has been determined; (iv) the fee or other transaction price has been allocated to each performance obligation; and (v) the Company has satisfied the applicable performance obligation. Other — Other revenue primarily includes fees earned for recordkeeping and administration services provided to employee benefit plans as well as commissions and distribution fees and outsourced services. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Recordkeeping and administration revenue, in accordance with the same five criteria above, is recognized over the period in which services are provided. Commissions and distribution fees and outsourced services, in accordance with the same five criteria above, are recognized when earned. Deferred Revenue —Fees collected in advance are deferred and recognized in revenue over the period earned with the unrecognized portion of fees collected in advance recorded as deferred revenue in the accompanying consolidated balance sheets. The Company disaggregates revenue based on the above two categories. The Company does not allocate revenue by the type of service provided in connection with providing holistic wealth management client services. The Company generally manages its business based on the operating results of the enterprise taken as a whole, not by geographic region. The following table disaggregates the revenues based on the location of the partner firm that generates the revenues and therefore may not be reflective of the geography in which clients are located. Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018 Domestic revenue $ 174,624 $ 230,286 $ 458,887 $ 646,805 International revenue 5,630 5,415 14,143 16,560 Total revenue $ 180,254 $ 235,701 $ 473,030 $ 663,365 |
Segment Reporting | Segment Reporting —Management has determined that the Company operates in one operating segment, as a wealth management focused organization, which is consistent with our structure and how we manage the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and our businesses are subject to a similar regulatory framework. Furthermore, the Company’s Chief Operating Decision Maker, which is the Company’s Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources. |
Income Taxes | Income Taxes — Subsequent to the Reorganization Transactions and the IPO, the Company is subject to federal, state and local income taxes on its allocable portion of taxable income from Focus LLC. Focus LLC is principally structured as a limited liability company treated as a partnership for U.S. income tax purposes and therefore does not pay income taxes on its taxable income in most jurisdictions in which it operates. Focus LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, such as the New York City Unincorporated Business Tax, and on the taxable income of its U.S. corporate subsidiaries. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. Among other things, the Tax Act reduced the U.S. federal corporate income tax rate from a maximum rate of 35%, to a flat rate of 21%, effective January 1, 2018. Income tax expense for the three and nine months ended September 30, 2018 reflects the reduction in the U.S. corporate income tax rate imposed on the Company and its U.S. corporate subsidiaries owned by Focus LLC. The Tax Act also requires companies to pay a one‑time repatriation tax on previously unremitted earnings of certain non‑U.S. corporate subsidiaries. All of the Company’s operations outside the U.S. are conducted by entities that are either disregarded entities or partnerships for U.S. income tax purposes, and, as a result, the deemed repatriation transition tax does not apply to these entities or their earnings. In accordance with the guidance provided by Staff Accounting Bulletin No. 118 (“SAB No. 118”), the Company recognized an income tax benefit of $2,653 during the three months ended December 31, 2017 related to the remeasurement of its U.S. corporate deferred tax assets and liabilities. The Company has completed its assessment of the impact of the Tax Act and no measurement period adjustments, as permitted under SAB No. 118, are expected. The Company applies the asset and liability method for deferred income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Valuation allowances, if any, are recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized. The Company reviews and evaluates tax positions in its major tax jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition. Based on this review, no reserves for uncertain tax positions at December 31, 2017 and September 30, 2018 were recorded. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements —In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, “ Revenue from Contracts with Customers”, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015‑14, “ Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date”. ASU No. 2015‑14 defers the effective date of ASU No. 2014‑09 by one year for public companies. ASU No. 2015‑14 applies to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. ASU No. 2014‑09 replaced most existing revenue recognition guidance in U.S. GAAP when it became effective for the Company on January 1, 2018. The standard permits the use of either the retrospective or modified retrospective transition method. Additionally, ASU No. 2014‑09 requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The Company adopted ASU No. 2014‑09 using the retrospective transition method. The adoption of ASU No. 2014‑09 did not have a material effect on the Company’s consolidated financial statements and no adjustments were required to prior periods because there were no changes to the Company’s recognition of revenues or presentation of revenues in the consolidated statements of operations. In January 2016, the FASB issued ASU No. 2016‑01, “ Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities ”. The amendments in this update address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016‑01 was effective for the Company beginning January 1, 2018. The adoption of ASU No. 2016‑01 did not have a material effect on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016‑02, “ Leases (Topic 842) ” and in July 2018, the FASB issued ASU 2018-10 " Codification Improvements to Topic 842, Leases " and ASU 2018-11 " Leases (Topic 842) Targeted Improvements" (collectively "ASC Topic 842"). ASC Topic 842 requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASC Topic 842 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right‑to‑use asset for the right to use the underlying asset for the lease term. ASC Topic 842 is effective for the Company for interim and annual periods beginning January 1, 2019 and early adoption is permitted. The Company expects that most of the Company’s operating lease commitments will be subject to ASC Topic 842 and recognized as operating lease liabilities and right of use assets upon adoption, resulting in a significant increase in assets and liabilities on the consolidated balance sheet. The Company is in the process of implementing lease administration software, changing business processes and internal controls in preparation for the adoption of ASC Topic 842. The Company is continuing its assessment of ASC Topic 842 which may identify additional impacts on the Company’s consolidated financial statements and disclosures. The Company will adopt ASC Topic 842 using the transition relief provided by ASU 2018-11. In March 2016, the FASB issued ASU No. 2016‑09, “ Improvements to Employee Share‑Based Payment Accounting , which amends ASC Topic 718, Stock Compensation ”. The objective of this amendment is part of the FASB’s Simplification Initiative as it applies to several aspects of the accounting for share‑based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU No. 2016‑09 was effective for the Company on January 1, 2017. The adoption of ASU No. 2016‑09 did not have a material effect on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU No. 2016‑15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ”. ASU No. 2016‑15 made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted ASU No. 2016‑15 on January 1, 2017. The adoption of ASU No. 2016‑15 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017‑01, “ Business Combinations (Topic 805) Clarifying the Definition of a Business”, which amends the guidance of FASB Accounting Standards Codification Topic 805, “ Business Combinations ”, adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU No. 2017‑01 was effective for the Company prospectively on January 1, 2018. The adoption of ASU No. 2017‑01 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017‑04, “ Simplifying the Test for Goodwill Impairment ”, which removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU No. 2017‑04 is effective for interim and annual reporting periods beginning after December 15, 2019 and will be applied prospectively, early adoption is permitted. ASU No. 2017‑04 is not expected to have a material effect on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU No. 2017‑09, “ Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” . ASU No. 2017‑09 provides guidance that clarifies when changes to the terms or conditions of a share‑based payment award require the application of modification accounting under ASC 718. ASU No. 2017‑09 will allow for certain changes to be made to awards without accounting for them as modifications. The Company early adopted ASU No. 2017‑09 during the year ended December 31, 2017. The adoption of ASU No. 2017‑09 did not have a material effect on the Company’s consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, “ Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. ASU No. 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted after adoption of ASU No. 2014-09. The Company has not yet determined the effect of ASU No. 2018-07 on its ongoing financial reporting. |
Subsequent Events | Subsequent Events — The Company has conducted a review for and evaluated subsequent events from October 1, 2018 through November 13, 2018, the date the unaudited condensed consolidated financial statements were available to be issued. Refer to Notes 5 and 9 for further information regarding subsequent events. |
SUMMARY OF ACCOUNTING POLICIE_2
SUMMARY OF ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF ACCOUNTING POLICIES | |
Schedule of disaggregates the revenues based on the location of the partner firm | Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018 Domestic revenue $ 174,624 $ 230,286 $ 458,887 $ 646,805 International revenue 5,630 5,415 14,143 16,560 Total revenue $ 180,254 $ 235,701 $ 473,030 $ 663,365 |
NON-CONTROLLING INTERESTS AND_2
NON-CONTROLLING INTERESTS AND LOSS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | |
Schedule of reconciliation of net loss before noncontrolling interest to net loss attributable to common stockholders | Focus LLC common units held by continuing owners 22,823,272 Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners (1) 9,810,779 Total common units and common unit equivalents attributable to non-controlling interest 32,634,051 Total common units and common unit equivalents of incentive units outstanding 75,163,702 Non-controlling interest allocation 43.4 % Company’s interest in Focus LLC 56.6 % (1) Focus LLC common units issuable upon conversion of 16,842,170 (see Note 9)vested and unvested Focus LLC incentive units was calculated using the common unit equivalent of vested and unvested Focus LLC incentive units based on the closing price of the Company’s Class A common stock on the last trading day of the period. The below table contains a reconciliation of net loss to net loss attributable to common stockholders: Three months Nine months ended ended September 30, 2018 September 30, 2018 Net loss $ (38,924) $ (58,634) Net loss attributable to members of Focus LLC (for the respective period through the IPO) 28,111 47,821 Non controlling interest subsequent to the IPO 615 615 Net loss attributable to common stockholders $ (10,198) $ (10,198) |
Schedule of calculation of basic earnings per share | Period July 30, 2018 through (in thousands, except for shares and per share amounts) September 30, 2018 Basic loss per share: Net loss attributable to common stockholders $ (10,198) Weighted average shares of Class A common stock outstanding 42,351,043 Basic loss per share $ (0.24) |
Schedule of calculation of diluted earnings per share | Period July 30, 2018 through (in thousands, except for shares and per share amounts) September 30, 2018 Diluted loss per share: Net loss attributable to common stockholders $ (10,198) Weighted average shares of Class A common stock outstanding 42,351,043 Effect of dilutive stock options — Effect of dilutive unvested Class A common stock — Total 42,351,043 Diluted loss per share $ (0.24) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
ACQUISITIONS | |
Schedule of purchase price associated with business acquisitions and the allocation thereof | Number of business acquisitions closed 17 Consideration: Cash due at closing and option premium $ 292,373 Cash due subsequent to closing at net present value 14,525 Fair market value of Focus LLC common units issued 51,456 Fair market value of estimated contingent consideration 32,196 Total consideration $ 390,550 Allocation of purchase price: Total tangible assets $ 3,317 Total liabilities assumed (2,079) Customer relationships 186,685 Management contracts 22,380 Goodwill 179,852 Other intangibles 395 Total allocated consideration $ 390,550 |
Schedule of weighted-average useful lives of intangible assets acquired | Number of Years Management contracts 20 Customer relationships 9 Other intangibles 5 Weighted-average useful life of all intangibles acquired 11 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Summary of changes in the goodwill balances | December 31, September 30, 2017 2018 Balance beginning of period: Goodwill $ 339,129 $ 538,113 Cumulative impairment losses (22,624) (22,624) 316,505 515,489 Goodwill acquired 198,546 179,852 Other 438 (2,181) 198,984 177,671 Balance end of period: Goodwill 538,113 715,784 Cumulative impairment losses (22,624) (22,624) $ 515,489 $ 693,160 |
Summary of amortizing acquired intangible assets | The following table summarizes the amortizing acquired intangible assets at December 31, 2017: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 713,966 $ (270,629) $ 443,337 Management contracts 103,316 (25,976) 77,340 Other intangibles 3,436 (1,831) 1,605 Total $ 820,718 $ (298,436) $ 522,282 The following table summarizes the amortizing acquired intangible assets at September 30, 2018: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 904,306 $ (329,172) $ 575,134 Management contracts 125,485 (30,315) 95,170 Other intangibles 4,140 (2,384) 1,756 Total $ 1,033,931 $ (361,871) $ 672,060 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
FAIR VALUE MEASUREMENTS | |
Schedule of implied fair value of the Company's First Lien Term Loan and Second Lien Term Loan based on Level 2 inputs | December 31, 2017 September 30, 2018 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan $ 793,012 $ 799,952 $ 800,993 $ 804,997 Second Lien Term Loan 207,000 208,811 — — |
Schedule of changes in the fair value of estimated contingent consideration for business acquisitions | Balance as of January 1, 2017 $ 26,188 Additions to estimated contingent consideration 37,551 Payments of contingent consideration (9,435) Non-cash changes in fair value of estimated contingent consideration 22,294 Other 79 Balance as of December 31, 2017 76,677 Additions to estimated contingent consideration 32,196 Payments of contingent consideration (20,397) Non-cash changes in fair value of estimated contingent consideration 28,879 Other (173) Balance at September 30, 2018 $ 117,182 |
Schedule of inputs used in the fair value measurement of estimated contingent consideration | Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2017 Techniques Input Range $ 76,677 Monte Carlo Simulation model Forecasted growth rates (0.8)% - 24.9 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable September 30, 2018 Techniques Input Range $ 117,182 Monte Carlo Simulation model Forecasted growth rates (19.9)% - 90.1 % |
CREDIT FACILITY (Tables)
CREDIT FACILITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
CREDIT FACILITY | |
Schedule of reconciliation of principal amounts outstanding under the Credit Facility to borrowings under credit facilities recorded in the unaudited condensed consolidated balance sheet | December 31, September 30, 2017 2018 First Lien Term Loan $ 793,012 $ 800,993 Second Lien Term Loan 207,000 — Unamortized debt financing costs (16,646) (2,512) Unamortized discount (2,864) — Total $ 980,502 $ 798,481 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of fair value of equity incentive units grants determined with assumptions | Expected term 4.1 years Expected unit price volatility 30 % Risk-free interest rate 2.74 % Expected dividend yield — % Weighted average grant date fair value $ |
Predecessor | |
Schedule of incentive units granted | Incentive Weighted Average Units Hurdle Price Outstanding—January 1, 2018 15,229,039 $ 15.53 Granted 4,671,411 31.57 Redeemed (2,746,655) 15.79 Forfeited (311,625) 22.26 Outstanding—September 30, 2018 16,842,170 19.81 Vested—September 30, 2018 7,747,920 12.34 |
Schedule of incentive units outstanding and vested by hurdle rates | Number Vested Incentive Hurdle Rates Outstanding Units $1.42 175,421 175,421 5.50 97,798 97,798 6.00 56,702 56,702 7.00 514,609 514,609 9.00 2,129,341 2,129,341 11.00 1,422,779 1,422,779 12.00 520,000 520,000 13.00 933,821 831,737 14.00 80,205 58,268 16.00 180,552 180,552 17.00 80,000 65,000 19.00 920,213 720,213 21.00 3,975,500 975,500 22.00 1,368,417 — 23.00 524,828 — 27.00 29,484 — 33.00 3,832,500 — 16,842,170 7,747,920 |
Stock options | |
Schedule of stock options granted | Weighted Average Stock Options Exercise Price Outstanding—January 1, 2018 — $ — Granted 890,409 33.00 Forfeited — — Outstanding—September 30, 2018 890,409 33.00 Vested—September 30, 2018 386,832 33.00 |
Time-based stock option awards | |
Schedule of fair value of stock options grants determined with assumptions | Expected term 7.3 years Expected unit price volatility 33 % Risk-free interest rate 2.90 % Expected dividend yield — % Weighted average grant date fair value $ 12.90 |
Market condition-based awards | |
Schedule of fair value of stock options grants determined with assumptions | Expected term 5.0 years Expected unit price volatility 30 % Risk-free interest rate 2.78 % Expected dividend yield — % Weighted average grant date fair value $ 3.97 |
Class A common stock | |
Schedule of stock options granted | Unvested Class A Grant Common Date Stock Fair Value Outstanding—January 1, 2018 — $ — Granted 178,608 33.00 Forfeited — — Outstanding—September 30, 2018 178,608 33.00 Vested—September 30, 2018 — — |
CASH FLOW INFORMATION (Tables)
CASH FLOW INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
CASH FLOW INFORMATION | |
Schedule of supplemental cash flow information | Nine Months Ended September 30, 2017 2018 Supplemental disclosures of cash flow information—cash paid for: Interest $ 24,172 $ 45,484 Income taxes $ 2,440 $ 4,680 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 37,101 $ 32,196 Fair market value of restricted common units in connection with acquisitions and contingent consideration $ 64,852 $ 53,877 Accretion of senior preferred units return $ 6,249 $ — Accretion of senior preferred units to estimated redemption value $ 17,463 $ — Accretion of junior preferred units return $ 672 $ — Accretion of junior preferred units to estimated redemption value $ 8,452 $ — Net tangible assets (liabilities) acquired in connection with business acquisitions $ (6,178) $ 1,238 Discount on proceeds from credit facilities $ 3,064 — Purchase price installment related to acquisitions $ — $ 14,525 Deferred taxes and tax receivable agreements $ — $ 36,581 Other $ 188 $ 228 |
SUMMARY OF ACCOUNTING POLICIE_3
SUMMARY OF ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue Recognition | ||||
Total revenue | $ 235,701 | $ 180,254 | $ 663,365 | $ 473,030 |
Domestic revenue | ||||
Revenue Recognition | ||||
Total revenue | 230,286 | 174,624 | 646,805 | 458,887 |
International revenue | ||||
Revenue Recognition | ||||
Total revenue | $ 5,415 | $ 5,630 | $ 16,560 | $ 14,143 |
SUMMARY OF ACCOUNTING POLICIE_4
SUMMARY OF ACCOUNTING POLICIES - Segment Reporting and Income Taxes (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2017USD ($) | Sep. 30, 2018segment | Dec. 31, 2017 | |
SUMMARY OF ACCOUNTING POLICIES | |||
Number of operating segments | segment | 1 | ||
Income Taxes | |||
U.S. federal corporate income tax rate (in percentage) | 21.00% | 35.00% | |
Income tax benefit on remeasurement of its U.S. corporate deferred tax assets and liabilities | $ | $ 2,653 |
IPO, REORGANIZATION TRANSACTI_2
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS (Details) $ / shares in Units, $ in Thousands | Jul. 30, 2018USD ($)Vote$ / sharesshares | Sep. 30, 2018$ / shares | Jul. 31, 2018shares | Dec. 31, 2017$ / shares |
Predecessor | ||||
Reorganization Transactions | ||||
Cash paid as a percentage of fair value of stock options (in percent) | 65.00% | |||
Preferred units conversion ratio | 1 | |||
Predecessor | Minimum | ||||
Reorganization Transactions | ||||
Number of common unit held by existing owners | 85,000 | |||
Predecessor | Non Accredited Investor | ||||
Reorganization Transactions | ||||
Unit price to Gross IPO price ratio | 1.25 | |||
Amount Paid to Existing Owners not Accredited Investors | $ | $ 26,001 | |||
Predecessor | Non Accredited Investor | Maximum | ||||
Reorganization Transactions | ||||
Number of common unit held by existing owners | 85,000 | |||
Percentage of vested units elected to sell | 100.00% | |||
Predecessor | Non Accredited Investor | Minimum | ||||
Reorganization Transactions | ||||
Percentage of vested units elected to sell | 100.00% | |||
Class A common stock | ||||
Initial Public Offering | ||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | ||
Reorganization Transactions | ||||
Issue of shares, Reorganization transaction | 23,881,002 | |||
Non-compensatory stock options issued to purchase of common stock under the reorganization transaction | 386,832 | |||
Compensatory stock options issued to purchase of common stock under the reorganization transaction | 348,577 | |||
Number of shares cancelled under reorganization transaction | 240,457 | |||
Class A common stock | Predecessor | ||||
Reorganization Transactions | ||||
Common units conversion ratio | 1 | |||
Class B common stock | ||||
Initial Public Offering | ||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | ||
Reorganization Transactions | ||||
Issue of shares, Reorganization transaction | 22,499,665 | |||
Number of new shares issued after cancellation under the reorganization transaction | 240,457 | |||
Class B common stock | Predecessor | ||||
Reorganization Transactions | ||||
Number of votes for each share | Vote | 1 | |||
IPO | ||||
Reorganization Transactions | ||||
Payment to mandatorily exchanging owners | $ | $ 11,137 | |||
Payment to existing owners | $ | $ 24,400 | |||
Number of units exchanged | 17,583,947 | |||
Repayment of credit facility | $ | $ 392,535 | |||
Remaining proceeds | $ | 137,088 | |||
IPO | Focus LLC | ||||
Reorganization Transactions | ||||
Payment for exchange of units | $ | $ 529,623 | |||
IPO | Class A common stock | ||||
Initial Public Offering | ||||
Issuance of stock (in shares) | 18,648,649 | |||
Common stock, par value | $ / shares | $ 0.01 | |||
Reorganization Transactions | ||||
Proceeds from sale of common stock | $ | $ 565,160 | |||
Underwriters option | Class A common stock | ||||
Initial Public Offering | ||||
Issuance of stock (in shares) | 2,432,432 | |||
Share price (in dollars per share) | $ / shares | $ 33 | |||
Reorganization Transactions | ||||
Proceeds from sale of common stock | $ | $ 74,651 |
NON-CONTROLLING INTERESTS AND_3
NON-CONTROLLING INTERESTS AND LOSS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 7 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Jul. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Jul. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Net loss attributable to common stockholders | ||||||||
Net loss | $ (38,924) | $ (37,881) | $ (58,634) | $ (38,669) | ||||
Non-controlling interest | $ 615 | (28,726) | (48,436) | |||||
Net loss attributable to common stockholders | (10,813) | $ (10,198) | $ (10,198) | |||||
Basic loss per share: | ||||||||
Net loss attributable to common stockholders | $ (10,198) | |||||||
Basic loss per share | $ (0.24) | |||||||
Diluted loss per share: | ||||||||
Net loss attributable to common stockholders | $ (10,198) | |||||||
Total | 42,351,043 | |||||||
Diluted loss per share | $ (0.24) | |||||||
Class A common stock | ||||||||
Basic loss per share: | ||||||||
Weighted average shares of Class A common stock outstanding | 42,351,043 | 42,351,043 | 42,351,043 | |||||
Basic loss per share | $ (0.24) | $ (0.24) | ||||||
Diluted loss per share: | ||||||||
Weighted average shares of Class A common stock outstanding | 42,351,043 | 42,351,043 | 42,351,043 | |||||
Diluted loss per share | $ (0.24) | $ (0.24) | ||||||
Market based stock options | ||||||||
Diluted loss per share: | ||||||||
Stock options excluded from diluted loss per share | 155,000 | |||||||
Threshold period | 90 days | |||||||
Vesting period | 5 years | |||||||
Threshold volume weighted average per share price trigger | $ 100 | |||||||
Predecessor | ||||||||
Net loss attributable to common stockholders | ||||||||
Net loss attributable to common stockholders | $ (47,821) | |||||||
Focus LLC | ||||||||
LOSS PER SHARE | ||||||||
Focus LLC common units held by continuing owners | $ 22,823,272 | $ 22,823,272 | $ 22,823,272 | $ 22,823,272 | ||||
Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners | 9,810,779 | 9,810,779 | 9,810,779 | 9,810,779 | ||||
Total common units and common unit equivalents attributable to non-controlling interest | 32,634,051 | 32,634,051 | 32,634,051 | 32,634,051 | ||||
Total common units and common unit equivalents of incentive units outstanding | $ 75,163,702 | $ 75,163,702 | $ 75,163,702 | $ 75,163,702 | ||||
Ownership interest (as a percentage) | 43.40% | 43.40% | 43.40% | 43.40% | ||||
Non-controlling interest allocation | 56.60% | 56.60% | 56.60% | 56.60% | ||||
Convertible incentive units | 16,842,170 | 16,842,170 | 16,842,170 | 16,842,170 | ||||
Net loss attributable to common stockholders | ||||||||
Net loss | $ 28,111 | $ 47,821 |
ACQUISITIONS - Business Acquisi
ACQUISITIONS - Business Acquisitions (Details) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2018USD ($)item | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Consideration: | |||
Cash due at closing and option premium | $ 4,557 | ||
Allocation of purchase price: | |||
Goodwill | $ 693,160 | $ 515,489 | $ 316,505 |
Business acquisitions | |||
ACQUISITIONS | |||
Number of business acquisitions closed | item | 17 | ||
Consideration: | |||
Cash due at closing and option premium | $ 292,373 | ||
Cash due subsequent to closing at net present value | 14,525 | ||
Fair market value of common units issued | 51,456 | ||
Fair market value of estimated contingent consideration | 32,196 | ||
Total consideration | 390,550 | ||
Allocation of purchase price: | |||
Total tangible assets | 3,317 | ||
Total liabilities assumed | (2,079) | ||
Goodwill | 179,852 | ||
Total allocated consideration | 390,550 | ||
Amount of tax on goodwill and intangibles related to business acquisitions | 317,246 | ||
Revenue from acquired entity in business acquisitions | 68,292 | ||
Income from acquired entity in business acquisitions | 10,426 | ||
Business acquisitions | Customer relationships | |||
Allocation of purchase price: | |||
Finite-lived intangible assets | 186,685 | ||
Business acquisitions | Management contracts | |||
Allocation of purchase price: | |||
Finite-lived intangible assets | 22,380 | ||
Business acquisitions | Other intangibles | |||
Allocation of purchase price: | |||
Finite-lived intangible assets | $ 395 |
ACQUISITIONS - Asset Acquisitio
ACQUISITIONS - Asset Acquisitions (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended |
Nov. 13, 2018 | Sep. 30, 2018 | |
Asset Acquisitions | ||
Purchase consideration for asset acquisitions | $ 4,557 | |
Weighted-average useful life of all intangibles acquired | 11 years | |
Business acquisitions | ||
Asset Acquisitions | ||
Purchase consideration for asset acquisitions | $ 292,373 | |
Business acquisitions | Subsequent Events | ||
Asset Acquisitions | ||
Purchase consideration for asset acquisitions | $ 20,250 | |
Management contracts | ||
Asset Acquisitions | ||
Weighted-average useful life of all intangibles acquired | 20 years | |
Customer relationships | ||
Asset Acquisitions | ||
Weighted-average useful life of all intangibles acquired | 9 years | |
Other intangibles | ||
Asset Acquisitions | ||
Weighted-average useful life of all intangibles acquired | 5 years |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Change in the goodwill (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Change in the goodwill | ||
Goodwill beginning of period | $ 538,113 | $ 339,129 |
Cumulative impairment losses beginning of period | (22,624) | (22,624) |
Balance beginning of period | 515,489 | 316,505 |
Goodwill acquired | 179,852 | 198,546 |
Other | (2,181) | 438 |
Goodwill period increase (decrease) | 177,671 | 198,984 |
Goodwill end of period | 715,784 | 538,113 |
Cumulative impairment losses end of period | (22,624) | (22,624) |
Balance end of period | $ 693,160 | $ 515,489 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS- Intangible assets (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 1,033,931 | $ 820,718 |
Accumulated Amortization | (361,871) | (298,436) |
Net Book Value | 672,060 | 522,282 |
Customer relationships | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | 904,306 | 713,966 |
Accumulated Amortization | (329,172) | (270,629) |
Net Book Value | 575,134 | 443,337 |
Management contracts | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | 125,485 | 103,316 |
Accumulated Amortization | (30,315) | (25,976) |
Net Book Value | 95,170 | 77,340 |
Other intangibles | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | 4,140 | 3,436 |
Accumulated Amortization | (2,384) | (1,831) |
Net Book Value | $ 1,756 | $ 1,605 |
FAIR VALUE MEASUREMENTS - Impli
FAIR VALUE MEASUREMENTS - Implied fair value (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Implied fair value based on level 2 inputs | ||
Stated value | $ 798,481 | $ 980,502 |
First Lien Term Loan | ||
Implied fair value based on level 2 inputs | ||
Stated value | 800,993 | 793,012 |
Fair value | $ 804,997 | 799,952 |
Second Lien Term Loan | ||
Implied fair value based on level 2 inputs | ||
Stated value | 207,000 | |
Fair value | $ 208,811 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in the fair value (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Balance as of beginning of period | $ 76,677 | $ 26,188 |
Additions to estimated contingent consideration | 32,196 | 37,551 |
Payments of contingent consideration | (20,397) | (9,435) |
Non-cash changes in fair value of estimated contingent consideration | 28,879 | 22,294 |
Other | (173) | 79 |
Balance as of end of period | $ 117,182 | $ 76,677 |
FAIR VALUE MEASUREMENTS - Conti
FAIR VALUE MEASUREMENTS - Contingent consideration (Details) - Level 3 $ in Thousands | Sep. 30, 2018USD ($)item | Dec. 31, 2017USD ($)item |
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration | $ | $ 117,182 | $ 76,677 |
Valuation techniques | us-gaap:ValuationTechniqueOptionPricingModelMember | us-gaap:ValuationTechniqueOptionPricingModelMember |
Unobservable input | focs:MeasurementInputForecastedGrowthRatesMember | focs:MeasurementInputForecastedGrowthRatesMember |
Minimum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration (in percent) | (19.9) | (0.8) |
Maximum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration (in percent) | 90.1 | 24.9 |
CREDIT FACILITY - Old and New C
CREDIT FACILITY - Old and New Credit Facility (Details) $ in Thousands | Jul. 30, 2018USD ($) | Jul. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Apr. 30, 2018USD ($) | Jan. 31, 2018USD ($) | Jul. 31, 2017USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
CREDIT FACILITY | ||||||||||||
Face amount of debt | $ 800,993 | $ 800,993 | $ 1,000,012 | |||||||||
Loss on extinguishment of debt | (7,060) | $ (8,106) | (21,071) | $ (8,106) | ||||||||
Deferred financing costs | 13,014 | $ 13,014 | 13,278 | |||||||||
Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Debt discount | $ 2,864 | |||||||||||
Credit Facility | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Face amount of debt | $ 1,067,000 | |||||||||||
Accordion feature | $ 255,000 | |||||||||||
Loss on extinguishment of debt | $ 8,106 | |||||||||||
Actual total secured leverage ratio | 3.19 | |||||||||||
Credit Facility | Predecessor | Maximum | ||||||||||||
CREDIT FACILITY | ||||||||||||
Total secured leverage ratio to be maintained through March 31, 2019 | 6.25 | |||||||||||
First Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Face amount of debt | $ 803,000 | $ 200,000 | $ 795,000 | |||||||||
Loss on extinguishment of debt | $ 14,011 | |||||||||||
Frequency of installment repayments | quarterly | |||||||||||
Quarterly installment repayments | 2,490 | $ 1,988 | ||||||||||
Debt discount (as a percent) | 0.125% | |||||||||||
Debt discount | $ 994 | |||||||||||
Prepayment penalty (as a percent) | 1.00% | |||||||||||
Write-off of debt issuance cost | 13,094 | |||||||||||
Write-off of debt discount | $ 917 | |||||||||||
Deferred financing costs | $ 1,347 | |||||||||||
Repayment of term loan | $ 2,007 | |||||||||||
First Lien Revolver | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Remaining amount | $ 250,000 | |||||||||||
Maximum borrowing capacity | $ 650,000 | |||||||||||
Unused commitment fee (as a percent) | 0.50% | 0.50% | ||||||||||
Deferred financing costs | $ 1,904 | $ 1,904 | $ 14,735 | |||||||||
Maturity term | 5 years | |||||||||||
First Lien Revolver Step Down One | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Unused commitment fee (as a percent) | 0.375% | 0.375% | ||||||||||
First Lien Revolver Step Down Two | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Unused commitment fee (as a percent) | 0.25% | |||||||||||
Letter of Credit | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Maximum borrowing capacity | $ 30,000 | |||||||||||
Second Lien Term Loan | ||||||||||||
CREDIT FACILITY | ||||||||||||
Loss on extinguishment of debt | 7,060 | |||||||||||
Deferred financing costs | $ 4,990 | $ 4,990 | ||||||||||
Second Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Face amount of debt | $ 207,000 | |||||||||||
Debt discount (as a percent) | 1.00% | |||||||||||
Debt discount | $ 2,070 | |||||||||||
Prepayment penalty (as a percent) | 1.00% | |||||||||||
Repayment of term loan | $ 207,000 | |||||||||||
LIBOR | First Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 2.50% | 2.75% | ||||||||||
LIBOR | First Lien Revolver | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 2.00% | 3.25% | ||||||||||
LIBOR | First Lien Revolver Step Down One | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 1.75% | 3.00% | ||||||||||
LIBOR | First Lien Revolver Step Down Two | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 1.50% | 2.75% | ||||||||||
LIBOR | First Lien Revolver Step Down Three | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 1.25% | |||||||||||
LIBOR | Second Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 7.50% | |||||||||||
Base rate | First Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 1.75% | |||||||||||
Base rate | First Lien Revolver | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 1.50% | 1.00% | 2.25% | |||||||||
Base rate | First Lien Revolver Step Down One | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 0.75% | 2.00% | ||||||||||
Base rate | First Lien Revolver Step Down Two | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 0.50% | 1.75% | ||||||||||
Base rate | First Lien Revolver Step Down Three | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 0.25% | |||||||||||
Base rate | Second Lien Term Loan | Predecessor | ||||||||||||
CREDIT FACILITY | ||||||||||||
Margin (as a percent) | 6.50% |
CREDIT FACILITY - Reconciliatio
CREDIT FACILITY - Reconciliation of Principal Amounts Outstanding (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Jul. 30, 2018 | Apr. 30, 2018 | Dec. 31, 2017 | Jul. 31, 2017 |
CREDIT FACILITY | |||||
Amount outstanding under credit facility | $ 798,481 | $ 980,502 | |||
Deferred financing costs | 13,014 | 13,278 | |||
First Lien Term Loan | |||||
CREDIT FACILITY | |||||
Amount outstanding under credit facility | 800,993 | 793,012 | |||
Second Lien Term Loan | |||||
CREDIT FACILITY | |||||
Amount outstanding under credit facility | 207,000 | ||||
Deferred financing costs | 4,990 | ||||
Predecessor | |||||
CREDIT FACILITY | |||||
Unamortized debt financing costs | (2,512) | (16,646) | |||
Unamortized discount | (2,864) | ||||
Amount outstanding under credit facility | 798,481 | 980,502 | |||
Predecessor | First Lien Term Loan | |||||
CREDIT FACILITY | |||||
Carrying value of debt | 800,993 | 793,012 | |||
Unamortized discount | $ (994) | ||||
Deferred financing costs | $ 1,347 | ||||
Predecessor | First Lien Revolver | |||||
CREDIT FACILITY | |||||
Unamortized debt financing costs | (13,014) | (13,278) | |||
Amount outstanding under credit facility | $ 0 | 0 | |||
Deferred financing costs | $ 1,904 | 14,735 | |||
Predecessor | Second Lien Term Loan | |||||
CREDIT FACILITY | |||||
Carrying value of debt | $ 207,000 | ||||
Unamortized discount | $ (2,070) |
CREDIT FACILITY - First Lien Re
CREDIT FACILITY - First Lien Revolver and Letters of Credit (Details) - Predecessor - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
CREDIT FACILITY | ||
Weighted average interest rate | 6.00% | 5.00% |
First Lien Revolver | ||
CREDIT FACILITY | ||
Unused commitment line | $ 645,793 | $ 247,768 |
Letter of credit | ||
CREDIT FACILITY | ||
Letter of credit outstanding | $ 4,207 | $ 2,232 |
Annual interest rate | 2.00% | 3.00% |
EQUITY - 2018 Omnibus Incentive
EQUITY - 2018 Omnibus Incentive Plan (Details) $ / shares in Units, $ in Thousands | Jul. 30, 2018installment$ / sharesshares | Sep. 30, 2018USD ($)$ / sharesshares | Sep. 30, 2018$ / sharesshares |
Class A common stock | |||
EQUITY | |||
Non-compensatory stock options granted to purchase shares of common stock | 386,832 | ||
Compensatory stock options granted to purchase shares of common stock | 348,577 | ||
2018 Omnibus Incentive Plan | Class A common stock | |||
EQUITY | |||
Stock options vests, number of installments | installment | 3 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Granted | 178,608 | 178,608 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Granted | 178,608 | 178,608 | |
Outstanding at the end of the period | 178,608 | 178,608 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Granted | $ / shares | $ 33 | ||
Outstanding at the end of the period | $ / shares | $ 33 | 33 | |
Fair value of the stock option grants determined with assumptions | |||
Weighted average grant date fair value | $ / shares | $ 33 | ||
2018 Omnibus Incentive Plan | Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Granted | 890,409 | ||
Outstanding at the end of the period | 890,409 | 890,409 | |
Vested | 386,832 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | |||
Granted | $ / shares | $ 33 | ||
Outstanding at the end of the period | $ / shares | $ 33 | 33 | |
Vested | $ / shares | $ 33 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Granted | 890,409 | ||
Vested | 386,832 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Vested | $ / shares | $ 33 | ||
Fair value of the stock option grants determined with assumptions | |||
Expected term (in years) | 5 years | ||
Expected unit price volatility (in percent) | 30.00% | ||
Risk free interest rate (in percent) | 2.78% | ||
Compensation expense recognized | $ | $ 6,098 | ||
2018 Omnibus Incentive Plan | Stock options | IPO and Reorganization transactions | |||
Fair value of the stock option grants determined with assumptions | |||
Compensation expense recognized | $ | $ 4,504 | ||
2018 Omnibus Incentive Plan | Stock options | Class A common stock | |||
EQUITY | |||
Non-compensatory stock options granted to purchase shares of common stock | 386,832 | ||
Compensatory stock options granted to purchase shares of common stock | 348,577 | ||
Non-compensatory stock options vests, number of installments | installment | 3 | ||
Compensatory stock options vests, number of installments | installment | 3 | ||
2018 Omnibus Incentive Plan | Time-based stock option awards | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Granted | $ / shares | $ 12.90 | ||
Fair value of the stock option grants determined with assumptions | |||
Expected term (in years) | 7 years 3 months 18 days | ||
Expected unit price volatility (in percent) | 33.00% | ||
Risk free interest rate (in percent) | 2.90% | ||
Weighted average grant date fair value | $ / shares | $ 12.90 | ||
2018 Omnibus Incentive Plan | Market condition-based awards | |||
EQUITY | |||
Threshold period | 90 days | ||
Vesting period threshold following IPO pricing | 5 years | ||
Threshold volume weighted average per share price trigger | $ / shares | $ 100 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Granted | $ / shares | 3.97 | ||
Fair value of the stock option grants determined with assumptions | |||
Weighted average grant date fair value | $ / shares | $ 3.97 | ||
2018 Omnibus Incentive Plan | Market condition-based awards | Class A common stock | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Granted | 155,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Granted | 155,000 | ||
2018 Omnibus Incentive Plan | Maximum | Stock options | |||
EQUITY | |||
Shares authorized | 6,000,000 | ||
Additional shares authorized for issuance under an established share-based compensation plan | 3,000,000 | ||
2018 Omnibus Incentive Plan | Maximum | Stock options | Class A common stock | |||
EQUITY | |||
Percentage of additional shares authorized for issuance under an established share-based compensation plan to the outstanding shares | 5.00% |
EQUITY - Focus LLC Incentive Un
EQUITY - Focus LLC Incentive Units (Details) - Predecessor - USD ($) $ / shares in Units, $ in Thousands | Jul. 30, 2018 | Oct. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Weighted Average Hurdle Price | ||||||
Noncash equity compensation expense | $ 56 | $ 17,512 | $ 131 | $ 17,744 | ||
Incentive Units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 3 years | |||||
Fair value of the stock option grants determined with assumptions | ||||||
Expected term (in years) | 4 years 1 month 6 days | |||||
Expected unit price volatility (in percent) | 30.00% | |||||
Risk free interest rate (in percent) | 2.74% | |||||
Weighted average grant date fair value | $ 5.05 | |||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 16,842,170 | 15,229,039 | ||||
Granted | 4,671,411 | |||||
Redeemed | (2,746,655) | |||||
Forfeited | (311,625) | |||||
Outstanding at the end of the period | 16,842,170 | 16,842,170 | ||||
Vested at the end of the period | 7,747,920 | |||||
Weighted Average Hurdle Price | ||||||
Outstanding at the beginning of the period | $ 19.81 | $ 15.53 | ||||
Granted | 31.57 | |||||
Redeemed | 15.79 | |||||
Forfeited | 22.26 | |||||
Outstanding at the end of the period | $ 19.81 | 19.81 | ||||
Vested at the end of the period | $ 12.34 | $ 12.34 | ||||
Noncash equity compensation expense | $ 17,903 | $ 10,108 | $ 25,383 | $ 13,655 | ||
Incentive Units | Hurdle Rate $1.42 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 175,421 | |||||
Outstanding at the end of the period | 175,421 | 175,421 | ||||
Vested at the end of the period | 175,421 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 1.42 | |||||
Incentive Units | Hurdle Rate 5.50 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 97,798 | |||||
Outstanding at the end of the period | 97,798 | 97,798 | ||||
Vested at the end of the period | 97,798 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 5.50 | |||||
Incentive Units | Hurdle Rate 6.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 56,702 | |||||
Outstanding at the end of the period | 56,702 | 56,702 | ||||
Vested at the end of the period | 56,702 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 6 | |||||
Incentive Units | Hurdle Rate 7.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 514,609 | |||||
Outstanding at the end of the period | 514,609 | 514,609 | ||||
Vested at the end of the period | 514,609 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 7 | |||||
Incentive Units | Hurdle Rate 9.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 2,129,341 | |||||
Outstanding at the end of the period | 2,129,341 | 2,129,341 | ||||
Vested at the end of the period | 2,129,341 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 9 | |||||
Incentive Units | Hurdle Rate 11.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 1,422,779 | |||||
Outstanding at the end of the period | 1,422,779 | 1,422,779 | ||||
Vested at the end of the period | 1,422,779 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 11 | |||||
Incentive Units | Hurdle Rate 12.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 520,000 | |||||
Outstanding at the end of the period | 520,000 | 520,000 | ||||
Vested at the end of the period | 520,000 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 12 | |||||
Incentive Units | Hurdle Rate 13.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 933,821 | |||||
Outstanding at the end of the period | 933,821 | 933,821 | ||||
Vested at the end of the period | 831,737 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 13 | |||||
Incentive Units | Hurdle Rate 14.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 80,205 | |||||
Outstanding at the end of the period | 80,205 | 80,205 | ||||
Vested at the end of the period | 58,268 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 14 | |||||
Incentive Units | Hurdle Rate 16.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 180,552 | |||||
Outstanding at the end of the period | 180,552 | 180,552 | ||||
Vested at the end of the period | 180,552 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 16 | |||||
Incentive Units | Hurdle Rate 17.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 80,000 | |||||
Outstanding at the end of the period | 80,000 | 80,000 | ||||
Vested at the end of the period | 65,000 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 17 | |||||
Incentive Units | Hurdle Rate 19.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 920,213 | |||||
Outstanding at the end of the period | 920,213 | 920,213 | ||||
Vested at the end of the period | 720,213 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 19 | |||||
Incentive Units | Hurdle Rate 21.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 3,975,500 | |||||
Outstanding at the end of the period | 3,975,500 | 3,975,500 | ||||
Vested at the end of the period | 975,500 | |||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 21 | |||||
Incentive Units | Hurdle Rate 22.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 1,368,417 | |||||
Outstanding at the end of the period | 1,368,417 | 1,368,417 | ||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 22 | |||||
Incentive Units | Hurdle Rate 23.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 524,828 | |||||
Outstanding at the end of the period | 524,828 | 524,828 | ||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 23 | |||||
Incentive Units | Hurdle Rate 27.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 29,484 | |||||
Outstanding at the end of the period | 29,484 | 29,484 | ||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 27 | |||||
Incentive Units | Hurdle Rate 33.00 | ||||||
Incentive Units | ||||||
Outstanding at the beginning of the period | 3,832,500 | |||||
Outstanding at the end of the period | 3,832,500 | 3,832,500 | ||||
Weighted Average Hurdle Price | ||||||
Hurdle Rates | $ 33 | |||||
Incentive Units | Average per share price $35.00 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Threshold period | 90 days | |||||
Vesting percentage | 50.00% | |||||
Incentive Units | ||||||
Vested at the end of the period | 3,000,000 | 1,500,000 | ||||
Incentive Units | Average per share price $35.00 | Minimum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Threshold volume weighted average per share price trigger | $ 35 | |||||
Vesting percentage | 50.00% | |||||
Incentive Units | Vesting Condition, Average Per Share Price Less Than $42.00 [Member] | Maximum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Threshold volume weighted average per share price trigger | 42 | |||||
Incentive Units | Vesting Condition, Average Per Share Price $63.00 [Member] | Minimum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Threshold volume weighted average per share price trigger | $ 63 | |||||
Incentive Units | Vesting Condition, Average Per Share Price $42.00 to $63.00 [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting percentage | 50.00% | |||||
Linear vesting percentage | 50.00% | |||||
Market-Based Incentive Units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Threshold period | 90 days | |||||
Vesting period | 5 years | |||||
Threshold volume weighted average per share price trigger | $ 100 | |||||
Incentive Units | ||||||
Granted | 3,845,000 | |||||
Time based incentive units | IPO and Reorganization transactions | ||||||
Weighted Average Hurdle Price | ||||||
Noncash equity compensation expense | $ 14,756 |
EQUITY - Cash compensation expe
EQUITY - Cash compensation expense and Other non cash compensation expense (Details) - Predecessor - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jul. 30, 2018 | |
Cash compensation expense and Other non cash compensation expense | |||||
Payment of cash to Mandatorily Exchanging Owners (in percent) | 65.00% | ||||
Cash compensation expense | $ 5,926 | ||||
Noncash equity compensation expense | $ 56 | $ 17,512 | $ 131 | $ 17,744 | |
Non Accredited Investor | |||||
Cash compensation expense and Other non cash compensation expense | |||||
Payment of cash in excess of Gross IPO Price (in percent) | 25.00% |
TAX RECEIVABLE AGREEMENTS (Deta
TAX RECEIVABLE AGREEMENTS (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($)agreement | |
TAX RECEIVABLE AGREEMENTS | |
Number of tax receivable agreements | agreement | 2 |
Payment to TRA holder on net cash savings (as a percent) | 85.00% |
Retained benefit on net cash savings (as a percent) | 15.00% |
Deferred tax assets | $ 72,146 |
TRA obligations | $ 39,156 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | ||
Liabilities, clearing brokers | $ 0 | $ 0 |
CASH FLOW INFORMATION (Details)
CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Supplemental disclosures of cash flow information-cash paid for: | ||
Interest | $ 45,484 | $ 24,172 |
Income taxes | 4,680 | 2,440 |
Supplemental noncash cash flow information: | ||
Fair market value of estimated contingent consideration in connection with acquisitions | 32,196 | 37,101 |
Fair market value of restricted common units in connection with acquisitions and contingent consideration | 53,877 | 64,852 |
Accretion of senior preferred units return | 6,249 | |
Accretion of senior preferred units to estimated redemption value | 17,463 | |
Accretion of junior preferred units return | 672 | |
Accretion of junior preferred units to estimated redemption value | 8,452 | |
Net tangible assets (liabilities) acquired in connection with business acquisitions | 1,238 | (6,178) |
Discount on proceeds from credit facilities | 3,064 | |
Purchase price installment related to acquisitions | 14,525 | |
Deferred taxes and tax receivable agreements | 36,581 | |
Other | $ 228 | $ 188 |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
RELATED PARTIES | ||||
Expenses recognized | $ 325 | $ 231 | $ 1,222 | $ 481 |
OTHER (Details)
OTHER (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Mar. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | |
Gain on sale of investment | $ 5,509 | $ 5,509 | |
Financial technology | |||
Minority cost method investment | $ 20,000 |