FOCS - Earnings call transcript Q3 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 SEC, which list some of the factors that may cause its results to differ materially from these statements, including, without limitation, uncertainties surrounding the 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

call We Thanks, QX, in of are year you Rusty, our morning, exceptional we delivered everyone. an every and joining strong good and our across today. having quarter business. We another appreciate dimension

tax quarter Our adjustments share net record year. another positioning us financial for adjusted $X.XX, of performance exceeded share, of million, generated per our revenues third and expectations income, per $XXX.X on excluding all measures, adjustments of We tax $X.XX.

flow for the year, also only cash XX-month last year reinforcing strong XX.X% our allocation economic over value Our $XXX.X not million, available capital of but grew our performance, to shield. tax

by has model complemented market tax-efficient Our across results high-growth consistently strong a that cycles. is financial resilient, delivered business

also firms partner consistently years list firms, of We firms for this U.S. XX Barons were the high America ranking recently that with Stop are our our XXXX reflecting in in the XXX a RIA row, the achieving of of RIA partnership. quality proud most in included many

on in M&A of a to accelerate in mergers closed two partners, the our Our Australia. connectors new partner momentum merger and seven quarter, for as including firms third continued we behalf

quarter our mergers three across connectors XX date, transactions, XX included eight XX that The which countries. brings firms, another first year-to-date including announced to for to total we new mergers are and four This transactions closed have our pending closing. partners, nine for partner

source revenue an important is footprint international of expanding Our diversification.

partner significant the both also our extraordinary to in and continues on behalf Connectors level transactions, of potential U.S. seeing firms to continues are mergers strongly, an proposition value experience international. in resonate and Our terms and interest of new partners. of we

pipeline seeing good are have opportunities transactions our expand of and new to business. in our We a mix

Ancora, partnership they as about we are closed of anticipate these approximately and annual in industry the well attracting. Not approximately we examples Point X. $XX been XX three caliber of are add this. partnership we of announced, -- XX I've approximately further million only are expertise records own or growth, $XX.X but annual service. complement their Cardinal client their deep Our recent earnings. November wealth right, never firms diversify and track assets, have of in at great they firms as will acquired Combined, partner that client in they firms oversee Ullman, base structuring through million our revenues and leaders their stood in billion in more they and excited as and

funds Ancora Over assets. clients billion has as Cardinal solutions for and equity, fixed more a than November X, $X.X assets. Canada. leader Focus' alternative a while Point late in management Toronto-based array is time. Partners, domiciled complex expected an is well in manager its investment value also existing enhancing in and who a mutual Ullman Beach, principal particularly close these has Cardinal of with firms, approximately deep integrated closed Ullman's Here's Florida, proprietary context cross-border little an preeminent its of highly reputation attractive income, more Point in presence first based management group scaled Each it billion of by track in an both on needs our impressive a record financial has is performance firm wealth market. model, through that October a Sonora Wealth much closed proposition addresses to to Ohio, XX investment as service more firm spanning brings in client their to make Jacksonville firm because which Focus as team Focus are is than closed U.S. which which we Cleveland, X, and is the investment than premier with just is over in with over in the client each. in are itself dynamic, manager Florida partner Cardinal its wealth differentiated The approximately advisory clients and expertise, years. decade, client which in multi-generational investments. in diversified a million wealth $X approach Point, known developed the a the unique a firm wealth X, partnership, management. offering well assets. Ancora, quarter, RIA complemented Investment joined with The October a which is acquirers. it built Canada $XXX network expanding through Management,

attractive unique a us and better said to investors, and the The join is services. Having services services. become partners capital, grow important firms a closely solutions that that partners their with offering provide value-added recent to purchasing is long-term specifically partner, Focus resources, strategic an adviser-friendly an that working The services element intellectual of reemphasizing. and worth our build are These distinction. and to of example have value-added serve identified most growth essential scale as and and We leverage a it we them us. with need, what are our our are their combination power. to enable clients is makes we of I've trust advantages are this scale expertise, entrepreneurship, faster, businesses, stronger permanent before this competitive as

Ted assets. multigenerational to head offering and estates and offer firms stewardship the significant partners' These who our for we began our opportunity are needs. in of Solutions, the create are scale we their can works that to a for solutions Simpson, advisor-coordinated, the network services to the highly trust this case, with who approach pricing. leveraging to took trustees, dedicated us That Fiduciary so trust solutions, diverse with team consultative to Focus have credit and This of and basis clients. their tailored client on services Similar independent expand partner joined of expertise under retain our do management recently partners our meet our will third we to advisers a and to client clients cash and partners' parties, develop competitive a at our needs quarter,

that As outstanding combination fourth to performance, five will sights no to we business of elements. the have Focus financial continue question growth I by driven and turn generate our the quarter,

are arguably in with market has other firm segment just XXXX, track we forefront in the scale, leader scope, are of financial no the and the our and been we getting Since There's that us we attractive independent most our the have but globally joined started. record at of industry, actually services. resources. partners First, management operates in expertise, our first wealth

further this foreseeable space believe on in future. is industry We for will that are early trend will innings, and partnership, characterize the accelerate a its a consolidation capitalizing that pure-play we

comprehensively Second, three company the and as on the behalf partnership best level, direct of models M&A our many -- at this partners, acquisitions holding -- our connectors firms. industry. And a of needs we serve of result, are the mergers attracting

that As international of years have sustained a domestic such, pipeline opportunities we expect M&A many for we high-quality will and to come.

are expertise. which during partner pandemic demonstrate operating unique which the records value-added onset enabled the entrepreneurs, firms. from growth Their but their was are the XXXX They benefiting also continued services, our performance scale of the businesses, crisis. particularly Third, our of our evident as and track caliber of are by

and a asset financial this Our subject point. are industry third recurring the that from management to revenue way XX.X% Fourth, fee is. derives organic not model that of underscores quarter wealth tax-efficient year-over-year on the pressure stability its its growth revenues management fee-based reliance

debt, by that, is cash Our payments. And and turn base. variable with With financial flow of a by acquisitions low-cost call consideration capital also me managed model to let prudently transactions Jim? the selectively CapEx-light, with in fifth, highly Jim. over increased earnout funded expense structure, combination a equity for using a and

Jim Shanahan

you joining today. us Good morning, everyone, and thank for

build have into and QX. Our our third-quarter to results strong of momentum continued reflect the performance business, we

firms partner performed another well quarter growth. strong and of delivered Our in QX

market capitalizing long and We growth that firms of rapidly the market. manage acquirer breadth record consistency we central and to way, strength entrepreneurship have quickly. we that to resources financial unavailable are in leaders a a business that. depth the these disciplined and accretive, other with any a Embracing value excellent of that acquiring our testament is is them and and in everything make a through consolidating firms the industry performance is do, We our provide on track growing of

substantial opportunity the of fuel U.S., ahead internationally not will us, come. here well, to market in as just We which years but have our a expansion for

the only in the of where QX the advantage taking what to immediately opportunity future of will us, to let's to on P&L. turn With opportunities our of We highlights business be. our not front success at also have set and evolving adapting in market demonstrated the capitalize identifying that, but is

the across of $XXX Our was $XXX.X revenue our above slightly estimate. over $XXX estimated high million, organic growth as end year were million, and XX% up the exceeding of XX.X%, end top of XX.X% year, to million range revenues the our partnership

adjusted EBITDA XX% $XXX.X year million, over was year. up QX Our

estimate. with Our adjusted EBITDA our line margin was XX%, in

to will We margins expect compared continue expanded business. the to prior-year leverage that XXXX, due EBITDA time, scale-driven our approximately September to period. the expand adjusted by Year-to-date of X.X% operating our our margin over

in were XX.X% of incremental acquisition higher net Our with year. adjustments year the half per year, effect reflected prefunding $X.XX, associated activity which expense the adjusted income, interest tax our excluding share, over this of second the of

reminder, $XXX term X. As we July our raise of down drew a $XXX loan on million million

structure is tax acquisition period, reflecting note of transactions M&A of of our important frees up a continues shareholders momentum. provide Our significant additional capital the were tax-efficient comparable adjustments share and M&A for per a $X.XX, tax benefit savings, XX.X% form our the for It in strong strategy. to up to execution to that our

billion, shield Almost make As our this which are $X every tax was shield. of the XX, the our we September acquisition unamortized value tax of gross details earnings increases over supplement. in of

full-quarter noted, in firms, and August into and in revenues These EBITDA in activity, total a these adjusted momentum QX, we $X.X EBITDA new two of adjusted EBITDA Badgley XX% continued Based million Phelps of $X.X about on of and closed QX, X. two million adjusted M&A and mid-quarter ARS as QX Rudy million on Our in on million, acquisition margin. $X.X strong has partner contributed estimate the firms in and was $X.X QX. July We that closings. from revenues respectively, or X,

revenues date, additional estimate will pending in QX contribute for XX% we and closings, margin. total we annual adjusted $XX annual $XX.X these one adjusted $XX and $X.X and about million EBITDA close, in million or have we three in to Additionally, which Based firms. closed signed EBITDA, revenues partner in estimate adjusted have on of and a mid-quarter on million million EBITDA in in QX firms

Now our million, were XX% line management and expenses with QX relatively $XXX.X prior in quarter. the turning of or fees cash to flow, revenues,

X.X% will X.X% also line QX expense we this in Our compensation QX of with revenues, revenues. be noncash estimate was estimated equity and expectation, approximately our of

our QX, of consideration simulations, remeasurement our reminder, which $XX.X an liabilities. value of quarter in earnout are a the As GAAP the increase Monte firms. impacted change results in reflecting of resulted use million noncash contingent the for estimated Carlo estimated growth This each our future of partner in remeasurement, by fair is in

QX, Additionally, we approximately in an with B XX,XXX connection obligation. also Class units earnout issued in

in selectively acquisitions payments. previously, said we have issue we As earnout equity connection with and

cash the as growth of LTM in estimate. firms cash approximately line our XX.X% was in allocation pay for our anticipate $XX available addition We earnout XX million million, QX new QX. cash this will during September over the flow Regarding higher $XX.X our capital of obligations of period. and partner partnership, we million, as cash XX reflecting $XXX.X LTM year well of flow, We XX as year, of that earnouts mergers paid with

XX% that will $XXX revenue Now a range QX be QX our of organic of growth in XX%. $XXX for a estimate We expectations. our to QX to the We million. of estimate quick million rate review revenues

reflect expectations margin the QX that also firm We EBITDA will contributions be XX%. new additions. QX Our adjusted anticipate approximately of partner our

our update December previously, margin our overall long-term on X, our of and growth long-term as targets. at business As I've EBITDA part mentioned our adjusted strategy we review Day of target will Investor

on comments leverage line of outstanding QX X.XXx, ratio few QX our net debt balance in sheet. $X.X approximately a of estimate. for our a with with billion and Now We ended

we given levels, committed QX, remain our into We leverage we current continue performance be of and and that the of range, to Assuming X.XXx. ratio QX is we will which markets To business. this we in growth that appropriate the net between X.Xx X.Xx, Xx stay continue leverage ratio beyond. at to and our strong anticipate constant nature our will believe range net acquisitive close, deliver and XXXX financial highly anticipate most to

their a track this the benefit space, positioned offers is according It to at our pure-play in and the from total. We trillion U.S. are trillion sources, capital growing a consolidation expanding $X globally. markets, investment No invested XXXX, just of uniquely approximate have build the this supported anywhere the by which record annual growth time benefits takes stood first-mover in and expected industry According is bears acquirer in these alone independent trillion addition industry, this and capabilities, we're $X XXXX another countries a compound XX%. distinct at several value investor growth large in of It near Focus repeating the and to public wealth our permanent by to to and proposition, and has to grow or in, to or adds private, to we in which approximately investment, an international other is rate $X of report, of management advantage. scale. the

growth, enduring outstanding contribute attributes for turn shareholders. their the differentiation these and the With competitive Taken operator that, value sustained and call to long-term Q&A. sustained together, financial for Operator? performance, let industry-leading of over me all creates that to

Operator

first is Oppenheimer. [Operator from Lau Owen Instructions] Our with question

Owen Lau

Could for pace outlook M&A? and of about would your how impact talk rate potential in you please the tax acquisitions, the change the

Rudy Adolf

be overall thanks we pipeline could not Owen, said, question. your stronger. Yes, for as the

the I We diversity, some have. the international and -- keep quality, here than -- industry of fundamental -- yes, But are not of domestic the let's business the no generation. the obviously, both have can both implication implication the may, -- mind probably tax more ultimately, international. of is U.S. on founders our founding the we really pleased has -- that aging may with that working And and ever the fundamental in in driver remember acquisition very always the consolidation, driver deals in

the after or continue have is older, momentum taxes we be than much very, managing our the forces in that U.S., so and assets. no very in heard so in year have years in You XX going statistic here trillion and client to Yes, stronger years XX,XXX $X strong. just before: are advisers next there, these question just the to

Owen Lau

and it very That's trust other can it. on on please out? also, be us value-added the Got material cash helpful. services? a you then, touched longer term? more bit give program, these numbers credit think any little And Any potential you could color Rudy, value-added And new Could you services and you give services. then,

Rudy Adolf

Yes. Yes.

It's we we penetration, services power So are the there's that think increasing want we of, the now to that very scale deeper sophistication, about what a but all have of depth, need. we offering. successful we to much be purchasing in offer. two pretty Cash one Maybe credit type program. I others increasing and have can think services or that we continues

so for We cash the to we transactions or the using may partners, for $X our our view using of since have than frankly, and as this in in participated, with provide you this our any billion of help And scale and here partners, We client announced scale, better joint to earlier end remember consultative the solutions of year the Orion in closing area. program aggregate good inception. power purchasing quite just venture, advice our organization, very the credit the industry the anybody could momentum. create

about with Just education, is to for differentiation XXX received. companies days, up launched. partners. we clients, we successful a just right conference was, program. and solutions did believe It's preferred of again, our clients now but very, which high lining this and and trust call like Trust, well again, their our a the very provide Early

preferred of these international, is both indications key equipping very really The early all banker, package. the we of value-added private all of any the skills a theme of capabilities, ultimately banker knowledge, which the architecture very high-end a passing right a we are through and to credit are different beyond so for where we certainly, on the market, using mass Quicken partners in them, all at about a are to has of have open done solution, my the pleased a been the our clients with of whole to private as are have sophisticated we is this really before. Loans and programs now, solution point. introduced certainly, roster never Yes, going good that without very with banks about but in market, high domestic But sense concept of providers end curated, new number the and you this in have and We XX the lending positive. the

Operator

Sachs. next is Alex Our Blostein from from Goldman question

Alex Goldman

guys, you being we M&A are for the to I constraints, quarters now. robust that's of guess, leverage, activity. pace you Xx the the of activity question, the into financial obviously surprisingly, A little a fourth bit think, over transactions about debt-to-EBITDA guys, When given on ramping, last the Not months, constraints, old think guiding the the quarter. a several really I several

below moderation year still And expect you So the kind affect to kind does do pace fours could of pace of and of you could as So, to other term? we've a the of X.X% similar or that activity? generally recently? a over of be anticipate into as target what you're kind the seen you that longer doing that extent get keep on a we things kind

Rudy Adolf

incredible. to Alex. is Thanks, no other The way put it. Yes. just Yes. momentum There's

We always were reality committed. is have And year we date. XX announced to our deals

right the we We range last performance at resiliency to it and business clearly, are to is X.X% the or for X.X% when was as a the range. always so in the this second it in -- right model, year, extremely X.X%, last and of think strong, year, quarter particularly That company. X.X% the what is our sorry, believe look committed us range. we -- the you And public this operating demonstrated

number of we equity. already component. equity said, yes, You always to have And a an transactions, are we transactions willing where a use as now, we in there's have seen of but number future also

our very fact, seen this course, growing pace. equities currency is these year, cash at And just days. strong, extremely $XXX about as know, of very you generation then, our million In attractive significant very, as a is a

of we currently there. opportunities course coming M&A the next flexibility meaning to But the of don't I as some so the that are we So all constrained, before, M&A, in that believe the is combination told ability our certainly change that said, hand, on tax see I equity there gives us And use our cash year any not see. opportunity out we, one or pace significant the that here shield, many Owen opportunities of years that of we the flow, need.

Jim Shanahan

make success we is flow tax-efficient to to undrawn begets Just the this periods. the structure flow. success, continue cash to term cash of add future element and tax that -- use manner, loan grow and the our for in also with and basis, and forth. so transactions cash have on an as LTM clearly our powder to the continues But then, leverage a dry we limits And shelter deductions revolver

opportunity future think we So and prudent with guidance. but be we the we'll in the managing bright, to our terms continue M&A and leverage our is have pipeline, of here great

Alex Goldman

leverage second on at us understand and But are Great. appreciate, last going I to the here. in question couple is underneath dynamics, the around on of Day My margins EBITDA kind the over operating better give Jim, surface trying what's quarters really of Investor to just going you targets December. updated guys

of three consolidated of kind that of your quarters line sort margin look the of and of of so over the so ton firms, a the improving in to business, scaling margin, So, been EBOC sense. right, partner when makes with four guys kind last expense a function EBOC I bit, goes nicely it's in a at a at coming fee percentage look I what EBITDA and of payout I'm the down margins, been number, that's if as it's you the the growing that if follow then, kind But and saying. of management of kind just really little

firms, is the EBITDA therefore, of in have that from is of and ratio to to way, and opposed the a sort you I'm partners? expense skewing of Focus. in from better as equity relative flattish, to team margins some So leverage firms the is operating the just scaling understand function affiliates participating trying the less keeping leverage kind the you management the wrong larger scaling those coming of the of of your

Rudy Adolf

Yes. Yes.

the about leverage So let here. me talk operating

important exactly levels. merger And our bit And the XX.X%. firms, In margin. Connectors kind are contributor going small with just trend through little trend. our EBITDA XX.X% first, a partner yes, you QX, multiple higher-margin be be the ownership But One P&L. -- and then, couldn't XXXX, larger frankly, thriving scale of see EBITDA reported of percentage So is quite partner in mega a discussed operating to as they level it's margin, from to on is, we translates improvement. fundamental our our margin of very that just yes, is into correct, the frankly, we this. the we firms an pace improvement Quite fast, the ultimately And firms calls. stronger. we and on coming the but, really partner Still a expected. business, so a also was margin really small, many well, see this, prior business margin

I quarter-over-quarter wouldn't much trends. too again, read So into

I think it's here. that long-term And not give I yes, numbers. and really are the you Jim trend to ready matters the

revise margin yet, ready come target December, upwards. you to going to And, You Investor beyond but the our to in we are number and give to I'm XXXX not Alex. have Day well,

Alex Goldman

We'll you enough. Fair Okay. December. in see

Operator

Our with next Kyle is question Voigt KBW. from

Kyle Voigt

in selectively a ask the percentage of Alex's still But for please past, been few a your question. on purposes. think I years done very follow-up strategically, know deals equity the transactions consideration. have Could tax I used in you've with over cash especially past Rudy, I high

inferring if wondering just that -- on more inferring I basis So, am just commentary I'm a I use ongoing am higher are you're look of as an or correctly consideration to willing percentage and you you equity equity given now, consideration, the there? I'm -- just on incorrectly ahead,

Rudy Adolf

it's But highly cheap got for interest same for can equity transactions, ability, too, flexibility when then, upstairs equity quite side. actually time, for where again, course, Yes, our structure, larger rate deals. It competitive on of no, have lot we equity of -- for downstairs we frankly, the side, we unique. obviously, and Kyle, a can, have unique for be very Kyle, advantage, we've us anybody of where so will And is at the it larger you're highly, very LSC of being attractive. exchange the we quite through a have frankly the we so which historically it's used is tax-free lot at very, powerful this Basically, blended equity, cash you can inferring else as in offer And use is a of can With And issue then same I format X.X%, a correctly. don't think the real the equity. there's on and UP-C transactions. larger which currency. course, it's because downstairs the in a

So currency but yes, are cash. our of time, we continue you're going hearing correctly. will ultimately equity majority use to From particularly options, to time the larger to some transactions, be for

Kyle Voigt

the question a leverage just ratio. And Understood. on

You've ratio see the the in a specifically. struggling close we're that are quarter, that when a you've net half X% expected take leverage into end account would pro in growth guided over rate we in maybe turns the year, to than to XQ, just guess I be to to and account fourth we EBITDA into more related also range take now. announced run by turn that X.X forma the the the added to quarter organic there of X.XX% still deals that the how to

those help all. So purchase little at I gap maybe bridge get could missing? on don't a of we're color a if little then could maybe that multiples know, us Jim, we kind really anything you bit. more changed And there recent Is that and have also,

Rudy Adolf

me guidance. on for talk multiples very about can let And quarter, every give so the jump in and you we Jim, leverage narrow Yes, guidance. first, the obviously,

Day, very We see that international fast-growing can are we ability -- on the have Yes, with we returns some give upside. what smaller we always the high-quality, on deals, Ultimately, and help we side, the our firms, very we for We for you multiples. for Investor basically firms there. your precise have to the multiple guidance, like continue for we flex to But mergers, again, have will so we quite on see. they -- update frankly, on attractive be you, and generating, of an very, say, first quality flexibility we have comfortable but Thirty-one attractive, very are. and we XXXX M&A use year is achieve, this date, going joining -- the and attractive that where look expect of very we partners are our have XXXX to be of when returns very, what foremost, the to, to are that on, just again, deals firms most the very on to expect We the successful bringing be so vintage we at we year, let's the or we in. the we will model us.

Jim Shanahan

Yes.

work in disclosed to QX, over and closed $XXX in guidance X% time, quarter, and deployed transactions. at to We've range activity. net think we QX, XX continue I we transactional X.XX% we've the on the I ratio. cash a million closed this of at on the leverage already this for Q think of we We've QX X.Xx for is have transactions

Operator

Craig is question next Bank Siegenthaler America. of Our with from

Craig Siegenthaler

had L.A.-based just affiliate largest access of I a to question how has your this wealth been on get to process see on partners the us a you leveraging believe help it's Can just platform investments. your I platform, alts. effort your their pretty update brought alternative of progressing? and in and other robust some they're

Rudy Adolf

absolutely. Yes, Yes.

real base. high-quality solutions a like where optimization, other solutions. portfolio from make so $XX firm. certainly well alternative of above New it, investments, will is participate. with it's ability asset program very And Kovitz which Chicago also terrific firm one to and other and And who industry. and Boston- And in actually the has FCS, in the L.A.-based program behind a billion, be but estate FCS, we yes, we You're believe a funds is other our record firms, It's track the there hedge of we their referring call York-based about these the X/X best to have partners very will

quite firm optimization, was California-based through programs. that's used guinea into silicon very portfolio They could FCS allocations because can by in years broaden clients past they their are a firm, interested The other into an they in program with that frankly, very done just increasingly And years this converting never pig. clientele very, way, So, well alternative at example we it in this Vista. to reaching serving. they scale this. very could were and making solutions. really and asset program, It proposition are their resulted tap investment the just larger serve definition, an percentage larger, they available a program other mix a these I broadly that build and value are going have could of like of And any Focus takes attractive ways is they enormous partners that kind And more the point. ultra-high-net-worth value-based and the tap to not needed it in in moment,

FCS we of in firms course, one they the can make available and basically, level what be have of In very fact, where actually. our is and all our there, and partners future come we many interest. them And meeting, we in-person pre-session, of unique to will which exciting, week, of are there, heading a together their our offer. other of be who partners the a firms to solutions, talk speakers to partners' about CIOs first next very meeting may in high partner expect interest And

Now question. important for thing, your Craig, here's the thanks and

That wire what of So, basically, do so this down not or is would asset products house who absolutely their model, a if not managers, doing. a underperforming clients. distribution overpriced what you throats is push not we're the want, this is

access to. solutions, and clients, our a where solutions, much and very of solutions, list. is -- But at before, for spirit And things, built. standards enormous scale whether want office it we and basically valuation is their access alternatives, access programs result ultimately the this our creating, and partners in trust of is discussed the alternatives decentralization. partners, scale choice, creates whether they high-quality simply have credit, multifamily the very can these This are what we all entrepreneurship that this they the other better cash outcomes by if of their is -- of simply, are to is the industry at for it top whether -- it We

Craig Siegenthaler

But chime us that we're inside AUM a of mix today imagine equity you do pointed will us the running of probably like stress and rough but scenarios. in mix? believe mix correct you rough client equity this that Tina side? it's in maybe client on bonds, XX-XX AUM And I what is generally when invested to in to know alts I one, of

Rudy Adolf

Yes.

in alternatives by FCS and and of saying that the the are alternative we allocation one we $XX $XX usually, I yes, break firm. overall of alternatives. it's really XX% probably that given is sophistication is But driven non-correlated. And billion that's highest have billion before, of and mentioned equities the Over high. But in the and level a a the are given they balance, out. serving component, are it XX% That the sophisticated important the low-yield we from don't So perspective, But between is in, area. we environment we a -- that very be part currently families, are our the correct, asset mix. particularly are of non-correlated, course, part high-net-worth, clients way. that this of would pretty are serving an in actually alternatives ultra-high-net-worth overall this serving

Operator

Securities. Young Our next question from is Truist from Michael

Michael Young

And to size larger or two question more larger, interest cetera? out by three similar of what in run M&A, demand buckets? becoming or et you a of M&A then your terms and of deals? kind One, just a acquisitions do of partner more plan firm, with you Connectus two, getting as there there ask maybe Is on the base seeing to look deals is demand are at for just faster kind parts. AUM a in Wanted at terms

Rudy Adolf

Yes. Michael. Yes. Thanks,

So believed and you -- I never in deals. look elephant of through the flashy big, -- history Focus' hunting, when kind

a biggest continue in We opportunity of billion probably $X to billion the north the see $X and range.

yes, to But Of through continuity advice, simply to transactions Ancora billion firm. you value-added look we protect like larger, and a for are first course, foremost, clients we access with to services. to was have our your vision, aligned $X want firms you that of want do

resonates. frankly, and the game you the this we and entrepreneur Quite Focus in capital, where for in an permanent want operate firms on looking want way? You town, are to

see your to which this sweet-spot deals in deals. yes, need is, elephant us don't largest in -- smaller our some also in some we more be the getting implication I we this being So business, in the have team is of M&A do it question, into industry. the or attractive occasionally But in Michael, -- simply deals, range larger occasionally

basically in mix has keeping have can, for And or a to ultimately, that question we consolidation operating by as number that objectives through a the multiple of and meet sophistication markets. on frankly, global clients we forefront scale quite stay comparable the advisers quite I and scale absolute been and creating We no the our on years, of the have. of are it value model industry to and,

Michael Young

to think Jim. inflation model Okay. as flows rates XXXX one an better not pressure And kind I'm how and headed fees. particularly behave you've your or macro Rudy kind of about reviews But to just if we potentially management this maybe is of and done I how kind effect, my know second it into don't I'm question, for just, relates of business that of XXXX, think margins of operating in higher trying a or the any inflationary sure exactly and environment. those that as through to therefore,

Jim Shanahan

Yes.

service, management, recurrent evaluate as revenues exposure. wealth more and on component. and have I is we've interest driven fee-based, we our holistic said, don't P&L, fixed a nature. variable revenue our revenue It's think we from interest the expense standpoint, The in constantly for often rates as our are so

of terms cost think million this a at we'll will is in of moderate don't it operating it's what that our does $XXX point; Fed so being is is hedged but anything loan this significant our already long-term limit term XXX that continue the have XX-floor, point. rates, at incurred. goals And We to interest of the we

Rudy Adolf

just stay tuned. Michael, And before, strategically, said Yes. I just and

very frankly, inverse rates at overweighted a an pure very, be will will the they between Day, multiples. be And interest from relation numbers We and the Investor it's we different this And have can have. we decentralized perspective, return that, macro based on the are then you're a dramatic environments, structure adapt just reasonable And -- critical. fast. that quarter perspective changes, any of But and anything course, if was is ultimately that impact and that's and generating of there's the to cost just macro business paying? doing. our our So, We of update very returns that little this business strong. market at there And environments, throw what should if year model very average multiples of from different are scenario also, is that macro demonstrated extremely some and extremely course, more is rate smaller business. we to what's you changes entrepreneurial, quite capital the cost of to the could second average weighted there power the adjust growth have about any resilient last model flexible on

Operator

for the We remarks. Rudy? will question-and-answer closing turn and have call end reached the session, Rudy now I of to over the

Rudy Adolf

the business I'm level conclude, is of To of extremely proud and you. momentum our Thank Yes. growth achieving.

not perform our their to It on team. in industry. deliver are could and of firms, without have reflective not quarter possible have exceptionally holding who are to that. continue partner We outcome company this possible service well, would clients, outstanding This been our firing and results leadership our also been define cylinders, this all without

deliver that We're And on will reflective the many our seeing for December for look forward but team We no forward and finish -- they will partner growth and looking results in well as you for sustained as about our a Investor second they we our -- and strong well of have more of you in to all said best many there's interest. that. our only execution that telling times Focus again positioned, not of to firms way much there, business, to story, are to Day. at many come. be extremely quarter your we facet than quarter, the years also this X. strong, our Day conveying Thank of better you have are every very Investor to at We

Focus Financial Partners (FOCS) 6 Nov 212021 Q3 Earnings call transcript