Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 20, 2020 | Jun. 28, 2019 | |
Entity Registrant Name | Focus Financial Partners Inc. | ||
Entity Central Index Key | 0001651052 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 829,203,698 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Class A common stock | |||
Entity Common Stock, Shares Outstanding | 47,421,315 | ||
Class B common stock | |||
Entity Common Stock, Shares Outstanding | 22,075,749 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash and cash equivalents | $ 65,178 | $ 33,213 |
Accounts receivable less allowances of $576 at 2018 and $684 at 2019 | 129,337 | 98,596 |
Prepaid expenses and other assets | 58,581 | 76,150 |
Fixed assets—net | 41,634 | 24,780 |
Operating lease assets | 180,114 | |
Debt financing costs—net | 9,645 | 12,340 |
Deferred tax assets—net | 75,453 | 70,009 |
Goodwill | 1,090,231 | 860,495 |
Other intangible assets—net | 1,003,456 | 762,195 |
TOTAL ASSETS | 2,653,629 | 1,937,778 |
LIABILITIES | ||
Accounts payable | 8,077 | 8,935 |
Accrued expenses | 41,442 | 36,252 |
Due to affiliates | 58,600 | 39,621 |
Deferred revenue | 7,839 | 6,215 |
Other liabilities | 215,878 | 158,497 |
Operating lease liabilities | 196,425 | |
Borrowings under credit facilities (stated value of $838,985 and $1,279,188 at December 31, 2018 and December 31, 2019, respectively) | 1,272,999 | 836,582 |
Tax receivable agreements obligations | 48,399 | 39,156 |
TOTAL LIABILITIES | 1,849,659 | 1,125,258 |
COMMITMENTS AND CONTINGENCIES (Note 14) | ||
EQUITY | ||
Additional paid-in capital | 498,186 | 471,386 |
Accumulated deficit | (13,462) | (590) |
Accumulated other comprehensive loss | (1,299) | (1,824) |
Total shareholders’ equity | 484,120 | 469,662 |
Non-controlling interest | 319,850 | 342,858 |
Total equity | 803,970 | 812,520 |
TOTAL LIABILITIES AND EQUITY | 2,653,629 | 1,937,778 |
Class A common stock | ||
EQUITY | ||
Common stock | 474 | 462 |
Class B common stock | ||
EQUITY | ||
Common stock | $ 221 | $ 228 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accounts receivable, allowances | $ 684 | $ 576 |
Borrowings under credit facilities, stated value | $ 1,279,188 | $ 838,985 |
Class A common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 500,000,000 |
Common stock, issued shares | 47,421,315 | 46,265,903 |
Common stock, outstanding shares | 47,421,315 | 46,265,903 |
Class B common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 500,000,000 |
Common stock, issued shares | 22,075,749 | 22,823,272 |
Common stock, outstanding shares | 22,075,749 | 22,823,272 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
REVENUES: | |||
Total revenues | $ 1,218,341 | $ 910,880 | $ 662,887 |
OPERATING EXPENSES: | |||
Compensation and related expenses | 431,465 | 358,084 | 265,555 |
Management fees | 304,701 | 232,703 | 163,617 |
Selling, general and administrative | 232,911 | 170,270 | 134,615 |
Management contract buyout | 1,428 | ||
Intangible amortization | 130,718 | 90,381 | 64,367 |
Non-cash changes in fair value of estimated contingent consideration | 38,797 | 6,638 | 22,294 |
Depreciation and other amortization | 10,675 | 8,370 | 6,686 |
Total operating expenses | 1,150,695 | 866,446 | 657,134 |
INCOME FROM OPERATIONS | 67,646 | 44,434 | 5,753 |
OTHER INCOME (EXPENSE): | |||
Interest income | 1,164 | 1,266 | 222 |
Interest expense | (58,291) | (56,448) | (41,861) |
Amortization of debt financing costs | (3,452) | (3,498) | (4,084) |
Gain on sale of investment | 5,509 | ||
Loss on extinguishment of borrowings | (21,071) | (8,106) | |
Other (expense) income—net | (1,049) | (2,350) | (3,191) |
Income from equity method investments | 755 | 521 | 1,407 |
Impairment of equity method investment | (11,749) | ||
Total other expense-net | (72,622) | (76,071) | (55,613) |
LOSS BEFORE INCOME TAX | (4,976) | (31,637) | (49,860) |
INCOME TAX EXPENSE (BENEFIT) | 7,049 | 9,450 | (1,501) |
NET LOSS | (12,025) | (41,087) | (48,359) |
Non-controlling interest | (847) | 40,497 | |
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ (12,872) | (590) | |
Weighted average shares of Class A common stock outstanding: | |||
Diluted | 46,792,389 | ||
Wealth management fees | |||
REVENUES: | |||
Total revenues | $ 1,149,655 | 853,033 | 617,124 |
Other | |||
REVENUES: | |||
Total revenues | $ 68,686 | $ 57,847 | $ 45,763 |
Class A common stock | |||
Income (loss) per share of Class A common stock: | |||
Basic | $ (0.28) | $ (0.01) | |
Diluted | $ (0.28) | $ (0.01) | |
Weighted average shares of Class A common stock outstanding: | |||
Basic | 46,792,389 | 43,122,782 | |
Diluted | 46,792,389 | 43,122,782 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive loss - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Comprehensive Loss | |||
Net loss | $ (12,025) | $ (41,087) | $ (48,359) |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation adjustments | 768 | (4,509) | 2,470 |
Comprehensive loss | (11,257) | (45,596) | $ (45,889) |
Less: Comprehensive (income) loss attributable to noncontrolling interest | (1,090) | 43,182 | |
Comprehensive loss attributable to common shareholders | $ (12,347) | $ (2,414) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net loss | $ (12,025) | $ (41,087) | $ (48,359) |
Adjustments to reconcile net loss to net cash provided by operating activities—net of effect of acquisitions: | |||
Intangible amortization | 130,718 | 90,381 | 64,367 |
Depreciation and other amortization | 10,675 | 8,370 | 6,686 |
Amortization of debt financing costs | 3,452 | 3,498 | 4,084 |
Non-cash equity compensation expense | 18,329 | 44,468 | 34,879 |
Non-cash changes in fair value of estimated contingent consideration | 38,797 | 6,638 | 22,294 |
Income from equity method investments | (755) | (521) | (1,407) |
Impairment of equity method investment | 11,749 | ||
Distributions received from equity method investments | 751 | 1,118 | 984 |
Deferred taxes and other non-cash items | 3,555 | 6,655 | (3,960) |
Loss on extinguishment of borrowings | 19,001 | 8,106 | |
Changes in cash resulting from changes in operating assets and liabilities: | |||
Accounts receivable | (29,562) | (23,747) | (30,209) |
Prepaid expenses and other assets | 3,796 | (10,401) | 9,889 |
Accounts payable | (1,172) | 2,341 | (1,210) |
Accrued expenses | 8,276 | 4,302 | (4,671) |
Due to affiliates | 18,989 | 6,706 | 9,700 |
Other liabilities | (10,487) | (10,322) | (3,686) |
Deferred revenue | (312) | (1,481) | 1,603 |
Net cash provided by operating activities | 194,774 | 105,919 | 69,090 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Cash paid for acquisitions and contingent consideration—net of cash acquired | (532,513) | (413,044) | (365,698) |
Purchase of fixed assets | (25,472) | (9,106) | (10,518) |
Investment and other | 1,530 | (24,300) | (500) |
Net cash used in investing activities | (556,455) | (446,450) | (376,716) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Borrowings under credit facilities | 969,125 | 300,000 | 1,181,936 |
Repayments of borrowings under credit facilities | (529,796) | (461,026) | (641,987) |
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 redemption, net | (61,539) | (795,894) | |
Contingent consideration paid | (22,040) | (12,554) | (6,224) |
Payments of debt financing costs | (3,743) | (4,612) | (32,612) |
Proceeds from exercise of stock options | 838 | ||
Payments on finance lease obligations | (176) | (198) | (271) |
Distributions for unitholders | (20,641) | (2,744) | (2,754) |
Net cash provided by financing activities | 393,567 | 322,487 | 342,403 |
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 79 | (198) | 170 |
CHANGE IN CASH AND CASH EQUIVALENTS | 31,965 | (18,242) | 34,947 |
CASH AND CASH EQUIVALENTS: | |||
Beginning of period | 33,213 | 51,455 | 16,508 |
End of period | $ 65,178 | $ 33,213 | $ 51,455 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Members' Deficit/Shareholders' Equity - USD ($) $ in Thousands | Total Members’ Deficit/ Shareholders’ Equity | Common StockClass A common stock | Common StockClass B common stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Common Units | Non-controlling Interest | Total |
Beginning balance at Dec. 31, 2016 | $ (261,883) | $ (405,526) | $ (10,739) | $ 154,382 | $ (261,883) | ||||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | (48,359) | (48,359) | (48,359) | ||||||
Issuance of restricted common units in connection with acquisitions and contingent consideration | 27,125 | 27,125 | 27,125 | ||||||
Accretion of senior preferred units return | (6,249) | $ (788) | (5,461) | (6,249) | |||||
Accretion of senior preferred units to estimated redemption value | (17,463) | (2,207) | (15,256) | (17,463) | |||||
Accretion of junior preferred units return | (672) | (85) | (587) | (672) | |||||
Accretion of junior preferred units to estimated redemption value | (8,452) | (1,068) | (7,384) | (8,452) | |||||
Issuance of convertible preferred units, redemption, retirement and recapitalization of units, net | (497,899) | (320,739) | (177,160) | (497,899) | |||||
Non-cash equity compensation expense | (34,879) | (34,879) | (34,879) | ||||||
Currency translation adjustment - net of tax | 2,470 | 2,470 | 2,470 | ||||||
Distributions for unitholders | (2,158) | (2,158) | (2,158) | ||||||
Ending balance at Dec. 31, 2017 | (778,661) | 30,731 | (805,470) | (8,269) | 4,347 | (778,661) | |||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | (47,821) | (47,821) | (47,821) | ||||||
Issuance of restricted common units in connection with acquisitions and contingent consideration | 40,389 | 40,389 | 40,389 | ||||||
Non-cash equity compensation expense | 24,987 | 24,987 | 24,987 | ||||||
Currency translation adjustment - net of tax | (1,398) | (1,398) | (1,398) | ||||||
Retirement of treasury stock | (2,909) | (2,067) | (842) | (2,909) | |||||
Distributions for unitholders | (2,224) | (2,224) | (2,224) | ||||||
Reorganization of equity structure | 550,445 | $ 239 | $ 225 | (271,307) | 855,515 | 9,667 | (43,894) | $ 258,670 | 809,115 |
Reorganization of equity structure (in shares) | 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 | (41,087) | ||||||||
Currency translation adjustment - net of tax | (4,509) | ||||||||
Ending balance at Dec. 31, 2018 | 469,662 | $ 462 | $ 228 | 471,386 | (590) | (1,824) | 342,858 | 812,520 | |
Ending Balance (in shares) at Dec. 31, 2018 | 46,265,903 | 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 | (590) | (590) | 7,324 | 6,734 | |||||
Change in non-controlling interest allocation | (56,222) | (56,222) | 78,151 | 21,929 | |||||
Non-cash equity compensation expense | 5,412 | 5,412 | 5,412 | ||||||
Currency translation adjustment - net of tax | (1,824) | (1,824) | (1,287) | (3,111) | |||||
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 acquisitions and contingent consideration | 112,464 | $ 37 | $ 3 | 112,424 | 112,464 | ||||
Issuance of common stock in connection with acquisitions and contingent consideration (in shares) | 3,736,252 | 323,607 | |||||||
Adjustment of deferred tax assets, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | 62,454 | 62,454 | 62,454 | ||||||
Ending balance at Dec. 31, 2018 | 469,662 | $ 462 | $ 228 | 471,386 | (590) | (1,824) | 342,858 | 812,520 | |
Ending Balance (in shares) at Dec. 31, 2018 | 46,265,903 | 22,823,272 | |||||||
Increase (Decrease) in MEMBERS' DEFICIT | |||||||||
Net loss | (12,872) | (12,872) | 847 | (12,025) | |||||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights | 22,280 | $ 8 | $ (7) | 22,279 | 22,280 | ||||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights (in shares) | 747,523 | (747,523) | |||||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights | 11,967 | $ 4 | 11,963 | 11,967 | |||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights (in shares) | 394,814 | ||||||||
Forfeiture of unvested Class A common stock | (412) | (412) | (412) | ||||||
Forfeiture of unvested Class A common stock | (12,500) | ||||||||
Exercise of stock options | 838 | 838 | 838 | ||||||
Exercise of stock options (in shares) | 25,575 | ||||||||
Change in non-controlling interest allocation | 10,895 | 10,895 | 24,098 | 34,993 | |||||
Non-cash equity compensation expense | 3,490 | 3,490 | 3,490 | ||||||
Currency translation adjustment - net of tax | 525 | 525 | 243 | 768 | |||||
Adjustment of deferred tax assets, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | (463) | (463) | (463) | ||||||
Ending balance at Dec. 31, 2019 | $ 484,120 | $ 474 | $ 221 | $ 498,186 | $ (13,462) | $ (1,299) | $ 319,850 | $ 803,970 | |
Ending Balance (in shares) at Dec. 31, 2019 | 47,421,315 | 22,075,749 |
GENERAL
GENERAL | 12 Months Ended |
Dec. 31, 2019 | |
GENERAL | |
GENERAL | 1. GENERAL Organization Focus Financial Partners Inc. (“Focus Inc.”) was formed as a Delaware corporation on July 29, 2015 for the sole purpose of completing its initial public offering (the "IPO") and related reorganization transactions (the "Reorganization Transactions") in order to carry on the business of Focus Financial Partners, LLC and its subsidiaries (“Focus LLC”). On July 30, 2018, Focus Inc. became the managing member of Focus LLC and operates and controls the businesses and affairs of Focus LLC. 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, as amended (the “Operating Agreement”), effective on July 30, 2018. The consolidated financial statements for periods prior to July 30, 2018 reflect the historical results of operations and financial position of Focus LLC. The consolidated financial statements for periods after July 30, 2018 reflect the results of operations and financial position of Focus Financial Partners Inc. and its subsidiaries (the “Company”). Business The Company is in the business of acquiring and overseeing independent fiduciary wealth management and related businesses. The Company typically acquires 100% of the net assets of the wealth management businesses on terms that are generally consistent for each acquisition. To determine the acquisition price, the Company first estimates the operating cash flow of the business to be acquired based on current and projected levels of revenue and expense. For this purpose, the Company defines operating cash flow as cash revenue of the business, less cash expenses, other than compensation and benefits to the selling entrepreneurs or individuals who typically become principals of the management entities discussed below. The Company refers to the estimated operating cash flow earnings before partner compensation as target earnings (“Target Earnings”). The acquisition price is a multiple of a portion of the Target Earnings, referred to as base earnings (“Base Earnings”). At the date of each of the respective acquisitions, the Company typically enters into a management agreement (“Management Agreement”) with a management company (“Management Company”) that is owned substantially by the selling principals of the acquired businesses. The Management Company earns management fees to manage the daily operations of the acquired business. The terms of the Management Agreements are generally six years with automatic renewals for consecutive one-year terms, unless terminated by either the Management Company or the Company. Under the Management Agreement, the Management Company is entitled to management fees typically consisting of all future earnings of the acquired business in excess of the Base Earnings up to Target Earnings, plus a percentage of any earnings in excess of Target Earnings. The Company, through its respective operating subsidiary, retains a cumulative preferred position in the Base Earnings. To the extent earnings of an acquired business in any year are less than the Base Earnings, in the following year the Company, through its respective operating subsidiary, is entitled to receive the Base Earnings together with the prior years’ shortfall before any management fees are earned by the Management Company. Since each Management Company is neither acquired nor consolidated, management fees are included in the Company’s consolidated statements of operations as operating expenses. Estimated management fees due are included in due to affiliates in the accompanying consolidated balance sheets. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates Focus LLC and its subsidiaries' financial statements and records the interests in Focus LLC consisting of common units and the common unit equivalent of incentive units of Focus LLC that the Company does not own as non-controlling interests, see Note 4. 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. Use of Estimates The preparation of the 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 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 shareholders 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 shareholders 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 shareholders for dilutive potential common shares. Revenue Recognition Wealth Management Fees The Company 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 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 and outsourced services revenue, in accordance with the same five criteria above, are recognized over the period in which services are provided. Commissions and distribution fees are recognized when earned. 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 legal entities that generate the revenues and therefore may not be reflective of the geography in which clients are located for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 Domestic revenue $ 643,077 $ 889,166 $ 1,170,169 International revenue 19,810 21,714 48,172 Total revenue $ 662,887 $ 910,880 $ 1,218,341 International revenue consists of revenue generated by partner firm legal entities in the United Kingdom, Canada and Australia. 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. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Accounts Receivable Accounts receivable are stated at their net realizable value. Allowances for uncollectible accounts are maintained for estimated losses resulting from the inability of customers to make required payments. In determining these estimates, historical write-offs, the aging of the receivables and other factors, such as overall economic conditions, are considered. Fixed Assets Fixed assets are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives for fixed assets, primarily consisting of computers, equipment, and furniture and fixtures, are generally between three to seven years. Leasehold improvements are amortized over the shorter of their estimated economic useful lives or the terms of the leases. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. The Company capitalizes costs related to computer software obtained or developed for internal use. Costs incurred in the application development phase are capitalized and amortized over their useful lives, which are generally three to five years. Debt Financing Costs Direct costs incurred with obtaining debt financing are capitalized or recorded as a reduction of the underlying debt. The costs are amortized over the respective term of the underlying debt and are included in amortization of debt financing costs in the accompanying consolidated statements of operations. Business Acquisitions Business acquisitions are accounted for in accordance with ASC Topic 805: Business Combinations . Business acquisitions are accounted for by allocating the purchase price consideration to the fair value of assets acquired and liabilities assumed. Goodwill is recognized as the excess of the purchase price consideration over the fair value of net assets of the business acquired. All transaction costs are expensed as incurred. The Company has incorporated contingent consideration, or earn out provisions, into the structure of its business acquisitions. These arrangements may result in the payment of additional purchase price consideration to the sellers based on the growth of certain financial thresholds for periods following the closing of the respective acquisition. The additional purchase price consideration is payable in the form of cash and, in some cases, equity. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in exchange for the acquired business. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying consolidated statements of operations. The results of the acquired businesses have been included in the Company’s consolidated financial statements from the respective dates of acquisition. Equity Method Investments The Company applies the equity method of accounting to investments where the Company has the ability to exercise significant influence over operating and financial matters. Equity method investments are periodically reviewed for impairment. The Company’s equity method investments are included in prepaid expenses and other assets in the consolidated balance sheets. Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is deemed to have an indefinite useful life and is not amortized. Intangible and other long-lived assets are amortized over their respective estimated useful lives. The Company has no indefinite-lived intangible assets. Goodwill is tested annually for impairment as of October 1, or more frequently if events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A two-step impairment test is performed on goodwill. In the first step, the Company compares the fair value of the reporting unit to the carrying value of the net assets of the reporting unit. The fair value of the reporting unit is determined using a market approach. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit in the first step, no further testing is performed. If the carrying value exceeds the fair value of the reporting unit in the first step, then the Company performs the second step of the impairment test to determine the implied fair value of goodwill and compares the implied fair value of goodwill to the carrying value of goodwill to determine the extent of the impairment, if any. In March 2018, the Company modified the manner in which it assesses goodwill for impairment. The Company determined for the purpose of its annual goodwill impairment test that its reporting units should be aggregated into one reporting unit. The Company’s determination was based on the Company’s reporting units having similar economic and business characteristics, and the services performed by the reporting units are wealth management related and that the reporting units are subject to a similar regulatory framework. The Company believes that the resulting change in accounting principle related to the reporting unit utilized in the annual goodwill impairment test did not delay, accelerate or avoid an impairment charge. The Company determined that the change in accounting principle related to the reporting unit used in the Company’s annual impairment test is appropriate based on the nature of the Company’s business. The change would not have had an impact on the results of the Company’s impairment test for 2017. Intangible assets and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the asset might be impaired or that the estimated useful life should be changed prospectively. If impairment indicators are present, the recoverability of these assets is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined using a discounted cash flow approach. Fair Value of Financial Instruments The carrying amounts of substantially all of the Company’s financial assets and liabilities are considered to approximate their fair values because of their short-term nature. The carrying amount of revolver borrowings under the Credit Facility (as defined below) approximates fair value, as the debt bears interest at selected short-term variable market rates. The Company measures the implied fair value of its First Lien Term Loan (as defined below) using trading levels obtained from a third-party service provider; accordingly, these borrowings are classified within Level 2 of the valuation hierarchy. See Note 8 for further information regarding the Company’s fair value measurements. Income Taxes In connection with the IPO and Reorganization Transactions, Focus Inc. became a holding company whose most significant asset is a membership interest in Focus LLC, and, as a result, Focus Inc. became subject to U.S. federal, state and local income taxes on Focus Inc.'s allocable portion of taxable income from Focus LLC. Focus LLC is treated as a partnership for U.S. federal income tax purposes. Accordingly, Focus LLC is generally not and has not been subject to U.S. federal and certain state income taxes at the entity level, although it has been subject to the New York City Unincorporated Business Tax and certain of its subsidiaries have been subject to U.S. federal and certain state and local or foreign income taxes. Instead, for U.S. federal and certain state income tax purposes, the income, deductions, losses and credits of Focus LLC are passed through to its unitholders, which after the IPO includes Focus Inc. Focus LLC has historically made tax distribution payments in accordance with its Third Amended and Restated Operating Agreement, which was replaced by the Operating Agreement on July 30, 2018, and Focus Inc. intends to cause Focus LLC to continue to make tax distribution payments, to the extent of available cash, in accordance with the Operating Agreement . Focus Inc. files income tax returns with the U.S. federal government as well as various state and local jurisdictions. The asset and liability method is applied for deferred income taxes. Deferred tax assets and liabilities are recognized on a net basis for each tax paying component 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 were recorded at December 31, 2018 and 2019. Segment Reporting Management has determined that the Company operates in one operating segment, as a wealth management focused organization, which is consistent with its structure and how the Company manages the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and the Company's 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. Translation of Non-U.S. Currency Amounts Assets and liabilities of non-U.S. subsidiaries and equity method investments that have a foreign currency as their functional currency are re-measured to U.S. dollars at year-end exchange rates, and revenues and expenses are re-measured at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in other (expense) income—net in the consolidated statements of operations. Consolidation Considerations ASC Topic 810, Consolidations , requires an entity to perform a qualitative analysis to determine whether its variable interests give it a controlling financial interest in a variable interest entity (“VIE”). Under the standard, an enterprise has a controlling financial interest when it has (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. An enterprise that holds a controlling financial interest is deemed to be the primary beneficiary and is required to consolidate the VIE. The Company’s subsidiaries have Management Agreements with the respective Management Company, which causes these Company subsidiaries to be VIEs. The Company has assessed whether or not it is the primary beneficiary for these subsidiaries and has concluded that it is the primary beneficiary. Accordingly, the results of these subsidiaries have been consolidated. Certain of the Company’s subsidiaries have variable interests in certain investment funds that are deemed voting interest entities. Due to substantive kick-out rights possessed by the limited partners of these funds, the Company does not consolidate the investment funds. From time to time, the Company enters into option agreements with wealth management businesses (the “Optionee”). In exchange for payment of an option premium, the option agreement allows the Company, at its sole discretion, to acquire the Optionee at a predetermined time and at a predetermined purchase price formula. If the Company chooses to exercise its option to acquire the Optionee, the acquisition and the corresponding Management Agreement would be executed in accordance with the Company’s typical acquisition structure as discussed in Note 1. If the Company chooses not to exercise the option, the option premium would be recorded as a loss on investment in the consolidated statements of operations in the period that the option expires. Option premiums paid by the Company of $4,300 and $0 are included in prepaid expenses and other assets in the consolidated balance sheets as of December 31, 2018 and 2019, respectively. The Company has determined that the respective option agreements with the Optionees qualify the Optionees as VIEs. The Company has determined that it is not the primary beneficiary of the Optionees and does not consolidate the results of the Optionees. Stock Based Compensation Costs Compensation cost for unit and stock based awards is measured based on the fair value of the unit and stock based awards determined by the Black-Scholes option pricing model or the Monte Carlo Simulation Model on the date that the unit and stock based awards are granted or modified, and is adjusted for the estimated number of awards that are expected to be forfeited. Compensation cost for unvested Class A common stock and restricted stock units are measured based on the market value of the Company’s Class A common stock on the date that the awards are granted and is adjusted for the estimated number of awards that are expected to be forfeited. The compensation cost is recognized on a straight-line basis over the requisite service period. Non-cash equity compensation expense, associated with employees and non-employees, including principals in the management companies, is included in compensation and related expenses in the consolidated statements of operations. The Company estimates forfeitures at the time of the respective grant and revises those estimates in subsequent periods if actual forfeitures differ materially from those estimates. The Company uses historical data to estimate forfeitures and records non-cash equity compensation expense only for those awards that are expected to vest. Leases The Company leases office space in various locations under noncancelable lease agreements. Many of these lease agreements provide for tenant improvement allowances, rent increases, and/or rent-free periods. Rent expense is recognized on a straight-line basis commencing with the possession date of the property, which is typically the earlier of the lease commencement date or the date when the Company takes possession of the property. Rent expense is included in selling, general and administrative expenses in the consolidated statements of operations. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) .” ASU No. 2016-02, as amended, requires lessees to put most leases on their balance sheets but recognize the expenses in their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right of use asset for the right to use the underlying asset for the lease term. ASU No. 2016-02 was effective for the Company for interim and annual periods beginning January 1, 2019. The Company adopted ASU No. 2016-02 effective January 1, 2019 using a modified retrospective method and therefore has not restated comparative periods. The Company elected to use the package of practical expedients to assist in the transition, which includes not reassessing the identification and classification of leases, among other things. Based on the portfolio of leases as of January 1, 2019, the Company recognized approximately $144,000 of lease liabilities and $134,000 of right of use assets (which reflects the reclassification of previous deferred rent balances into the right of use asset as required under the transition guidance) on the balance sheet, primarily related to operating leases for real estate. There was no material impact to the consolidated statement of operations and comprehensive loss or consolidated statement of cash flows as a result of adoption of this new guidance. Refer to Note 13 for further information regarding leases. Recent Accounting Pronouncements 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 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 was effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU No. 2018-07 on January 1, 2019 did not have a material effect on the Company's consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, “ Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU No. 2019-12 on the Company's consolidated financial statements. |
IPO, REORGANIZATION TRANSACTION
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS | 12 Months Ended |
Dec. 31, 2019 | |
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 (the “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 non-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 non-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 non-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 were converted into common units on a one-for-one basis. The common units held by certain affiliates of the Company’s private equity investors were distributed to their owners, some of which were entities treated as corporations for U.S. federal income tax purposes, which are referred to as “blockers.” Each blocker then merged with a separate newly formed subsidiary of Focus Inc., with the blocker as the surviving entity. Each owner of each blocker received consideration in the merger equal to one share of Class A common stock for each common unit held. Certain of the common units not held by blockers 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 was used by Focus LLC for acquisitions and general corporate business purposes. |
NON-CONTROLLING INTERESTS AND L
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2019 | |
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 shareholders 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 December 31, 2018 and 2019: 2018 2019 Focus LLC common units held by continuing owners 22,823,272 22,075,749 Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners(1) 5,139,653 5,731,995 Total common units and common unit equivalents attributable to non-controlling interest 27,962,925 27,807,744 Total common units and common unit equivalents of incentive units outstanding 74,228,828 75,229,059 Non-controlling interest allocation 37.7 % 37.0 % Company’s interest in Focus LLC 62.3 % 63.0 % (1) Focus LLC common units issuable upon conversion of 18,597,474 and 19,754,450 (see Note 10) vested and unvested Focus LLC incentive units outstanding as of December 31, 2018 and 2019, respectively, were 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 shareholders for the years ended December 31, 2018 and 2019: 2018 2019 Net loss $ (41,087) $ (12,025) Net loss attributable to members of Focus LLC (for the respective period through the IPO) 47,821 — Non-controlling interest subsequent to the IPO (7,324) (847) Net loss attributable to common shareholders $ (590) $ (12,872) The calculation of basic and diluted loss per share is described below: Basic loss per share is calculated utilizing net loss attributable to common shareholders divided by the weighted average number of shares of Class A common stock outstanding during the same period: Period July 30, 2018 through Year Ended December 31, 2018 December 31, 2019 Basic loss per share: Net loss attributable to common shareholders $ (590) $ (12,872) Weighted average shares of Class A common stock outstanding 43,122,782 46,792,389 Basic loss per share $ (0.01) $ (0.28) Diluted loss per share is calculated utilizing net loss attributable to common shareholders 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, unvested Class A common stock and restricted stock units as calculated using the treasury stock method. Period July 30, 2018 through Year Ended December 31, 2018 December 31, 2019 Diluted loss per share: Net loss attributable to common shareholders $ (590) $ (12,872) Weighted average shares of Class A common stock outstanding 43,122,782 46,792,389 Effect of dilutive stock options — — Effect of dilutive unvested Class A common stock and restricted stock units — — Total 43,122,782 46,792,389 Diluted loss per share $ (0.01) $ (0.28) Diluted loss per share for the period July 30, 2018 through December 31, 2018 excludes incremental shares of 52,555 related to time-based stock options and incremental shares of 49,994 related to unvested Class A common stock, since the effect would be antidilutive. Diluted loss per share for the period July 30, 2018 through December 31, 2018 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 December 31, 2018. Diluted loss per share for the year ended December 31, 2019 excludes incremental shares of 373 related to time-based stock options and incremental shares of 20,055 related to unvested Class A common stock and restricted stock units, since the effect would be antidilutive. Diluted loss per share for the year ended December 31, 2019 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 December 31, 2019. Focus LLC common and incentive units may be exchanged for Class A common stock, subject to certain limitations (see Note 10). Such exchange is not reflected in diluted loss per share as the assumed exchange is not dilutive. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2019 | |
ACQUISITIONS | |
ACQUISITIONS | 5. ACQUISITIONS Business Acquisitions The purchase price associated with business acquisitions and the allocation thereof during the years ended December 31, 2017, 2018 and 2019, is summarized as follows: 2017 2018 2019 Number of business acquisitions closed 23 19 31 Consideration: Cash and option premium $ 362,524 $ 408,478 $ 507,498 Cash due subsequent to closing at net present value and estimated working capital adjustment 188 39,134 4,341 Fair market value of Focus LLC common units issued 64,728 51,456 — Fair market value of Class A common stock issued — 112,461 — Fair market value of estimated contingent consideration 37,551 42,086 82,781 Total consideration $ 464,991 $ 653,615 $ 594,620 Allocation of purchase price: Total tangible assets $ 6,095 $ 14,817 $ 50,761 Total liabilities assumed (12,273) (34,411) (53,394) Customer relationships 244,289 294,785 349,447 Management contracts 27,890 30,080 17,284 Goodwill 198,546 347,496 229,799 Other acquired intangibles 444 848 723 Total allocated consideration $ 464,991 $ 653,615 $ 594,620 Management believes approximately $508,547 of tax goodwill and intangibles related to 2019 business acquisitions will be deductible for tax purposes. Additional tax goodwill may be deductible when estimated contingent consideration is earned and paid. The accompanying consolidated statement of operations for the year ended December 31, 2019 includes revenue and income from operations for business acquisitions that are new subsidiary partner firms from the date they were acquired of $85,025 and $7,999, respectively. Asset Acquisitions The Company also separately purchases 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 . The Company completed two, six and three asset acquisitions during the years ended December 31, 2017, 2018 and 2019, respectively. Total purchase consideration for asset acquisitions during the year ended December 31, 2017 was $0. Total purchase consideration, inclusive of transaction costs, for asset acquisitions during the year ended December 31, 2018 was $4,577 in cash and installment payments. Total purchase consideration, inclusive of transaction costs, for asset acquisitions during the year ended December 31, 2019 was $850 in cash. Certain asset acquisitions include contingent consideration provisions. The Company records the contingent consideration as additional purchase consideration when the outcome of the contingency is determinable. During the years ended December 31, 2017, 2018 and 2019, the Company paid $7,713, $2,007 and $3,452, respectively, of additional purchase price consideration related to asset acquisitions. Intangible assets acquired in asset acquisitions for the years ended December 31, 2017, 2018 and 2019 were as follows: 2017 2018 2019 Customer relationships $ — $ 4,352 $ 808 Management contracts — — 12 Other acquired intangibles — 225 30 Total $ — $ 4,577 $ 850 The weighted-average useful life of intangibles acquired during the years ended December 31, 2017, 2018 and 2019 through business acquisitions and asset acquisitions are as follows: 2017 2018 2019 Management contracts 19 20 18 Customer relationships 10 10 9 Other acquired intangibles 5 5 5 Weighted-average useful life of all intangibles acquired 11 11 9 In June 2018, the Company purchased a minority equity interest in a technology firm in the United States for approximately $20,000 in cash that is accounted for using the cost method of accounting. This cost method investment is included in prepaid expenses and other assets in the consolidated balance sheet as of December 31, 2018 and 2019. From January 1, 2020, to February 25, 2020, the Company completed wealth management business acquisitions for cash consideration of $46,041, plus contingent consideration. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
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 years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 Balance beginning of period: Goodwill $ 339,129 $ 538,113 $ 883,119 Cumulative impairment losses (22,624) (22,624) (22,624) 316,505 515,489 860,495 Goodwill acquired 198,546 347,496 229,799 Other 438 (2,490) (63) 198,984 345,006 229,736 Balance end of period: Goodwill 538,113 883,119 1,112,855 Cumulative impairment losses (22,624) (22,624) (22,624) $ 515,489 $ 860,495 $ 1,090,231 There were no goodwill impairment losses during the years ended December 31, 2017, 2018 and 2019. The following table summarizes the amortizing acquired intangible assets at December 31, 2018: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 1,008,186 $ (349,125) $ 659,061 Management contracts 133,112 (31,911) 101,201 Other acquired intangibles 4,402 (2,469) 1,933 Total $ 1,145,700 $ (383,505) $ 762,195 The following table summarizes the amortizing acquired intangible assets at December 31, 2019: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 1,362,104 $ (471,361) $ 890,743 Management contracts 150,464 (39,888) 110,576 Other acquired intangibles 5,157 (3,020) 2,137 Total $ 1,517,725 $ (514,269) $ 1,003,456 Management contracts and other acquired intangibles are amortized on a straight-line basis over their estimated useful lives ranging from 2 to 20 years. Customer relationships are amortized on a straight-line basis over their estimated useful lives of 4 to 10 years. Estimated amortization expense for each of the next five years is as follows: Years Ending December 31, Amount 2020 $ 139,474 2021 136,573 2022 131,532 2023 123,734 2024 111,253 |
FIXED ASSETS
FIXED ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
FIXED ASSETS | |
FIXED ASSETS | 7. FIXED ASSETS Fixed assets consist of the following at December 31, 2018 and 2019: 2018 2019 Computers, software development and equipment $ 31,172 $ 34,462 Leasehold improvements 20,710 36,699 Furniture and fixtures 12,405 16,805 Subtotal 64,287 87,966 Less accumulated depreciation and amortization (39,507) (46,332) Total $ 24,780 $ 41,634 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2019 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 8. 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) based on Level 2 inputs is as follows as of December 31, 2018 and 2019: December 31, 2018 December 31, 2019 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan $ 798,985 $ 773,018 $ 1,139,188 $ 1,146,307 For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on unobservable ( Level 3) inputs. The following table represents changes in the fair value of estimated contingent consideration for business acquisitions for the years ended December 31, 2018 and 2019: 2018 2019 Balance at January 1, $ 76,677 $ 98,905 Additions to estimated contingent consideration 42,086 82,781 Payments of contingent consideration (26,237) (36,862) Non-cash changes in fair value of estimated contingent consideration 6,638 38,797 Other (259) (53) Balance at December 31, $ 98,905 $ 183,568 Estimated contingent consideration is included in other liabilities in the accompanying consolidated balance sheets. During the year ended December 31, 2018, the Company paid $23,816 in cash and issued $2,421 of restricted common units as contingent consideration associated with business acquisitions. During the year ended December 31, 2019, the Company paid $36,862 in cash as contingent consideration associated with business acquisitions. In determining fair value of the estimated contingent consideration, the acquired business’s 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. In addition, discount rates are established based on the cost of debt and the cost of equity. The Company uses the Monte Carlo Simulation Model to determine the fair value of the Company’s estimated contingent consideration. The significant unobservable inputs used in the fair value measurement of the Company’s estimated contingent consideration is the forecasted growth rates over the measurement period and discount rates. Significant increases or decreases in the Company’s forecasted growth rates over the measurement period or discount rates would result in a higher or lower fair value measurement. Inputs used in the fair value measurement of estimated contingent consideration at December 31, 2018 and 2019 are summarized below: Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2018 Techniques Inputs Ranges $ 98,905 Monte Carlo Simulation Model Forecasted growth rates (16.2)% - 18.7 % Discount rates 12% - 18 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2019 Techniques Inputs Ranges $ 183,568 Monte Carlo Simulation Model Forecasted growth rates (10.7)% - 51.1 % Discount rates 11% - 17 % |
CREDIT FACILITY
CREDIT FACILITY | 12 Months Ended |
Dec. 31, 2019 | |
CREDIT FACILITY | |
CREDIT FACILITY | 9. CREDIT FACILITY In July 2019, Focus LLC expanded its first lien term loan (the “First Lien Term Loan”) by $350,000 and incurred $3,743 in debt financing costs. The debt was issued at a discount of 0.25% or $875 which is being amortized to interest expense over the remaining term of the First Lien Term Loan. As of December 31, 2019, Focus LLC’s credit facility (the “Credit Facility”) consisted of a $1,153,000 First Lien Term Loan and a $650,000 first lien revolving credit facility (the “First Lien Revolver”). The First Lien Term Loan has a maturity date of July 2024 and requires quarterly installment repayments of $2,891, as amended in July 2019. As of December 31, 2019, the First Lien Term Loan bore interest (at Focus LLC’s option) at: (i) the London InterBank Offered Rate (“LIBOR”) plus a margin of 2.50% or (ii) the lender’s Base Rate (as defined in the Credit Facility) plus a margin of 1.50%. In January 2020, Focus LLC amended its First Lien Term Loan to reduce its interest rate to LIBOR plus a margin of 2.00% or the lender’s Base Rate plus a margin of 1.00%. The First Lien Revolver has a maturity date of July 2023. 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 Revolver 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. 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. Focus LLC is required to maintain a First Lien Leverage Ratio (as defined in the Credit Facility) of not more than 6.25:1.00 as of the last day of each fiscal quarter. At December 31, 2019, Focus LLC's First Lien Leverage Ratio was 4.00:1.00, 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). Consolidated EBITDA for purposes of the Credit Facility was $303,319 at December 31, 2019. Focus LLC is also subject on an annual basis to contingent principal payments based on an excess cash flow calculation (as defined in the Credit Facility) for any fiscal year if the First Lien Leverage Ratio exceeds 3.75:1.00. No contingent principal payments were required to be made in 2019. Based on the excess cash flow calculation for the year ended December 31, 2019, no contingent principal payments are required to be made in 2020. The Company defers and amortizes its debt financing costs over the respective terms of the First Lien Term Loan and First Lien Revolver. The debt financing costs related to the First Lien Term Loan are recorded as a reduction of the carrying amount of the First Lien Term Loan in the consolidated balance sheets. The debt financing costs related to the First Lien Revolver are recorded in debt financing costs-net in the consolidated balance sheets. The following is a reconciliation of principal amounts outstanding under the Credit Facility to borrowings under the Credit Facility recorded in the consolidated balance sheets at December 31, 2018 and 2019: 2018 2019 First Lien Term Loan $ 798,985 $ 1,139,188 First Lien Revolver 40,000 140,000 Unamortized debt financing costs (2,403) (5,389) Unamortized discount — (800) Total $ 836,582 $ 1,272,999 At December 31, 2018 and 2019, unamortized debt financing costs associated with the First Lien Revolver of $12,340 and $9,645, respectively, were recorded in debt financing costs-net in the consolidated balance sheets. Weighted‑average interest rates for borrowings were approximately 6% for the year ended December 31, 2018 and 5% for the year ended December 31, 2019. As of December 31, 2018 and 2019, the First Lien Revolver available unused commitment line was $605,793 and $502,962 respectively. As of December 31, 2018 and 2019, Focus LLC was contingently obligated for letters of credit in the amount of $4,207 and $7,038, respectively, each bearing interest at an annual rate of approximately 1% and 2%, respectively. In connection with a January 2018 amendment to the First Lien Term Loan to reduce its interest rate and the repayment of the $207,000 Second Lien Term Loan in July 2018, the Company recognized an aggregate loss on extinguishment of borrowings of $21,071 during the year ended December 31, 2018. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
EQUITY | |
EQUITY | 10. EQUITY The following is a summary of the capital stock of the Company: Class A Common Stock Voting Rights Holders of shares of the Company's Class A common stock are entitled to one vote per share held of record on all matters to be voted upon by the shareholders. The holders of Class A common stock do not have cumulative voting rights in the election of directors. Dividend Rights Holders of shares of the Company’s Class A common stock are entitled to ratably receive dividends when and if declared by the Company’s Board of Directors (the “Board”) out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding preferred stock. Liquidation Rights Upon the Company’s liquidation, dissolution, distribution of assets or other winding up, the holders of Class A common stock are entitled to receive ratably the assets available for distribution to the shareholders after payment of liabilities and the liquidation preference of any of the Company's outstanding shares of preferred stock. Other Matters The shares of the Company's Class A common stock have no preemptive or conversion rights and are not subject to further calls or assessment by the Company. There are no redemption or sinking fund provisions applicable to the Class A common stock. All outstanding shares of the Company’s Class A common stock are fully paid and non‑assessable. Class B Common Stock Voting Rights Holders of shares of the Company’s Class B common stock are entitled to one vote per share held of record on all matters to be voted upon by the shareholders. Holders of shares of the Company’s Class A common stock and Class B common stock vote together as a single class on all matters presented to the Company’s shareholders for their vote or approval, except the amendment of certain provisions of the Company’s certificate of incorporation that would alter or change the powers, preferences or special rights of the Class B common stock so as to affect them adversely must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a single class, or as otherwise required by applicable law. Dividend and Liquidation Rights Holders of the Company’s Class B common stock do not have any right to receive dividends, unless the dividend consists of shares of the Company’s Class B common stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class B common stock paid proportionally with respect to each outstanding share of our Class B common stock and a dividend consisting of shares of Class A common stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class A common stock on equivalent terms is simultaneously paid to the holders of Class A common stock. Holders of the Company’s Class B common stock do not have any right to receive a distribution upon a liquidation, dissolution or winding up of the Company. Preferred Stock The Company’s certificate of incorporation authorizes the Board, subject to any limitations prescribed by law, without further shareholder approval, to establish and to issue from time to time one or more classes or series of preferred stock, par value $0.01 per share, covering up to an aggregate of 500,000,000 shares of preferred stock. Each class or series of preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of shareholders. 2018 Omnibus Incentive Plan On July 30, 2018, 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 the 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 valued at $33.00 per share 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. Stock options granted subsequent to the IPO during the year ended December 31, 2018 and 2019 generally vest ratably over a four-year period. Restricted stock units granted during the year ended December 31, 2019 vest ratably over a four-year period. The following table provides information relating to the status of, and changes in, the Company's stock options granted during years ended December 31, 2018 and 2019: Stock Weighted Average Options Exercise Price Outstanding—January 1, 2018 — $ — Granted 1,401,276 31.34 Exercised — — Forfeited — — Outstanding—December 31, 2018 1,401,276 31.34 Vested—December 31, 2018 503,014 33.00 Granted 558,021 28.19 Exercised (25,575) 32.75 Forfeited (100,756) 30.31 Outstanding—December 31, 2019 1,832,966 30.42 Vested—December 31, 2019 698,805 32.01 For the purpose of calculating equity-based compensation expense for time-based stock option awards, the grant date fair value was determined using the Black-Scholes model with the following weighted average assumptions for the years ended December 31, 2018 and 2019: 2018 2019 Expected term 7.3 years 6.2 years Expected stock price volatility 32 % 29 % Risk-free interest rate 2.81 % 1.76 % Expected dividend yield — % — % Weighted average grant date fair value $ 12.56 $ 9.03 For the purpose of calculating equity-based compensation expense for market condition-based awards granted during the year ended December 31, 2018, 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 following table provides information relating to the status of, and changes in, the Company's unvested Class A common stock during the years ended December 31, 2018 and 2019: Weighted Average Unvested Class A Grant Date Common Stock Fair Value Outstanding—January 1, 2018 — $ — Granted 178,608 33.00 Forfeited — — Vested (59,530) 33.00 Outstanding—December 31, 2018 119,078 33.00 Granted — — Forfeited (12,500) 33.00 Vested (53,285) 33.00 Outstanding—December 31, 2019 53,293 33.00 The following table provides information relating to the status of, and changes in, the Company's restricted stock units granted during the year ended December 31, 2019: Weighted Average Grant Date Restricted Stock Units Fair Value Outstanding—January 1, 2019 — $ — Granted 98,061 27.90 Forfeited — — Vested — — Outstanding—December 31, 2019 98,061 27.90 The Company recognized $7,725 of non-cash equity compensation expense in relation to stock options and unvested Class A common stock during the year ended December 31 , 2018 inclusive of a one-time non-cash equity compensation expense of $4,504 in connection with the IPO and Reorganization Transactions. The Company recognized $4,247 of non-cash equity compensation expense in relation to stock options, unvested Class A common stock and restricted stock units during the year ended December 31, 2019. Total unrecognized expense, adjusted for estimated forfeitures, related to unvested stock options at December 31, 2019 was $8,911 and is expected to be recognized over a weighted-average period of 3.2 years. Total unrecognized expense, adjusted for estimated forfeitures, related to unvested Class A common stock at December 31, 2019 was $1,621, and is expected to be recognized over a period of 1.0 year. Total unrecognized expense, adjusted for estimated forfeitures, related to restricted stock units at December 31, 2019 was $2,569, and is expected to be recognized over a period of 4.0 years. Focus LLC Common Units As of December 31, 2019, Focus LLC had 22,075,749 common units that had a corresponding share of the Company's Class B common stock outstanding. Each common unit holder and incentive unitholder of Focus LLC (other than the Company), subject to certain limitations, has the right to cause Focus LLC to redeem all or a portion of their vested common units and vested incentive units (“Exchange Right”). Upon an exercise of an Exchange Right with respect to vested incentive units, such incentive units will first be converted into a number of common units that takes into account the then‑current value of the common units and such incentive units’ aggregate hurdle amount. Upon an exercise of an Exchange Right with respect to vested common units, and immediately after the conversion of vested incentive units into common units, Focus LLC will acquire each tendered common unit for, at its election, (i) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions, or (ii) an equivalent amount of cash. In addition, in connection with any redemption of vested common units (other than common units received upon a conversion of incentive units as described in this paragraph), the corresponding shares of Class B common stock will be cancelled. Alternatively, upon the exercise of any Exchange Right, the Company (instead of Focus LLC) will have the right to acquire each tendered common unit (and corresponding share of Class B common stock, as applicable) from the exchanging unitholder for, at its election, (i) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions, or (ii) an equivalent amount of cash. The Exchange Rights are subject to certain limitations and restrictions intended to ensure that Focus LLC will continue to be treated as a partnership for U.S. federal income tax purposes. In March 2019, the Company issued an aggregate of 403,712 shares of Class A common stock and retired 254,441 shares of Class B common stock and 217,730 incentive units in Focus LLC and acquired 403,712 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. In June 2019, the Company issued an aggregate of 423,985 shares of Class A common stock and retired 260,385 shares of Class B common stock and 248,142 incentive units in Focus LLC and acquired 423,985 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC In September 2019, the Company issued an aggregate of 150,681 shares of Class A common stock and retired 109,781 shares of Class B common stock and 81,673 incentive units in Focus LLC and acquired 150,681 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. In December 2019, the Company issued an aggregate of 163,959 shares of Class A common stock and retired 122,916 shares of Class B common stock and 70,572 incentive units in Focus LLC and acquired 163,959 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. During the year ended December 31, 2017 Focus LLC recorded $263 of non-cash equity compensation expense for certain common units that met time-based vesting criteria. 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. The Company uses the Black-Scholes option-pricing model to determine the fair value of time-based incentive units. The determination of the fair value using the Black-Scholes option-pricing model is affected by the Company’s estimated common unit price, as well as by assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected unit price volatility over the term of the incentive unit, expected term, risk-free interest rates and expected dividend yield. The estimated grant-date fair values of the 2017, 2018 and 2019 time-based incentive unit grants were calculated based on the following weighted-average assumptions: 2017 2018 2019 Expected term 4.0 years 4.0 years 4.0 years Expected unit price volatility 37 % 31 % 29 % Risk-free interest rate 1.79 % 2.53 % 1.64 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 6.64 $ 7.71 $ 7.15 In connection with IPO and Reorganization Transactions described in Note 3, Focus LLC (i) granted 3,845,000 market-based incentive units with a hurdle rate of $33.00 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 with a hurdle rate of $21.00 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 during the year ended December 31, 2018 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 Company has recorded $10,247, $36,743 and $14,082 of non-cash equity compensation expense for incentive units during the years ended December 31, 2017, 2018 and 2019, respectively. Non-cash equity compensation expense for the year ended December 31, 2017 includes non-cash equity compensation expense related to time and performance based incentive units that were vested in connection with the issuance of Convertible Preferred Units as described below. Non-cash equity compensation expense for the year ended December 31, 2018 includes one-time non-cash 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. Total unrecognized expense, adjusted for estimated forfeitures, related to unvested incentive units at December 31, 2019, was $44,693 and is expected to be recognized over a weighted-average period of 3.1 years. The following table provides information relating to the status of, and changes in, Focus LLC incentive units granted during the years ended December 31, 2017, 2018 and 2019: Weighted Average Incentive Units Hurdle Price Outstanding—January 1, 2017 12,234,283 $ 10.97 Granted 6,193,042 21.30 Forfeited (392,375) 16.50 Redeemed (2,805,911) 8.25 Outstanding—December 31, 2017 15,229,039 15.53 Vested—December 31, 2017 8,237,146 11.22 Outstanding—January 1, 2018 15,229,039 15.53 Granted 6,426,715 30.73 Forfeited (311,625) 22.26 Redeemed (2,746,655) 15.79 Outstanding—December 31, 2018 18,597,474 20.63 Vested—December 31, 2018 9,910,399 14.19 Outstanding—January 1, 2019 18,597,474 20.63 Granted 2,106,131 28.01 Exchanged (618,117) 11.24 Forfeited (331,038) 27.80 Outstanding—December 31, 2019 19,754,450 21.59 Vested—December 31, 2019 10,288,263 15.37 Incentive units outstanding and vested at December 31, 2019 were as follows: Number Vested Hurdle Rates Outstanding Units $1.42 175,421 175,421 5.50 97,798 97,798 6.00 56,702 56,702 7.00 482,545 482,545 9.00 1,984,779 1,984,779 11.00 1,148,023 1,148,023 12.00 520,000 520,000 13.00 831,416 831,416 14.00 56,205 56,205 16.00 168,552 168,552 17.00 80,000 72,500 19.00 865,633 859,383 21.00 3,975,500 2,475,500 22.00 1,289,667 657,960 23.00 524,828 262,414 26.26 25,000 — 27.00 29,484 7,371 27.90 2,051,131 — 28.50 1,646,766 411,694 33.00 3,715,000 20,000 36.64 30,000 — 19,754,450 10,288,263 Focus LLC Convertible Preferred Units In July 2017, pursuant to a series of transactions and a tender offer, investors acquired 30,918,280 of the Company’s Convertible Preferred Units at a price of $21 per unit for $649,284. Such funds, together with a portion of the proceeds from the Credit Facility, were used primarily to create cash liquidity for existing holders of the Company’s then outstanding senior preferred units, junior preferred units, common units and incentive units. In connection with the transactions, accrued preferred return of $44,815 related to the senior preferred units and junior preferred units was converted, redeemed or recapitalized and $3,063 of accrued preferred return was paid in cash. The Convertible Preferred Units were recorded at $21 per unit, their fair value on the effective date of the transactions, net of transaction expenses of $2,012. The investors acquired the senior preferred units and junior preferred units from certain of Focus LLC’s existing preferred unitholders for $207,014, net of transaction expenses, and from Focus LLC for $442,270. Through a tender offer, Focus LLC subsequently retired 17,195,412 senior preferred units, 10,332,956 junior preferred units, 6,521,720 common units, and 2,767,911 incentive units. The price per unit paid for senior preferred units, junior preferred units and common units was $21 per unit reduced by an allocation of transaction expenses of $15,500 (borne by the selling unitholders). The price per unit paid for incentive units was $21 per unit reduced by an allocation of transaction expenses of $15,500 (borne by the selling unitholders) and the applicable hurdle rate of the incentive units. The Company accounted for the units acquired in the tender offer as a repurchase and retirement of the respective units with the difference between the cash paid and the carrying amount of the respective units, if any, recorded in accumulated deficit. Senior preferred units of 2,380,952 and junior preferred units of 58,495 that were not tendered by the investors were recapitalized as 2,439,447 of Convertible Preferred Units. In connection with the issuance of the Convertible Preferred Units, the Company recognized additional non-cash equity compensation expense of $24,369 related to certain common units and incentive units that were modified or contractually vested as a result of the transactions. The Company incurred certain legal, audit, tax and other professional fee costs in connection with the planned initial public offering that were initially capitalized. As a result of the Convertible Preferred Unit transaction, the planned initial public offering was delayed. Accordingly, the Company expensed $9,840 of costs initially capitalized in connection with the planned initial public offering in selling, general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2017. In connection with the Reorganization Transactions described in Note 3, on July 30, 2018, outstanding Convertible Preferred Units were converted into common units on a one-for-one basis. 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 year ended December 31, 2018. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES In connection with the IPO and Reorganization Transactions, Focus Inc. became a holding company whose most significant asset is a membership interest in Focus LLC, and, as a result, Focus Inc. became subject to U.S. federal, state and local income taxes on Focus Inc.’s allocable portion of taxable income from Focus LLC. Focus LLC is treated as a partnership for U.S. federal income tax purposes. Accordingly, Focus LLC is generally not and has not been subject to U.S. federal and certain state income taxes at the entity level, although it has been subject to the New York City Unincorporated Business Tax, and certain of its subsidiaries have been subject to U.S. federal, state and local or foreign income taxes. Instead, for U.S. federal and certain state income tax purposes, the income, deductions, losses and credits of Focus LLC are passed through to its unitholders, which after the IPO includes Focus Inc. Focus LLC has historically made tax distribution payments in accordance with its Third Amended and Restated Operating Agreement, which was replaced by the Operating Agreement on July 30, 2018, and Focus Inc. intends to cause Focus LLC to continue to make tax distribution payments, to the extent of available cash, in accordance with the Operating Agreement. For tax years beginning on or after January 1, 2018, Focus LLC is subject to partnership audit rules enacted as part of the Bipartisan Budget Act of 2015 (the "Centralized Partnership Audit Regime"). Under the Centralized Partnership Audit Regime, any IRS audit of Focus LLC would be conducted at the partnership level and, if the IRS determines an adjustment, the default rule is that Focus LLC would pay an "imputed underpayment" including interest and penalties, if applicable. Focus LLC may instead elect to make a "push-out" election, in which case the partners for the year that is under audit would be required to take into account the adjustments on their own personal income tax returns. Our partnership agreement provides that if Focus LLC receives an imputed underpayment, a "push-out" election may be made. Any payments that the Company ultimately makes on behalf of its current partners will be reflected as a distribution, rather than tax expense, at the time that such distribution is declared. 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 rate of 21%, effective January 1, 2018. The change in the U.S. federal corporate income tax rate resulted in the remeasurement of certain of the Company's deferred tax assets and liabilities during the year ended December 31, 2017, based on the reduction in the tax rate at which they are expected to reverse. Such remeasurement resulted in an income tax benefit of $2,653 for the year ended December 31, 2017. Income tax expense for year ended December 31, 2019 is primarily related to U.S. federal, state and local income taxes imposed on Focus Inc.'s allocable portion of taxable income from Focus LLC. The allocable portion of taxable income primarily differs from the net loss attributable to Focus Inc. due to permanent differences such as non-deductible equity-based compensation expense of Focus LLC. The following represents the U.S. and foreign components of income (loss) before income tax for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 Income (loss) before income tax: United States $ (52,276) $ (41,636) $ (7,828) Foreign 2,416 9,999 2,852 Total income (loss) before income tax $ (49,860) $ (31,637) $ (4,976) The following represents the U.S. and foreign components of income tax expense (benefit) for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 Current provision: Federal $ 1,020 $ 1,511 $ 1,201 State and local 477 1,080 1,579 Foreign 980 2,132 2,419 Subtotal 2,477 4,723 5,199 Deferred provision (benefit): Federal (3,455) 3,932 2,293 State and local (49) 954 435 Foreign (474) (159) (878) Subtotal (3,978) 4,727 1,850 Total income tax expense (benefit) $ (1,501) $ 9,450 $ 7,049 At December 31, 2018 and 2019, tax effects of book/tax temporary differences give rise to deferred tax assets (liabilities) as follows: 2018 2019 Deferred tax assets: Investment in Focus LLC $ 62,618 $ 74,415 Net operating loss carryforwards 5,842 429 Business interest carryforwards 1,219 — Intangible assets 532 586 Deferred rent and other 410 629 Gross deferred tax assets 70,621 76,059 Deferred tax liabilities: Intangible assets (6,248) (13,184) Fixed assets and other (288) (270) Gross deferred tax liabilities (6,536) (13,454) Net deferred tax assets $ 64,085 $ 62,605 At December 31, 2018, $5,924 of deferred tax liabilities were recorded as other liabilities in the consolidated balance sheets. At December 31, 2019, $12,848 of deferred tax liabilities were recorded as other liabilities in the consolidated balance sheets. A reconciliation of the differences between the U.S. federal statutory tax rate and the effective tax rate for the years ended December 31, 2017, 2018 and 2019 is as follows: 2017 2018 2019 U.S. federal statutory tax rate 35.0 % 21.0 % 21.0 % Income passed through to individual members (36.8) (31.9) (11.3) Foreign income taxes (1.0) (6.2) (31.0) Non-cash equity compensation expense — (5.8) (41.8) Impairment of equity method investment — — (31.0) Other non-deductible expenses (0.3) (1.6) (19.2) Valuation allowance 1.6 0.1 — State and local income taxes, net of U.S. federal tax benefit (0.7) (6.1) (32.6) Remeasurement of deferred taxes 5.3 — — Other (0.1) 0.6 4.2 Effective income tax rate 3.0 % (29.9) % (141.7) % At December 31, 2019, the Company had approximately $620 of U.S. federal net operating loss carryforwards and a comparable amount of state net operating losses generated from the same losses and deductions. U.S. federal net operating losses have an indefinite carryforward period. Certain state net operating losses expire in various years between 2023 and 2038, while certain state net operating losses have an indefinite carryforward period. In addition, at December 31, 2019, a corporate subsidiary of Focus LLC had U.S. federal net operating loss carryforwards of $1,344 which will begin to expire in 2033. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Based on this assessment, no valuation allowances were recorded at December 31, 2018 and 2019, respectively. The Company files tax returns in U.S. federal, local and state jurisdictions and certain of the Company’s subsidiaries file income tax returns in foreign jurisdictions. The Company is no longer subject to income tax examinations for years prior to 2016. In addition, open tax years related to local, state and foreign jurisdictions remain subject to examination, but are not considered material to the Company’s consolidated financial position, results of operations or cash flows. The Company is not aware of any tax position for which it is reasonably possible that the total amount of unrecognized benefits will change materially in the next 12 months. |
TAX RECEIVABLE AGREEMENTS
TAX RECEIVABLE AGREEMENTS | 12 Months Ended |
Dec. 31, 2019 | |
TAX RECEIVABLE AGREEMENTS | |
TAX RECEIVABLE AGREEMENTS | 12. TAX RECEIVABLE AGREEMENTS In connection with the Reorganization Transactions and the closing of the IPO, Focus Inc. entered into two Tax Receivable Agreements ( the "Tax Receivable Agreements"): one with certain entities affiliated with the Private Equity Investors and the other with certain other continuing and former owners of Focus LLC (the parties to the two agreements collectively, 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 Reorganization Transactions and the exchange of certain units of Focus LLC, Focus Inc. had a liability of $39,156 and $48,399 relating to its obligations under the Tax Receivable Agreements as of December 31, 2018 and 2019, respectively. The Company does not expect any payments to be made under the Tax Receivable Agreements in the next twelve months. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2019 | |
LEASES | |
LEASES | 13. LEASES The Company rents office space under operating leases with various expiration dates. The Company determines if a contract contains a lease at inception. Leases with an initial term of 12 months or less, which are immaterial to the consolidated financial statements, are not recorded on the balance sheet. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recorded on a straight-line basis over the lease term. The Company has a limited number of finance leases which are not material to the consolidated financial statements. Operating lease costs are recorded within selling, general and administrative expenses. The implicit discount rates used to determine the present value of the Company’s leases are not readily determinable. Therefore, an incremental borrowing rate is used which is estimated based on the Company’s cost of borrowing for the relevant terms of each lease. The weighted average discount rate used to determine the Company’s operating lease liabilities was approximately 6.6% at December 31, 2019. The weighted average remaining lease term at December 31, 2019 was 7.4 years. The future minimum lease payments under operating leases in place as of December 31, 2019 were as follows: Year ending December 31, Amount 2020 $ 45,006 2021 38,484 2022 32,583 2023 27,957 2024 24,505 2025 and thereafter 85,043 253,578 Less: present value discount (57,153) Operating lease liabilities at December 31, 2019 $ 196,425 Other information pertaining to leases consists of the following: Year Ended December 31, 2019 Operating lease costs included in selling, general and administrative expenses $ 44,213 Operating cash flows from operating leases 41,333 Operating lease assets obtained in exchange for operating lease obligations 68,891 In accordance with ASC 840 future minimum lease payments under operating leases in place at December 31, 2018 were as follows: Year Ending December 31, Amount 2019 $ 35,426 2020 31,695 2021 24,813 2022 20,906 2023 16,743 2024 and thereafter 50,045 Total minimum lease payments $ 179,628 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 14. 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, 2018 and 2019, 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, 2018 and 2019, a significant portion of cash and cash equivalents were held at a single institution. Contingent Consideration Arrangements As discussed in Notes 2 and 8, contingent consideration is payable in the form of cash, and in some cases, equity. Since the contingent consideration to be paid is based on forecasted growth rates over the measurement period, 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 in the consolidated balance sheets. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2019 | |
EMPLOYEE BENEFIT PLANS | |
EMPLOYEE BENEFIT PLANS | 15. EMPLOYEE BENEFIT PLANS The Company and its subsidiaries have defined contribution retirement plans, including 401(k) and profit-sharing plans covering eligible employees. During the years ended December 31, 2017, 2018 and 2019, the amounts recorded in expense relating to these plans were $7,485, $8,329 and $10,235, respectively, and are included in compensation and related expenses in the consolidated statements of operations. |
NET CAPITAL REQUIREMENTS
NET CAPITAL REQUIREMENTS | 12 Months Ended |
Dec. 31, 2019 | |
NET CAPITAL REQUIREMENTS | |
NET CAPITAL REQUIREMENTS | 16. NET CAPITAL REQUIREMENTS Certain of the Company’s regulated subsidiaries are subject to minimum net capital requirements. As of December 31, 2018 and 2019, all regulated subsidiaries subject to minimum net capital requirements individually had net capital in excess of minimum net capital requirements. As of December 31, 2018, these subsidiaries had aggregate net capital of $12,990, which was $11,880 in excess of aggregate minimum net capital requirements of $1,110. As of December 31, 2019, these subsidiaries had aggregate net capital of $14,142, which was $11,439 in excess of aggregate minimum net capital requirements of $2,703. |
CASH FLOW INFORMATION
CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
CASH FLOW INFORMATION | |
CASH FLOW INFORMATION | 17. CASH FLOW INFORMATION Year Ended December 31, 2017 2018 2019 Supplemental disclosures of cash flow information—cash paid for: Interest $ 41,840 $ 56,584 $ 57,344 Income taxes $ 3,357 $ 6,149 $ 7,775 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 37,551 $ 42,086 $ 82,781 Fair market value of restricted common units in connection with acquisitions and contingent consideration $ 65,064 $ 53,877 $ — Fair market value of Class A common stock in connection with acquisitions $ — $ 112,461 $ — 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 liabilities acquired in connection with business acquisitions $ (6,178) $ (19,594) $ (2,633) Discount on proceeds from Credit Facility $ 3,064 $ — $ 875 Purchase price installments related to acquisitions $ — $ 39,134 $ — Deferred taxes and tax receivable agreements $ — $ 62,454 $ (463) Operating lease assets $ — $ — $ 180,114 Operating lease liabilities $ — $ — $ 196,425 Other $ 188 $ 228 $ — |
RELATED PARTIES
RELATED PARTIES | 12 Months Ended |
Dec. 31, 2019 | |
RELATED PARTIES | |
RELATED PARTIES | 18. RELATED PARTIES The Company’s Chief Executive Officer, through an entity owned and controlled by him, owns a personal aircraft that was acquired without Company resources that he uses for business travel. 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 years ended December 31, 2017, 2018 and 2019, the Company recognized expenses of $770, $1,712 and $1,906, respectively, related to these reimbursements. Given the geography of the Company’s partner firms and prospects, the Company believes that the use of private aircraft creates efficiencies to enhance the productivity of the Company’s Chief Executive Officer and certain other authorized personnel. Affiliates of certain holders of the Company's Class A common stock and Class B common stock received underwriting fees of $6,244 in connection with the Company’s IPO during the year ended December 31, 2018. Affiliates of certain holders of the Company's Class A common stock and Class B common stock are lenders under the First Lien Term Loan. In July 2019, affiliates of certain holders of the Company’s Class A common stock and Class B common stock received $135 in fees in connection with the amendment and expansion of the Company’s First Lien Term Loan. |
OTHER
OTHER | 12 Months Ended |
Dec. 31, 2019 | |
OTHER | |
OTHER | 19. 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 consolidated statement of operations for the year ended December 31, 2018. In February 2019, the Company recorded a management contract buyout expense of $1,428 related to cash consideration for the buyout of a management agreement with one of the Company’s retiring principals whereby the business operations of the relevant partner firm were transitioned to one of the Company’s other partner firms. In December 2019, the Company evaluated a minority interest investment in a financial services company accounted for using the equity method for impairment and determined that the impairment was an other-than temporary loss in fair value. The Company recognized an impairment in the fair value of the equity method investment of $11,749. The impairment is presented within other income (expense) in the Company’s consolidated statement of operations for the year ended December 31, 2019. |
SUPPLEMENTAL FINANCIAL INFORMAT
SUPPLEMENTAL FINANCIAL INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
SUPPLEMENTAL FINANCIAL INFORMATION | |
SUPPLEMENTAL FINANCIAL INFORMATION | 20. SUPPLEMENTAL FINANCIAL INFORMATION Consolidated Quarterly Results of Operations (Unaudited): For the Three Months Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (in thousands, except per share data) Revenues $ 196,229 $ 231,435 $ 235,701 $ 247,515 Operating expenses 183,683 219,721 249,958 213,084 Income (loss) from operations 12,546 11,714 (14,257) 34,431 Net income (loss) $ (12,054) $ (7,656) (38,924) 17,547 Non-controlling interests(1) N/A N/A 28,726 (7,939) Net income (loss) attributable to Common Shareholders(1) N/A N/A $ (10,198) $ 9,608 Income (loss) per share of Class A common stock(1): Basic N/A N/A $ (0.24) $ 0.22 Diluted N/A N/A $ (0.24) $ 0.22 For the Three Months Ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except per share data) Revenues $ 259,924 $ 301,545 $ 316,641 $ 340,231 Operating expenses 250,607 282,012 303,736 314,340 Income from operations 9,317 19,533 12,905 25,891 Net income (loss) (2,828) 3,102 392 (12,691) Non-controlling interests (114) (2,306) 881 692 Net income (loss) attributable to Common Shareholders $ (2,942) $ 796 $ 1,273 $ (11,999) Income (loss) per share of Class A common stock: Basic $ (0.06) $ 0.02 $ 0.03 $ (0.25) Diluted $ (0.06) $ 0.02 $ 0.03 $ (0.25) (1) Not applicable for periods prior to the date of the Company’s IPO in July 2018. Income (loss) per share of Class A common stock for the quarterly periods may not sum to Income (loss) per share of Class A common stock for the respective yearly period due to rounding. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates Focus LLC and its subsidiaries' financial statements and records the interests in Focus LLC consisting of common units and the common unit equivalent of incentive units of Focus LLC that the Company does not own as non-controlling interests, see Note 4. 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. |
Use of Estimates | Use of Estimates The preparation of the 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 | Loss 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 shareholders 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 shareholders 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 shareholders for dilutive potential common shares. |
Revenue Recognition | Revenue Recognition Wealth Management Fees The Company 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 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 and outsourced services revenue, in accordance with the same five criteria above, are recognized over the period in which services are provided. Commissions and distribution fees are recognized when earned. 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 legal entities that generate the revenues and therefore may not be reflective of the geography in which clients are located for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 Domestic revenue $ 643,077 $ 889,166 $ 1,170,169 International revenue 19,810 21,714 48,172 Total revenue $ 662,887 $ 910,880 $ 1,218,341 International revenue consists of revenue generated by partner firm legal entities in the United Kingdom, Canada and Australia. 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. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at their net realizable value. Allowances for uncollectible accounts are maintained for estimated losses resulting from the inability of customers to make required payments. In determining these estimates, historical write-offs, the aging of the receivables and other factors, such as overall economic conditions, are considered. |
Fixed Assets | Fixed Assets Fixed assets are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives for fixed assets, primarily consisting of computers, equipment, and furniture and fixtures, are generally between three to seven years. Leasehold improvements are amortized over the shorter of their estimated economic useful lives or the terms of the leases. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. The Company capitalizes costs related to computer software obtained or developed for internal use. Costs incurred in the application development phase are capitalized and amortized over their useful lives, which are generally three to five years. |
Debt Financing Costs | Debt Financing Costs Direct costs incurred with obtaining debt financing are capitalized or recorded as a reduction of the underlying debt. The costs are amortized over the respective term of the underlying debt and are included in amortization of debt financing costs in the accompanying consolidated statements of operations. |
Business Acquisitions | Business Acquisitions Business acquisitions are accounted for in accordance with ASC Topic 805: Business Combinations . Business acquisitions are accounted for by allocating the purchase price consideration to the fair value of assets acquired and liabilities assumed. Goodwill is recognized as the excess of the purchase price consideration over the fair value of net assets of the business acquired. All transaction costs are expensed as incurred. The Company has incorporated contingent consideration, or earn out provisions, into the structure of its business acquisitions. These arrangements may result in the payment of additional purchase price consideration to the sellers based on the growth of certain financial thresholds for periods following the closing of the respective acquisition. The additional purchase price consideration is payable in the form of cash and, in some cases, equity. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in exchange for the acquired business. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying consolidated statements of operations. The results of the acquired businesses have been included in the Company’s consolidated financial statements from the respective dates of acquisition. |
Equity Method Investments | Equity Method Investments The Company applies the equity method of accounting to investments where the Company has the ability to exercise significant influence over operating and financial matters. Equity method investments are periodically reviewed for impairment. The Company’s equity method investments are included in prepaid expenses and other assets in the consolidated balance sheets. |
Goodwill, Intangible Assets and Other Long-Lived Assets | Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is deemed to have an indefinite useful life and is not amortized. Intangible and other long-lived assets are amortized over their respective estimated useful lives. The Company has no indefinite-lived intangible assets. Goodwill is tested annually for impairment as of October 1, or more frequently if events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A two-step impairment test is performed on goodwill. In the first step, the Company compares the fair value of the reporting unit to the carrying value of the net assets of the reporting unit. The fair value of the reporting unit is determined using a market approach. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit in the first step, no further testing is performed. If the carrying value exceeds the fair value of the reporting unit in the first step, then the Company performs the second step of the impairment test to determine the implied fair value of goodwill and compares the implied fair value of goodwill to the carrying value of goodwill to determine the extent of the impairment, if any. In March 2018, the Company modified the manner in which it assesses goodwill for impairment. The Company determined for the purpose of its annual goodwill impairment test that its reporting units should be aggregated into one reporting unit. The Company’s determination was based on the Company’s reporting units having similar economic and business characteristics, and the services performed by the reporting units are wealth management related and that the reporting units are subject to a similar regulatory framework. The Company believes that the resulting change in accounting principle related to the reporting unit utilized in the annual goodwill impairment test did not delay, accelerate or avoid an impairment charge. The Company determined that the change in accounting principle related to the reporting unit used in the Company’s annual impairment test is appropriate based on the nature of the Company’s business. The change would not have had an impact on the results of the Company’s impairment test for 2017. Intangible assets and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the asset might be impaired or that the estimated useful life should be changed prospectively. If impairment indicators are present, the recoverability of these assets is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined using a discounted cash flow approach. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of substantially all of the Company’s financial assets and liabilities are considered to approximate their fair values because of their short-term nature. The carrying amount of revolver borrowings under the Credit Facility (as defined below) approximates fair value, as the debt bears interest at selected short-term variable market rates. The Company measures the implied fair value of its First Lien Term Loan (as defined below) using trading levels obtained from a third-party service provider; accordingly, these borrowings are classified within Level 2 of the valuation hierarchy. See Note 8 for further information regarding the Company’s fair value measurements. |
Income Taxes | Income Taxes In connection with the IPO and Reorganization Transactions, Focus Inc. became a holding company whose most significant asset is a membership interest in Focus LLC, and, as a result, Focus Inc. became subject to U.S. federal, state and local income taxes on Focus Inc.'s allocable portion of taxable income from Focus LLC. Focus LLC is treated as a partnership for U.S. federal income tax purposes. Accordingly, Focus LLC is generally not and has not been subject to U.S. federal and certain state income taxes at the entity level, although it has been subject to the New York City Unincorporated Business Tax and certain of its subsidiaries have been subject to U.S. federal and certain state and local or foreign income taxes. Instead, for U.S. federal and certain state income tax purposes, the income, deductions, losses and credits of Focus LLC are passed through to its unitholders, which after the IPO includes Focus Inc. Focus LLC has historically made tax distribution payments in accordance with its Third Amended and Restated Operating Agreement, which was replaced by the Operating Agreement on July 30, 2018, and Focus Inc. intends to cause Focus LLC to continue to make tax distribution payments, to the extent of available cash, in accordance with the Operating Agreement . Focus Inc. files income tax returns with the U.S. federal government as well as various state and local jurisdictions. The asset and liability method is applied for deferred income taxes. Deferred tax assets and liabilities are recognized on a net basis for each tax paying component 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 were recorded at December 31, 2018 and 2019. |
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 its structure and how the Company manages the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and the Company's 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. |
Translation of Non-U.S. Currency Amounts | Translation of Non-U.S. Currency Amounts Assets and liabilities of non-U.S. subsidiaries and equity method investments that have a foreign currency as their functional currency are re-measured to U.S. dollars at year-end exchange rates, and revenues and expenses are re-measured at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in other (expense) income—net in the consolidated statements of operations. |
Consolidation Considerations | Consolidation Considerations ASC Topic 810, Consolidations , requires an entity to perform a qualitative analysis to determine whether its variable interests give it a controlling financial interest in a variable interest entity (“VIE”). Under the standard, an enterprise has a controlling financial interest when it has (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. An enterprise that holds a controlling financial interest is deemed to be the primary beneficiary and is required to consolidate the VIE. The Company’s subsidiaries have Management Agreements with the respective Management Company, which causes these Company subsidiaries to be VIEs. The Company has assessed whether or not it is the primary beneficiary for these subsidiaries and has concluded that it is the primary beneficiary. Accordingly, the results of these subsidiaries have been consolidated. Certain of the Company’s subsidiaries have variable interests in certain investment funds that are deemed voting interest entities. Due to substantive kick-out rights possessed by the limited partners of these funds, the Company does not consolidate the investment funds. From time to time, the Company enters into option agreements with wealth management businesses (the “Optionee”). In exchange for payment of an option premium, the option agreement allows the Company, at its sole discretion, to acquire the Optionee at a predetermined time and at a predetermined purchase price formula. If the Company chooses to exercise its option to acquire the Optionee, the acquisition and the corresponding Management Agreement would be executed in accordance with the Company’s typical acquisition structure as discussed in Note 1. If the Company chooses not to exercise the option, the option premium would be recorded as a loss on investment in the consolidated statements of operations in the period that the option expires. Option premiums paid by the Company of $4,300 and $0 are included in prepaid expenses and other assets in the consolidated balance sheets as of December 31, 2018 and 2019, respectively. The Company has determined that the respective option agreements with the Optionees qualify the Optionees as VIEs. The Company has determined that it is not the primary beneficiary of the Optionees and does not consolidate the results of the Optionees. |
Stock Based Compensation Costs | Stock Based Compensation Costs Compensation cost for unit and stock based awards is measured based on the fair value of the unit and stock based awards determined by the Black-Scholes option pricing model or the Monte Carlo Simulation Model on the date that the unit and stock based awards are granted or modified, and is adjusted for the estimated number of awards that are expected to be forfeited. Compensation cost for unvested Class A common stock and restricted stock units are measured based on the market value of the Company’s Class A common stock on the date that the awards are granted and is adjusted for the estimated number of awards that are expected to be forfeited. The compensation cost is recognized on a straight-line basis over the requisite service period. Non-cash equity compensation expense, associated with employees and non-employees, including principals in the management companies, is included in compensation and related expenses in the consolidated statements of operations. The Company estimates forfeitures at the time of the respective grant and revises those estimates in subsequent periods if actual forfeitures differ materially from those estimates. The Company uses historical data to estimate forfeitures and records non-cash equity compensation expense only for those awards that are expected to vest. |
Leases | Leases The Company leases office space in various locations under noncancelable lease agreements. Many of these lease agreements provide for tenant improvement allowances, rent increases, and/or rent-free periods. Rent expense is recognized on a straight-line basis commencing with the possession date of the property, which is typically the earlier of the lease commencement date or the date when the Company takes possession of the property. Rent expense is included in selling, general and administrative expenses in the consolidated statements of operations. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) .” ASU No. 2016-02, as amended, requires lessees to put most leases on their balance sheets but recognize the expenses in their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right of use asset for the right to use the underlying asset for the lease term. ASU No. 2016-02 was effective for the Company for interim and annual periods beginning January 1, 2019. The Company adopted ASU No. 2016-02 effective January 1, 2019 using a modified retrospective method and therefore has not restated comparative periods. The Company elected to use the package of practical expedients to assist in the transition, which includes not reassessing the identification and classification of leases, among other things. Based on the portfolio of leases as of January 1, 2019, the Company recognized approximately $144,000 of lease liabilities and $134,000 of right of use assets (which reflects the reclassification of previous deferred rent balances into the right of use asset as required under the transition guidance) on the balance sheet, primarily related to operating leases for real estate. There was no material impact to the consolidated statement of operations and comprehensive loss or consolidated statement of cash flows as a result of adoption of this new guidance. Refer to Note 13 for further information regarding leases. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements 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 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 was effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU No. 2018-07 on January 1, 2019 did not have a material effect on the Company's consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, “ Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU No. 2019-12 on the Company's consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SUMMARY OF OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregated revenues based on the location of the partner firm | 2017 2018 2019 Domestic revenue $ 643,077 $ 889,166 $ 1,170,169 International revenue 19,810 21,714 48,172 Total revenue $ 662,887 $ 910,880 $ 1,218,341 |
NON-CONTROLLING INTERESTS AND_2
NON-CONTROLLING INTERESTS AND LOSS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
NON-CONTROLLING INTERESTS AND LOSS PER SHARE | |
Schedule of reconciliation of net income before noncontrolling interest to net income (loss) attributable to common stockholders | 2018 2019 Focus LLC common units held by continuing owners 22,823,272 22,075,749 Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners(1) 5,139,653 5,731,995 Total common units and common unit equivalents attributable to non-controlling interest 27,962,925 27,807,744 Total common units and common unit equivalents of incentive units outstanding 74,228,828 75,229,059 Non-controlling interest allocation 37.7 % 37.0 % Company’s interest in Focus LLC 62.3 % 63.0 % (1) Focus LLC common units issuable upon conversion of 18,597,474 and 19,754,450 (see Note 10) vested and unvested Focus LLC incentive units outstanding as of December 31, 2018 and 2019, respectively, were 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 shareholders for the years ended December 31, 2018 and 2019: 2018 2019 Net loss $ (41,087) $ (12,025) Net loss attributable to members of Focus LLC (for the respective period through the IPO) 47,821 — Non-controlling interest subsequent to the IPO (7,324) (847) Net loss attributable to common shareholders $ (590) $ (12,872) |
Schedule of calculation of basic earnings per share | Period July 30, 2018 through Year Ended December 31, 2018 December 31, 2019 Basic loss per share: Net loss attributable to common shareholders $ (590) $ (12,872) Weighted average shares of Class A common stock outstanding 43,122,782 46,792,389 Basic loss per share $ (0.01) $ (0.28) |
Schedule of calculation of diluted earnings per share | Period July 30, 2018 through Year Ended December 31, 2018 December 31, 2019 Diluted loss per share: Net loss attributable to common shareholders $ (590) $ (12,872) Weighted average shares of Class A common stock outstanding 43,122,782 46,792,389 Effect of dilutive stock options — — Effect of dilutive unvested Class A common stock and restricted stock units — — Total 43,122,782 46,792,389 Diluted loss per share $ (0.01) $ (0.28) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ACQUISITIONS | |
Schedule of purchase price associated with business acquisitions and the allocation thereof | 2017 2018 2019 Number of business acquisitions closed 23 19 31 Consideration: Cash and option premium $ 362,524 $ 408,478 $ 507,498 Cash due subsequent to closing at net present value and estimated working capital adjustment 188 39,134 4,341 Fair market value of Focus LLC common units issued 64,728 51,456 — Fair market value of Class A common stock issued — 112,461 — Fair market value of estimated contingent consideration 37,551 42,086 82,781 Total consideration $ 464,991 $ 653,615 $ 594,620 Allocation of purchase price: Total tangible assets $ 6,095 $ 14,817 $ 50,761 Total liabilities assumed (12,273) (34,411) (53,394) Customer relationships 244,289 294,785 349,447 Management contracts 27,890 30,080 17,284 Goodwill 198,546 347,496 229,799 Other acquired intangibles 444 848 723 Total allocated consideration $ 464,991 $ 653,615 $ 594,620 |
Schedule of intangible assets acquired in asset acquisitions | 2017 2018 2019 Customer relationships $ — $ 4,352 $ 808 Management contracts — — 12 Other acquired intangibles — 225 30 Total $ — $ 4,577 $ 850 |
Schedule of weighted-average useful lives of intangible assets acquired | 2017 2018 2019 Management contracts 19 20 18 Customer relationships 10 10 9 Other acquired intangibles 5 5 5 Weighted-average useful life of all intangibles acquired 11 11 9 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Summary of changes in the goodwill balances | 2017 2018 2019 Balance beginning of period: Goodwill $ 339,129 $ 538,113 $ 883,119 Cumulative impairment losses (22,624) (22,624) (22,624) 316,505 515,489 860,495 Goodwill acquired 198,546 347,496 229,799 Other 438 (2,490) (63) 198,984 345,006 229,736 Balance end of period: Goodwill 538,113 883,119 1,112,855 Cumulative impairment losses (22,624) (22,624) (22,624) $ 515,489 $ 860,495 $ 1,090,231 |
Summary of amortizing acquired intangible assets | The following table summarizes the amortizing acquired intangible assets at December 31, 2018: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 1,008,186 $ (349,125) $ 659,061 Management contracts 133,112 (31,911) 101,201 Other acquired intangibles 4,402 (2,469) 1,933 Total $ 1,145,700 $ (383,505) $ 762,195 The following table summarizes the amortizing acquired intangible assets at December 31, 2019: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 1,362,104 $ (471,361) $ 890,743 Management contracts 150,464 (39,888) 110,576 Other acquired intangibles 5,157 (3,020) 2,137 Total $ 1,517,725 $ (514,269) $ 1,003,456 |
Schedule of estimated amortization expense | Years Ending December 31, Amount 2020 $ 139,474 2021 136,573 2022 131,532 2023 123,734 2024 111,253 |
FIXED ASSETS (Tables)
FIXED ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
FIXED ASSETS | |
Schedule of fixed assets | 2018 2019 Computers, software development and equipment $ 31,172 $ 34,462 Leasehold improvements 20,710 36,699 Furniture and fixtures 12,405 16,805 Subtotal 64,287 87,966 Less accumulated depreciation and amortization (39,507) (46,332) Total $ 24,780 $ 41,634 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
FAIR VALUE MEASUREMENTS | |
Schedule of implied fair value of the Company’s First Lien Term Loan (as defined below) | December 31, 2018 December 31, 2019 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan $ 798,985 $ 773,018 $ 1,139,188 $ 1,146,307 |
Schedule of changes in the fair value of estimated contingent consideration for business acquisitions | 2018 2019 Balance at January 1, $ 76,677 $ 98,905 Additions to estimated contingent consideration 42,086 82,781 Payments of contingent consideration (26,237) (36,862) Non-cash changes in fair value of estimated contingent consideration 6,638 38,797 Other (259) (53) Balance at December 31, $ 98,905 $ 183,568 |
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, 2018 Techniques Inputs Ranges $ 98,905 Monte Carlo Simulation Model Forecasted growth rates (16.2)% - 18.7 % Discount rates 12% - 18 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2019 Techniques Inputs Ranges $ 183,568 Monte Carlo Simulation Model Forecasted growth rates (10.7)% - 51.1 % Discount rates 11% - 17 % |
CREDIT FACILITY (Tables)
CREDIT FACILITY (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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 | 2018 2019 First Lien Term Loan $ 798,985 $ 1,139,188 First Lien Revolver 40,000 140,000 Unamortized debt financing costs (2,403) (5,389) Unamortized discount — (800) Total $ 836,582 $ 1,272,999 |
EQUITY (Tables)
EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Schedule of incentive units granted | Weighted Average Incentive Units Hurdle Price Outstanding—January 1, 2017 12,234,283 $ 10.97 Granted 6,193,042 21.30 Forfeited (392,375) 16.50 Redeemed (2,805,911) 8.25 Outstanding—December 31, 2017 15,229,039 15.53 Vested—December 31, 2017 8,237,146 11.22 Outstanding—January 1, 2018 15,229,039 15.53 Granted 6,426,715 30.73 Forfeited (311,625) 22.26 Redeemed (2,746,655) 15.79 Outstanding—December 31, 2018 18,597,474 20.63 Vested—December 31, 2018 9,910,399 14.19 Outstanding—January 1, 2019 18,597,474 20.63 Granted 2,106,131 28.01 Exchanged (618,117) 11.24 Forfeited (331,038) 27.80 Outstanding—December 31, 2019 19,754,450 21.59 Vested—December 31, 2019 10,288,263 15.37 |
Schedule of incentive units outstanding and vested by hurdle rates | Number Vested Hurdle Rates Outstanding Units $1.42 175,421 175,421 5.50 97,798 97,798 6.00 56,702 56,702 7.00 482,545 482,545 9.00 1,984,779 1,984,779 11.00 1,148,023 1,148,023 12.00 520,000 520,000 13.00 831,416 831,416 14.00 56,205 56,205 16.00 168,552 168,552 17.00 80,000 72,500 19.00 865,633 859,383 21.00 3,975,500 2,475,500 22.00 1,289,667 657,960 23.00 524,828 262,414 26.26 25,000 — 27.00 29,484 7,371 27.90 2,051,131 — 28.50 1,646,766 411,694 33.00 3,715,000 20,000 36.64 30,000 — 19,754,450 10,288,263 |
Schedule of information relating to the status of, and changes in, the Company's restricted stock units granted | Weighted Average Grant Date Restricted Stock Units Fair Value Outstanding—January 1, 2019 — $ — Granted 98,061 27.90 Forfeited — — Vested — — Outstanding—December 31, 2019 98,061 27.90 |
Stock options | |
Schedule of stock options granted | Stock Weighted Average Options Exercise Price Outstanding—January 1, 2018 — $ — Granted 1,401,276 31.34 Exercised — — Forfeited — — Outstanding—December 31, 2018 1,401,276 31.34 Vested—December 31, 2018 503,014 33.00 Granted 558,021 28.19 Exercised (25,575) 32.75 Forfeited (100,756) 30.31 Outstanding—December 31, 2019 1,832,966 30.42 Vested—December 31, 2019 698,805 32.01 |
Time-based stock option awards | |
Schedule of fair value of stock options grants determined with assumptions | 2018 2019 Expected term 7.3 years 6.2 years Expected stock price volatility 32 % 29 % Risk-free interest rate 2.81 % 1.76 % Expected dividend yield — % — % Weighted average grant date fair value $ 12.56 $ 9.03 |
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 |
Time based incentive units | |
Schedule of fair value of equity incentive units grants determined with assumptions | 2017 2018 2019 Expected term 4.0 years 4.0 years 4.0 years Expected unit price volatility 37 % 31 % 29 % Risk-free interest rate 1.79 % 2.53 % 1.64 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 6.64 $ 7.71 $ 7.15 |
Market-Based Incentive Units | |
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 $ |
Class A common stock | |
Schedule of stock options granted | Weighted Average Unvested Class A Grant Date Common Stock Fair Value Outstanding—January 1, 2018 — $ — Granted 178,608 33.00 Forfeited — — Vested (59,530) 33.00 Outstanding—December 31, 2018 119,078 33.00 Granted — — Forfeited (12,500) 33.00 Vested (53,285) 33.00 Outstanding—December 31, 2019 53,293 33.00 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
INCOME TAXES | |
Schedule of U.S. and foreign components of income (loss) before income tax | 2017 2018 2019 Income (loss) before income tax: United States $ (52,276) $ (41,636) $ (7,828) Foreign 2,416 9,999 2,852 Total income (loss) before income tax $ (49,860) $ (31,637) $ (4,976) |
Schedule of U.S. and foreign components of income tax expense (benefit) | 2017 2018 2019 Current provision: Federal $ 1,020 $ 1,511 $ 1,201 State and local 477 1,080 1,579 Foreign 980 2,132 2,419 Subtotal 2,477 4,723 5,199 Deferred provision (benefit): Federal (3,455) 3,932 2,293 State and local (49) 954 435 Foreign (474) (159) (878) Subtotal (3,978) 4,727 1,850 Total income tax expense (benefit) $ (1,501) $ 9,450 $ 7,049 |
Schedule of deferred tax assets (liabilities) | 2018 2019 Deferred tax assets: Investment in Focus LLC $ 62,618 $ 74,415 Net operating loss carryforwards 5,842 429 Business interest carryforwards 1,219 — Intangible assets 532 586 Deferred rent and other 410 629 Gross deferred tax assets 70,621 76,059 Deferred tax liabilities: Intangible assets (6,248) (13,184) Fixed assets and other (288) (270) Gross deferred tax liabilities (6,536) (13,454) Net deferred tax assets $ 64,085 $ 62,605 |
Schedule of reconciliation of the differences between the U.S. federal statutory tax rate and the effective tax rate | 2017 2018 2019 U.S. federal statutory tax rate 35.0 % 21.0 % 21.0 % Income passed through to individual members (36.8) (31.9) (11.3) Foreign income taxes (1.0) (6.2) (31.0) Non-cash equity compensation expense — (5.8) (41.8) Impairment of equity method investment — — (31.0) Other non-deductible expenses (0.3) (1.6) (19.2) Valuation allowance 1.6 0.1 — State and local income taxes, net of U.S. federal tax benefit (0.7) (6.1) (32.6) Remeasurement of deferred taxes 5.3 — — Other (0.1) 0.6 4.2 Effective income tax rate 3.0 % (29.9) % (141.7) % |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LEASES | |
Future minimum lease payments under operating leases | Year ending December 31, Amount 2020 $ 45,006 2021 38,484 2022 32,583 2023 27,957 2024 24,505 2025 and thereafter 85,043 253,578 Less: present value discount (57,153) Operating lease liabilities at December 31, 2019 $ 196,425 |
Other information pertaining to leases | Year Ended December 31, 2019 Operating lease costs included in selling, general and administrative expenses $ 44,213 Operating cash flows from operating leases 41,333 Operating lease assets obtained in exchange for operating lease obligations 68,891 |
Future minimum lease payments under operating leases ASU 840 | In accordance with ASC 840 future minimum lease payments under operating leases in place at December 31, 2018 were as follows: Year Ending December 31, Amount 2019 $ 35,426 2020 31,695 2021 24,813 2022 20,906 2023 16,743 2024 and thereafter 50,045 Total minimum lease payments $ 179,628 |
CASH FLOW INFORMATION (Tables)
CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
CASH FLOW INFORMATION | |
Schedule of supplemental cash flow information | Year Ended December 31, 2017 2018 2019 Supplemental disclosures of cash flow information—cash paid for: Interest $ 41,840 $ 56,584 $ 57,344 Income taxes $ 3,357 $ 6,149 $ 7,775 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 37,551 $ 42,086 $ 82,781 Fair market value of restricted common units in connection with acquisitions and contingent consideration $ 65,064 $ 53,877 $ — Fair market value of Class A common stock in connection with acquisitions $ — $ 112,461 $ — 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 liabilities acquired in connection with business acquisitions $ (6,178) $ (19,594) $ (2,633) Discount on proceeds from Credit Facility $ 3,064 $ — $ 875 Purchase price installments related to acquisitions $ — $ 39,134 $ — Deferred taxes and tax receivable agreements $ — $ 62,454 $ (463) Operating lease assets $ — $ — $ 180,114 Operating lease liabilities $ — $ — $ 196,425 Other $ 188 $ 228 $ — |
SUPPLEMENTAL FINANCIAL INFORM_2
SUPPLEMENTAL FINANCIAL INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SUPPLEMENTAL FINANCIAL INFORMATION | |
Schedule of consolidated quarterly results of operations | For the Three Months Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (in thousands, except per share data) Revenues $ 196,229 $ 231,435 $ 235,701 $ 247,515 Operating expenses 183,683 219,721 249,958 213,084 Income (loss) from operations 12,546 11,714 (14,257) 34,431 Net income (loss) $ (12,054) $ (7,656) (38,924) 17,547 Non-controlling interests(1) N/A N/A 28,726 (7,939) Net income (loss) attributable to Common Shareholders(1) N/A N/A $ (10,198) $ 9,608 Income (loss) per share of Class A common stock(1): Basic N/A N/A $ (0.24) $ 0.22 Diluted N/A N/A $ (0.24) $ 0.22 For the Three Months Ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except per share data) Revenues $ 259,924 $ 301,545 $ 316,641 $ 340,231 Operating expenses 250,607 282,012 303,736 314,340 Income from operations 9,317 19,533 12,905 25,891 Net income (loss) (2,828) 3,102 392 (12,691) Non-controlling interests (114) (2,306) 881 692 Net income (loss) attributable to Common Shareholders $ (2,942) $ 796 $ 1,273 $ (11,999) Income (loss) per share of Class A common stock: Basic $ (0.06) $ 0.02 $ 0.03 $ (0.25) Diluted $ (0.06) $ 0.02 $ 0.03 $ (0.25) (1) Not applicable for periods prior to the date of the Company’s IPO in July 2018. |
GENERAL (Details)
GENERAL (Details) | 12 Months Ended |
Dec. 31, 2019 | |
GENERAL | |
Acquisition of net assets of wealth management businesses (as a percent) | 100.00% |
Management Agreement | |
GENERAL | |
Term of agreement (in years) | 6 years |
Term of automatic renewal of agreement (in years) | 1 year |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue Recognition | |||||||||||
Total revenues | $ 340,231 | $ 316,641 | $ 301,545 | $ 259,924 | $ 247,515 | $ 235,701 | $ 231,435 | $ 196,229 | $ 1,218,341 | $ 910,880 | $ 662,887 |
Domestic revenue | |||||||||||
Revenue Recognition | |||||||||||
Total revenues | 1,170,169 | 889,166 | 643,077 | ||||||||
International revenue | |||||||||||
Revenue Recognition | |||||||||||
Total revenues | $ 48,172 | $ 21,714 | $ 19,810 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fixed Assets and Goodwill, Intangible Assets and Other Long Lived Assets (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Goodwill, Intangible Assets and Other Long-Lived Assets | |
Number of reportable segments | 1 |
Minimum | Computers | |
Fixed Assets | |
Estimated useful lives (in years) | 3 years |
Minimum | Equipment | |
Fixed Assets | |
Estimated useful lives (in years) | 3 years |
Minimum | Furniture and fixtures | |
Fixed Assets | |
Estimated useful lives (in years) | 3 years |
Minimum | Computer software | |
Fixed Assets | |
Estimated useful lives (in years) | 3 years |
Maximum | Computers | |
Fixed Assets | |
Estimated useful lives (in years) | 7 years |
Maximum | Equipment | |
Fixed Assets | |
Estimated useful lives (in years) | 7 years |
Maximum | Furniture and fixtures | |
Fixed Assets | |
Estimated useful lives (in years) | 7 years |
Maximum | Computer software | |
Fixed Assets | |
Estimated useful lives (in years) | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting and Income Taxes (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019USD ($)segment | Dec. 31, 2018USD ($) | |
Income Taxes | ||
Uncertain tax positions reserve | $ | $ 0 | $ 0 |
Number of operating segments | segment | 1 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Consolidation Considerations (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Prepaid expenses and other assets | ||
Option premiums paid | $ 0 | $ 4,300 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 |
Recent Accounting Pronouncements | ||
Operating lease liabilities | $ 196,425 | |
Operating lease assets | $ 180,114 | |
Accounting Standards Update 2016-02 | ||
Recent Accounting Pronouncements | ||
Operating lease liabilities | $ 144,000 | |
Operating lease assets | $ 134,000 |
IPO, REORGANIZATION TRANSACTI_2
IPO, REORGANIZATION TRANSACTIONS AND USE OF PROCEEDS (Details) $ / shares in Units, $ in Thousands | Jul. 30, 2018USD ($)Vote$ / sharesshares | Dec. 31, 2019$ / sharesshares | Sep. 30, 2019shares | Jun. 30, 2019shares | Mar. 31, 2019shares | Dec. 31, 2018$ / shares | Jul. 31, 2018shares |
Reorganization Transactions | |||||||
Cash paid as a percentage of fair value of stock options (in percent) | 65.00% | ||||||
Preferred units conversion ratio | 1 | ||||||
Non Accredited Investor | |||||||
Reorganization Transactions | |||||||
Unit price to Gross IPO price ratio | 1.25 | ||||||
Amount Paid to Existing Owners Non-Accredited Investors | $ | $ 26,001 | ||||||
Accredited Investor | Maximum | |||||||
Reorganization Transactions | |||||||
Number of common unit held by existing owners | 85,000 | ||||||
Percentage of vested units elected to sell | 100.00% | ||||||
Accredited Investor | Minimum | |||||||
Reorganization Transactions | |||||||
Number of common unit held by existing owners | 85,000 | ||||||
Percentage of vested units elected to sell | 100.00% | ||||||
Class A common stock | |||||||
Initial Public Offering | |||||||
Issuance of stock (in shares) | 163,959 | 150,681 | 423,985 | 403,712 | |||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | |||||
Reorganization Transactions | |||||||
Common units conversion ratio | 1 | ||||||
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 B common stock | |||||||
Initial Public Offering | |||||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | |||||
Reorganization Transactions | |||||||
Number of votes for each share | Vote | 1 | ||||||
Issue of shares, Reorganization transaction | 22,499,665 | ||||||
Number of new shares issued after cancellation under the reorganization transaction | 240,457 | ||||||
IPO | |||||||
Initial Public Offering | |||||||
Share price (in dollars per share) | $ / shares | $ 33 | ||||||
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 | 3 Months Ended | 5 Months Ended | 7 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2018 | Jul. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net income (loss) attributable to common stockholders | |||||||||||||
Net loss | $ (12,691) | $ 392 | $ 3,102 | $ (2,828) | $ 17,547 | $ (38,924) | $ (7,656) | $ (12,054) | $ 6,734 | $ (47,821) | $ (12,025) | $ (41,087) | $ (48,359) |
Non-controlling interest subsequent to the IPO | (847) | (7,324) | |||||||||||
Net income (loss) attributable to common shareholders | $ (11,999) | $ 1,273 | $ 796 | $ (2,942) | $ 9,608 | $ (10,198) | (12,872) | $ (590) | |||||
Basic income (loss) per share: | |||||||||||||
Net income (loss) attributable to common shareholders | (590) | (12,872) | |||||||||||
Basic income (loss) per share | $ (0.25) | $ 0.03 | $ 0.02 | $ (0.06) | $ 0.22 | $ (0.24) | |||||||
Diluted income (loss) per share: | |||||||||||||
Net income (loss) attributable to common shareholders | $ (590) | $ (12,872) | |||||||||||
Total | 43,122,782 | 46,792,389 | |||||||||||
Diluted income (loss) per share | $ (0.25) | $ 0.03 | $ 0.02 | $ (0.06) | $ 0.22 | $ (0.24) | |||||||
Class A common stock | |||||||||||||
Basic income (loss) per share: | |||||||||||||
Weighted average shares of Class A common stock outstanding | 43,122,782 | 46,792,389 | 43,122,782 | ||||||||||
Basic income (loss) per share | $ (0.01) | $ (0.28) | $ (0.01) | ||||||||||
Diluted income (loss) per share: | |||||||||||||
Weighted average shares of Class A common stock outstanding | 43,122,782 | 46,792,389 | 43,122,782 | ||||||||||
Total | 46,792,389 | 43,122,782 | |||||||||||
Diluted income (loss) per share | $ (0.01) | $ (0.28) | $ (0.01) | ||||||||||
Antidilutive shares | 49,994 | ||||||||||||
Time based stock options | |||||||||||||
Diluted income (loss) per share: | |||||||||||||
Antidilutive shares | 52,555 | 373 | |||||||||||
Market based stock options | |||||||||||||
Diluted income (loss) per share: | |||||||||||||
Antidilutive shares | 155,000 | 155,000 | |||||||||||
Threshold period | 90 days | 90 days | |||||||||||
Vesting period | 5 years | 5 years | |||||||||||
Market based stock options | Minimum | |||||||||||||
Diluted income (loss) per share: | |||||||||||||
Threshold volume weighted average per share price trigger | $ 100 | $ 100 | |||||||||||
Market based stock options | Class A common stock | |||||||||||||
Diluted income (loss) per share: | |||||||||||||
Antidilutive shares | 20,055 | ||||||||||||
Focus LLC | |||||||||||||
LOSS PER SHARE | |||||||||||||
Focus LLC common units held by continuing owners | 22,075,749 | 22,823,272 | 22,823,272 | 22,075,749 | 22,823,272 | ||||||||
Common unit equivalents of outstanding vested and unvested incentive units held by continuing owners | 5,731,995 | 5,139,653 | 5,139,653 | 5,731,995 | 5,139,653 | ||||||||
Total common units and common unit equivalents attributable to non-controlling interest | 27,807,744 | 27,962,925 | 27,962,925 | 27,807,744 | 27,962,925 | ||||||||
Total common units and common unit equivalents of incentive units outstanding | 75,229,059 | 74,228,828 | 74,228,828 | 75,229,059 | 74,228,828 | ||||||||
Ownership interest (as a percentage) | 37.00% | 37.70% | 37.70% | 37.00% | 37.70% | ||||||||
Non-controlling interest allocation | 63.00% | 62.30% | 62.30% | 63.00% | 62.30% | ||||||||
Convertible incentive units | 18,597,474 | 19,754,450 | 19,754,450 | 18,597,474 | 19,754,450 | ||||||||
Net income (loss) attributable to common stockholders | |||||||||||||
Net loss | $ 47,821 |
ACQUISITIONS - Business Acquisi
ACQUISITIONS - Business Acquisitions (Details) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | |
ACQUISITIONS | ||||
Number of business acquisitions closed | item | 31 | 19 | 23 | |
Consideration: | ||||
Cash and option premium | $ 507,498 | $ 408,478 | $ 362,524 | |
Cash due subsequent to closing at net present value and estimated working capital adjustment | 4,341 | 39,134 | 188 | |
Fair market value of estimated contingent consideration | 82,781 | 42,086 | 37,551 | |
Total consideration | 594,620 | 653,615 | 464,991 | |
Allocation of purchase price: | ||||
Total tangible assets | 50,761 | 14,817 | 6,095 | |
Total liabilities assumed | (53,394) | (34,411) | (12,273) | |
Goodwill | 1,090,231 | 860,495 | 515,489 | $ 316,505 |
Total allocated consideration | 594,620 | 653,615 | 464,991 | |
Focus LLC | ||||
Consideration: | ||||
Fair market value of common units issued | 51,456 | 64,728 | ||
Class A common stock | ||||
Consideration: | ||||
Fair market value of common units issued | 112,461 | |||
Business acquisitions | ||||
Allocation of purchase price: | ||||
Goodwill | 229,799 | 347,496 | 198,546 | |
Amount of tax on goodwill and intangibles related to business acquisitions | 508,547 | |||
Revenue from acquired entity in business acquisitions | 85,025 | |||
Income from acquired entity in business acquisitions | 7,999 | |||
Business acquisitions | Management contracts | ||||
Allocation of purchase price: | ||||
Finite-lived intangible assets | 17,284 | 30,080 | 27,890 | |
Business acquisitions | Customer relationships | ||||
Allocation of purchase price: | ||||
Finite-lived intangible assets | 349,447 | 294,785 | 244,289 | |
Business acquisitions | Other intangibles | ||||
Allocation of purchase price: | ||||
Finite-lived intangible assets | $ 723 | $ 848 | $ 444 |
ACQUISITIONS - Asset Acquisitio
ACQUISITIONS - Asset Acquisitions (Details) $ in Thousands | 2 Months Ended | 12 Months Ended | |||
Feb. 25, 2020USD ($) | Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | Jun. 30, 2018USD ($) | |
Asset Acquisitions | |||||
Number of asset acquisitions | item | 3 | 6 | 2 | ||
Total purchase consideration | $ 850 | $ 4,577 | $ 0 | ||
Contingent consideration | 3,452 | 2,007 | $ 7,713 | ||
Intangible assets acquired in asset acquisitions | $ 850 | $ 4,577 | |||
Weighted-average useful life of all intangibles acquired | 9 years | 11 years | 11 years | ||
Number of business acquisitions | item | 31 | 19 | 23 | ||
Purchase consideration for asset acquisitions | $ 507,498 | $ 408,478 | $ 362,524 | ||
Financial technology | |||||
Asset Acquisitions | |||||
Cost Method Investments | $ 20,000 | ||||
Business acquisitions | Subsequent Events | |||||
Asset Acquisitions | |||||
Purchase consideration for asset acquisitions | $ 46,041 | ||||
Management contracts | |||||
Asset Acquisitions | |||||
Intangible assets acquired in asset acquisitions | $ 12 | ||||
Weighted-average useful life of all intangibles acquired | 18 years | 20 years | 19 years | ||
Customer relationships | |||||
Asset Acquisitions | |||||
Intangible assets acquired in asset acquisitions | $ 808 | $ 4,352 | |||
Weighted-average useful life of all intangibles acquired | 9 years | 10 years | 10 years | ||
Other intangibles | |||||
Asset Acquisitions | |||||
Intangible assets acquired in asset acquisitions | $ 30 | $ 225 | |||
Weighted-average useful life of all intangibles acquired | 5 years | 5 years | 5 years |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Change in goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Change in the goodwill | |||
Goodwill beginning of period | $ 883,119 | $ 538,113 | $ 339,129 |
Cumulative impairment losses beginning of period | (22,624) | (22,624) | (22,624) |
Balance beginning of period | 860,495 | 515,489 | 316,505 |
Goodwill acquired | 229,799 | 347,496 | 198,546 |
Other | (63) | (2,490) | 438 |
Goodwill period increase (decrease) | 229,736 | 345,006 | 198,984 |
Goodwill end of period | 1,112,855 | 883,119 | 538,113 |
Cumulative impairment losses end of period | (22,624) | (22,624) | (22,624) |
Balance end of period | 1,090,231 | 860,495 | 515,489 |
Impairment loss of goodwill | $ 0 | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS- Intangible assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 1,517,725 | $ 1,145,700 |
Accumulated Amortization | (514,269) | (383,505) |
Net Book Value | 1,003,456 | 762,195 |
Customer relationships | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | 1,362,104 | 1,008,186 |
Accumulated Amortization | (471,361) | (349,125) |
Net Book Value | $ 890,743 | 659,061 |
Customer relationships | Minimum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 4 years | |
Customer relationships | Maximum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 10 years | |
Management contracts | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 150,464 | 133,112 |
Accumulated Amortization | (39,888) | (31,911) |
Net Book Value | $ 110,576 | 101,201 |
Management contracts | Minimum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 2 years | |
Management contracts | Maximum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 20 years | |
Other intangibles | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 5,157 | 4,402 |
Accumulated Amortization | (3,020) | (2,469) |
Net Book Value | $ 2,137 | $ 1,933 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS- Estimated amortization expense (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Estimated amortization expense | |
2020 | $ 139,474 |
2021 | 136,573 |
2022 | 131,532 |
2023 | 123,734 |
2024 | $ 111,253 |
FIXED ASSETS - Fixed assets (De
FIXED ASSETS - Fixed assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Fixed Assets | ||
Subtotal | $ 87,966 | $ 64,287 |
Less accumulated depreciation and amortization | (46,332) | (39,507) |
Total | 41,634 | 24,780 |
Computers, software development and equipment | ||
Fixed Assets | ||
Subtotal | 34,462 | 31,172 |
Leasehold improvements | ||
Fixed Assets | ||
Subtotal | 36,699 | 20,710 |
Furniture and fixtures | ||
Fixed Assets | ||
Subtotal | $ 16,805 | $ 12,405 |
FAIR VALUE MEASUREMENTS - Impli
FAIR VALUE MEASUREMENTS - Implied fair value (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Implied fair value based on level 2 inputs | ||
Stated value | $ 1,272,999 | $ 836,582 |
First Lien Term Loan | Level 2 | ||
Implied fair value based on level 2 inputs | ||
Stated value | 1,139,188 | 798,985 |
Fair value | $ 1,146,307 | $ 773,018 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in the fair value (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Balance at beginning of period | $ 98,905 | $ 76,677 |
Additions to estimated contingent consideration | 82,781 | 42,086 |
Payments of contingent consideration | (36,862) | (26,237) |
Non-cash changes in fair value of estimated contingent consideration | 38,797 | 6,638 |
Other | (53) | (259) |
Balance at end of period | 183,568 | 98,905 |
Other liabilities | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Contingent consideration paid in cash | $ 36,862 | 23,816 |
Contingent consideration issued of restricted common units | $ 2,421 |
FAIR VALUE MEASUREMENTS - Conti
FAIR VALUE MEASUREMENTS - Contingent consideration (Details) - Level 3 $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration | $ 183,568 | $ 98,905 |
Valuation techniques | us-gaap:ValuationTechniqueOptionPricingModelMember | us-gaap:ValuationTechniqueOptionPricingModelMember |
Minimum | Valuation Technique, Option Pricing Model [Member] | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration (in percent) | (10.7) | (16.2) |
Minimum | Valuation Technique, Discounted Cash Flow [Member] | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Business Combination Contingent Consideration Liability Measurement Discount Rate | 11 | 12 |
Maximum | Valuation Technique, Option Pricing Model [Member] | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration (in percent) | 51.1 | 18.7 |
Maximum | Valuation Technique, Discounted Cash Flow [Member] | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Business Combination Contingent Consideration Liability Measurement Discount Rate | 17 | 18 |
CREDIT FACILITY - Old and New C
CREDIT FACILITY - Old and New Credit Facility (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Jan. 31, 2020 | Jul. 31, 2019USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
CREDIT FACILITY | |||||
Face amount of debt | $ 1,279,188 | $ 838,985 | |||
Deferred financing costs | 9,645 | 12,340 | |||
Debt issuance costs | 3,743 | 4,612 | $ 32,612 | ||
Loss on extinguishment of borrowings | (21,071) | $ (8,106) | |||
Consolidated EBITDA | $ 303,319 | ||||
Credit Facility | |||||
CREDIT FACILITY | |||||
First lien leverage ratio as defined in the Credit Facility | 6.25% | ||||
Actual total secured leverage ratio | 4 | ||||
Secured leverage ratio threshold for contingent principal payments | 3.75 | ||||
Credit Facility | Maximum | |||||
CREDIT FACILITY | |||||
First lien leverage ratio as defined in the Credit Facility | 6.25% | ||||
Credit Facility | Base rate | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.50% | ||||
First Lien Term Loan | |||||
CREDIT FACILITY | |||||
Face amount of debt | $ 350,000 | $ 1,153,000 | |||
Deferred financing costs | $ 3,743 | ||||
Quarterly installment repayments | $ 2,891 | ||||
Debt discount (as a percent) | 0.25% | ||||
First Lien Term Loan | LIBOR | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 2.50% | ||||
First Lien Term Loan | LIBOR | Subsequent Events | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 2.00% | ||||
First Lien Term Loan | Base rate | Subsequent Events | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.00% | ||||
First Lien Revolver | |||||
CREDIT FACILITY | |||||
Deferred financing costs | $ 9,645 | 12,340 | |||
Accordion feature | 650,000 | ||||
Maximum borrowing capacity | $ 30,000 | ||||
Margin (as a percent) | 0.50% | ||||
First Lien Revolver | LIBOR | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 2.00% | ||||
First Lien Revolver | Base rate | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.00% | ||||
First Lien Revolver Step Down One | |||||
CREDIT FACILITY | |||||
Unused commitment fee (as a percent) | 0.375% | ||||
First Lien Revolver Step Down One | LIBOR | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.75% | ||||
First Lien Revolver Step Down One | Base rate | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 0.75% | ||||
First Lien Revolver Step Down Two | |||||
CREDIT FACILITY | |||||
Unused commitment fee (as a percent) | 0.25% | ||||
First Lien Revolver Step Down Two | LIBOR | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.50% | ||||
First Lien Revolver Step Down Two | Base rate | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 0.50% | ||||
First Lien Revolver Step Down Three | LIBOR | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 1.25% | ||||
First Lien Revolver Step Down Three | Base rate | |||||
CREDIT FACILITY | |||||
Margin (as a percent) | 0.25% | ||||
Second Lien Term Loan | |||||
CREDIT FACILITY | |||||
Loss on extinguishment of borrowings | $ 21,071 |
CREDIT FACILITY - Reconciliatio
CREDIT FACILITY - Reconciliation of Principal Amounts Outstanding (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jul. 31, 2019 | Dec. 31, 2018 |
CREDIT FACILITY | |||
Unamortized debt financing costs | $ (5,389) | $ (2,403) | |
Unamortized discount | (800) | ||
Amount outstanding under credit facility | 1,272,999 | 836,582 | |
First Lien Term Loan | |||
CREDIT FACILITY | |||
Carrying value of debt | 1,139,188 | 798,985 | |
Unamortized discount | $ (875) | ||
First Lien Revolver | |||
CREDIT FACILITY | |||
Carrying value of debt | $ 140,000 | $ 40,000 |
CREDIT FACILITY - First Lien Re
CREDIT FACILITY - First Lien Revolver and Letters of Credit (Details) - USD ($) $ in Thousands | 5 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CREDIT FACILITY | ||||
Weighted average interest rate | 6.00% | 5.00% | 6.00% | |
Face amount of debt | $ 838,985 | $ 1,279,188 | $ 838,985 | |
Deferred financing costs | 12,340 | 9,645 | 12,340 | |
Debt discount | 800 | |||
Loss on extinguishment of borrowings | (21,071) | $ (8,106) | ||
First Lien Revolver | ||||
CREDIT FACILITY | ||||
Unused commitment line | 605,793 | 502,962 | 605,793 | |
Deferred financing costs | 12,340 | 9,645 | 12,340 | |
Letter of credit | ||||
CREDIT FACILITY | ||||
Letter of credit outstanding | 4,207 | $ 7,038 | $ 4,207 | |
Annual interest rate | 2.00% | 1.00% | ||
Second Lien Term Loan | ||||
CREDIT FACILITY | ||||
Early Repayment of Senior Debt | $ 207,000 | |||
Loss on extinguishment of borrowings | $ 21,071 |
EQUITY - Common Stock (Details)
EQUITY - Common Stock (Details) | Dec. 31, 2019Vote$ / sharesshares |
EQUITY | |
Preferred stock, par value | $ / shares | $ 0.01 |
Preferred stock, authorized shares | shares | 500,000,000 |
Class A common stock | |
EQUITY | |
Voting rights per share | 1 |
Class B common stock | |
EQUITY | |
Voting rights per share | 1 |
EQUITY - 2018 Omnibus Incentive
EQUITY - 2018 Omnibus Incentive Plan (Details) $ / shares in Units, $ in Thousands | Jul. 30, 2018installment$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Sep. 30, 2019shares | Jun. 30, 2019shares | Mar. 31, 2019shares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares |
Class A common stock | ||||||||
EQUITY | ||||||||
Issuance of common stock (in shares) | 163,959 | 150,681 | 423,985 | 403,712 | ||||
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 | |||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Total unrecognized expense | $ | $ 1,621 | $ 1,621 | ||||||
Weighted-average period to recognize compensation expense (in years) | 1 year | |||||||
Class B common stock | ||||||||
EQUITY | ||||||||
Common stock retired (in shares) | 122,916 | 109,781 | 260,385 | 254,441 | ||||
Incentive Units | ||||||||
EQUITY | ||||||||
Common stock exchanged (in shares) | 70,572 | 81,673 | 248,142 | 217,730 | 618,117 | |||
Issuance of common stock in connection with acquisitions and contingent consideration (in shares) | 163,959 | 150,681 | 423,985 | 403,712 | ||||
Threshold period | 90 days | |||||||
Vesting period | 3 years | |||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Total unrecognized expense | $ | $ 44,693 | $ 44,693 | ||||||
Weighted-average period to recognize compensation expense (in years) | 3 years 1 month 6 days | |||||||
Stock options | ||||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Total unrecognized expense | $ | 8,911 | $ 8,911 | ||||||
Weighted-average period to recognize compensation expense (in years) | 3 years 2 months 12 days | |||||||
Restricted Stock Units (RSUs) | ||||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Total unrecognized expense | $ | $ 2,569 | $ 2,569 | ||||||
Weighted-average period to recognize compensation expense (in years) | 4 years | |||||||
Common Stock | Class A common stock | ||||||||
EQUITY | ||||||||
Issuance of common stock (in shares) | 18,648,649 | |||||||
Issuance of common stock in connection with acquisitions and contingent consideration (in shares) | 3,736,252 | |||||||
Common Stock | Class B common stock | ||||||||
EQUITY | ||||||||
Issuance of common stock in connection with acquisitions and contingent consideration (in shares) | 323,607 | |||||||
2018 Omnibus Incentive Plan | Class A common stock | ||||||||
EQUITY | ||||||||
Share price (in dollars per share) | $ / shares | $ 33 | |||||||
Stock options vests, number of installments | installment | 3 | |||||||
Changes in stock options | ||||||||
Granted | 178,608 | 178,608 | ||||||
Vested | 53,285 | 59,530 | ||||||
Changes in stock option, Weighted Average Exercise Price | ||||||||
Vested | $ / shares | $ 33 | $ 33 | ||||||
Changes in unvested common stock | ||||||||
Outstanding at the beginning of the period | 119,078 | |||||||
Granted | 178,608 | 178,608 | ||||||
Forfeited | (12,500) | |||||||
Vested | (53,285) | (59,530) | ||||||
Outstanding at the end of the period | 53,293 | 119,078 | 53,293 | 119,078 | ||||
Changes in unvested common stock, Grant Date Fair Value | ||||||||
Outstanding at the beginning of the period | $ / shares | $ 33 | |||||||
Granted | $ / shares | $ 33 | |||||||
Forfeited | $ / shares | 33 | |||||||
Vested | $ / shares | 33 | 33 | ||||||
Outstanding at the end of the period | $ / shares | $ 33 | $ 33 | $ 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 | ||||||||
Changes in stock options | ||||||||
Outstanding at the beginning of the period | 1,401,276 | |||||||
Granted | 558,021 | 1,401,276 | ||||||
Exercised | (25,575) | |||||||
Forfeited | (100,756) | |||||||
Outstanding at the end of the period | 1,832,966 | 1,401,276 | 1,832,966 | 1,401,276 | ||||
Vested | 698,805 | 503,014 | ||||||
Changes in stock option, Weighted Average Exercise Price | ||||||||
Outstanding at the beginning of the period | $ / shares | $ 31.34 | |||||||
Granted | $ / shares | 28.19 | $ 31.34 | ||||||
Exercised | $ / shares | 32.75 | |||||||
Forfeited | $ / shares | 30.31 | |||||||
Outstanding at the end of the period | $ / shares | $ 30.42 | $ 31.34 | 30.42 | 31.34 | ||||
Vested | $ / shares | $ 32.01 | $ 33 | ||||||
Changes in unvested common stock | ||||||||
Granted | 558,021 | 1,401,276 | ||||||
Vested | (698,805) | (503,014) | ||||||
Changes in unvested common stock, Grant Date Fair Value | ||||||||
Vested | $ / shares | $ 32.01 | $ 33 | ||||||
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 | |||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Compensation expense recognized | $ | $ 4,247 | $ 7,725 | ||||||
2018 Omnibus Incentive Plan | Stock options | Class A common stock | IPO and Reorganization transactions | ||||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Compensation expense recognized | $ | $ 4,504 | |||||||
2018 Omnibus Incentive Plan | Time-based stock option awards | ||||||||
Changes in unvested common stock, Grant Date Fair Value | ||||||||
Granted | $ / shares | $ 9.03 | $ 12.56 | ||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Expected term (in years) | 6 years 2 months 12 days | 7 years 3 months 18 days | ||||||
Expected stock price volatility (in percent) | 29.00% | 32.00% | ||||||
Risk-free interest rate (in percent) | 1.76% | 2.81% | ||||||
Weighted average grant date fair value | $ / shares | $ 9.03 | $ 12.56 | ||||||
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 | |||||||
Changes in unvested common stock, Grant Date Fair Value | ||||||||
Granted | $ / shares | $ 3.97 | |||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Expected term (in years) | 5 years | |||||||
Expected stock price volatility (in percent) | 30.00% | |||||||
Risk-free interest rate (in percent) | 2.78% | |||||||
Weighted average grant date fair value | $ / shares | $ 3.97 | |||||||
2018 Omnibus Incentive Plan | Market condition-based awards | Class A common stock | ||||||||
Changes in stock options | ||||||||
Granted | 155,000 | |||||||
Changes in unvested common stock | ||||||||
Granted | 155,000 | |||||||
2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | ||||||||
EQUITY | ||||||||
Vesting period | 4 years | |||||||
Changes in stock options | ||||||||
Granted | 98,061 | |||||||
Changes in unvested common stock | ||||||||
Granted | 98,061 | |||||||
Outstanding at the end of the period | 98,061 | 98,061 | ||||||
Changes in unvested common stock, Grant Date Fair Value | ||||||||
Granted | $ / shares | $ 27.90 | |||||||
Outstanding at the end of the period | $ / shares | $ 27.90 | 27.90 | ||||||
Fair value of the stock option grants determined with assumptions | ||||||||
Weighted average grant date fair value | $ / shares | $ 27.90 | |||||||
2018 Omnibus Incentive Plan | Maximum | Stock options | Class A common stock | ||||||||
EQUITY | ||||||||
Shares authorized | 6,000,000 | |||||||
Additional shares authorized for issuance under an established share-based compensation plan | 3,000,000 | |||||||
Percentage of additional shares authorized for issuance under an established share-based compensation plan to the outstanding shares | 5.00% |
EQUITY - Focus LLC Common Units
EQUITY - Focus LLC Common Units (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2017 | |
Common Units | ||||||
EQUITY | ||||||
Outstanding common units | 22,075,749 | 22,075,749 | ||||
Compensation expense recognized | $ 263 | |||||
Class A common stock | ||||||
EQUITY | ||||||
Issuance of common stock (in shares) | 163,959 | 150,681 | 423,985 | 403,712 | ||
Class B common stock | ||||||
EQUITY | ||||||
Common stock retired (in shares) | 122,916 | 109,781 | 260,385 | 254,441 | ||
Incentive Units | ||||||
EQUITY | ||||||
Common stock exchanged (in shares) | 70,572 | 81,673 | 248,142 | 217,730 | 618,117 | |
Issuance of common stock in connection with acquisitions and contingent consideration (in shares) | 163,959 | 150,681 | 423,985 | 403,712 |
EQUITY - Focus LLC Incentive Un
EQUITY - Focus LLC Incentive Unit - Hurdle Rates (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Incentive Units | |||||||
Incentive Units | |||||||
Outstanding at the beginning of the period | 18,597,474 | 15,229,039 | 12,234,283 | ||||
Granted | 2,106,131 | 6,426,715 | 6,193,042 | ||||
Common stock exchanged (in shares) | (70,572) | (81,673) | (248,142) | (217,730) | (618,117) | ||
Forfeited | (331,038) | (311,625) | (392,375) | ||||
Redeemed | (2,746,655) | (2,805,911) | |||||
Outstanding at the end of the period | 19,754,450 | 19,754,450 | 18,597,474 | 15,229,039 | |||
Vested at the end of the period | 10,288,263 | 9,910,399 | 8,237,146 | ||||
Weighted Average Hurdle Price | |||||||
Outstanding at the beginning of the period | $ 20.63 | $ 15.53 | $ 10.97 | ||||
Granted | 28.01 | 30.73 | 21.30 | ||||
Exchanged | 11.24 | ||||||
Forfeited | 27.80 | 22.26 | 16.50 | ||||
Redeemed | 15.79 | 8.25 | |||||
Outstanding at the end of the period | $ 21.59 | 21.59 | 20.63 | 15.53 | |||
Vested at the end of the period | $ 15.37 | $ 15.37 | $ 14.19 | $ 11.22 | |||
Incentive Units | Hurdle Rate $1.42 | |||||||
Incentive Units | |||||||
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 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 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 end of the period | 482,545 | 482,545 | |||||
Vested at the end of the period | 482,545 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 7 | ||||||
Incentive Units | Hurdle Rate 9.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,984,779 | 1,984,779 | |||||
Vested at the end of the period | 1,984,779 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 9 | ||||||
Incentive Units | Hurdle Rate 11.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,148,023 | 1,148,023 | |||||
Vested at the end of the period | 1,148,023 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 11 | ||||||
Incentive Units | Hurdle Rate 12.00 | |||||||
Incentive Units | |||||||
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 end of the period | 831,416 | 831,416 | |||||
Vested at the end of the period | 831,416 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 13 | ||||||
Incentive Units | Hurdle Rate 14.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 56,205 | 56,205 | |||||
Vested at the end of the period | 56,205 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 14 | ||||||
Incentive Units | Hurdle Rate 16.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 168,552 | 168,552 | |||||
Vested at the end of the period | 168,552 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 16 | ||||||
Incentive Units | Hurdle Rate 17.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 80,000 | 80,000 | |||||
Vested at the end of the period | 72,500 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 17 | ||||||
Incentive Units | Hurdle Rate 19.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 865,633 | 865,633 | |||||
Vested at the end of the period | 859,383 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 19 | ||||||
Incentive Units | Hurdle Rate 21.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 3,975,500 | 3,975,500 | |||||
Vested at the end of the period | 2,475,500 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 21 | ||||||
Incentive Units | Hurdle Rate 22.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,289,667 | 1,289,667 | |||||
Vested at the end of the period | 657,960 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 22 | ||||||
Incentive Units | Hurdle Rate 23.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 524,828 | 524,828 | |||||
Vested at the end of the period | 262,414 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 23 | ||||||
Incentive Units | Hurdle Rate 26.26 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 25,000 | 25,000 | |||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 26.26 | ||||||
Incentive Units | Hurdle Rate 27.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 29,484 | 29,484 | |||||
Vested at the end of the period | 7,371 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 27 | ||||||
Incentive Units | Hurdle Rate 27.90 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 2,051,131 | 2,051,131 | |||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 27.90 | ||||||
Incentive Units | Hurdle Rate 28.50 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,646,766 | 1,646,766 | |||||
Vested at the end of the period | 411,694 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 28.50 | ||||||
Incentive Units | Hurdle Rate 33.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 3,715,000 | 3,715,000 | |||||
Vested at the end of the period | 20,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 33 | ||||||
Incentive Units | Hurdle Rate 36.64 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 30,000 | 30,000 | |||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 36.64 | ||||||
Time based incentive units | |||||||
Weighted Average Hurdle Price | |||||||
Non-cash equity compensation expense | $ 14,756 |
EQUITY - Focus LLC Incentive _2
EQUITY - Focus LLC Incentive Units (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 30, 2018 | Oct. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Employees and Nonemployees | |||||
Incentive Units | |||||
Non-cash equity compensation expense | $ 14,082 | $ 36,743 | $ 10,247 | ||
Incentive Units | |||||
EQUITY | |||||
Threshold period | 90 days | ||||
Vesting period | 3 years | ||||
Incentive Units | |||||
Granted | 2,106,131 | 6,426,715 | 6,193,042 | ||
Forfeited | 331,038 | 311,625 | 392,375 | ||
Vested at the end of the period | 10,288,263 | 9,910,399 | 8,237,146 | ||
Total unrecognized expense | $ 44,693 | ||||
Weighted-average period to recognize compensation expense (in years) | 3 years 1 month 6 days | ||||
Incentive Units | Average per share price $35.00 | |||||
EQUITY | |||||
Hurdle Rate | $ 21 | ||||
Threshold period | 90 days | ||||
Threshold volume weighted average per share price trigger | $ 35 | ||||
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 | |||||
EQUITY | |||||
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 | Minimum | |||||
EQUITY | |||||
Threshold volume weighted average per share price trigger | 42 | ||||
Incentive Units | Vesting Condition, Average Per Share Price $63.00 | Maximum | |||||
EQUITY | |||||
Threshold volume weighted average per share price trigger | $ 63 | ||||
Incentive Units | Vesting Condition, Average Per Share Price $42.00 to $63.00 | |||||
EQUITY | |||||
Vesting percentage | 50.00% | ||||
Linear vesting percentage | 50.00% | ||||
Incentive Units | Vesting Condition, Average Per Share Price $42.00 to $63.00 | Minimum | |||||
EQUITY | |||||
Threshold volume weighted average per share price trigger | $ 42 | ||||
Incentive Units | Vesting Condition, Average Per Share Price $42.00 to $63.00 | Maximum | |||||
EQUITY | |||||
Threshold volume weighted average per share price trigger | 63 | ||||
Time based incentive units | |||||
Fair value of the stock option grants determined with assumptions | |||||
Expected term (in years) | 4 years | 4 years | 4 years | ||
Expected stock price volatility (in percent) | 29.00% | 31.00% | 37.00% | ||
Risk-free interest rate (in percent) | 1.64% | 2.53% | 1.79% | ||
Weighted average grant date fair value | $ 7.15 | $ 7.71 | $ 6.64 | ||
Incentive Units | |||||
Non-cash equity compensation expense | $ 14,756 | ||||
Market-Based Incentive Units | |||||
EQUITY | |||||
Hurdle Rate | $ 33 | ||||
Threshold period | 90 days | ||||
Vesting period | 5 years | ||||
Threshold volume weighted average per share price trigger | $ 100 | ||||
Fair value of the stock option grants determined with assumptions | |||||
Expected term (in years) | 4 years 1 month 6 days | ||||
Expected stock price volatility (in percent) | 30.00% | ||||
Risk-free interest rate (in percent) | 2.74% | ||||
Weighted average grant date fair value | $ 5.05 | ||||
Incentive Units | |||||
Granted | 3,845,000 |
EQUITY - Focus LLC Convertible
EQUITY - Focus LLC Convertible Preferred Units (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($) | Jul. 30, 2018 | |
EQUITY | |||
Value of units issued | $ 442,270 | ||
Preferred units conversion ratio | 1 | ||
Selling, general and administrative expenses | |||
EQUITY | |||
Capitalized initial public offering cost expended | $ 9,840 | ||
Convertible preferred units | |||
EQUITY | |||
Number of units acquired by new investors (in units) | shares | 30,918,280 | ||
Unit price (in dollars per unit) | $ / shares | $ 21 | ||
Value of units issued | $ 649,284 | ||
Accrued preferred return paid in cash | 3,063 | ||
Transaction expenses | $ 2,012 | ||
Units recapitalized (in units) | shares | 2,439,447 | ||
Additional noncash equity compensation expense | $ 24,369 | ||
Senior and Junior Preferred Units | |||
EQUITY | |||
Value of units issued | 207,014 | ||
Accrued preferred return converted, redeemed or recapitalized | $ 44,815 | ||
Senior Preferred Units | |||
EQUITY | |||
Units retired (in units) | shares | 17,195,412 | ||
Units recapitalized (in units) | shares | 2,380,952 | ||
Junior Preferred Units | |||
EQUITY | |||
Units retired (in units) | shares | 10,332,956 | ||
Units recapitalized (in units) | shares | 58,495 | ||
Common Units | |||
EQUITY | |||
Units retired (in units) | shares | 6,521,720 | ||
Senior and Junior Preferred Units and Common Units | |||
EQUITY | |||
Transaction expenses | $ 15,500 | ||
Retirement price (in dollars per unit) | $ / shares | $ 21 | ||
Class A common stock | |||
EQUITY | |||
Common units conversion ratio | 1 | ||
Incentive Units | |||
EQUITY | |||
Transaction expenses | $ 15,500 | ||
Units retired (in units) | shares | 2,767,911 | ||
Retirement price (in dollars per unit) | $ / shares | $ 21 |
EQUITY - Cash compensation expe
EQUITY - Cash compensation expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Jul. 30, 2018 | |
EQUITY | ||
Payment of cash to Mandatorily Exchanging Owners (in percent) | 65.00% | |
Cash compensation expense | $ 5,926 | |
Preferred units conversion ratio | 1 | |
Non Accredited Investor | ||
EQUITY | ||
Payment of cash in excess of Gross IPO Price (in percent) | 25.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
INCOME TAXES | ||||
U.S. Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 21.00% | 35.00% |
Uncertain tax positions reserve | $ 0 | $ 0 | ||
Income tax benefit on remeasurement of its U.S. corporate deferred tax assets and liabilities | $ 2,653 |
INCOME TAXES - Components of in
INCOME TAXES - Components of income (loss) before income tax (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
INCOME TAXES | ||||
U.S. Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 21.00% | 35.00% |
Income (loss) before income tax, United States | $ (7,828) | $ (41,636) | $ (52,276) | |
Income (loss) before income tax, Foreign | 2,852 | 9,999 | 2,416 | |
LOSS BEFORE INCOME TAX | $ (4,976) | $ (31,637) | $ (49,860) |
INCOME TAXES - Components of _2
INCOME TAXES - Components of income tax expense (benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Current provision: | |||
Federal | $ 1,201 | $ 1,511 | $ 1,020 |
State and local | 1,579 | 1,080 | 477 |
Foreign | 2,419 | 2,132 | 980 |
Total current provision | 5,199 | 4,723 | 2,477 |
Deferred provision (benefit): | |||
Federal | 2,293 | 3,932 | (3,455) |
State and local | 435 | 954 | (49) |
Foreign | (878) | (159) | (474) |
Total deferred provision (benefit) | 1,850 | 4,727 | (3,978) |
Total income tax expense (benefit) | $ 7,049 | $ 9,450 | $ (1,501) |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets (liabilities) (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Investment in Focus LLC | $ 74,415 | $ 62,618 |
Net operating loss carryforwards | 429 | 5,842 |
Business interest carryforwards | 1,219 | |
Intangible assets | 586 | 532 |
Deferred rent and other | 629 | 410 |
Gross deferred tax assets | 76,059 | 70,621 |
Deferred tax liabilities: | ||
Intangible assets | (13,184) | (6,248) |
Fixed assets and other | (270) | (288) |
Gross deferred tax liabilities | (13,454) | (6,536) |
Net deferred tax assets (liabilities) | 62,605 | 64,085 |
Other liabilities | ||
Deferred tax liabilities: | ||
Gross deferred tax liabilities | $ (12,848) | $ (5,924) |
INCOME TAXES - Effective tax ra
INCOME TAXES - Effective tax rate reconciliation (Details) | Jan. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
INCOME TAXES | ||||
U.S. Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 21.00% | 35.00% |
Income passed through to individual members (as a percent) | (11.30%) | (31.90%) | (36.80%) | |
Foreign income taxes (as a percent) | (31.00%) | (6.20%) | (1.00%) | |
Non-cash equity compensation expense (as a percent) | (41.80%) | (5.80%) | ||
Impairment of equity method investment | (31.00%) | |||
Other non-deductible expenses | (19.20%) | (1.60%) | (0.30%) | |
Valuation allowance (as a percent) | 0.10% | 1.60% | ||
State and local income taxes, net of U.S federal tax benefit (as a percent) | (32.60%) | (6.10%) | (0.70%) | |
Remeasurement of deferred taxes (as a percent) | 5.30% | |||
Other (as a percent) | 4.20% | 0.60% | (0.10%) | |
Effective income tax rate (as a percent) | (141.70%) | (29.90%) | 3.00% |
INCOME TAXES - Operating loss c
INCOME TAXES - Operating loss carryforwards (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
operating loss carryforwards | ||
Valuation allowance | $ 0 | $ 0 |
U.S. federal | ||
operating loss carryforwards | ||
Net operating loss carryforwards | 620 | |
U.S. federal | Corporate subsidiary of Focus LLC | ||
operating loss carryforwards | ||
Net operating loss carryforwards subject to expiration | $ 1,344 |
TAX RECEIVABLE AGREEMENTS (Deta
TAX RECEIVABLE AGREEMENTS (Details) $ in Thousands | Jul. 30, 2018agreement | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
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% | ||
TRA obligations | $ | $ 48,399 | $ 39,156 |
LEASES (Details)
LEASES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
LEASES | ||
Initial term | 12 months | |
Operating lease cost, selling, general and administrative expenses | $ 44,213 | |
Cash flows from operating leases | $ 41,333 | |
Weighted-average discount rate | 6.60% | |
Weighted-average remaining lease term | 7 years 4 months 24 days | |
Future minimum lease payments under operating leases | ||
2020 | $ 45,006 | |
2021 | 38,484 | |
2022 | 32,583 | |
2023 | 27,957 | |
2024 | 24,505 | |
2025 and thereafter | 85,043 | |
Total | 253,578 | |
Less: present value discount | (57,153) | |
Operating lease liabilities at December 31, 2019 | 196,425 | |
Other information pertaining to leases | ||
Operating lease costs included in selling general and administrative expenses | 44,213 | |
Operating cash flows from operating leases | 41,333 | |
Operating lease assets obtained in exchange for operating lease obligations | $ 68,891 | |
Future minimum lease payments under operating leases | ||
2019 | $ 35,426 | |
2020 | 31,695 | |
2021 | 24,813 | |
2022 | 20,906 | |
2023 | 16,743 | |
2024 and thereafter | 50,045 | |
Total minimum lease payments | $ 179,628 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | ||
Liabilities, clearing brokers | $ 0 | $ 0 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Compensation and related expenses | |||
EMPLOYEE BENEFIT PLANS | |||
Employee benefit plan expense | $ 10,235 | $ 8,329 | $ 7,485 |
NET CAPITAL REQUIREMENTS (Detai
NET CAPITAL REQUIREMENTS (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
NET CAPITAL REQUIREMENTS | ||
Aggregate net capital of subsidiaries | $ 14,142 | $ 12,990 |
Excess net capital | 11,439 | 11,880 |
Minimum net capital requirement | $ 2,703 | $ 1,110 |
CASH FLOW INFORMATION (Details)
CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Supplemental disclosures of cash flow information—cash paid for: | |||
Interest | $ 57,344 | $ 56,584 | $ 41,840 |
Income taxes | 7,775 | 6,149 | 3,357 |
Supplemental non-cash cash flow information: | |||
Fair market value of estimated contingent consideration in connection with acquisitions | 82,781 | 42,086 | 37,551 |
Fair market value of restricted common units in connection with acquisitions and contingent consideration | 53,877 | 65,064 | |
Fair market value of Class A common stock in connection with acquisitions | 112,461 | ||
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 | (2,633) | (19,594) | (6,178) |
Discount on proceeds from Credit Facility | 875 | 3,064 | |
Purchase price installments related to acquisitions | 39,134 | ||
Deferred taxes and tax receivable agreements | (463) | 62,454 | |
Operating lease assets | 180,114 | ||
Operating lease liabilities | $ 196,425 | ||
Other | $ 228 | $ 188 |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Jul. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Expenses recognized | $ 1,906 | $ 1,712 | $ 770 | |
Debt issuance costs | $ 3,743 | 4,612 | $ 32,612 | |
Class A common stock and Class B common stock | ||||
Underwriting fees received by affiliates of stockholders | $ 6,244 | |||
Class A common stock and Class B common stock | First Lien Term Loan | ||||
Debt issuance costs | $ 135 |
OTHER (Details)
OTHER (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Feb. 28, 2019 | Mar. 31, 2018 | Dec. 31, 2019 | |
OTHER | |||
Gain on sale of investment | $ 5,509 | ||
Management contract buyout expense | $ 1,428 | ||
Impairment of equity method investment | $ 11,749 |
SUPPLEMENTAL FINANCIAL INFORM_3
SUPPLEMENTAL FINANCIAL INFORMATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 5 Months Ended | 7 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2018 | Jul. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||||
Revenues | $ 340,231 | $ 316,641 | $ 301,545 | $ 259,924 | $ 247,515 | $ 235,701 | $ 231,435 | $ 196,229 | $ 1,218,341 | $ 910,880 | $ 662,887 | ||
Operating expenses | 314,340 | 303,736 | 282,012 | 250,607 | 213,084 | 249,958 | 219,721 | 183,683 | 1,150,695 | 866,446 | 657,134 | ||
Income (loss) from operations | 25,891 | 12,905 | 19,533 | 9,317 | 34,431 | (14,257) | 11,714 | 12,546 | 67,646 | 44,434 | 5,753 | ||
Net income (loss) | (12,691) | 392 | 3,102 | (2,828) | 17,547 | (38,924) | $ (7,656) | $ (12,054) | $ 6,734 | $ (47,821) | (12,025) | (41,087) | $ (48,359) |
Non-controlling interest | 692 | 881 | (2,306) | (114) | 7,939 | (28,726) | (847) | 40,497 | |||||
Net income (loss) attributable to common shareholders | $ (11,999) | $ 1,273 | $ 796 | $ (2,942) | $ 9,608 | $ (10,198) | $ (12,872) | $ (590) | |||||
Income (loss) per share of Class A common stock: | |||||||||||||
Basic | $ (0.25) | $ 0.03 | $ 0.02 | $ (0.06) | $ 0.22 | $ (0.24) | |||||||
Diluted | $ (0.25) | $ 0.03 | $ 0.02 | $ (0.06) | $ 0.22 | $ (0.24) |