FOCS - Earnings call transcript Q1 2021 | 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 FCC, which lists some of the factors that may cause its results to differ materially from these statements, including without limitation, uncertainty surrounding the current COVID-19 pandemic. 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

our and Thanks, you Rusty morning everyone and for good joining call. thank

in As generated always, Focus. we the adjusted our per another record revenues, announced our wealth reinforcing exceptional interest $XXX.X management of performance. results, the leadership of share This long-term and excluding continuation excellent of of morning, income, quarter clear tax appreciate of we share your million tax in in We sector per financial adjustments net and $X.XX. track adjustments $.XX,

momentum. Our end organic of revenues strong top acceleration year-over-year the growth reflecting ahead were our and QX business of of expectations, further overall our

to QX year-over-year. XX.X% also We for rapidly. available flow flow last cash allocation cash of million, saw capital Our continued $XXX.X XX-month up grow

the is our million, We milestone that first of also reported our reinforces $XXX of of adjusted excess a substantial in benefits EBITDA scale which quarter further business. to

Our growing of remained outstanding clients quarter we evidence during this their backdrop performance service strong the to the QX, and navigating partner achieved unsettled agile businesses, organic revenue delivering with as XX.X% growth firms partners. their their macro in

as landscape. market is are integrated especially during volatility ultra-high and them personalized clients legacies and their to advisors financial economic worth of manage their highly net and to valuable evolving conditions Providing advice the high market and individuals estate partners’ tax these Our sophisticated, and planning periods lives help and net evolve. worth depend on exceptionally complexities in clients, of

strong that continuing in Following our into QX, QX. the into most momentum history in remains is quarter our and QX active M&A

excellent Capital, approximately firms that client three firms year-to-date, billion We adding are track our including partner in have record accretive. value which of new is Prairie assets, extending $X added

the ultra-high included partner their firms, their net Connectus We in Boston behalf for our to two serves our Financial, four will growth. that firm We our take industry anticipate which scale also mergers that on advantage growth SCS partner of bolster partners substantial one of opportunity worth and clients. for completed and further increase

excellent has including is pipeline mix firm solid internationally. good a both of partner which and mergers, Connectus, acquisitions the mergers Our building further and a and of U.S. pipeline is with new in

As industry autonomy Connectus globally. a Against market Connectus a firm, Connectus utilize the of backdrop is to resonate. acquisition optimize that increasing and who model partner an model teams over offers evolving landscape, a continues competitive the solve expands semiautonomous the client designed reminder, relationships, M&A a hybrid their addressable shared to to for but Focus maintain infrastructure volumes for Focus is growth. want alternative efficiency our and with the

and believe Asia of is create additional presence Beryllus the Group, which Beryllus to extends to global based services is BCG, These segment is are we region to growth the the in U.S. creating strategic America the will enabling in ultra-high our cater when use access characteristics an particularly of us, in expanded size to growing expertise. excellent also a enduring is of and within but North international the client Quadrant we families Australia. because increasing further source the fastest focus net alternatives, net multi-family Canada segment. the Gelfand, only economy. as through our Escala in differentiation market assets net compared QX, In the continue and London, According with our of that worth worth This on This and of families. the of like ultra-high and Rennert to presence Beryllus not attractive both worth internationals Feldman Europe, has in Kovitz who Prime This prominent partners segment our and trillion model. core to needs learnings evolving space. its worth which formation capitalizing and as offices of ultra-high over of Singapore. and rebuilding net globally similar like well for partners attracting sophisticated the Continental worth are market will forefront unique most through growth, on Geneva the venture through Hinduja and entrepreneurs. time, because individuals been three its & into of from Many and will through global be families and proposition innovators value in reach avenues competitive approximately one us COVID permanent wealth principles: individuals individuals joint of the these world. Our $XX the Capital, in value-added remains SES, entrepreneurs an the the growth capital, at independence, of net combination are and office and ultra-high for differentiated ultra-high highly us is the

need specialized choice develops, scale, wealth and As offer we become services to the landscape important. ability increasingly for the for the highly need will

clients the wealth solutions. are support entrepreneurs, also because but integral in because team not of of the Focus in areas that management well-positioned are only to our the providing our evolution services itself advisors and space, are value-added continued We to holistic of partners and

management and add the solutions, capabilities we valuation that to and and alternative investments to services, partners adding over continue initiatives clients their organic offerings. trust of credit help and significant our increase types insurance, cash our value enhance fiduciary These our scale are business and will growth in We partners’ and development are time.

health. from in to Key and casualty, portfolio include For benefits property will of available business areas firms QX. life executive offerings example, disability, and individual and carriers and leading beginning be will our partner a we making insurance

offer Additionally, curated risk such specialties, we range of and will in services concierge reputation a damage insurance. as

over this dedicated to and for client later a services services These expand We trust will time. opportunity partner our offer create multi-generational advisors significant also firms to wealth retain year. assets

alternative and the diverse for partner Separately, a trust highly high-end our investment independent with of through offering a high-quality a expertise creating portfolios. the coordinated meet network offerings advisor clients so and and are have a at sophisticated theme become to of competitive central client needs can do We scale pricing. trustees,

will firms SCS through private Through of best the to private managers Investment the access from have SCS management pricing. equity partner investment attractive our Partners, partner some be industry our arm partners strategists of Our SCS, asset Financial. to able leading access will performing with

this We partners number with are investment offer who additional a join working to solutions attractive program. of

positioned expansion second our of for anticipate year, As sights our earnings. we of path to question continue this strong have to turn repeating uniquely dollar and global business on we industry that from that dynamics. no in and a the the and are world believe this tailwinds is multi-trillion quarter has will that in I these benefit that success positioned Focus remainder bears Focus best the of significant It the we

acquirer net the all by advantage and the manage not investment an high also complementary, revenue, that of diversification adjusted and income, firms Not our adjustment of does a we are assets of competitive is an growth highest adjusted community. creates believe excluding allocate only is extremely This that highly multiple to to portfolio are rates. of RAs partner we the consistently our tax growth us in foundation still this solely and result. as and important significant underappreciated a and portfolio client it building our acquire partner EBITDA markets capital geographies firms is opportunities. We not Additionally, complementary continue enable

touch Before Jim, wanted turning secondary we briefly I completed to the QX. offering call over to on that the in

Class monetized common a A equity at sponsors time our in $XX in stock. XXXX, Focus increased first portion liquidity of since investing holdings private their our the per For X sale which in the million share, the approximately of of shares

not reminder, a As participate. Focus team the management did

impact our are dilution the likely and fundamentals and years business. share summary, price, of had have an very XXXX well-positioned our While growth this growth it no there targets no on this. changes for In and the ahead of we to adverse size our transaction been XXXX reflect in the caused

the wealth leader We increase. business in for the momentum continues our management clear sector and trajectory a are to

advantages, the near the long-term. that, more over globally Jim. of to I the for Jim? diverse partnership strong excited both firms enduring let outlook years for sustainability our and call growth scale come. reinforcing With very to remain XX turn of me about many Focus, Our creates than

Jim Shanahan

results, the strong with good and business. delivered expectation everyone. Rudy morning pleased we the and of We QX our across outperforming growth all excellent Thanks, performance very measures are and

creating Rudy future multiple presence As levers noted, our enhance offerings, the ultra-high presence build-out in the we our continued expands net for to our value-added and our partnership. of growth further space, worth international

the strong industry operating management pandemic fundamentals, accelerated. are growth wealth a further in which sector underlying We the of has with

our let P&L. me to details Now, of QX turn the

$XXX to the XX.X% of XX.X% estimate higher year-over-year up growth Our than estimated revenues $XXX revenue were X% and moderately as $XXX.X range partnership our of million XX%. ahead to slightly of across organic of was our million, million

up was XX.X% due to million, operating EBITDA adjusted of well This EBITDA costs ahead which to margin our result was XX.X%, adjusted higher and $XXX lower relative XX.X% the reflected revenue QX expectation Our year-over-year. growth organic revenues. of in

significant noted, achieved operating the reflects to-date. have scale embedded our The Rudy we As a this milestone. in business another is of leverage benefit

the that our expenses growth invariable leverage further certain T&E this there will line the time. operating growth such our margins will anticipate over return we benefit top costs believe as to some our will adjustment our of to outpaces that business be and the While increase, office we of as from employees expenses as

Our our $X.XX, period. adjusted for per share, income, net higher $X.XX, the share year-over-year XX% excluding tax and up X.X% per adjustments adjustments was were comparable tax

closed in Hill and partner Hill, million we and adjusted completed aggregate two and QX April $X.X the which EBITDA a $X an estimate million contribute Connectus firm, late of firms, revenues for UK strong and in QX. four during merger adjusted quarter, QX, In we There the and mergers, Prairie EBITDA was year-to-date, its completed in Lane have We Group, partner momentum in Connectus in Financial Matthews due Prairie market no M&A Rollins December. revenue X remained merger and in but contribution Australia our last Australia firm Our to new the we is on March fourth Connectus. that SCS our entered for X. that partner from included this merger into Financial, since merger for This Connectus a of in Capital Hill closing one additional Rollins meaningful will or continues QX. Investment QX and on

the Rudy is while acquisition highlighted, robust, is predict. our difficult [Technical inherently of transactions to As signing Difficulty]

pipeline this partnership other proposition, firms in bears the a No across accelerate They source which Focus that and offers to wealth each who supported Our partner to to our space And capital remains M&A scale. and service continues investment is are offer by are XX partner result is are has and near unique of an intellectual array teams part becoming the entrepreneurial are by without industry wealth would of management network resources led who leaders, that highly offer management helps this scale industry. client and our forefront their and who It at firms permanent the value as growing. difficult in international joining industry looking company of growth. to steps. The year their repeating we anywhere can or of substantial this them at capital. increase. activity remains next prospective Focus’ attractive clients exceptionally advantages the able resources for be to current is benefits managers of the excellent organic

clients gain benefit catalyst also we sophisticated of the we now Through in serving of the with partners the ultra-high we many position our Our offer. expand space globally. complex net are expertise partners the that share our services world, the and and most worth insights behind some in as and value-add we

up QX of XX.X% flow, and slightly structure. cost our variable cash relative QX, to $XXX.X lower highlights percentage of expenses to million, management ongoing fees benefits turning which as Now, revenues, the a our were

in that Our was quarter. awards $XX.X which modified the during were investment million, part equity invested non-cash reflected expense in compensation long-term certain

contingent reflects We the to be equity including of in expense revenues. in an non-cash expect in $XX.X estimated the fair simulations. QX the estimated Carlo Stronger reflecting the drove consideration, non-cash as increase X.X% compensation estimated conditions, the fair QX value changes of increase a approximately also revenue million increase of XX. to March of these market liabilities in growth, value earn-outs value organic estimates pursuant Monte effect of fair of our

this $XXX.X million reflecting growth available $X.X XX well allocation the higher as XX XX.X% QX, our LTM cash during of we partner line as period. of was Our X new March firms of guidance. tax as flow addition for year-over-year, capital our agreement partnership In the and mergers in payments receivable of with million, paid

earn-outs we includes and for our earn-out pay estimated QX We in also of QX, we paid million which cash of will guidance approximately $XX obligations anticipate line acquisitions. in certain payments $XX that with million

unamortized future our periods flow shield reminder, $X.X our by March to as be XX. enhanced tax cash a of billion will continue As in gross

will given increase We enhanced corporate also expect shield value efficient tax would the and tax grow to of structure continue in this our by acquisition tax be highly any rates.

estimate turning QX our the in range million million. we expectations, that our Now, to QX to will of revenues $XXX $XXX be

organic estimated to which our impact sharp While QX rate XX% XX%, growth was XXXX revenue the our revenue QX of rate reflects levels on market QX XX.X%, in organic of decline COVID-related we growth the revenues.

with expectations our reflect partner the generating. also QX growth together organic firms Our revenue M&A our momentum are

[indiscernible] to year, we revenues later with type expected, anticipate and COVID wide like of As this live the related availability events the normalize the will family office vaccinations.

will EBITDA adjusted QX also be about that We XX.X%. our estimate margin

levels, XXXX our we EBITDA margin that at be around Assuming anticipate adjusted current market will stay XX%. year conditions full constant

travel We adjusted of work clear EBITDA as in in activities to year income, half plans and adjustments confident growth our XX%. excluding shared of normalized XX% will target become development, continue year other margin to excess adjusted we will full business the levels. deliver expect of tax that long-term XXXX We return net update and second revenue that return this for and we to remain

few entered leverage debt billion outstanding $X.X we on a QX approximately comments balance with of and sheet, net ratio a X.XXx. of Now, our

need available stay of allocation increasing that net for at ratio X.XXx we Assuming flow continues QX our our a will constant to capital levels, the markets to rapidly current in anticipate the range highly cash as reduce be remain acquisitive of range X.Xx leverage capital appropriate net business. to ratio We to activity. of debt which M&A to given committed X.Xx, nature range our leverage we believe use to fund the our our X.Xx the most is

revolver the $X approximately and of we capacity, our on to of billion to cash hand based capital have flow generate this March on expect as We cash deploy XX, year.

transactions pay. We will and the pursue remain we we multiples the disciplined in

We have growth in the trajectory In momentum strong. opportunities internationally. and a We executed very our the results conclusion, remains excellent our in is and number both U.S. M&A and robust. of we delivered well attractive of acquisition QX business

took We and expand our the advantage international our in ultra-high worth and grow our worth continue net presence to ultra-high footprints of market. to net scale

quarter, partners We providing superior enabling during client their breadth scale expanded and depth also advisors substantially our of advantages to services our deliver the value add and the to services.

built are of outcomes visibility, further the scale business. today, growth All and have profitability our reinforce of the the the since differentiation. invest these have IPO financial our we and and our insights would a have flexibility we Without function of to competitive not or scale drive we

for over growth ahead We Operator? position business the are that, With Q&A. about for and excited are continued deliver the let turn path and that our me the strong, we of operator confident robust to returns shareholders. us the sustained call our evolution to

Operator

proceed with Thank Suisse. Please Siegenthaler question Craig Credit [Operator question. the you. your of Your Instructions] line comes first with from

Craig Siegenthaler

you Thanks. are well. team doing Good the morning, and Rudy. Hope

Rudy Adolf

Mr. are Siegenthaler, you? how

Craig Siegenthaler

You pronounced right. it

Can on how an about And one Focus taxes mainly of gain to you impact underlying it first also how RAA about business? prospects higher the my but trends? talk could is the M&A acceleration capital flow could impact am including I too, taxes. clients the So, thinking

Rudy Adolf

headwind, frankly, it activity, Craig, so discussions quite impact Yes, still meaningfully, will question, wealth many subject. think clearly, important not we taking is wealth more more is believe you our it what are are we accelerating In in has the having, away will is on by do some because complex more facets. managing. have sure, It the on you because because business this it government, but for the the obviously and short-term, certainly medium-term impact a this in many very absolutely. I when are of an are and from turn probably management an a so will we M&A into have just dramatically,

live very estate in partners, people high-quality the Washington frankly, to to now, of advice, want need is them, predict for migration what country what busier And a economy impact perspective then talked has fiduciary hard on with major long-term quite major clients if impact have the anticipate planning? so what However, probably and advice. impact been for you a this for need for for happening the course an a right governments tax by understanding of is where quality out there from generation, have wealth ultimately to and short-term certainly never maybe probably is our is from when need I the people net-net, headwind, coming it planning, frankly really they of the Quite offset trying local a the probably to M&A most positive. the on and an advice,

Craig Siegenthaler

it. have Rudy, verticals, valuations are with much what Got to then sticking in for how U.S. your international then comment higher across also valuation And multiples like can especially given the seeing you in on the markets? contrast you last this and trended moment, year, M&A a looks just competition it

Rudy Adolf

absolutely. yes, Yes,

Of course, evaluate, Yes, we because unique capital. else can entrepreneurship, ultimately position, have nobody a proposition permanent credibly claim. very value of and simply our

over And the a year are our multiples so years. earnings bit year. basically a the year the it said little X flat and again versus fact, were Craig, were call, in on we Technically, operating prior the they prior niche. down attractive very last last I last in

the So, market credibility by quite of the it’s power the the leader. and strategy value all frankly, simply the of executed proposition, around consistently

same. the – we industry, many are see in these unusual this some so yet there let’s some, say they many frankly, have You quite seen ways, patterns always are and in But we times correct are multiples occasionally.

with proposition. newcomers So, some poor space, value kind the inexperienced of usually a enter

overpaid, itself. they multiples. quite they all repeats then the do pattern higher frankly, that they pay And then realize really have can and So, is

businesses these all on operate to which quite started them in brand, that that Then their value encouraging has just to introduce very platforms, this encourage, then mandatory and frankly acquired it’s they their of force underperforming, frequently firms advisors buyer overpriced the they it announce of clients. then market. is I prices a they that they And bank manager, under they has now never a finally, are for of number see industry. These certainly no is in asset little increase products. industry their First, has their succeeded and they Usually insurance never a way because sell And foolish strategies. foreign no the this this you these and not said times, And works. lack a succeeded, what the industry, things trying. exit company,

you ultimately and So, successful. partners, business where so what you made compatible add need truly that And a where you are you business, model execute since ultimately this you this also to value have industry asked my consistently executed one Actually, strategy. with kitchen on and straight this tables, the been table thing we we way international. co-founder’s sorry, kitchen in we my started line the

Craig Siegenthaler

on I am contrast Yes, to multiples? the international of I sorry. markets U.S. you terms in versus asked what’s your in going

Rudy Adolf

that’s Yes, important very question. of your sorry, a aspect

is us gives in ultimately, of buckets international scope are multiples are the than in a wealth can constantly markets, and just the they just And U.S. allocate we attractive unique the advantage. more domestic We and So, investing where highest opportunity, this some managers. fiduciary scale and our to are in international guessing capital the some

high-end OCIO We and an your recently and PPAs. in offices entertainers. targeting in ultra invested did athletes transaction We investing are multifamily have

model in time. very we unique keep allows us is over have our equity and that So, on our consistent returns to very this really very, diversity

Craig Siegenthaler

you, Thank Rudy.

Operator

Please with Lau the of from comes proceed question next question. Owen your Your Oppenheimer. with line

Owen Lau

Could proposition value my value Focus Capital? thank please add space, multi-family the morning venture? joint this this taking Thank new competitive how can talk for in Beryllus you of Good landscape What joint your to and is you. the and question. about venture, you

Rudy Adolf

absolutely. Yes,

leadership can quite So work their really wealthiest Hinduja globe, help course as families we perspective, world. and one them made net the net chose of are in in the one value-added of develop obviously a to very the the can really most that the worth resources, course, excited together, offices in start us team, a the just ultimately with under of wealth families because this of market. and into ultra-high we We about lot very is frankly, on prominent of it basically choose But our multi-family are in bullish believe is from with the true they And about where this the about ultra-high big UK. management opportunity, the They one partners anybody. the statement leading they is concentrated. London, of Singapore. really launching in worth Geneva, our simultaneously This this of

across we And from very can about each we we look everything we partnership differentiated – XX basically, I is And very really have partners. at proposition or at bullish diverse firms We news always that group one we – will a and one bring here very of that the the of are much do in group. important them, Focus, we help believe partner that value appropriate, this network actually we when ultimately, firms. very spread have learn learning the those the it’s of of Beryllus as

Owen Lau

That’s in it. And trending helpful. then the guidance leverage, down? take environment. so, mean leverage on adjust pretty quickly does to a M&A for I been what it healthy Focus down has the Got very it

EBITDA adjusted you. the the leverage generating, you thought cash your flow what’s are guidance? updating the and about with So, changing, Thank process

Rudy Adolf

in QX what the want executed on our but may are your first transactions, as well, And margins, in where And again, to revenues, everything Yes. in XX amount free quarter from XX% with flow. enormous focus think really for trading of improved. to still prior we we I we to guidance, really down X.XX important but by QX just Jim allocation, We accomplished, now available to X.X generating leverage we capital big of cash increased course, And yes, profitability which is like cash jump came X is flow is X.XX Free number in now. of on, a are basis. versus factor this a months an X.X.

and the cash us the free you have that flexibility million very, available feel capital not excellent, past leverage our said Having pipeline because accretive in and about simply is keep $XXX.X the announcement allocation I side. generated year, will as flow the one on the deploying highly helps to that, good after we see we transactions. the just we other. just So, for excellent spot. an we rest year are Texas, structurally, capital want on in just in to in of of have And very

recurring So we of middle demonstrated to could cash QX also in diversification the leveraged the when crisis. our very that in if the the anything had the and of XXXX, headwind nature very optimizing our of using, hit flows have in full to easily kind course, really sustain the returns attractive we this we Particularly really demonstrate guidance business, yet quality, available reality is of shareholder by us. capital ultimately the

Jim Shanahan

have to really don’t specific there, I anything Owen. add

operate like a We base recently volatility opportunity the the great last in We we with RIA the international opportunities. we mentioned we us. really periods industry year just in our fee The what growing opportunities how of to can front that’s leverage connect, We that proved industry launched. revenue. set U.S. maintain have we see high and recurring large has during of We It’s is guidance. like Obviously an high a like industry.

transactions and we that using had, cash opportunities about attractive our look a do. So, cost at flow positive being on it’s opportunity low and in capacity of the debt really while the still maintaining our discipline and

Rudy Adolf

an I $XXX.X leverage basis on ever the a drop on EBITDA would because LTM our XX% reach to showed just point, charts, interesting. basically, We think X.XX by so last need meaning it’s covenant. million, net our Maybe to

by X.X X.X adjusted we returns So, the excellent position that and generate the range. within ultimately an to we it’s staying optimizing

Owen Lau

you. Thank

Operator

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

Mike Carrier

Hi good questions. the taking Thanks morning. for

question guys some the working offering are also focusing so well, of you can we when to you be credit, new the then want if Just insurance, the on are how winning has services create a it important done understand going new how first all on We of and are partner or on private update. to products where areas have offerings, after but like M&A the numbers those initiatives maybe seem firms? be it to just investments, in differentiation, tax, certain are any help how you earlier some involved may update And front? you you

Rudy Adolf

this then the group Yes. solve are part Hi do partner their that’s our we us have the helping that to bargaining scale reached to years, this opportunities us And And frankly, clients, these is that’s but space always a number This with need thing or is just same. hand, but you quite is we And Mike. to client for genesis find create saying, the gives gives something clients. in about initial we that quite number our you across often because pattern when And at of This the needs in we the us very frankly, partners been the problem, they scale of the of of one about prospects, industry. enable serve. starts you is can have a has. point. everything service how will we Focus have help raising Focus last else then insights. our we are the we start, look, we real-life are cases, are about really we any clients, excess when starting always partners deploy this for the our really And This And what of it’s partners. built the know through the largest service client these can I purchaser working over Focus that could not are value nobody our or helpful that it’s always need didn’t this help? client firm partners. from our in our It and plus are scale, in gives XX ultimately added. one solutions us just with some power. that what, And RIA partner we laboratory, largest industry. scale, that this unique very, frankly, quite very And just it’s

The credit. on and first worked that cash was we and publicly announced area have

are and billion financing rights pleased very, We segment. and over was tremendous the [indiscernible] in see very, we it’s It cash the $X We of very momentum help recently high-tech just with last lending credit very royalty the of like year. program. kind

very added in attractive value transaction. terms very had complex, You high a very but very,

done We yachts international have and things. other aircraft done have we lending, and

The industry is a than are or bringing purchasing into of there maybe kind insights X high-tech capabilities We more lot the areas in power in us speech, and of need are purchasing do will energy areas where today. we in Quite X I way year. them a comes industry. where frankly, is overpriced the the typical solutions a of that. that that is now with the a RIA So, solutions. put of trust major to we many This this this we right my trust power. party, in. Again, addressed And gives lot – we a them do our

Delaware, probably makes look look and but profit through, the Mike, as we because other added proposition planning even which access, the we them just partners important you our need distribution therefore best very, competitive we are very and the investing clients. license. with have partners services access don’t of managers are insurance. will at important investments, South These all market areas of more in have Alternative therefore returns, of getting our increase their to of to these Dakota, retaining also state Tennessee, we ultimately and the and a at growth the as We very in national else, you our have organization, your scale their more than like anybody have valuation through centers, FCS, better services, and clients for purposes expertise the value this partners, through but and to

lending. this of is have tremendous over cash attractive a fact, with half These In in year thing increase one If partners. and there often assets. leads I solution, learned lending hold our last a clients you are so to is year,

win our So, a it’s of win-win a really partners a client, for for course win then Focus. the for and

Mike Carrier

amount, good the improved better over but just has And then helpful. That’s years. past just a last over a EBITDA coming not Great. XX in follow-up, margin Alright. Jim, few COVID, with maybe is months and the quick by

changed the on the shift has few margin a that is curious or am makes opportunity I more years and versus attractive the ago? next outlook So anything maybe

Jim Shanahan

just Yes. margin adjusted XX.X% QX are this on last XX.X%. quarter. the of And year growth Obviously, was we the EBITDA happy the with reported

So points X.X year-over-year. percentage

about We details We are provided that, very obviously happy the in earnings that supplement growth. QX. in

partners million We are to EBITDA. going that revenue, adjusted have new $X about of few million a $X.X estimated in contribute

around we think contribute XX% EBITDA firms those adjusted margin. So, will

math. that goes into our So, of kind

margins. time. EBITDA mentioned. But our on Expect the as last at We when year, margin travel at all the the pretty visibility happy the impact later these end business of to margins more guiding over to that up. will days, that it’s we start X.X they transactions of materially have things, year pick this will year-over-year will on the we contributing change, adjusted least are just any not margin. said this activities I little early of Connectus full year, as so reevaluate the EBITDA towards with overall are adjusted earnings growth And percentage development XX% call time probably points long-term we are Structurally, at of a we still higher have but

Mike Carrier

a Thanks it. Got lot.

Jim Shanahan

Thanks.

Operator

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

Kyle Voigt

years Focus join them to as and been announced the potentially partner in by for firms. go billion then, at number mentioned firms Hi, there be think your good large almost IPO, deals AUM I as you morning. with in of is viewed RIA significant you that If ago there could X to that has XXX about sectors. now, we others were potential time, since acquisition or over back partnership a $X But which targets the

am of billion potential changed if XXX, an anything Just just Thank update ago just a market get – give you M&A I addressable else kind pool on and that as of that targets. of how over a or share us wondering today I partner to firms large has RIAs versus that years for around was kind on RIAs, of you that few sense number your number you the over that very can could Rudy you. time? trying maybe how potential looks for potential $X see believe

Rudy Adolf

Kyle. Yes. Absolutely,

on the total – basically, is is about a industry firms fascinating XX,XXX So, opportunity. actually things increasing $X are about one Reality billion. There of over research this number is pool several based this of industry is in ever RIAs. is an groups the the about X,XXX of

so group is XXX so probably is reality believe, staying industry, deals number year. XXX on this consolidating there Yes, a you or but And constant. deals really industries under Kyle, XXX It’s depending increasing. Why? consolidation, this actually maybe in the should be there level which is some these research to of

of industry. and My over basically deals and managing building year XX are the So years statistic, favorite out this advisors is is really XX,XXX both RIAs most trillion are brokers $X the older. that every in there, in backlog this

there continue basically the $X in X and are our not other. years, And reality way of these will So we just or are and is years next transition, have trillion X are get not industry the numbers will or numbers. XX to is in that market fair more – we share this. a than These focused years, research one we

selectively So high grow. basically, bankers, brokers, consistent to is banks more space. firms number RIA or the just into $X even the growing wirehouses what’s of moving and more firms. plus from billion are and is number One driving basically the Two a

growing So, zone. there who of large target constant firms is a supply this into entering basically are or

of at company getting recent, have. most proposition large deals most $X deal. real firm of model, plus value yes, do deals this direct billion the deal attractive here we Prairie holding range. multiples shelf constant a that Capital, a was Now is that us, billion if joined because very because correct, large of just we powerful you’re that opportunity $XX business but the very Very, firms, our announced

Kyle Voigt

just economics .Now can the of of just to part about value clarify your being I That’s Thank make as offering rolling other services advisors to all, at just enhance Thank you regarding that very some or helpful. think Focus added should really to you’re stickier we to and in sharing that those them? insurance those the wanted you. advisors clarification the value just out. offering to a ask or is I question proposition

Rudy Adolf

Yes.

to positive them everything just how which better can we model. partners enhance a have very as impact really revenue on but the some What first that’s value how secondary. ultimately holding is value probably becoming help that awesome the our Prospects your proposition, our of and of I profitability revenues part join of we really the our veto, recover only our So to said has be their on and scale really before, want foremost, proposition course and partner. really clients a us expense clients. and serve of about just of have their and can simple these capabilities we players Kyle, we see is company, XX%. because frankly, and we their of they It’s can their Occasionally, – these then offering where get models quite it’s a core plus minus will

Kyle Voigt

you. Understood. Thank

Operator

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

Alex Blostein

Great. everybody. Hi, Good everybody. morning

been partner I the growth kind the them, back guys your firms, market, when the of the on more us a but years not also little algorithm access. about algorithm couple growth, I and growth for obviously a services both has really right? been of value-added maybe and take majority you sales driver, has the The biggest and of firm fund help just and believe, deals same-store So the that think for

of the enough kind same-store that cause my been is, services of a you you of quite in of could where that the years accelerate done guys evidence it organic value last based firms? same-store think could what’s of sale with sales couple and us guess it’s you’ve question been on Any everything could go your these evidence actual couple share I over years, added you has and of So lot? ultimately partner do the see the kind last

Rudy Adolf

very what yesterday, – simply over $X every this the it’s sorry, excellent million see it, on balance line that we for added growth rates the of programs, And far. client Alex, for and yes, enough. And we million and impact believe with at to impact Yes. that world, the There disclosed much programs. pass-through, just organic they just type quite we new margin said talent so of liquidity, And is, billion about we not I firms firms very, also and for never Focused cash it’s in credit of get outside in have. And again, that’s because of power important of when we have. this, our have. demands of new with meet two sheet long our medium-sized marketing ultimately because the and it $XX said And actually, we before, get there course, And I management all is business the is fully operations didn’t services. And wouldn’t And as partner created these ultimately includes focused you most of these we acquisitions. well of our doing learned they mergers no this bank’s meaning partner million that use make Alex, increased that small, we investments. we really, see obviously we solutions real it’s these laboratory that when we that solutions, scale of these before, business. and frankly, are arranged $XX new we we this I And powerful we these we technology things once be are there did quarter, clients. help $XX very solutions, help the – here South, if a us And things where the in is But the there numbers. arranged a yes, but have credit we the impact always just can value very done some question to a tremendous came compliance. and is the here look as and do basically

the jury market. really – office So are services, optimization, portfolio out. We major see are carefully. proposition, still tracking we is a as these It’s it’s value part insurance, multifamily valuation we core services, a and too differentiator very early. Trust they things of think them in our the

announcing of are number We a just things.

resources major our from on and it space but this are Alex, has we wouldn’t launching clients if in for we convinced We that a – these. just But that also a impact yes, we weren’t sure, have perspective. these prospecting invest

Alex Blostein

it. Got

Okay, details makes there. more stay for sense. tuned will I guess we

Rudy Adolf

Yes.

Alex Blostein

so around amount just of if the question, are the could earn-outs, second months. help wondering with vesting of next the Jim, earn-outs that you over I kind XX My was the

value is around fair I million. think liability total $XXX the

gave I the think us million you in quarter. second the $XX

the the like the looks cash think sort payout? Just XX for of net earn-out what about that kind flow deals capacity of over of next we curious of kind months as

Jim Shanahan

Yes.

million. we the provide QX, So provided. this paid guidance $XX in with guidance is – that quarterly. quarter We that line That the was we had Alex, we

harder estimated this the GAAP Our guidance on me It’s point right, or under earn-out QX you’re is for based March is $XX $XXX change. million. XX months for at the to estimate longer And the million. term XX periods

growth obviously, the quarter, which we’re the proceeds, up gone this is XX%, of flow So $XX well activities the the that $XXX for and that’s available LTM will, conjunction credit revenue with guidance you million, that up for is our And we next bit. allocation line the flow M&A capacity that that piece quite we has provide in was the a are capital as XX% then using becoming a cash million. more cash The towards have if the driving and more year. business top

Alex Blostein

– go ahead. And Yes.

Rudy Adolf

maybe portfolio. I transactions. ultimately of of I we of our done for really because I just thought. – just here a have payments, large it’s more whenever some big one great firm quality Actually, the partner it approve with sign do wires a Alex, or The these the checks reflection it earn-out always that proves And smile the

Alex Blostein

High for Yes, sure. class problem.

sure as it the the is equity of fair whether cash? million, the value all is is a of believe there $XXX there liability wasn’t well? it the or or inclusive I is stock cash Just is clarification stock I sometimes just of that

Jim Shanahan

pay We as equity predominantly can be Yes. elements cash, but there well.

Alex Blostein

very you thank Okay, much.

Rudy Adolf

you. Thank

Operator

Securities. Michael proceed comes the Please question. line with Your Truist Young your from of next question with

Michael Young

Hi, the for you Thank morning. question. taking good

Rudy Adolf

Hi, Michael.

Michael Young

a they than stunted etcetera, entertainment they the we higher we to on just revenue on follow-up here from be how move thought And to before where wanted back of expect the them COVID-impacted little bit been or period? as I have should reopen any for businesses, to trend? should those sort should levels kind a of

Rudy Adolf

to Yes. want to, – Jim, may you want to you in? And Tim, jump

Jim Shanahan

sure. Sure,

year at specific non-correlated you of of pent-up sector So lot million. this We for look live entertainment guidance this a future. obviously, recover year tailwinds of it and positive. while point to revenue guidance, deployed the around was $XX.X event don’t we overall million sort the is obviously, remain revenues later year, $XXX anticipate just million. at and last vaccinations of some some countrywide. our the the reported we’re demand A business obviously, peaked into of headwind for But activities embedded We if and towards the $XXX or in over into full hoping X, we provide which, it on on activities are obviously year-over-year. sort this. XXXX our the Obviously, in driving as plus in past of QX, growth year XX% It’s revenue

Rudy Adolf

– better basically in ago. positive segment, quarters of the this now. much most shortage a But partner people only it It’s in later And can And the the that two now step are looking I talk world at other our clearly, this, mentioned this one the But when going just booking. way is but a Yes. course, so by than has of seems a a pendulum partners that very is recently, to interesting it started. is and call time. impact, booking now – the to have in just where venues be year, clearly,

Michael Young

a have the maybe behind? of to picture, but targets, going guys where year, are etcetera? that year you thanks. kind you And I the of EBITDA last there but to to plan just and done the or you this COVID that ahead out a Great, guess lot little a guys over of to we more kind get bit maybe I front high reopening now the and you’re like that of wanted might things ahead kind later or longer in through You be kind of of normal, view are foot, big seems zooming pandemic provided term update just on level curious back outlook the

Rudy Adolf

been clear very I to of the impact, EBITDA. throughout Michael, ultimately, last some we Yes. didn’t very business in momentum think frankly to de these or think million quite $X.X our billion change think that are we see are year minimis the course, be and – targets. don’t a was, guidance that good I there through margin we powerful but determined need And $XXX are targets have COVID to impact feel we We very I This revenues, still below. updated. is don’t ahead. in

the doubling this I XXXX, a just are along think more very good business of We chugging by is and really size aspiration. fundamentally to which

Michael Young

great. Thanks. Okay,

Operator

question the line comes question. next of proceed from your with Gerry with Your O'Hara Jefferies. Please

Gerry O'Hara

platforms some Rudy, thanks. pickup is Okay, are a of type of a either I broker recruitment, in runway to pandemic year, last that such looking stats around motion, activity. driving think I assets significant or maybe you we quarter, market that perhaps industry of so through fairly partner frame us we as suppose, kind largely post with third help yourself? dislocations it the there still you Can process? of where cited advisers in Are

Rudy Adolf

Yes.

Gerry think know starting. it’s what, I just You

there by Actually, some industry. clearly out the are the are yet. there what now. is we Of market seeing statistics share XXXX is acceleration course, gain RIA no But an of for industry

the know, you XX% traditional so is while we’re XX%, going course, the exactly which industries. in XX% in the then industry RIAs, – XX% it ratio. X where while you year does basically and then of stabilizes It we better to than here, crisis. our long year growth And X.X%, the at other by cycle, As about X, simply And industry X% only showed after where then about by over empirics part you the while incumbent industry the wirehouses in the again wirehouses a wirehouses get XX% then grows But the if all in XX%, RIA crisis, the it the was basically of typical to RIA impacted look the triple grow industry you’re But the year still gets crisis, versus here X%. earnings, the the right. the RIA grow of players. at versus QX grows

going the of think surprises to our just seen we in So, it’s over, this couple almost is go we is guidance for we that, come. beginning. next are more more And the to QX. yes, to and think never be years but terrific reality is think from over, you there yes, industry But it’s just for – truly have And and Focus. crisis I and

Our an frankly, which, these to QX rate for growth to speaks guidance that are XX%, quite themselves. numbers speak XX% organic of

Gerry O'Hara

can the the Or specific regions That’s beyond little get Australia? it, but on I helpful. platform of seeing? this missed relatively still it’s evolving an bit to is And morning, I had but know join has any a update apologies little if Connectus of I that call the that kind been has if late we traction a on that focused you how early, can? been of sort

Rudy Adolf

Yes, absolutely.

in very Connectus, we are but and very international, we on bullish the So also are in U.S. bullish

my total And really Really just a So process we much Quite these point, we market and Co-Founder, – thought Australian we of Connectus Molly, Four in of this where six at this came, tremendously. that just my frankly, model resonates Rajini it’s colleague in announced already. just experiences the it. Connectus. of from around the Australia. have deals are deals

at one So the then, and four deals Australia, in the already UK point. U.S. in in of course, this one

expand. expect this continue that we to going So is to absolutely

think – the course, one what company that we typically. question. mergers hallmark where We that and resources will in a grow kind between no And the be the a to that model was expect is this we markets are it’s on in. holding not between the our deploy just direct of that tremendous about partner of is, hybrid transactions help Connectus largest Focus’ long And we partner the square through it stands firms deals, middle this too time, which we of will hand, Connectus these in developed firms, operating all opportunity does in, just of two. the our smaller Focus one

Gerry O'Hara

Great. Thanks my questions taking for today.

Rudy Adolf

Thanks, Gerry.

Operator

remarks. question-and-answer reached over turn the end and back we now have of to I’ll Ladies the gentlemen, Rudy? Rudy the closing session. call for

Rudy Adolf

our very excellence by would financial our to marked clients I backdrop. increasing capital We expanding thank allocation, presence partnership LTM we closing, also solid their in in and And our you. partner firms continued worth quarter market. and footprint, Thank performance much serving another create partner outstanding volatile portfolio the growth, approximately diversifying Yes. their in during flow in and value and macro for momentum. like to in sustained business cash company in attributes challenging I’d for M&A for diversity the to hard million delivered quarter models ultra-high available work like enduring scale the advantages significant achieved in I strong We EBITDA, $XXX net further us. and million of international delivering our to milestone competitive build another the progress for our of serving of made holding times. our our their and on business partners our these adjusted $XXX the our thank in continuing reiterate want a more employees and generated

to ability We deliver our their through value-added personalized now to able services integrated, partners’ enhance provide. continue services the highly we to additional clients are to

partnership of been X profitability years have and wouldn’t a that innovation of our and scale Our behalf ago. support execution achievable just level on

positioned you the our all well your will the world and extremely growth pandemic fundamentals us performance. to are of enable driving as continue business interest. We strong and for the moves beyond superior Thank

Focus Financial Partners (FOCS) 9 May 212021 Q1 Earnings call transcript