FOCS - Earnings call transcript Q4 2019 | Focus Financial Partners Inc

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Rusty McGranahan

Good morning, everyone.

Before we begin, let me remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that Focus’ results may, of course, differ from these statements. These statements are based on assumptions made by and information currently available to Focus Financial Partners and involve risks and uncertainties that could cause the results of Focus to materially differ from these statements.

Focus has made filings with the SEC, which lists some of the factors that may cause its results to differ materially from these statements. no forward-looking does statements. assumes update undertake Focus such any finally, duty not and to And,

With to CEO, our I Founder that, will and Rudy turn Adolf. it over Rudy?

Rudy Adolf

earnings morning, welcome and everyone Rusty, good to Thanks, our call. and

As always, Focus. pleased Year our with Full interest Fourth and I’m Quarter extremely XXXX Results. appreciate we your in

$X.XX revenue revenues XX.X% and by of adjusted growth Our year-over-year XX.X%. million QX net income on organic increased and $XXX.X per of share of XX.X%

IPO, number crossing our income of by revenues on billion XX% were leadership, $X.XX, For and exceeded the the our strong our billion, positioning. time revenues net $X of revenue XX.X%. attractive partner for In of $X.X our adjusted reinforce up full model the demonstrate per our XX%. growth first business. the have growth year, and results initial nearly the our the organic These XX.X% our industry mark increased business since over six trajectory was These by firms and results competitive XX.X%, expectations grown and and share strong quarters

At profitability our believe XXX scale November, Investor billion, $X.X can our laid of of firms. million adjusted partner Focus Revenues by approximately and deliver XXXX. we the for EBITDA Day strategic vision about out $XXX last growth, we and

demonstrate Our to ability vision. XXXX why this results we are our confident achieve in

XX over scale successful a firms, track leading billion industry, assets, and of long with client this and value-add at acquisitions. in operating are We billion partner record in a $XXX in $X.X revenues over

relationships, fiduciary combined to would attributes we economics. knowledge replicate gained when believe difficult with they We longevity are in taken have our and These the and compelling space. the deep partner together, of advice with be highly differentiated insight

generating levered with our quality our of and our at of weighted XX%. of years for are through partners, consistently an partner two to time growth than in been We demonstrating half an that our and more, their accelerate IRR are partners us generating Investor right of the IRR excess of more to resources. highlighted are acumen have investing over delivered XX%, our those we at the positioned Day, best XX% a the IRR of Over firms XX% or portfolio than more that access XX our As group. pick

year, coming our Last focus great of strengthening be talent, these businesses. we’re operational we areas to continue in in partners and And developing year. next-generation made and enhancements growing and actively progress technology development engaged for the Key initiatives. will areas business their

new training For propositions, we are rebranding sales develop value and including initiatives. helping example,

with assisting are and We strategic and technology planning, including assessments enhancements, are incentives alignment. on reporting we vendor pathing career And working implementation.

client partners their took our advantage of Our increasingly services. scale also extend to

or a We balance on exposure of is resources pricing are example private without taking sheet at investment. equipping credit any this. terrific Cash them competitive with banking infrastructure

organic growth. We in and in level our we of than and XX, funded closed along similar have been active Both had our partners XX are of catalysts $XXX program. through dialog in over more for a deposit participation loans, million with with December

completed strategically last as which important and partners, remaining as, space. year, More our consolidation industry of in in their closed office family a dynamics. capping XX% were they to half XXXX, expanded M&A. firms, partners our we transactions who In year capitalized completed Australia Of new XX U.S., our for The by XX transactions, the related merger. Canada, acquisitions strong well on the six mergers first deals as the markets partner than in presence

three Our with drivers long-term growth insight, the levers four capital our XXXX. priorities strategy, scale, our combined and are M&A for of

internationally. excellent a per new supporting share mergers by our U.S. partners revenue partner our XX%-plus combination deliver annual through adding and and group, of to ANI growth and First, through partners growth into

remaining our leverage to and highest we target to deploy X.X enhance opportunities, to capital to X.X can And times. while range times business partners. the our to insights return third, client in offer the within scale our solutions leverage Second, of

According XX% XXXX a and remains of Against positioned recent survey, to assets opportunity partnership. they’re manage RIAs our in this we management [ph] are Envestnet wealth market by to grow expected substantial. to extremely backdrop, well The XX%. XXXX,

make As into more and highly to the attractive we our grow and are the best intellectual Day, These industry our advisors larger, capital from their and than clients. benchmarks highlighted we at value-add substantially partners our Investor benefit profitable provide. faster attributes partners

our We are enhance focused on competitive that position. further will partner’s business delivering solutions and client

our leveraging are optimize service we to costs negotiations side, and business enhance the scale in vendor On levels.

of For providers, they to by from costs reduce example, pay. the are partners our alternatives aggregate research we common most because evaluating

the On solutions client experiences. evaluating will service best-in-class are that drive side, client and we

While and still days, is early an is other management optimization. insurance example asset

on quarters. alternative one in capability partners For we’ll behalf anticipate that clients. example, their utilize of and information coming these initiatives with to are starting on a our in have investments to capability you and our strong other has of more this of the other We partners certain share

M&A began anticipating and We solid are a pipeline we with XXXX year. another strong

minimum remain we the consider, disciplined levered transactions in highly multiples selective in pay that in IRR capital invest of rigorous we we will We generates the ensuring XX%. and the a

for brought inception, was one our growth for by was They that the mergers benefits they referrals. profitability announced of accelerator industry mergers, accelerate and designed From clients, us the platforms, value continue rates service model to client will closed the a be and to performing utilizing shareholders. and and RIA growth innovation from the value-add growth partner to the add major additional consolidation. Mergers our advisors partner’s our of driver our the Increasing enhance also industry, a and our to have Focus primary will Focus making adding partners. partners two beneficiary will The year-to-date partners derive capabilities. high significant we have we and

in in We Melbourne, new recently diversification partner announced Toronto acquisition [ph] nearly or We’re group. also our MEDIQ two of closes strategy. Management presence, MEDIQ further our when international partners our Nexus which expanding to is and Investment XX% which X% will of our bring international the to important partners,

most highly is net regarded provides independent market to billion one and Nexus with as clients, and across assets. endowments high of management over Nexus ultra-high in the wealth $X.X as Canada wealth Canadian foundations. investment and management in names client worth the services well select

their MEDIQ’s its to in national this access advisor integrated and to base, and services. to trusted wealth footprint. providing positioning specializes client MEDIQ tax the lucrative management and medical professionals to services provides expand with management, other including as insurance, opportunities its investment unique market growing families,

XXXX. leverage on meaningful sequential provides a our with due X net EBITDA. few Now, starting times, point level This a to words ratio year of leverage. ended great We increase decline in the the adjusted for a a QX

deploy support and appropriate We is growth will our return opportunities, target top range the capital while targets. range. within continue highest XX% our the remaining X.X to to to bottom to believe this We X.X line

attractive to very To and with continue finish we closely We pleased leverage, our while are executing QX XXXX. our M&A monitor against results opportunities. balancing priority close, on this strong to

turn to partner as high model continue advance will attractive we believe capital in XXXX XXXX, we choice, of performing partners the multiples. objectives. the our value-added business, potential of make to our with to entrepreneurship forward As attract unique confident our access We towards us at combined and that of to services enabling are permanent we us

turn now Jim. me let that, call the over Jim? to With

Jim Shanahan

what our To XXXX fourth a growth an everyone. business, profitability. Rudy by said, morning, quarter reinforce both capped excellent Good strong was year for for and

QX $XXX.X million, XX.X% revenues Our were higher year-over-year.

share income was up quarter. and per income was $X.XX, net our adjusted XX.X%, net adjusted from the prior-year million, $XX up XX.X% Our

These reflected our up was growth targets. partner higher to Our full resources year annual intellectual million, not results prior only per up but $X.XX, than Full net scale, billion, ANI and portfolio XX% the was by strong our benefits over income results year were $X.X and our year. capital. $XXX.X were revenues of well above XX.X%. Adjusted the year-over-year, share XX.X% also access performance XX.X%

Our growth. partner be to and performing continue are platforms firms future well for excellent will

revenues XX% the increase revenue $XX.X exceptionally of our The driven of of of growth P&L. organic mergers, inclusive scale. the from by the firms, turning growth portfolio generating two demonstrating power resulted strong our our details in year-over-year Approximately partner Now or million by at to factors. QX strong was the

$XX.X year, including growth QX our million advantage new and resources partner part landmark and remaining in XX% by Jones, to in the increase, of their took an enhancing from The clients which & XXXX. profitability. million service Altman QX Escala by capital to of acquisitions. adding substantial our last and Selvaggi, resulted transactions offerings. increase revenues Greenfield expand completed contributing and was $X.X the also their businesses incremental advisors and partners We XXXX drove Our Ward compared Williams XXXX Loring or several of

organic strong reflected prior-year Our revenue same-store QX XX.X%, over our which growth partners period. the was rate by organic growth

from billings. our in million the of the services. for rate we $XXX family our financial revenues provide billing we’ll around we in time. office was type QX, QX, from anticipate based that XX.X% was non-correlated partners And advanced sources, For primarily remaining that year, XX.X% The generated was non-correlated the on reached revenues from which visibility. be markets, In our quarterly advanced first the QX correlated to full of XX.X% XX.X%. was XX%

for typically Before slower points which few fourth to in new partners M&A close our turning related to on didn’t revenues. QX a is any We highlight to expenses, the activity. seasonally I want modeling period quarter, a

Investment our $XXX,XXX Management Nexus has due quarter, in or Rudy approximately will in approximately as The we reflected partnership. million closed QX $XXX,XXX to mid-quarter $X.X However results, close. acquired Nexus the joined add Canada February transaction in announced that Focus on base X earnings and be mentioned, per will the annual

correlated and As office There year-over-year. these mentioned, high aware exceeded QX, primarily family approximately industry, quarterly $XXX revenue provided to increase activities clients are specific in services to services, typically non-market are an accordingly, seasonality XX% be revenue lead worth to in of related to projects million which in those I QX services. fluctuations. revenues, to net million entertainment These clients related just type the $XX can the of in of out and the is

that This these percentage of of by four relative associated contributed for difference. rate, amount QX favorably our to expectations to type with roughly our revenues were were points First, our original organic office the accounting impacted incremental services. family our growth $XX primarily outperformance QX approximately million for revenues

the this in majority do QX don’t recur that we While $XX will in to our of revenues, reflected expect year. anticipate we QX be this million

QX services, clients. typically quarter Second, of activities these the based for the on is seasonally the slowest

growth amount expect impacts this QX. to year. million the will lower an recur seasonal As a by in result our that relative we incremental $XX our that QX, estimate although, we revenues, in to of revenues rapid this QX non-correlated will QX be greater anticipate be the in of We

the for full firms. to QX. increasing QX they Management $XXX.X Management XX.X% EBITDA. turning XX.X%. fees the adjusted are our one were of period, were largest revenues management at Now year million, increasing are performance and of but to $XX.X fees fees were XX.X% of from tied and partner relatively million, consistent QX, our in with fees expenses, prior-year the Management

period, was $XXX.X Our EBITDA adjusted than higher our million, EBITDA up was million, adjusted the and $XX XX.X% full-year prior-year XX.X%.

for revenues, I well mentioned XX.X%. Our margin was it primarily adjusted to management. margin QX from expense the EBITDA QX, and earlier, the as The was disciplined full QX resulted from as increase year XX.X%, incremental

million company, I that Our $XX expenses which XX%, will margin the we and at holding which to estimate includes our impact QX, EBITDA earlier. remained managed QX. particularly, items, approximately QX In adjusted flat of were from partners compensation well be mentioned expenses, of by the revenue our the

approximately Equity-based team, equity $XX.XX our investment. incentive a proxy two our shareholders. with we a In for of for of revenues four-year granted with remains compensation non-cash approximately which million year, time this reinforces was strong in units good of incentive December, which substantial a expense year. alignment compensation our hurdle management incentive with full annual the compensation, connection a Our portion compensation a for rate X.X% with remains

a a QX with QX, only related our earnings. full in of and not year, recorded contributor we minority were associated this charge that’s the no method million earnings year consolidated In for and $XXX,XXX one-time full equity There meaningful $XX.X a impairment to investment equity to investment.

our capital allocation, available to $X of In was and in flow our flow it million similar Loring was year-over-year. as M&A for EBITDA. for as, this $XX.X million, XX.X% QX, to million, use fashion price year. of well to Ward our used paid expect driven fund adjusted obligations, the increase allocation we XX transaction. we activity cash and earn-out cash growth capital in earn-outs In related purchase a satisfy to we $XXX.X by higher The primarily XXXX, LTM substantial Our December the installment final the as

investors this help capital in our three our allocation, flow disclosures understand better our quarter To supplement we’ve cash areas. expanded in available earnings for

receivable added have on we additional First, our agreements. information tax

on model. added we a excess business our new credit prospects. have disclosure better flow that intangibles our disclosures to our the understand a more help we growth investors understand And remains on our efficiency the Second, third, requirement expanded key under tax and disclosure of our so facility. easily priority, cash can tax our investors Enhancing have

our balance quarter with credit outstanding approximately to ended $X.X of in ratio leverage billion our turning Now times. the a sheet. under facility We and net four debt

a our mentioned, from our Rudy function in net primarily As of the in the QX. adjusted ratio increase reduction EBITDA QX leverage is to

times will X.X activity continued this times. we anticipate to range our year, M&A we strong within of While operate X.X target

four times. For QX, our net that ratio leverage approximately we at remain estimate will

against capital that our to closely priority and allocating We our will meet leverage, return growth our this criteria. while transactions balancing to continue monitor

term rate from successfully plus to interest XXX. we January, the XXX In reducing re-priced plus loan, LIBOR LIBOR our

this in interest constant, stays reduce we LIBOR Assuming of estimate million excess will $X annually. that our expense

Although institutional transaction was not additional the in raise capital. our to we confidence and oversubscribed, our business access markets, any strong reinforcing debt did lending the community’s model debt the

growth. million we December had to revolver an under our available excess of of of our capacity $XXX As fund XX,

increased further stream growth financial growth. To close, management top revenue EBITDA we record XXXX per adjusted services, levels and substantially above capital at our and that grew well was for and an generally. rates allocation. line industry flow outstanding typical delivered available and We our cash year. in are and wealth ANI ANI the in our And We share diversified bottom

expectation strong transactions our M&A and further delivered completed benefits of consolidation. strengthened access We the sheet on net of partners enhanced services, We growth transaction ratio. our balance to and capitalizing client our our respect and scale large reflecting Our further resources. industry communicated to number – leverage with a

am enhanced better year first Investor ahead. the successful our to that lies our Day. help excited disclosures we Lastly, business, and investors I further very a understand completed about

our great to targets benefits have leverage our against confident that alike. that drive partners are We average and deliver momentum, our to continue these partners XX% will and combined differentiated scale and our well I I time. and that over will operating value business When our increase substantial of from time. annual over shareholders business highly benefits model, we the am a growth the line top elements believe on with positioned create to bottom

call over Q&A. the the for to turn Operator? now I’ll operator

Operator

of Our comes your first question question. Lau from the with line Owen with Oppenheimer. Please proceed

Owen Lau

and my thank morning, Good you taking question. for

adjusted going to kind quarter, your Thank forward? full-year appears next long-term your your your I XX% EBITDA this XX.X% you margin year. trajectory was in that very the and How to year your so close given think Do guided seasonality expansion or think continue there guidance in to long-term is, target And you get about we me margin scale in conservative, of, understand But that should up? first you. to is the that quarter, you margin it revenue. somewhere and fourth can XX% to

Rudy Adolf

and Owen, thanks for Hi, question. Yes. your

XX.X% ultimately acquired. we is the as new us. for scale, gave the considering join the we key we appropriate, and course, in is, we one EBITDA the reflection acquired excellent yes, simply and strengthen know, guidance. our but this determinant the core firms – business that our that seeing hand, guidance operating as on is believe one a of for Investor are We momentum of this guidance a reason when leverage – the percent was quarter Of that we business. Day for we the terrific our have And margin, important at And they you for ultimately this percent

Jim Shanahan

Right. XX.X%. year And were XXXX, we for at Owen, full

of So year sort growing for reflecting on outlook. QX the XX% business full towards long-term business a sort – and the of the

quarterly So, margin continue on we’ll as the a to provide EBITDA for guidance basis well.

Owen Lau

E*TRADE RIA it. you. should Thank deals? Stanley Morgan of and is Nexus the your from pace the follow-up Thank then you. think any space? in And how you the And investors do my MEDIQ withdrawals have after expansion and Got your about also environment, international regarding M&A deal

Rudy Adolf

year, of need not you – cannot this means, did compete enough and RIA mind losing one model does side the a hundreds of of is the with talking dollars cross businesses. not simply that in saw the equation, I is winning fiduciary gaining when today. brokering busy of I’m much to the Focus, you’re one about, industry, billions about model, the other to on I tunes operating – do which, a which Well, is It’s traditional consolidation. announcement my comment the share when to market want Sure. which course, of The the the yes, I’m however, sure comment reflection model thought,

E*TRADE And are higher consolidation moves what that are cost client what and, but we about in deal, about and savings your ultimately you’re value, fundamentally of seeing ultimately is seeing with are consolidation. with and defensive your course, – traditional the nature really course, Schwab-Ameritrade not of

exciting leading solution And, way beyond And the there at to right how on the from time to that, firm in U.S. always Australia see As our in Canada, one website. by of the markets. came back in clear were core our in of the a just see firms we right for and the it yes, to but be partner the and up trip international, our how time frankly, very model it say point I from have course, the business Canada, we video is is over quite our or way, will have Canadian been some we I Nexus U.S. markets. in additional great so opportunities relates resonates starting business, the

yes, we this we in of happening what’s capital of in markets. the scale course deploy where see And about these the breadth – unique are in very a number another have industry, that we best – excited opportunities. can international we the Given and scale

Owen Lau

That’s very Thank very you helpful. much.

Operator

Thank you.

KBW. from comes question. your line question next the proceed Our Kyle Voigt with with of Please

Kyle Voigt

types question said morning. margin than the was expect just the it revenues was exactly seasonality margin what And $XX million of there and of, quarter? of, Like, realize fourth also My these is were you drove fourth and, that you services you family very revenue know quarter. high – kind just the a kind stronger revenues, in first what revenues good here originally granular quarter? bit EBITDA to the can office some in more give of partially didn’t Hi, that. on the that’s, in type the but I why

Rudy Adolf

strategic in are – excellent terms course, of side, way. of Kyle. hi, a as – of a excellent a know, ultra-high paying we to quite simply and calls in and move firms we net more in worth. off off it’s an And had frankly, definition toward other We paying arrears the investments made Yes, by seeing of gives visibility. advance The is less of billings. visibility move And number us that we are in what we the are these have, whether [indiscernible] – explained course, that you the these business number has

important these of these with simply just are pleased it’s frankly services very, revenues. have are recurring the And quite And seen. some quarterly And success not underlying what to tied note, we we why to are clients. the of very

is this So QX. benefit believe us you that to phenomenon is We recurring they the not in won’t years. are going to going that them fundamentally throughout QX see – a or

Jim Shanahan

correct. for was Kyle, margin and much million. a fee, except incremental perspective, Yes. this your associated there of cost It revenue about question was management $XX And million $X then which the about you’re with from wasn’t revenue,

was So about margin. XX% this

these – specific this Just just economics.

Rudy Adolf

attractive. very Yes,

Kyle Voigt

of XX% the one question organic was on quarter it. Got guidance And other I just XXXX. Thank had first then growth for the you.

you to wondering three of quarter? that close Just includes expect that entirety the sub the in the if acquisitions

Rudy Adolf

organic Yes, of our course, we know how growth. you defining are

are in going help We the the judging will in frankly the quarter. quarter. get we Jim that’s see. to the but first next quite again have some markets, the Quite help first have excited from And about from some frankly, visibility quarter, are have much help into fourth We help didn’t in quarter, billing, we some from in very where great announced. we our what that this advanced transactions I and we the

Jim Shanahan

the we on and it so reflective the have $XX mergers is that of of in the million. reflective outlook the supplement Yes,

Kyle Voigt

Got it. you. Thank

Operator

you. Thank

question. from comes question Please the of next Bank with of Our Carrier with line Mike proceed your America.

Dean Stephan

quick Hi, a line Stephan on is just around competitive the Dean the Mike, from environment. this question

deal just playing of, given And of more out for changes So, entering you regards forces pricing moving competition seeing these kind of environment, to the the Are guys players competitive that, competitive any forward? you space. in see kind do how in or terms deals?

Rudy Adolf

Yes.

that’s clearly, so money private added, market – Much we the differentiated. driven. equity And So, the is into starting money in our position. business temporary is Dean, is a coming the already model is private disadvantage very and are of equity low-value

so Our value-added model ongoing a record about we of track entrepreneurship, long the that partner our permanent is tangible of many with access about to demonstrated firms capital. and

it’s of equity means buying temporary RIA, is, that, when firms course, what private with response firms money. involved So, an get and with

you Yes, just most net not affluent of this frankly, then an quite you in equity. is clients worth, resonate ultra-high So, from ownership from with market; the yes, fully group. issue. by three not years, block very explain is private will does equity the to years to attractive mass transaction and a the again, five And more it’s clients the of you in the formula that way, be four percentage is by less now, controlled the quite that the a have frankly, years, on and private took your

So, to are committed we targets. our annual fully

get the before tremendous many the side. perspective, We where have like have we we are an as think from returns. I said as a best but on unique we we markets, capital this deploy good opportunity overall to where different we across M&A pipeline,

Dean Stephan

Thanks. Okay.

Operator

Thank you.

line Alex Sachs. the proceed Goldman comes Blostein your with question question. next of Please with Our from

Alex Blostein

questions. Good guys. of couple morning, a Hey,

what to and translate looked add you about these XXXX infrastructure the book you bit to Rudy, of scale. the in business, build EBITDA time? Focus’ first, business? leverage excluding benefits So, talk So, firms know talked of a up of, kind to the is Can little deals, you what helping but margins kind about at looking scale how firms. kind know-how Focus’ over go to partner I marketplace which their of to guess, for, having quite to future I I’m your the your So really really EBITDA are scale margin margin time? these margins of steady Where state continue XX%, the is the could benefits not and assuming, over partner

Rudy Adolf

sure. Yes,

has So, many seen up system I our just growth. from Boston. our us whole over the firms but great very XX a investors, recently is was just little Colony are very This of billion retention, first-class firm. client of ago. They business they start billion that was tremendous This visited dynamics, now client And The blend years firm partner also in $XX new geared around nice value-added. have Group a joined $X.X acquisitive. a

to industry. being from ways, excellent an very this partner good best of So, a business in firm of one evolves how in example a many being businesses it’s the

margin we The basically translates base financials incremental year, this the and higher is a the extreme into way ultimately, case again, where an it of that in this are course, $XX million get generated, we on XX% revenues, had our the margin revenues being revenue. than –

our partner and which partners, and we we of economics through firms increase ultimately, XX%. in get the growth our increases improved then fee XX%, the So they and these economics, the with are get management their revenues efficiency sharing

value, and in we a through can not said that’s changing model we is that generate that the highly Investor are model, really guidance this in also spot it’s excellent with. margin a expansion. target we We XX% stay that, our the an and be So, to provided that it’s aligned Day. Having think

Alex Blostein

to wanted I like active you’ve seems non-U.S. then touch on the for a there. It little guys. bit you And Okay. opportunity more been

guys to of So, the about of you line as so U.S.? percentage businesses what the see of kind talk little we acquire U.S., kind the push business a dynamics outside some are can paying of you that forward in you ownership with buying you those of for what margins the we mindful nuances or the what’s U.S., U.S., there outside need versus bit are multiples – sort that the can in there EBITDA be

Rudy Adolf

absolutely. Yes,

pushed the out Exhibit are in this and is traditional makes with model, what us So, about discontinuities, fiduciary where quite fines, creates major create so excited basically market, so independent dollars is looking a regulators terms that of opportunity A in discontinuities for many in field of get we fiduciary a ways, creating an for advisors the ways, standards. basically it all And opportunities advice what ultimately model. of the we a follow leapfrogging of have wide-open advice billions players in some U.S. that what even for frankly Australia

to opportunity. unheard the multiples same of we that The identical; comparable usually the our are quite what of We U.S. are the are this unique, a special enhances comparable – in business similar very we very and is the model to economics It’s in model buy XX%. the about The is U.S. quite of Alex, single-digit mid-to-high deals. is margin multiples, number these we is markets it again, of in kind paying. It’s core have

So, the the same these way. exactly take much of they number business of – and a over spirit, be the businesses these businesses you right number crane U.S. would lift could us in to and pretty quite doing a the frankly, and up but with transport

the model this. course, little quite core is the of business on time be same over well. some core us the same environment spend, more value-added going as and what to course, need for time, regulatory a the our and Of frankly, more to legal We taxes. is But is is complex model

Alex Blostein

to I or deals? the frame what look going firm robust you And deployed. like thanks. of XXXX, XXXX terms that, help but or you And then not in Focus to actual talked help XXXX put guess just to a to just number in on you pipeline capital deals Can deploy in for how me. much XXXX about us last frame I deals Great, either capital know a XXXX for heading partner probably Thanks. relative you us expect what could one into again.

Rudy Adolf

We Yes. want to we substantial pipeline. but – and good always are spin at I I we I pin really transactions pipeline, our deploy but of will very to a see. of have like I capital, know – when know amount don’t since we look We because business what know they to the a very is a that timing don’t specific the clearly, this number, M&A predict, hard it’s again,

Alex Blostein

Great, thanks.

Rudy Adolf

Alex. you, Thank

Operator

you. Thank

with your line Our comes question Blair. proceed question. Shutler with William from next Please the Chris of

Chris Shutler

firm year give Hey can guys, that the highest deals what ownership ownership us that the was good what and a last morning. took the over When you’ve sense you the look lowest stake? stake partner at you completed, was we

Rudy Adolf

It’s pretty had we to similar what Yes. the past. in

eyeball quickly me Let deals. these

there say I out one stand So, any way other. the wouldn’t in that or was

at we AGS, much very Selvaggi our percentages look in deals [ph] with murky percentages Escala, Greenfield last are Jones, acquired, of line year, Williams course, As the acquired. Altman, our typical &

Chris Shutler

of couple on a there’s follow-ups that. And Okay.

the divide the I – number want So, and know take the by that if about that this that to percentage income, that would should fee you we’ve be make I a of that Would be decent the to own. percentage proxy for you correct? past, operating I talked that in if So, management I do but close sure own? inverse I be of the just firms not understand the

Rudy Adolf

Yes.

we as fees, XX% quarter, the of the fourth were about revenues, management yes. So, say, in

Chris Shutler

Right.

Rudy Adolf

pretty a number. consistent was that And

mathematics. holdco through the goes that there’s course, expenses here Of this

of Also, in little is what rate, a common run some relevance. preference the have the really because buying it has a a year pretty but we on transaction, quite often you the of X:X create, ratio. course, bit of phenomenon, So, are can’t does relevance, first

get of and there of own. can’t just you a So, inverse percentage this the what to we number calculate are where dynamics,

Chris Shutler

ask then at look I a And other simplest to just XXX QX guidance. the the margin little if basis one, Okay. your of way XX% is, maybe, than over the was better EBITDA that points almost

management haven’t like metric occurred. changed Given family quarter-over-quarter. by office just that was was why the fee that the margin, thing, divided have like looking ownership it me the inverse the to; outperformance that pointing – that sounds did at income And then the substantially operating I understand stakes it other similar look pretty help really the of increased would

the understand margin? So, basically just to – what helps what trying

Jim Shanahan

portion also have XX% so I $XX the QX about where of way the come margin proxy. a impact. aggregate with other of for that’s a core think, it just so a a this associated business one expenses, than small comp management, based at at the earlier, XX take Obviously, that’s give you or company on to I But company, holding cash the economics. holding we that firm the revenue didn’t employees. of that indicated that you if look cost, Maybe, the so inclusive point, is the place it, call was as million incremental cash size pure as of of other proxy revenue XX% any about Chris SG&A, of of can is minus revenue kind minus

Chris Shutler

Okay. I’ll follow up offline. Thanks, guys.

Rudy Adolf

Excellent. Thanks, Chris.

Operator

you. Thank

line Our Please comes of Jefferies. the your Jerry from O’Hara with question next question. with proceed

Jerry O’Hara

within you some mentioned remarks; sounds forthcoming can like sounds is my drivers Thank this is perhaps It Thanks out positioned contributed or morning. you. to the investment that information build asset prepared importantly, question in initiatives. for deliver class of here, the speak some how you the but alternative have Great. alternative to additional this like to on there initiative. Focus and this taking demand other kind It

Rudy Adolf

Yes.

not and worth alternative the been manager worth into very to our allocating are we as course, manager, assets and we side and – different the asset more we ultra-high many wealth more as alternative demand of quite And access targeting the business, important. Jerry, net an high So, classes. is net for clients’ such, are asset we of assets are frankly, have

total of have some the into alternatives. different partner all are XX% types our allocations firms, of of We where

of at between X,XXX we opportunity leverage explained are gives so on. our we people to can taking now us on advantage focusing unique more Day, Investor built that they we this each in this billion, $XXX linkages the where And industry, basically partner other’s capabilities. over As create the scale have and firms,

these are that for the really other very the firms implementation, we be demand asset we’ll in more creating space and between here evolve, And firms we if have updates investors. have more. after this as partner the basically which there this – things intelligence, want that you will of handful classes. good are And high firms alternative type are we a have we for of And a and

Jerry O’Hara

still Great, of thanks. I around the end I’m to at new And updated story, then a seems the but range. forgive just in came the me, ratio follow-up and perhaps, know the lower like it leverage it

current might Just sort be of plus kind current – curious how as here we what move the should or to what leading indicator range? around of of we might expect the to or within minus you. Thank at that would look a number that

Rudy Adolf

Yes.

delevered the X.X. fourth very, think number Jerry, how quarter, important terms exactly and we they’re is – experienced So, midpoint the the very us, range dynamics clear very we was a the between that X.XX. that X.X. between for it is for And guidance to quite dynamics we The comfortable give was X.X investors of leverage. favorable and very frankly, a about X.X of quarter, it it the us. Because in to in Last

around But based oscillate to spot a are a but a deploy delever would this and at we We very later spot, that reaching thought will economics our quite enabled to to of where this capital. see just us is terrific basically we we be on, frankly, And opportunities terrific where frankly, QX. to XXXX throughout economic comfortable. exactly faster quite basically part, much the we

Jerry O’Hara

my taking for Thanks Great. morning. this questions

Rudy Adolf

Absolutely.

Operator

Thank you.

remarks. any to the our to closing would back Adolf the We Mr. have of reached end for call session. Rudy like question-and-answer over I turn

Rudy Adolf

strong partner to the year a progression for was XXXX the of Thank business. our stress our prouder the closing, interest. you great of that it of really reinforced in on performance our I not be of firms. and growth want I thank you business, trajectory many and And all your dimensions and could and

expand have this our in today. us scale choice business ability attractive competitive make of given partner and confident advantages highly model are we the to unique the the that leader and believe We to continue in will market. our that our firmly We

of their all have we partners momentum of customers the I we employees. and where not and about that to the talented would thank XXXX be excited into coming and all take year. – shareholders. our throughout I relentless will dedication their achieve hard to our drive We benefit this work, do our and incredibly moment to and want this are we today their without am

Thank you all for your interest.

Focus Financial Partners (FOCS) 20 Feb 202019 Q4 Earnings call transcript