FOCS - Earnings call transcript Q1 2019 | Focus Financial Partners Inc

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Operator

Good morning. I would like to welcome everyone to the Focus Financial Partners 2019 First Quarter Earnings Call.

Joining today's call are Rudy Adolf, Founder and CEO; Jim Shanahan, Chief Financial Officer; Rusty McGranahan, General Counsel; and Tina Madon, Head of Investor Relations and Corporate Communications. [Operator Instructions].

As a reminder, this conference call may be recorded. Mr. begin. may you McGranahan,

Russell McGranahan

I Partners. McGranahan, everyone. of General Focus Financial am morning, the Rusty Counsel Good

from begin, me the the does results statements could these involve information may, to currently of these that, results statements. a we the of this statements. and These not Focus course, cause Before let statements. call Focus statements. cause such fact will update call, risks I list materially course CEO, which assumptions And during to We on With Financial we forward-looking to from any has of to that the differ Rudy the with materially Focus' may finally, to attention from make Focus our and your filings results that may number future based differ of forward-looking its and remind of to it made and some available factors that you uncertainties duty undertake made statements. over Partners turn these are Founder by that Focus SEC, Adolf. assumes differ no and

Ruediger Adolf

We Thank good joined call. everyone in morning appreciate Focus. your who you, our interest has to and Rusty,

start. we before update quick a Just

will will This I this be quarter, facilitate that discussing quarter this the your our the recaps and find to key feedback. about helpful, we and our welcome supplement on morning. We help we expanded earnings discussion statistics supplement as information you hope The and Jim always, call. other

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We strategy, XX with services including preferred our which Page Evaluate major is of technology of On some the cybersecurity, state-of-the-art legal detail provide service and development, our team to pricing and HR have largest matches help regulatory of which to best on X range provide. we partners. one providers professionals our and Focus recommendations pass the support marketing will over are supplement, advice. make of us partner on enables most Separately, these who a operational more to and along ones and business we of firms. we've support a across the industry offerings for of provided clients vendors

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an As a result, are they RIA. industry-leading

first acquisitions pipeline signed our the to deal you we and on XX XXXX partner transactions that four scale will more detail, for Because Year-to-date, momentum we seeing activity. achieved we based of deals. on M&A have we of and increasing terms partners. our provide The impending opportunities number our in turning outlook. first merger Jim are have of will half in network, quarter pipeline, but is with attractive believe and we a continuing. Now robust and closed an have our

our remain to However, be it is appropriate credit in transaction, note multiples XXXX IPO the important to our ensure we we positive our controlling highly to an that each yes, carefully achieve successful outlook. approach to we in we And that very do pay return. disciplined

We the runway to U.S. to adjusted of wealth call now significant qualities per Focus Jim. our me targets. revenue I'm and over our sustained to international. share business Jim? further excess in let which unique in us of both management ahead a will the have be income continue in that, catalysts the net a the business leading expand name have that driving and made confident space With turn for growth and

James Shanahan

Rudy, everyone. Thanks, good and morning,

the in quick our presentation. Partners the disclosures financial include of the our Financial of interest other contained The of Partners, Inc., member our the XX, company; format Focus Focus Financial financial IPO. XXXX, Inc. statements owner July the LLC, GAAP majority a the results public with reminder which Partners on Financial and outstanding those and release and is press became First, of of of which Focus on managing in membership connection

results, quarter results our a combined financial reinforce year-over-year over adjusted growth our average quarter average per revenues growth which targets and our Difficulty] income significant annual strong XXXX are are share and recapped pleased growth extremely with net revenue to growth in during share. M&A robust adjusted XX% turning which with time. I'm activity in income annual net and with performance our XX% confidence the per pipeline, Now These on [Technical

Regarding quarter, our the I like highlight following. revenues would to the in

were management increasing our of or Wealth were which XXXX. primary $XX.X that from the revenues $XX.X provide or $XX.X from to management the fees services XX million Our new that they firms total the XXXX. closed their March wealth XX% million Approximately for a earned XX.X% in months year-over-year. revenue clients, growth, increase fees, driver resulted QX the are XX.X% million, million by ended acquisitions firm or $XXX.X a our partner growth XX, partner of

revenues Our reflecting expect our the and our trend revenues, recurring base excess fee-based and of in total we of to of XX% remained this continue. stability revenue

in organic XXXX. growth X.X% in revenue XX.X% QX and QX was QX to XXXX Our as XX.X% compared in XXXX

discussed revenues. earnings fixed our XXXX by we organic quarter the As fourth decline our a our call, downturn. in markets, our lag on primarily X market income be fourth the XXXX on equities the revenues impacted many of advanced structure billing would quarter that anticipated by resulted market quarter and effect effect of The of utilized partner firms QX

major in XXX S&P a growth variance This of QX As a the rate. first a increase point organic driver of QX the significant and XXXX. reference, XXXX quarter was from our decreased X% thus the the XX% change period-over-period in in in S&P revenue

of market of will in recent quarter strong activity, the QX that and that As performance we above rally basis growth revenues and organic a the our be QX demonstrating for our the XXXX, XX%, by XXXX business increase partner resiliency the anticipate result on sequential we revenue model. a our firms expect merger underlying will

organic will partner merger we of comfortable to also due our by we timing transactions some encounter this our quarterly Although variability on firms, which target. growth, can the with vary remain

that is growth annual basis. As we our on best organic stated, have evaluated we always revenue an believe rate

on Ward XXXX. $XX.X Our November which revenue QX of Loring included the revenues XX, quarter from closed a acquisition XXXX full contribution million

correlated approximately XX% contribution QX equities closed were XX% approximately primarily we $XX of the basis, revenues correlated million million markets, XXXX, quarter contribution partner a Dykema $X.X this These family advanced In firms, to in $XX billings. of million fixed service, estimate different high new were not approximately primarily revenues to from investment AG&S, income, or Quadrant, the Prime tax net we points fees and of for worth advice, fees and of office ultra-high for revenues clients. Page our typically or quarter million. type consist markets. impacted were or of billing movements. market supplement, the allocation quarter On of fixed a as which study of for the may client that provided result have Cabot, portfolio Foster first XX a a to X and remaining Additionally, revenue at generated XX million. we of $XXX a composition revenue of we recap be and financial our our full approximately methodologies, how and $XXX revenues and be On XX% The expect

Now continued partner the and let M&A turn firms demonstrate be to EBITDA The In deal during a terms XX.X% activity quarter record quarter. million. on a in increase quarter, basis year-over-year. approximately quarter $XX.X adjusted during during first me million into earnings the we of first acquired We EBITDA the volume second approximately that for had EBITDA. in X momentum our quarter firms $X.X the which These will base quarter, adjusted contributed full closed million, the $X strong $XX.X the new million. annual adjusted were to was

closed Page of We provided we a our of the have have or summary deals on XX supplement. announced

anticipate XX the EBITDA. first firms completion adjusted with X second summary, closed and X mergers As of that $XX.X In our million. closing acquired for QX, the this partner X on and Advisors. earnings are in April the Sound in X Australia supplemented XXXX, XX million the these $X.X by $X.X Partners million quarter The will Escala had View in We of approximately additional earnings annual firms approximately in firms we contribute quarter. is QX year-to-date base end new firms with acquired these X, base are and closings year-to-date in for partner of

guidance margin As a of is by the transactions. we year cannot primarily on provide reminder, we our percentage this Accordingly, driven in our margin. EBITDA EBITDA acquire full

estimate be we our XX%, QX will XXXX QX. for However, with that margin line EBITDA approximately in

Now items. let expense-related few address me a

full increased transactions the quarter expenses as quarter Ward M&A of to Loring the we closed. as the well due first Our transaction effect

firms. QX Management result of are $XX.X in that fees a is the or XX primarily results variable XX.X% fees in expenses our increased XXXX growth of management our correlated partner of These partner and revenues March which formulaic, One closed are ended XXXX the by largest operating of fees, our to in earnings by as million additions new partner firms. QX XX, firm from months XXXX. the

which the As values a over noncash each estimated estimated for recur of is which results are X-year of by our liabilities, contingent in million a measurement, by which result influence earnout period. partner fair change value GAAP in factors long-term $X.X impacted liabilities This quarter firm Carlo these QX Monte generally reminder, each of the use in remeasurement has XXXX. a of the fair of consideration quarter, affected number simulations,

compensation compensation Regarding expense. and quarter the was for $X.X noncash Noncash interest million.

was IPO XXXX related our the noncash term XXXX $XX.X compensation more XXXX costs charges million This and $XX.X borrowing us, under quarterly to credit by million compensation in lien connection with higher Interest $XXX in related to QX X.X% QX primarily in our the repayment second noncash due QX our acquisition that IPO, approximately was XXXX. reflects our expense activity. decrease partially agreement of Now of million normalized are behind revenues. loan to revolving compared offset of level a amount of

million the first Our compared QX million to quarter XXXX GAAP $XX.X loss net loss XXXX. a of of $X.X was net in

per the than our as per over well organic acquisition or share year $X.XX $XX.X year the million an quarter. year per was from net XXXX, quarter, completed $XX.X as growth. activity $X.XX prior million, revenue reflecting income was prior QX share the income For increase XX.X% higher adjusted net or Adjusted first of last XX.X% the share,

quarter-end calculations which exempted our is per at equivalents LLC net common calculate income the adjusted the unit share our used impacted units outstanding share by reminder, price a to As is level. Focus count for share for

we a hurdle of as For release. and of XX, your respective included table March XXXX, units rates reference, have outstanding their our earnings exempted our in

count, with we do not any we not did issuances our XXXX share and equity activity. in anticipate equity connection our connection with acquisitions Regarding issue acquisition QX in any QX

and balance Now billion outstanding Page quarter key the approximately a we credit facilities, turning increase debt supplement. to on our end ended to XX cash, firms is with We acquisitions the attributable under recapped $XXX our This for sheet, increase with under with mergers and typically during $X.X We cash drawdowns which of partner which our in for of the quarter. primarily our of from since pay the was metrics XXXX. have acquisitions facility. first financed million million $XXX completed our revolver operations

our leverage XX, As Xx within range. was net XXXX, and X.XXx of ratio X to March our targeted

with X mentioned, high As to respect long-term quality we levels these and that to we are exceptionally transactions to target will above to net leverage acquisitions and our to pursue accretive ensure expect We Rudy we be nature. of remain any in are temporary earnings. Xx, disciplined committed the our to

the While potential pipeline, new in a access range provides capital us access attractive experience range growth to given meaningfully these to Having current larger ready compounded raise equity one no financing substantial us. we capitalize to that generate of current we the firm uptick they opportunities for would of our we to of the increases if opportunities partner a reasons earnings greater markets to growth the or go we flexibility on is public. to to may the markets acquisitions, be to support additional raise see. decided from accretion we need This and levels which support see equity it incremental tend acquisitions,

achieve acquisitions the we've attractive. IRRs on highly discussed, previously our As we are

rate in the example, generated on this and assuming are digits low synergies, a accretion year. upside we without further closed deals year-to-date run basis we an double meaningful the see As have in

dynamic by We to are an only to confident additional of and view for generated would issue available see by equity we we our net our effect and a us, but shareholders. our dilutive very offset be opportunities be To issuing this look positive the business that of acceleration the equity if clear, leverage our reducing by acquisitions. we as would accretion

it turn over Rudy to provide concluding Rudy? remarks. to I'll Now back

Ruediger Adolf

about Thank the mark insights other vision members are ourselves ever calendars. we have so excited want that you, we know turn their Jim. of where We for please the as our we'll of XXXX introducing future. Investor for you partners quarter. persistence the over let I also term. focus Focus would value With November first to achieve proud XX to this your work, targets opportunities our shareholder our year-to-date that, it and questions. exceed and the closing, business the wanted our open year, to to see growth Day we I our look forward planning results sharing we In employees thank Operator? hard be the further long deliver we in today. business and not achieved are of our providing this superior are and on team, them, and is Without position now on call for and

Operator

[Operator Instructions].

first Our Alex Sachs. question with from comes Goldman Blostein

Alexander Blostein

was First hoping the pipeline. have the I just is question pipeline around the Focus-related expand beyond could between what of been topics and composition for deals. announced, partner the deals you guys maybe already you

Ruediger Adolf

your Alex. question. for Hi, Thank Yes. you

like quarter get result you the credit we We're of transaction it it visibility We quarter, deals going frankly, year-to-date deals. geared with into this year very you have more excellent tremendous very our in will mergers. if -- size are pipeline that and well, an excellent this good XX So the given and has to know momentum deals, IPO. to M&A -- don't IPO forward. you just actually mergers. have close the yet know to as be do when in we the quality diversification we underway, with of ever It's do going we momentum, terms the is never of and indicated of activities we of while towards are to deals, really year, we gains comfortable just And last fourth this entering quite the

our firms transaction, from existing we and screen strong which but an in -- merger this a our very transaction, In be we as of very excellent see throughout an first momentum, optimistic we could -- move partner partner are year are the here. overall fact, every it's time is we

Alexander Blostein

it. appreciate definitely added what size all way helpful. yet. the that deals I that to deals the closed haven't the number was are haven't on Any guys yet? ones earnings announced the know provided that And color stuff completed a but to you is the Got contribution from us on us closed, get and more hoping you in That's I the that's disclosure help pending.

Ruediger Adolf

Yes. We don't relates M&A a really acquired in that, are very it position, provide guidance and we very, as strong said to Having earnings. Alex.

the do we XXXX we our announce the I, the very Jim will after We In which are deals, and and achievable. that targets fine comfortable, we IPO. are are moment,

fact, momentum overall also the a we're business on the there's good in to our pipeline. going In them exceed but chance based in

Alexander Blostein

Ward from pipeline, that flavor as were maybe integration we Loring seen integration one that margins, where the then Last first cost come me, synergies of the How stands think they a guys, maybe cleanup. with XX% you've the of or you just while progress through that, Buckingham us EBITDA of merger and a year? give larger maybe around a we deal deals the of out? a for it. as part about some When like should yet the to reflection are And announced. Got we've quarter. for in looks at some that lowest I is in bit That's margins the understand we for adjusted of a look the EBITDA and

James Shanahan

fees we buy model SG&A depending the margins. our remember, compensation, We the business. unique a generally impact perspective business buy cash we the to our one the Alex, partners XX% management that the think is about so the from the run can of portion as flows, always because XX% upon cost and that margin So because

that including on impact So and from of in with that an obviously, change those based the because earlier, share towards mix margins. per so a share the QX, new and the revenue partners Obviously, drives accordingly revenue partners, But is uniqueness the as the the mergers we the growth standpoint, impact to in in QX, of due ANI model. advance the Obviously, business lag the there billing accelerating. Loring percentage. the I'd of of business the percentages. for economics model how guide the would joined We contribute Ward how allocation those the business was mentioned

We an really QX. for would to forecast on what this in margin and are the for provided share. EBITDA ANI it's at per be quarter us focused new be we help, long over a revenue margin it's the But term, that the EBITDA acquired. may term of guidance least metrics, And function to the XX% the because X short hard percentage

Ruediger Adolf

did. More specifically to with on we some seeing. the restructuring you're the integration for are some your question took Loring we Ward, We very that that of pleased charges

the So expected. kicking synergies X Tier are as in

We have Ward seen some platform. initial migration of clients, meaning, Loring clients onto Buckingham the

previously, number excellent underway. of a there discussions announced are we have quite As

years will and value come. expected as deliver performing synergies is for transaction to and the clearly, So

Operator

comes America with Carrier And question our Merrill Michael of next Lynch. Bank from

Michael Carrier

the contribution on the million. I first rose debt that was look you $XXX said I until Maybe you If And the because the you're just that the think at full EBITDA around net M&A deals at maybe terms else understand in move to. annualize, what front. XQ, million, around just pieces of any we're Anything need would missing missing in what the year-end of cash in there's like on can deals, you seems But we've things those also we're well be things if looking it And $X million. was to at I'm just that on the and it like looks trying seen then maybe drove $XX quarter, going I than it other or as other on a sheet higher multiple past. -- looking balance know when kind at that it?

Ruediger Adolf

we Michael. don't any see multiples. expansion Hi, question. of Yes, No, important

as Our true of mergers. for company very a consistent as transactions over well multiples time, is long have which period both been holding

do Of course, higher the adjusted get larger for multiples. deals size,

them cash is As the these you increase two multiple based as many have capital holding know well the IPO different in paying company both deployed in that factors. on are for transactions. the merger because as can't deals explained Yes, of has and numbers we you we one process, really determine

on not we to is perspective. takeaway multiples with our true this what a key is the line possible numbers, So but continue seen based from in these that very much math same be the have simply pipeline by and the way, is historically,

James Shanahan

And right. X, the to if footnote $XXX what Obviously, million. there's supplement All close-end you said. just Q, a was Rudy see to at the then in cash reference a

at used approximately from look cash in the on deal by the you activity QX. sheet for $XX balance March, change to If up the cash million. that went was of in December Part

Michael Carrier

you the or a Okay. guys fourth can we it's I about maybe contribution your as both think given forward volatility growth, had you elevated, trailing whether the but That's either the when in deals And bringing money, quarter, that the assets XX the organic think you how helpful, going market and new quarter markets and we months, -- about quarter, add-on from contributor? volatility. at that then like the net it more should we firms look -- when provide the new seems obviously just is color the first saw in then the in any think given that

Ruediger Adolf

Yes.

client of that I course, overall steady -- from quarter really of more a frankly from experienced. the of yes, based impact consistent, of impact both well very impact billing have any the in very had of given measurable these disruption retention, claimed of a we of did that we model, quarter. we're of perspective what market acquisition, an markets markets the on doing. model saw And we we very it's the new first we can on in the Client the clearly, the course So the see our had saw independent -- think certainly client quite in we're is acquisition/retention consistent, markets numbers RIA which which no here, -- growth that the is is power the first we methodologies,

prudent on with, demonstrates perspective that As of really from good because of some said business advice, prior is, an which we thing a calls, course, quite in. is actually I of the volatility the proposition advice it are fiduciary frankly this quality

impact get the what quarter. fourth we in first exactly where Now have on equity formula December basically to market here importantly, is that quarter guys market of -- the in the the dynamics shown to helps numbers you here revenues that we showed our gave we in the

through on So it business a you very but impact, the client then business time of high the very steady about a just market transparency is cycle. have any same level at

Operator

And Blair. our Shutler from Chris comes question with William next

Christopher Shutler

On the close, those four are additional a firm transactions mergers? you pending deals size you signed of how of sense deals? are partner and the many And give can versus us

Ruediger Adolf

Hi, Yes. Chris.

deals that kind have you we did done when all deals plus what showing go consistent closing. we for of disclosing more pending Page of the here these time first -- supplement to are sweet that not economics we specifically the are XX of that of the in X It's So the deals, kind this, we're are practices. doing, past much spot with very it a we our small medium-sized of transactions of little is and but course,

Christopher Shutler

partner why firms Okay. the quarter did in sorry, investments made -- number the supplement, two, of in you in but the And too, increase three quarter? by then is I'm the this but if

Ruediger Adolf

look at the of again, Page XX, number new basically where we transactions. break out So

is the this mergers one done then to and time had portfolio across us actually, split which a great way is this portfolio the quarter, firms. way to for from we we will you our we partners, have time by pattern our because partner our one between help a to like -- see what merger, Now in X

yes, just business yesterday. don't So what, they we and completed meetings, one to at these practices be a partner And happen can say, get we your partner why actually of these one where often meet synergies succession us. and serve between other partners to ultimately, would are for very you to each It firms. we models a succession there very leads merge the things them you can gets know know they plan you compatible, -- are know our better because we other, know when each actually what, clients, great partner, then another and say

distorts the that number which So are transactions doing. we of this we had in quarter, these

James Shanahan

Yes.

clients with the time. example, a the in partners So each of our for just together. They've other It Connecticut they Geographically, a well. win-win real partner services for merged as period They Resnick firm for joined, together. GYL partner client work and was enhanced known firm obviously other existing in a Hartford. they're as our well Westport, close

Ruediger Adolf

But initiated. all very important it's to just cases, in note that actually, partner about these --

wanting frankly, transactions. where to areas those the quite course, be partners behind the into one can then it's entrepreneur economically and the turn hand the these employee. an this together, partners get But it's time, of we're, So helpful for we Over attractive very for of never and us.

the are. really partners' -- in what by have priorities a visible hand background we our the is invisible motivated hand So

Christopher Shutler

percentage proxy. lastly, Okay, us quarter-over-quarter. makes bit had but any the a that a Loring increased your to quarter-over-quarter? understand Ward outsized effect looks just percentage the why XX% guessing sense. increased you ownership then XX% like using maybe on And detail calculating might will an have more I'm great. ownership I'm -- guys, be Can help

Ruediger Adolf

referring Which that? you one to? are ownership was What

Christopher Shutler

of percentage at looking the of income taking and as inverse your fees ownership. as ratio management just a I'm of then a basically kind that operating proxy for

Ruediger Adolf

got I it. Okay.

Yes. basically company. So it's the holding

revenue this a is first And select it's of the a really interesting revenues. market small the some reflection quarter our the quarter example impacted really quarter a it's cases. how dynamics So in example, first first actually, of very or

protected preference Our us. basically

and automatically that the adjust and are subject markets here. mathematically of Management in in the that fees we a the powerful talking what a to keep model, quarter. a a is application small because of effects numbers and lower because preference in it's So an part the example, of the economic such there about revenues, for then -- of part it's first in profitability, on lower we our is that temporary important seeing

Operator

comes question next Owen with our from Oppenheimer. Lau And

Owen Lau

nonbank it. really for Focus thank and Solutions. partnering questions all, of banks disclosure. appreciate First with additional related lenders. I Focus A of to you couple the Client is the

So is for network the structure can now about the nonbank network? please to right How in banks it the also, balance on lenders fair the And and to more you the going many assume sheet risk? fee to take lenders product? is that Focus and talk new incentive maybe of not join any also, the

Ruediger Adolf

thank feedback you, Owen, always Yes. disclosures appreciate the the supplement. we in further on yes, and

it addition for because Thank on can we're to better. was to do I helpful FCS. for get be, you the You for is dying you the and know our doing what it partners. this question this more the such important question an we guys

is So important not is this firstly, sheet risk most balance no, that we taking. are

and at to We are we point. group And of currently XX conduit using banks. it's power -- doing are basically scale be approaching purchasing what to a they this and our It credit could providing course, of a is of that on create our benefit is to access themselves their cash simply the partners clients. our solutions by not here and, ultimately, own to

-- hotly there cash debated enough the is not Quite industry. the a very there within out the competitive providers. traditional So frankly, in are solutions area from

in That don't deposits good space. course, these points very are on to created of the clientele. So they basically to a the capability. program, we from as to products. from gets these It efficient net the very is comes the ultra-high collect It willing things, and deposits. type this to our worth insured are type basis programs network the rates for There's RIAs of share. because suite -- they what our deposit of here based a is very we traditional access onto superior that It FDIC vastly clients and high-net-worth that's of have FDIC XXX and banks where is money and powerful have for the insured is efficiencies banks of them then

our very other a to We really on we not to the highly commercial an there, side, insurance. on the and But specialty often frankly, clients aircraft of competitive ultimately, are we loan basically create these of of that These non-purpose right to had own. bank. have a These with again nothing our loans. to create And the mortgages. is are we to would of course residential FDIC rates balance have are attractive type offers working Similarly, highly the sheet competitive, highly loans large on their like solutions. power asset-secured which on a basically none scale partners credit the capability are network lending have Focus our quite clients are offer now, finance, this

it We it. launched visible, pick just sure industry going we days, and wanted I'm to because will mention be the early to on it. So it's press up very

time highly have So the of over organic of business. powerful differentiated a to year, big think and to have any this our growth it's over impact clients that it here is program. contributor for the but proposition the we very time, we Won't a then, value overall course,

Owen Lau

to another strategy. related have I question helpful. very your very, That's tech

Morgan administration So Solium acquired which provides services. Stanley equity

Ward both more Loring experience? also Given acquisitions and you way software of HiddenLevers, recent see revenue with with partnerships drive a your partnership your customer or improve do and as to acquisition companies

Ruediger Adolf

Yes.

a and a of looking is XX in is quite natural we technology flexibility, company real So now years this vendors in terrific it's are not this technology level a emerging offered functionality, at of portfolio how are industry -- enabler pricing that the a that of doing. what by to choices, Owen, the different see we ago, but of And beneficiary than ourselves as are our as solutions it now was frankly, major we industry. business

operations to versus to or use We is solutions our a price technology about of power technology levels scale the because And they and team, and are our possible philosophy scale any everybody access we else. possible expertise, the the help at can. largest just this client partners possible best with the and other purchasing relative ultimately our that vendor to have dedicated best of our service simply industry

are not We coding. business the in of

with rather best whatever the and brightest We own and to there never business I empower are enable not economics our systems technology. legacy developing out build I'd problems. legacy Quite my use and in of the vendors to partners. best frankly, the wanted

helped of fronts X into then see get it X these yes, we we innovative We , a leading have -- , solution, we can have firms up. fronts scale quickly, X deal number we a rather fronts, it when

in We investments these made firms. haven't

lead investment. which area is this in happy a investment not generator, very really which been itself. only B, Our assets smart for But is prime it's has by we a technology are firm with actually this

we to think and their I we a performance, have some lot quite them contributions learned from their made very are We with have good growth. frankly, happy and yes, very

Operator

comes question next with Raymond O'Shaughnessy Our from James. Patrick

Patrick O'Shaughnessy

provide calling as to us the them acquisitions Can or why you of remind you're earlier. mergers become those acquired to you're firm spoke partner more base So important, able as level us mergers? earnings you not as

Ruediger Adolf

Yes. different. very transactions just economics the Because are very, of these

as Yes, expense I the our be economics it or we company. once attractive and other But have we these partner synergies multiples, comes these do to can tend we creating said, in what firms. the from synergies together, deals synergies holding significant merge lower firms, that, real with economics would that but multiples blended the are effects. have So it's than them revenue not significant the

disclosing consistent number not So guy price we be the quite would by it's the other IPO. number approach acquired the is, the markets because course the of frankly, has versus which and been with very a just a purchase very way helpful incomplete

Patrick O'Shaughnessy

competing you're pretty after that sense. the of And things makes Or amount competitive to turning then terms of that going Any stable some money Okay, in these on the landscape. are kind front? of RIAs change of that against?

Ruediger Adolf

aligned many got game -- also from value-added you firmly through to remain yes, into our been whatever because or I deal frankly, only into believe capital. This is after were relationships to XX cases, stars lease and to were call want, go. to with most the are an NCIs us, to these only after against I deal, the of the opportunities are some our to in deal dimensions us And non-established And we're of of one is town. we're history little in you and our have believe the want come don't industry proposition. the the and you you us as year access first these many they want X call. our banks been -- where to proprietary somewhere; do want: you entrepreneur; prospects have access value have the to to big a of announcements want there turn We only things services transaction. If always if want follow-through you it an uniqueness town, where we and, after of firmly were partner and have every firms. very but no the X said then just not record the you but year, The delivering have game ready in now things they quite the for our track

naturally I are if or industry, least there perspective. roughly observers half from what the than that probably industry tracking deal XXX of believe And the reports, many half should industry read you less the this so deals at about of or in year, happening these how is it. velocity some be Now are this believe services doing industry a

the in year or And us assumption deal advisers. next text you for behind again creates when retiring trillion opportunity. trillion, the weak the to based what the client change ever-increasing of means and the before, trillion just in what just $X It's numbers a way this it's one is in solution all said So have going demographic big most there's year these anything unfortunately that opportunity at every are it. wirehouses, We this wirehouses the transactions $X backlog where way, on in clear. are is I stunning an point need next that to space, no older where this and there's of or ever I've the other, -- assets Because XX this ultimately RIA a the advisers. the this in again. very it's By and as years, in seen. see a remarks my Yes, change $X one

double probably this number. can You

the -- address runway momentum is have business of -- course of accretive the Focus market, ability that ahead our and growth to essence extraordinary is of and the long model. the is quite the story of of we this compared it frankly, our to a us, and So behind ahead the size us which opportunity of

Operator

SunTrust. with Our next question comes from Oscar Turner

Oscar Turner

question is First on the leverage.

target. leverage its company's term the near end high of turn to X So long X

equity towards do shift any for couple look Jim's the Or continue towards Just M&A about the funding pace but as wondering pace of have does we forward comments will the issuance the imply that will years? the next implications equity?

Ruediger Adolf

the We question. Yes. above also but X that run always are go long Hi, committed that the any have us -- immediate for to may to excellent we stated attractive deploy we've a we over are and it Xx simply we acquisitions. Oscar. leverage capital have capital. the to Yes, if to touch as we very don't and opportunities see said, very with Xx And way accretive occasionally, is we fund need raise an believe to important highly

objectives. don't need our yes, be financial is we revolver, $XXX really of have versus of factor that under But envision kind our a capacity We plenty leverage million.

We think is financial to this actually terrific. clear, to it have Oscar, terrific really tap we that other on before, very we demonstrating the That's now as IPOed, we And is the there thing it. to think that Alex's a get. markets, obviously, to company why we are going we we don't as this However, here at immediately into flexibility I way do. good do it's to hoped -- us in that. exactly gives we point, but that explained which a an we would But to opportunity to momentum. momentum there's any if don't pipeline, need There's this a public it. need question are no see change do if just describe where And is be

Oscar Turner

over temp revenue And I goal migrating growth on second question of we integration? assets just any RIA margin know discussed upside previously following to you've of How timing the the Ward. should or about time. the Loring think

Ruediger Adolf

Correct. Yes.

into was announced already, speak insightful. were thought the about we you when the was synergies CEOs a X we video have the restructuring but we Two, Investor had Relations not of quite type is this a these, charge -- frankly, is RIA. of as to have of transaction an the kind are We transaction over the and we in it we our some saw So step opportunity, structured. One But X-stage of billions-a-year on long very happening from there assets have as actually life basically that talking adviser the website sure Loring as this Ward has the to opportunity. it migration that I'm and of cost a seeing and billion the cycle number clients. a for took we -- which this. it and, accretive long history Loring on where Then you -- see X Ward assets this absolutely history combined Jim, to about I tangible life you're approach a that call immediately The covered Buckingham. came this, are between They their solution Buckingham $XX offer to temp we track.

frankly transaction, seen, the Goldie of Dan many have we we was first very as ahead very terrific, and with solution, expected. are or underway and good with over step that timing one to the also Loring We there the very, of largest a Ward the firms Buckingham of speak. largest quite That conversations the migrate the

are. expenses And yes, yes, Quite So feel were we good of and the are migration we the hoped the you very some are what benefits, is a took would deal this of it do. there little is that doing terms X us exactly here, frankly, longer, where -- this of we happening. transaction happening in of have the opportunity bit but Page

into Now avalanche, of an was to this the from never RIA. temp moving dollars billions be the of predicted steady a trickle but

Operator

from Kyle next Our with KBW. question Voigt comes

Kyle Voigt

I leverage run net leverage max seems follow-ups. into how willing ratio. like should rate thinking was you'd range. the high absolute is above follow-up of on at Maybe just to One end range. be a be before ratio couple long that Xx above deleveraging net about moving just Xx net back leverage an we you're there But to wondering And go the willing the of It forward?

Ruediger Adolf

Yes.

But above with a then target. So try think the deals this trends I and also are of we're to target, have quarter as slightly will then demonstrating Loring again. the very in this we temporary after It's this the of velocity Ward see -- are like the X is past, of said, we opportunities, we there of a to less what always deal see is using are in pipeline. which basically consideration deleverage stock. all cash this but a of the our then we'd at step-out we of point. function half really tremendous function transaction all we go Occasionally, consistent Kyle, X where quarter would that the the It than are explained

just of deals we're percentages on, are larger when -- a other these working question came much it's to The hit. very deals they when stock and

But really the X I visibility and Jim levels we above X. that. bias which of we there is to basically the also this, willing way have very the a for of a into as know pipeline, would that go again, then when get a these looking a this feel mentioned, running whenever to kind then our real of bit X, company. the the and of are like simply terms increase good work need news. that said flow on capital, powerful do and because of it the course we temporarily bit exactly would to before, market So at yes, may if the we because tap the way and some pipeline is be have based feature consideration little we course little in we at course X a as would can through dynamics to right we more this of I for are into And of pipeline a the as public be below Jim we I markets, is time

James Shanahan

Yes.

use Obviously, transactions so but transactions may or very maybe the look Obviously, temporary, accretion elements is I we a shareholder a if the last things. time capital models currently instance, We transactions are look X.X so all down. point positive preference, The consistent. and we X of of be X with will in of all there's to couple accretive, Loring alternatives, as can or, or added public a be X mean at at from in over the anything years, our preference. Ward. we we we the of another for at It we model million equity X our to And transaction, perspective, X our would then shareholder. delever most. to structure data a the to be fast leverage large over with ensure nature, just the consistent. the the stand come Just XXX over temporary did alternative and quarters it's remains QX, would

Kyle Voigt

Okay.

all And And on just right then that me. EBITDA too. margin, so I you the one the for that's -- follow-up made more additional there, enough. some fair And appreciate of disclosure

$XX.X added an revenues if the an XX% right, think million $X.X million EBITDA is which some additional I I think -- it acquisitions incremental I margin. got roughly

in really So we're sequentially at that the for company, think as margins obviously I margins XQ looking total to that impacted some are the company quarter of of the mix the when margins, we're that is we overall, seeing? looking part fourth it that that XQ. the did corporate that reverse as shift But incremental to also like kind additional your were X%, we're growth overhead it compression? from partner from revenue that Or bit? XQ Is something to play specifically And -- margin first look the of the some grew the and headwinds trying or EBITDA at now XQ, specifically quarter is compression just firms the so above up quarter? understand in sequentially. there EBITDA modest I'm a to like was expenses the a in going just facing beyond the in are in margin first

James Shanahan

Yes.

it's lag function you indicated. think the of I -- a as one's revenue of the

between when through partner there so constant as mergers new share be or economics, on as of the are do as fee. mergers, second those coming we as economics. management coming they are on well on mix those partners, and is they the coming how people joining And employees it's The economics would the firms join

EBITDA, on QX that's color with retail work here. But From why that, for the it on give revenue as we and structural XX% per flux wanted a partners lot transactional going on activity we we share statistic. constant waterfalls the to obviously and additional estimate mean margin remain the there's ANI the you how help So as provided and of forecast so well. focused a to nothing our it's I just the is

Kyle Voigt

there's guess or corporate expenses kind overhead respect to holding with call out to the of I company nothing anything? or And

Ruediger Adolf

very thing than transactions consistent. more transaction-related. simply It's happen It's The No. does expensive just others. is that are basically some

to all are business the higher model. absolutely to but Ward what related simply effect, expenses Loring transactions the which onetime are So no incurred than typically there's structurally, specifically what we in doing. change These the we're

Operator

comes Matthew question next from Our Roswell with RBC.

Matthew Roswell

expanded Just a noticed market the update I on it's was the know internationally. a And you've and give question, that's how very early recently you quick wondering changes in whether days, to quick but U.S. going. relative market? any can you've if I

Ruediger Adolf

Yes.

disclosed our from X% of So part our it's know, internationally, overall international. tiny you business. coming of revenues roughly a We as is still

are However, transaction Escala markets of Australia highly we in sophisticated the them managers. respective in in established, both Prime worth Quadrant are net Canada very announcing transaction ultra-high the and excited highly their

a fact, had to In the of the very some joined very, pleasure that study impressive clients week at tour just our I it's us. earlier meeting partners a and Escala meet group on this were who

environment and the couldn't firms is turned We're help created or grow nimble, that know wealth small frankly, market, the innovative, it's traditional to and players, one our tremendous international quite to access the and quite look out U.S., expertise in for of they capital path but to reality management probably a here growth really is model the so their on kind just our we it organic firms in continue like Australia, in other of for into it's U.S., the often with model ultimately, copy So but work the our its the like there's we we but multibillion like by trying Escala in other, them happens others us. without in is really firms Royal model doing a that, really our -- but mega hope is a something unparalleled. Australia player the that, frankly, to these turn way ultimately do worth feel are standards where although unique the Escala, fundamentally to particularly and space a platform provide markets, small, because quite also white our of with where more we traditional the upside changing players Commission, down pushed we

certainly the not envisioning. what on we of are So scale

early indications we over before, we're be really have company. this So long course, this for deals contributors are the here to we painful doing in these growth flights strong. tremendous But the that despite to Australia. been of think in like Canada what very and We holding time, will space

Operator

Alex question And our Goldman from Blostein with next comes Sachs.

Alexander Blostein

that this double wanted relationship you establish. cash guys check just new I to on to sort lending started of and

opportunities? is and So the is Focus' hoping that's this that, can That's for sort kind of give -- hoping us part going really accelerate offering your revenues? sense be more solution across Or a direct another two, growth any And to to them whole RIAs platform? in how customers much there part one. have they of you currently of economics inorganic the then going cash on

Ruediger Adolf

Yes.

So FCS, Focus Client in launched program. Again, the Solutions the impact measurable just expect don't We any is new offering. XXXX.

increasing cash the that particularly before broadening economics really not the helping if side these clients. alternatives, an relationship the on their advice just do had participate that ultimately given spectrum a foremost, that discussions can ability want, economics on and will in multi-data that is very there a that us, deepening, broadening, And some of participate first our are yes, partners already to But in we've However, with gave clients the that alternatives show it attractive specific with didn't economics, decision. close the make programs. lending the advice it the some transactions of share yes, just our you or clients. partners, our to to to or that these important of with these be extension quite did led they advise even here, them seen for ultimately initial partners ultimately, for these partners on were It like wallet of the to

course, of of get share get get yes, the economics our consistent model. economics, we and always economics, our So we our partners with

it year this goes of full -- this is fact, not -- the focus into In the business. some product important is its

are get before. our not the are providing to solutions in than they their access superior product we partners had We into but what the interested and business in of clients business, going better

James Shanahan

their experience Think had a But to will we Yes. help providing value significant the which improving don't XXXX revenue our time. financials. them about impact grow client's we as our growth on any over earlier, partnership organic add indicated see

Ruediger Adolf

outside And the this it. relationships of of only is part yes, of about And cash much don't touch I a question, of that cash roughly. custodial cash want because the yes, but other roughly we type are not in accounts but our number, specific the is to give to accounts opportunity $XX you traditional in actually billion Yes. throughout sitting --

a So business, look traditionally partners a of opportunity course, size, And this these it's over side, at not whether our our of sizable that. would you in. areas multiple And have the very frankly, of time. the is quite involved that credit are on been

think actually for turn So powerful we them. this it in is very

Operator

And remarks. I'm Rudy any over further to call time. for further now the back to Adolf this like showing not any questions I at would turn

Ruediger Adolf

Yes.

in interest your and forward call. for you. to all Focus, you second you thank with our speaking all on look Thank again So we quarter

Operator

Ladies wonderful thank all Everyone, and for have day. may and you conclude today's does participating a today's disconnect. program, you gentlemen, This conference. in

Focus Financial Partners (FOCS) 12 May 192019 Q1 Earnings call transcript