FOCS - Earnings call transcript Q4 2020 | Focus Financial Partners Inc

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Operator

Good morning. I would like to welcome everyone to the Focus Financial Partners 2020 Fourth Quarter and Full Year 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. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. reminder, is a recorded. As Instructions] this being conference [Operator Mr. Granahan, ahead. please go

Rusty McGranahan

everyone. morning, Good

Focus materially of are of call current Focus we you filings that statements. these of we this from that number its from has and remind these let made involve Adolf. does Focus’ update differ may statements. lists and and may to which during finally, And a it Before not With course, me results I duty of the results statements, that on some including, Rudy no uncertainties statements. factors may, such any cause by begin, the attention COVID-XX Focus Focus and that your made to differ the to the of will course assumes make with forward-looking CEO, fact We Rudy? from based to over to and that, Partners without these materially information cause SEC, Financial results the turn limitation, could to differ These statements. statements assumptions forward-looking currently the Founder available undertake our risks call, surrounding pandemic. uncertainties

Rudy Adolf

and everyone, morning, our Good to Rusty. Thanks, today. call welcome

the an your related in continued despite always proud As value challenges. we and Focus. unprecedented XXXX I what accomplished. pandemic interest and We results financial operating was we year of extremely am delivered record

margin growth reducing are during within our We strong ratio. services, time and leverage expansion position of in a while net unique a delivering crisis, simultaneously financial

of XXXX scale expectations. consistently relative our story many its In ways, matters. demonstrated and the that Our outperformed resiliency business was to

delivered added XXXX. move even it our us of partnership weather depth, thrive, position We an this instrumental the and value momentum was be services full with in generating highest nearly with $X.X the job adjustments not $X.XX breadth adjustments excellent in scale well helping were history. value shareholders Together year all net our tax results and demonstrate believe storm, in to but model stronger adjusted excluding will dynamics managing of billion of outcome. M&A results combined instrumental robust what the in just tax revenues, These their to business. and financial for and past a our designed outstanding and of Our share share per year we diversification strong income, for $X.XX. our the partners These did our the in us, per

with debt us allocation activities generate and shareholders XXXX flow Our cash our The continues months usage last efficiency our and capital of transaction substantial value XX.X% for cash volume available funding to up limit our in substantially flows. tax enabling increased. to our enhances acquisition million, structure $XXX.X flow grew our M&A cash XX for reaching as

and to since remaining macro attrition client challenges M&A value prudent partner agile whole and successfully face not backdrop exceptional Our year We our navigated one fiduciary tangible we volume. evolving service, an added especially XX firm and new capping was to commitment In completed XXXX posed the best transactions They by the the pandemic. experience as volatile a for client seven industry in despite finest which was of apparent, advice hour equipped and did well the any completed for the history years a our markets. unwavering partners partners our demonstrating were XXXX, substantial that of excellent key in having a firms. the over Through industry on XX aggressively across firms and ever presence one completed record extended behalf and expanded three XX% of management We capitalizing mergers, XX XX our are XX%, internationally, who firms in merger U.S. acquiring firms wealth the firms growth, more. our three our transaction of merger partner partner year, partner accretive. completed value our mergers our are of on or opportunity track with markets the first and partner completing Focus that last completed joining at Of is least emerging. their

increasingly We practices business important client complex deliver advantage taking firms catalyst These clients, of our growth. needs year. in forefront increasing to are organic last innovative, by value meet for the operating and to at the resources an enable able is ever By expertise, our environment. partners also providing an solutions their industry the remained their our growing best scale, and to of which clients partner of

partners benefit For from enhancement, initiatives our including pricing business continued cybersecurity technology to development, vendor in optimization. example, and operations

coming in these over engaged areas years. actively remain will the We

across technology efficiency the demonstrating firms. to our Last by Solutions cultures advisors enabling quickly model and JV management continue independent could Last founders by We complements our believe want or FCS expand ecosystem. gaining leveraging continue client relationships more credit approximately by will in example abilities scale, But It to all advisor’s Yesterday, advisor and credit also shared firms. clients. enhance FCS five than relationship. to and leverage who help billion that to over by XX and further the our cash services with structures for meaningful this serve convenient expertise relationships announced alike. need long billion believe for partner resources month, create target delivering net emphasis our Excelerate XXXX, time. outstanding standing to Excelerate subsides. their capabilities value-added Focus’ partner services, do for that leveraging our a enhances we proven to to benefits the believes our important XXXX, a clients, the that in Focus for and with on significant by its impact platform. short-term, Connectus as we we service wealth partner better cash the available extremely Connectus of Through innovative launch of our This joint one expertise longstanding advised growing highly services. Focus and an Therefore, premier FCS, resources, of as joint them. vision related on to innovative a business of Connectus the $X.X of clients Also, new initiative The approximately Connectus Orion. to value to the are highly beta we ability advisors and existing and X,XXX we in operations profitability put we Solutions, by pandemic management our Client have therefore, wealth extensively in expect will delivers $X and partner components, and and shaping we important offering XXXX. in Excelerate, in to maintain loans strategic and Orion’s scale use unique teams clients, the leader and other advisor with our venture that adds Revenues largest It not Strategically, grow on value We curated, we advisors our team their these a targets. the another that our optimize Excelerate growth is used addresses have solutions. are market. improve their create venture will efficiencies of XXX will partnership growth wealth of initiative, shared developed providers is can how margins is for to announced growth. continue globally become and stage growth, strategic whom Advisor and value their managing anticipate and integrated scale collective to venture client important solve demonstrated joint Clearly, partners The aspects efficiencies our offering. which comprehensive, both Orion it competitive firms leadership the to of an results program credit all we new but an position achieve which we management the it on and will personalized revisit making FCS make and Orion proposition firms. Connectus. WealthTech a sustain by reaffirming that our ratio transition operational Focus leverage already is FCS for year, is significant plan approaching manages

on approximately have how efficient XX%. learned of of based end. Our pandemic initial margin the goal was million more during adjusted believe partners $XXX our EBITDA become to We of a

days, early that margins. believe as EBITDA it adjusted long-term still our Connectus we While enhance scales, will further

X.X excluding tax growth, revenue organic maintaining an levels, year adjusted and ratio in in share market operating will excess our us net by leverage X.X amplified returned substantial to are in scale we believe and times current of and targeted income, growth industry-leading to adjustments deliver momentum, to is We dynamics full which XXXX per revenue XX% double-digit while times. Based on of have net enable these Connectus.

we addition be substantial acquisition additional one closed one have we partner anticipate announcing the side, firm another and a firm for deal M&A And announced will partner which U.K. the On Connectus us. in year-to-date. transaction shortly,

We our good activity well carries expect a and XXXX. deals, with be of M&A QX in strong a acquisitions we mix that will pipeline and significant into mergers have Connectus that direct

industry We expand from QX, search presence will also to we anticipate that hand between outstanding fire today, and expect our Based and over the After exceptional of benefit international continuing stand will in pace year are power our M&A Connectus we we we we further the that in have that will for our accelerate about billion be where cash on flow revolver, estimate invest activity. activity. generation. an cash We unfunded business. will time on XXXX M&A $X an to

to value adding significant partners. our industry proposition resonate value mergers are continues to the Our and strongly in

attractive momentum. deploy finish our capital. performance our in and M&A many we disciplined financial remain year terms in the process pleased we will we extremely to as strong In opportunities XXXX of see always, While closing, acquisition with are

them, destroyed choice. I am make them. excited turn about I great and momentum improved survive have how XXXX thinking continue Jim? significantly positioning. are our advanced The partner end in of competitive but There’s repeating. our The and me potential With expectations very a and crisis, seeing year let believe even and was enables to beyond Jim. call before, as good companies scale today worth invest advance model will profitability confident business to growth us like our partner to would phased been our the that have possible we three scale ways XXXX our towards advantages. opportunities that in diversity a our forward ours. As business, portfolio our by we of the our us XXXX Focus The further the in unfolds. have and it objectives. over we of to crisis unique creation we I turn XXXX, ago that, reinforce evolution are to in beyond, of creates look forward unique are our the growth strengthens shared future XXXX years value thought companies Bad and the companies not the of grow we numerous to to

Jim Shanahan

flow the unique cash stability bears It everyone. transaction, strong generate and momentum fee to and our repeating Despite and excellent. many revenues large and growth are unprecedented in were growth financial resiliency, created invested cash management draw substantial our our shareholder proportion model our with remarkable our an generation. was our growing morning, high The that wealth accretive shields M&A ongoing consistently Good of value. year flows tax of activities uncertainties, high in of business and strong, recurring demonstrated revenue the and industry and and combination by based M&A continued the performance

to of P&L. our Now details turning the

revenues office XX% of coming our due expectations. estimate better X.X% end that outperformance of the clients QX were in the in type occur in and the conditions improving, certain of of fees could arrears $XXX in earned million, estimated revenue repeat Approximately organic associated initial and periods. above $XXX.X by our $XXX revenue with ahead than Our $XX for market where incentive well QX industry firms, This will we result acquired. future partner We revenue business in growth million OCIO outperformance activities not million, to results including flat. was versus non-recurring would the top but our client revenues our rerecorded of this our revenues range to recently client excellent, family activities associated of of million revenues with favorable building rate are entertainment essentially be certain expected part of

XX.X% partner up of QX, were growth $XX.X organic $XX.X acquisitions of million inclusive growth remaining Of or our revenue XX% from outperformance million million, our the $XX of came or partner partner QX XX mergers, million organic increase by firms, scale year. revenue from increase coming of XX% of rate. demonstrating $XXX.X of the that approximately firms. not million that revenues approximately the power QX will The our the repeat during with year-over-year across that $XX.X impacted favorably approximate in Our

revenue revenue an strong our X.X%, year QX QX have amount, growth reflects continue also over event XXXX from to would firms considering office this been year headwinds experience. growth our and strong which that the rate Excluding organic exceptionally live family

was than of adjusted QX our the our X.X% prior $XX.X was strong EBITDA margin Our year adjusted and slightly EBITDA million, ahead expectations. higher period XX.X%,

Our revenue period prior record were adjusted tax and the share per by higher organic XX.X% excluding On year XX.X% $X.XX compared prior unchanged year than period. $X.XX, adjustments in rate prior net an from adjustments was were full X%. driven basis, year the share of to income revenues and per part the year, our tax a a our $X.XX growth billion, up

of X.X levels percentage ever. Adjusted XX.X% adjustments higher have from closed SG&A Despite $X.XX, share and XX.X% the adjustments total for relative U.K. excluding were the prior higher, and QX, was seven closed XXXX tax per prior of million, result mergers firms our and the to of our EBITDA new transactions. we pandemic-related strongest tax year reflecting as of XX.X%, merger on the closed XX years revenue margin expenses primarily half for adjusted and and up We to-date per Connectus than the partner In a M&A up XX $XXX.X lower in five was was a mergers points firms in activity, we QX first slowdown one $X.XX, XX income, COVID. our partner year. net share XX.X% was EBITDA year-over-year adjusted Our

firm in $X QX signed We new about these an Hill annualized revenues signing add partner contribute due added in in two referenced new approximately a could mid basis. and which approximately Investment firms period and Due has total million the the We partner on QX to adjusted QX base firm estimate transactions estimate impact they to million client in partner incremental anticipate We acquired results. that five $X the Group $X.X the firm, Rudy will in additional will shortly, also significantly billion not million EBITDA closings. timing, partner $XX earnings an assets. that our

is to our industry gives market we in XXXX noted, Australia, expanding further U.K., by efforts. direct activity acquisition managed across opportunity in $XXX trillion M&A advisers excellent. our the the in is three focused According momentum increasing set Rudy and XX,XXX U.S. M&A continues and model, internationally. have mergers our like. sources, for and is where Connectus our advisers to in us billion. expansion is As considerable to addressable the approximately both approximately deals resonate and third client or the $X.X heading and model in a U.S. countries in Canada manage Canada industry assets XXX,XXX dollars, Australia, approximately The

accelerate This this, many components their growth. in has ratio. their a transaction in reset global of million predict, pipeline of the closings year, size proceeds is expand transactions portion of always loan including our under by strong to business, While launch to we the partner hard the our our M&A powder. in XXXX further will our an our pipeline did also incremental activity January XXXX. initial a to are million anticipation heavily its transaction. In at across actual our dry $XXX substantial net of this repay impact the term revolver all to is for footprint increasing oversubscribed upsizing borrowings We from not used who and merger of a of our of leverage increased firms, $XXX our Connectus

future we capitalize with mentioned, positioned billion, of on well are about opportunities. acquisition power to fire Rudy As $X

discipline. strong by acquisition strategy remains selective highly However, a multiple on based approach, our supported

are criteria about pursuing for our We acquisitions and a meet that partnership. our are return fit only good stringent

Focus will the We resources their capital. permanent advantages, are independence acquire growth also firms the about growth who pay, and firm. disciplined but to entrepreneurial competitive, want scale operational substantial our unique multiples reflect a with value-add maintain benefits we which are We from high becoming and of quality benefit potential, partner

nimble expense, few tied is $XXX.X are on our of our the Now largest were fee XX% our our partner firms which profitability of expenses, our discretionary operating million cash activity. to discretionary low and partner to firms partner expenses firms and continue comments controlling remained Similar increase second and even We as or in Management for our approximately in QX with work remotely. a revenues. M&A QX, remain expenses the disciplined most flows. of to

In under Monte a liabilities our of of estimated interest costs December charges recorded and significant the low the simulations low beneficiary earn-outs non-cash Carlo fair rate Additionally, as our performance we drove estimate an remained the totaling changes as GAAP. increase of market conditions we in million, environment. are XXst. pursuant $XX.X value to borrowing reflecting QX, in Stronger of these

million, from we Our paid The full higher during for in We business, cash prior period. year than $XX about margin. our growth the adjusted year that EBITDA and firms pay million available the the the earn-outs fourth will we acquired was $XXX.X QX. $X.X flow capital allocation in XXXX resulted partner we increased and new XX.X% million quarter increase in estimate

Our unamortized cash shield as XXst. future our flow billion be by gross will of December $X.X for periods enhanced to continue tax

the that X% given quarterly XX%. Now continue that our to our approximately guidance. to We million rate range persist, to will to uncertainties reflects growth $XXX an pandemic-related QX organic revenue provide This estimate we range turning revenues QX to million. of will be the in estimated $XXX continue expectations, of

in QX, the As revenue revenue typical seasonal recur revenues mentioned estimated $XX an although related family in to as guidance million in $XX million from expect earlier, seasonality activities, office QX excludes the revenue non-recurring million QX QX. as our $XX we to well

EBITDA adjusted and year our EBITDA better. current conditions, XX% be with XX.X% that or QX about adjusted margin full estimate be margin XXXX we to market our we Additionally, expect will

Now sheet. turning to our balance

to As ratio had we ratio XXst, leverage for between the appropriate we remain committed given acquisitive will debt. of X.XX to our of be QX in billion is approximately acquisitions leverage business, times. expect X.X outstanding X X.X We leverage QX, December that market current and levels our highly was and believe net net X.XX debt between continue nature our and anticipate times end $X.X with maintaining period times we highly range to and in the At cost times. this we net close times attractive our ratio and to our

To prudently to strong cash also sheet. delivered use balance enables quarter a generation business. QX QX our our our we to We conclude, had flow important in to XXXX as when strong remember macro continue XXXX debt manage excellent, particularly the and very results It to overall grow that of is were even our our backdrop. the us we given limit we excellent compared

Our our stability resiliency performed its model partner proved business exceptionally and in strategy unprecedented evolved has and client solutions our acquisition through We well. and conditions partner and firms further offer firms. we enhance the Connectus market our to

our We this in operator XXXX are are we well-positioned the and turn to the Q&A. business Operator? optimistic capitalizing will over the to shape tailwinds industry. now outlook continue I on in secular for for about call the

Operator

Instructions] you. [Operator you. Thank Thank

question Craig with questions. first proceed Suisse. your Our Please Siegenthaler Credit with comes from

Craig Siegenthaler

Hope well? you morning, are Good Hey. Rudy. doing

Rudy Adolf

you? are Hi, Craig. How

Craig Siegenthaler

am I I good. good. am

and more is half M&A about But do think how be and of merger back XX we So you so the Focus, into the you momentum potential my announcements in first in can M&A has last and to year. record year XXXX were has XXXX pleased see than continued the for transactions? talk a on to pickup acquisition one

Rudy Adolf

Craig. Hi, Yeah.

XX and way, year than unit many frankly, busier remarks, -- we was our in XX pipeline by we deals, deals the quite is the We was before. we indicated prior excellent. deals Last our the record XX did we then As ways, in our year year ever. did almost are in

$X very billion for relatively we Quite mergers, very good the is holding merger partner a more we about see of are These including last mix So number billion-plus see excited large frankly, a We international. opportunities firms, are which usually transactions. company we merger transactions. quite of year did transactions, plus unusual.

am fact, deals? and by joined a In on Co-Founder, Rajini, Rajini. second you do to want call on I my my today, Connectus spend on international

Rajini Kodialam

just Thank definitely sunsets Sure. you, our on Australia. with Craig, Connectus. across and Kingdom through starts the and day bullish international Rudy. we My and United with these very days and North pipeline America are

and value believe and combination Our the us we that the we winning unique rather true is value-added across globally of and makes the proposition bring, Connectus value entrepreneurial support proposition, right proposition Focus for value the firms resources flexibility, geographies. combination these capital a the resonating permanent

Craig Siegenthaler

simple you I one for did color there. Great. have the follow-up. real Thank

last was it the think gave time us roughly $XXX you I AUM billion.

is the You since roughly? have XXst lot AUM acquisitions markets today probably given the a or and either Do have you at announced. where just where grown all then, was December it

Rudy Adolf

Yeah. Absolutely.

you obviously we the business is asking, above, said are know, consistently our us. don’t or that, a so Shanahan, we Jim always interesting time are to know, driver our -- assets have are number you for it’s let first of glad the business it’s IPO, business. since because in significantly. a we really not But as the core actually operating me in Having terrific So, we billion but way time It’s said an I the as we where grown client benchmark. really number a CFO, talk AUM see about $XXX am this is

Craig Siegenthaler

you, Understand. Rudy. Thank

Rudy Adolf

Thanks.

Operator

Thank you.

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

Mike Carrier

for questions. wanted Good take firm launch to expands the that morning Excelerate the possible taking that only get for time? just past, audience with Texas? how the like expands but guys Connectus in And revenue target thanks not you and margin, but with In on M&A, the for over how also the and opportunity, the opportunity a had potential your of opportunity

Rudy Adolf

Yeah.

net are end head OCIO are with you a reasonably looking high our had to ultra-high whether saw really the office, high multifamily it targeted services what basically you centric in always net have RIAs, M&A really worth then we So, us. we more -- view and these client join Meaning as that whether are know, starts families offices, worth activities. need

a So both escape this Connectus you Excelerate yes, holding client number which transactions, are services it which the M&A yesterday we can many with and the direct what year, now And with how broadens ways, needs have and footprint. day XX. between our always we from it client since Connectus of capabilities. started announcement surround are always In company deals is the fills so largest that of we course, the merger did gap deals, done in one, last was correct,

a basically and are its them we But efficiency that, at the that brand. quite keeps opportunities industry. and infrastructure identity time, in powerful quite believe We same -- gives we firm this we that leverage ultimately very this built frankly, growth have unique are

Jim Shanahan

is Yeah. and merger did reported guidance perspective, we announced three a there, one in XX.X%, was end of U.S. at the XX.X%. year. our opportunities The margin QX of We from And just the obviously, one for the activity Connectus the just U.K.

we time, how that. Connectus to over contributes guidance will and EBITDA So, revisit long-term our

Mike Carrier

been on follow a improved up, and of the And platform at practices that on guys growth any like firm’s for adding as views, productivity, organic services new sense how have has that best just Great. the some you then Okay. the firm’s the

Rudy Adolf

Yeah.

of most recently. have launched we course, quite Of these

we programs. As two of type you know, have

we Business while. Focus This for is really use have and have Solutions. quite where We a

about these the are the contributor growth, firm partner grow firms important and at Focus for our looking faster individual, Business power to growth, partner and quite ultimately improve of purchasing Our very are scale, our And simply we you frankly, publish when expertise Solutions. course, the from help growth numbers margins. that our

banking the capabilities, will substantial capabilities believe our be very in will of without we course, of over cash private are into a still our translate about end partner economics. roughly For this yes, we Last provide, services say, and help any and we lending cash the Client firms, of billion And this of beyond about in the Solutions, partners time year, Ultimately and enablers that ultimately, have talked we private partner either works. solutions that banker $X the supported the of high credit. placed to on package firms. behalf or

clients our still over seen ultimately announced want many We and recently these to with that years. we you Yeah, programs. is the Orion basically it. leading stage. opt available technology time, also one we to many, our venture. in in X,XXX has sure course somebody beta Orion make have have I Is advisers. It’s have this we joint credit that worked capabilities But who the of where providers this Orion all of for am into industry cash group

So, yeah, we is in to going not meaningful XXXX, believe you time, a but guidance. be importantly, over our Most also seen contributor. have this

expect organic was organic know, you and go as double-digit growth ‘XX, to numbers higher in our We to growth historically, that. even than

for So it’s really organic our and rest all first growth of we the boost believe year. the will have ultimately in significantly of these quarter programs together you the that that seen

Mike Carrier

Okay. Great. Thanks a lot.

Operator

Thank you.

your question Our next with question. Please comes from Gerry Jefferies. proceed O'Hara with

Gerry O'Hara

maybe out could the think be than little led be Thank more context in throughout maybe would about question there then Great. some the are as revenue year-end rebound more to I the, give broadly a and revenue to around what it’s also if family color And quarter? the you what anticipated spread Thanks. office drivers just of Maybe helpful? higher color if that two-part broadly any we should or incentive but year, fees, appears how you. to guess,

Rudy Adolf

get people the no on this events, channels, an different basically business I million that Yeah. from here well business disclosed. as a but drag $XX.X are to the what really YouTube, there business. segment. quarter that per numbers. But course, was back go We some just did in you we had and did of Entertainment of is, What life know, some people people morphing leads will Life have seen overall happened this there are But the through came year. about is, Jim last are into acceleration publicly we the in let have of we business, ultimately still extremely meaning

of We quarter. been, not to where the this? be to I that we this in partially some see Jim, first go have you quite But we here seen or want are say. need to have should quite reacceleration frankly, we,

Jim Shanahan

Yes. Yeah.

a do type and at as were industry. here Rudy activities new entertainment and activities. looking revenue these of to came end are environment, what aren’t we So, but $X the their improve. and based And recall, happening, Netflix we all with the we And we we find outsourced in as They ways to in are ways in the as mentioned, in going on probably expected things. at will of has than their December. live in still learning they at reviews, contract dealing these that the that, November, really activities. for things the are sitting ‘XX about Prime year are needs, activities clients. of of Clients activities you type these clients, we November see was insurance continue when like COVID higher into like all these in Obviously, mentioning. million other taxes, intelligent their those and generating essentially And events Rudy yet it

They with business was Incentive large activities with part increase fees. well. fees of through in clients, annual those came not So $X.X the all. generally we and revenue over million kind billion have, you in a incentive then are as the also come And revenues base of QX, increase these when there December in as certainly, measure year. our $XX our them. those some at obviously, an activities don’t

say, in of it that So it’s plus was million fee minus related $XX probably was I’d QX. incentive $XX million, about or

QX. for end against our the that guidance outperformance drove So top of the

Gerry O'Hara

for Okay. taking my questions. Thanks

Operator

Thank you.

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

Alex Blostein

a but things comments would morning, Good bit But Rudy. addresses to Thanks, provided can Rudy, on I a guess, understand, Connectus around higher that the EBITDA by Connectus help being then more firm? firms? and RIA maybe What EBITDA Good more. learning spill like kind And sort to your office those specific sort morning, start is I over of us standardization level the growth activity standardized their margin of love guys’ of could kind middle expand know, and some addressable think Connectus into today more of Jim. of you how platforms what’s platform? lessons help kind sort your today? I the kind around of could at you little couple contribution you Great. of of think us getting time to market. expand scaling office to slightly through picture, on across of of for and back Connectus that Meaning that pursue that the partner from do and bigger rest of other that the they the are benefits

Rudy Adolf

Alex. Absolutely, Yeah.

So, obviously, we just launched it.

it’s So specific early about too to talk numbers.

from have still scale, where -- launched program of and and very some ultimately probably unique you announced this a But proposition. believe handle believe Rajini, let’s talk quite already Alex’s want important we a been have global you that time we initial brain very of is highlight the the a seen, rather transactions. ultimately Although, on than to me, Connectus. is, questions. a do is to first What’s hearing real behind powerful we to has number

Rajini Kodialam

Yeah. value. Thanks, of entrepreneurs and shareholder said, Rudy add Connectus just always are Alex, course, to Rudy. like But we starting. is we look

This a conversations proposition. every global as program and our on come. is promise launched all we have value together and clients. XX adviser is about the fulfill global scale are shoulders program they in Connectus, between from the client their stands inter-leverage Focus years that constructed And it expanding What we the efficiency is is that put to these Excelerate of have the is provide the will partner the vendors is us Connectus ecosystem. build of expertise the we with not which and fact yesterday. firms expressed and Connectus, and relationships fact unique vendor a services. needs have Nothing content for of Excelerate, being bring very that enables has based technology, the and firms of needed multiple they Unique what growth, firm, Focus about the just a It the together to Excelerate this We element that have together brings on and what Excelerate to institutional excited built that is we partner comes that in developed.

what clarity, like we FCS be makes for us. on Will top interwoven like and bringing intelligent country? have customization this this is by unique We solutions Absolutely. solutions proprietary That our of are that, smart integration. Focus there global into

of partner firm but Focus will be Every Some There common to of some choice customization. will available use every to Excelerate firm. global be will across, Connectus has vendors not. is Excelerate, them by these

So overtime, Focus the Absolutely. the Do do across the inter-leverage? see benefit we family? we see

Alex Blostein

interesting. Very that. for Thanks Great.

be am you but to I maybe follow-up, it, will sure will if not -- I Another guys anyway. answer try able

that talk deploy how to frame, help $X billion? you of billion Anyway guys expect robust pipeline powder multiple ultimately highlighted that $X quickly you to So dry very to, obviously, you on us call. times this

Rudy Adolf

it, ask you knew Alex. going to are I Well,

that obviously, -- and billion that our But good been if a hole checking in This made it’s it’s burning So model is has very draw never pockets. very need. ultimate this is account It’s our it what way. thought capital this have this not got and so disciplined. we And into a sitting can when question. we about we we successful and on, $X

average XXXX, again, at XXXX in In is down. that they is, capital so touched frankly, XXXX fact constant, the when weighted constant, fact, debt, multiples our continue basically very you quite we of Alex, on cost which look cost to versus high. paid the ultimately down means we But, based in returns because are versus of may rates, be our interest basically the

more You returns. than our average returns, deals in XX% will probably XX% of XX% over remember returns create

deal no that’s absolutely the a business But of doing is, but be always us very a timeframe, are So it’s there’s to deployment, about short in has we tell not I of really relatively this helped this not it’s about thing years. the a this And rush we the is discipline quality deploy a worse deal team part over of build bad that deployment. good to the doing only confident speed will yes, the able and here.

Alex Blostein

anyway. answer, figured that out everybody. be right. but thought try I Great. Thanks to will your All it I

Rudy Adolf

right. That’s

Operator

you. Thank

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

Chris Shutler

A as close think And mergers? should would that Good questions with locked in think partners the everybody. what traditional for on they handful then, in we Connectus, you means pay typically about of paying the few in the agreement a in you so being years. employment I very to first, multiples Connectus Hi, are are morning. your traditional model,

lastly, year? but the could like it your And be, So how of pipeline, differ sounds part be that it’s Connectus Connectus? a then, could does EBITDA XX%, XX% with that you this of add healthy

Rudy Adolf

question, Chris. Hi, some first and the effective foremost that as from Rajini learnings phone We experience she I of her it Ultimately, Rajini Australian for market. synergistic our -- in transactions answer was prior have will really the because some glad in a something the these as developed a in today. and highly had than on multiple, I it’s but am filling you questions. quite Yeah. be and foremost, will even it’s more in model. we and quite we the here, gap the so said But, ultimately M&A the ultimately, of the we the attractive because But want just team infrastructure, U.S. -- more frankly, effective the believe or frankly, add the it’s shared that in that multiples Rajini, something? -- U.S., because to attractive have what clearly, first

Rajini Kodialam

Absolutely.

Rudy that premise said, As of is the Connectus.

which not to be advisers does service fiduciary to are But for, market only that approach the The that which to and of we because Rudy looking it both for thing said will us, of emphasize firms with the the caliber pipeline. and is that revenue what that client is model is have like consistent, we irrespective an the centric is to with expands than going of ourselves asking Focus applying. robust -- hybrid. disciplined direct add a is the have offer, advisers want services a affiliating and help, shared model with need is adviser to accretive. I change is, would different the to Connectus Connectus yes, And eventually definitely our or something we for caters the quality mergers what what our do certainly We adviser platform efficiencies, it base

Rudy Adolf

Yeah.

have no same in we from We really change traditional have our contractual the protections so as this transaction, perspective.

Chris Shutler

the Okay. you give for the, rough XXXX? us the for a Thank just I first quarter. earn-out Can one And number expected Jim, for you think, gave just then payments you.

Jim Shanahan

this at -- year, the just Yeah. to on it’s Chris. full hard provide don’t We point guidance estimate. It’s

We will be XX-K shortly. publishing the

business be. in the the earn-outs out Monte earn-out of annual GAAP may guidance estimate -- aggregate over $XXX methodology and just about under too have precision for $XX it’s the with acquisitions several Carlo to basis It’s gets million what for is given paid we hard QX. that the So million years these

Chris Shutler

Okay. Thank you. Got it.

Operator

Thank you.

your questions. Raymond next question Our O'Shaughnessy Patrick from comes proceed with with James. Please

Patrick O'Shaughnessy

morning. Hey. Good

going economics? you aligned of XXX% to going over I firms how that with with historically Connectus, given to sure that be are the for the be with yours owning think partner are long-term, you do selling of incentivized grow you So, own selling make incentives the How partner have and so, XX%, earnings are to selling you the model, partners to going do a with clearly, Connectus franchise? the that you XX% economically, to make be is aligned. to preference continue sure the a

Rudy Adolf

with here than sharing of be some top But sure of the it’s and And are contractual on and or ultimately said, it’s ultimately these of in into aligned let the partners it. Rajini be provisions, Absolutely. the plus any we continue, through make other -- we economics business, to said, really incentives that We glad frankly, selective. the us, a Rajini simply have I formulaic partnership you who here. first, very Yeah. just careful as interest quite more as the

the the are comfortable as to slightly expertise we add? here, So are are influence have on part these control platform the on different the our business in we with formulae you transactions. want very we built for again our ultimately, aligned approach ultimately our based we it’s the that the a anything what so and to as business. with more -- platform and much firms. we But We partner have partners here very all this that just have alignment we they these economics Rajini, very, are that close course of of core because over ultimately, because core

Rajini Kodialam

that every a and of alignment and our it’s Gen economic firm, Connectus. model a like The firm, sure Connectus part we for make is across core of is incentives as Connectus. Sure. aspect inherently very that with That that Focus, are just part not Gen completely and X ongoing aligned consistent And is Gen just that X aligned. definitely with partner is every Focus X of

Patrick O'Shaughnessy

about RAs U.S. less Great. money consolidators the for when now, outside Is in question competitive of of And Thank competitive right there. firms acquisitions, bidding you obviously, there’s lot it a the of then a a equity-backed landscape chasing you. are advisory lot of terms out private U.S.?

Rudy Adolf

Yeah.

So XX did total first, transactions. last partners, five we last fourth new in year, XX and XX transactions, year quarter mergers

So, proposition and will our to resonate. continue just value clearly, unique resonates

I multiples called disciplined, sailors. very are very buying unusual a would frankly, the year shareholder we have to year shareholders. at internally, acquirer firms be stay it the and Yes, do just last very, have have little be the seen last transactions bit this Drunken as we destroying to We said worth obviously Quite type value of We The of they our year, the transactions. some triple. be meaning double, would we worse, and this would never beginning.

evaluated programs, unique building around to block unique Our ultimately discipline capital. we the speaks what a because entrepreneur itself. this very of of that for successions approach And permanent and provider and effect the our important

scale years a equity, of our any provider to sell going be five PEs thing example, is control we firms versus for the very very these be who over are differentiated yet company to in this principles at the ability or second to the only And public little least this years, three again where and private happens, on go every going are space capital in transaction We will of it the block around, permanent the have is whenever. of in to.

the years quality we to our pipeline track opportunities that our reality, almost in here come. are So will we speaks and for itself unlimited confident record just for very in of have

trillion to trillion in space XX next to plus. pointing report it and Focus really this, the and today number in $X.X recently came M&A the trillion, the it’s U.S. in with before are basically billion We just X illustrate out $XXX they in opportunity mentioned T, -- of years. one $X.X Just to this is

So and just extremely U.S. is just numbers, are just size high. the these sheer

space. this in largest the are We

the not of value-added. but transactions, have just record, We longest of track

Hello? very in are ‘XX very confident year that position am is again. and still I think a rock be good I are we a you Pat, to there? solid going

Operator

you. Thank

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

Kyle Voigt

there for margin maybe Is this Hi. in the the you of Thanks and retain the percentage the then, understand is could XXXX way incremental the secondly, kind the the acquired any help Maybe you balance ownership businesses is due margins, of during second us in a very year question. versus you of more obviously versus over of simply advisers is, about a change environment, of just part strong. to wanting realizing of which maybe think EBITDA how and taking shareholders? scale growing share calculating much to benefits on leverage? about margin that operating XX%, a for how question expansion And can revenue driving in you bit pay

Jim Shanahan

Yeah.

think start. I I will just maybe

earnings QX based into and the ended estimated -- where five. earnings we revenue had firms an the and the up closing we four acquired was announced with of Kyle, we So, supplement that we

the to five seen there. in partner you XX% going margin XX%, new that up. relative been somewhere as So QX Obviously, have around not firms were SG&A firms, revenue of have costs

of $XX the impact a to positive then And a million in onetime the probably XX% had that’s the EBITDA QX So on adjusted about margin. margin.

So for color on that’s margins. a the little you

Rudy Adolf

related these at the much, and of how there going look of to learned this have what are that clearly permanent. have XXXX we a in we it’s point. like, not are base But once a But business. partners we the these ongoing and the evolves efficient structure we of we the not because one to kind And Kyle, upwards from aren’t of potential and with more the revising clear business. our or which perspective, running I the temporary as we will cost approach very long-term expense which clarity a have were yet precision are changing saying are we year Jim at better this towards is yes to guidance is learned our be that corona, what point, into throughout XXXX XX%

Kyle Voigt

year. but provided for really reach more if from wondering don’t terms clarification current a just But assuming second that need like maybe -- revenue It And the missed if XX% of need help levels order I you to guess, live from hit of that the question, you target you to this, come that. and Jim, Are sounds events Thanks. the return am I in the sorry, I in we in a markets to those XXXX. that see there’s back half target? of XX%

Jim Shanahan

half will this hopefully we are optimistic we half think, year. start of increase activities in and vaccinated first to all that get the the back of I all in the Well, year

point type the are growth breaking So XX% XXXX. We QX. some XX% between did of revenue of the we give the guidance into comfortable market of non-market. of the we are revenue that with not But seasonality over and guidance guidance this for of at on

Kyle Voigt

Okay. very you Great. much. Thanks

Jim Shanahan

You are welcome.

Operator

Rudy are There to would time. like to this floor over no remarks. questions turn at I Rudy? for further the closing back

Rudy Adolf

Yeah. Thank you.

in to and how They in So times. have ways, shown our partners we challenging manage are company also many and who well so their extremely during proud of went challenging extraordinary a our thank in what beyond above they holding clients business company dedication employees, I our our supported accomplished as serve XXXX want these businesses environment. and their and precedence.

will With begin effective the rollout treatments, year. of world to normal later the stronger that this and COVID returning hope vaccines we

and with looking great beyond. are towards XXXX We optimism

expand our of deleveraging leading while capital margin to substantial flexibility you business. our Our all and Bye-bye. expansion, us health and in and thank scale international our and you tremendous to ability the take interest to in combined position during good advantage wish your the position industry In model deliver I unique with all U.S. our markets. selected growth closing, in for crisis,

Operator

conference. today’s concludes This

lines You a your you time. may Thank wonderful disconnect Have your at day. this participation. for

Focus Financial Partners (FOCS) 18 Feb 212020 Q4 Earnings call transcript