FOCS - Earnings call transcript Q4 2021 | Focus Financial Partners Inc

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Operator

Good morning. I would like to welcome everyone to the Focus Financial Partners 2021 Fourth Quarter and Full Year Earnings Call.

Joining us today are, Rudy Adolf, Founder and CEO; Jim Shanahan, Chief Financial Officer; Rusty McGranahan, General Counsel; and Tina Madden, Head of Investor Relations and Corporate Communications. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. instructions]. [Operator

this recorded. reminder, go McGranahan, is ahead. conference a Mr. being please As

Rusty McGranahan

morning, Good everyone.

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

Rudy Adolf

excellent We net on heights. reinforcing performance the all our today. Good in that had our sector. adjusted adjustments, and revenues wealth to the generated Rusty. proud We performance the Lenny, with incredibly and tax income, Focus. reaching financial delivered, of year, clear and in welcome Thanks, and in business appreciate Rajini, our measures, an our everyone, interest leadership XXXX, for management excluding exceeding new expectations independent call your year morning, We outstanding I, are

we of our activity the with new extending proposition, the firms combined last entered in we ended partner of We with all pace activity, in scale The quality some highest We excellent firms partnership, the continue industry, to attract XXXX momentum, with that value further our countries. of year. were four XXXX services enhanced this strong record to M&A and XX and value-added quality integral outcome. and experienced

substantial We expand into on Australia, US, Canada, and a countries. are the working pipeline and plan UK, the to other in

equity capitalize further attractive our that revenues primary to We XXXX for the demonstrated by and to year M&A markets and we billion. support December raise delivered access our excellent to year-over-year, on expect equity full opportunities the shareholders, Our in ability XX.X% nearly $X.X beyond. growing results

excess reinforce a were per adjusted created Our at the share, XX.X% $X.XX, excluding of were high business, by our which our the of XXXX, the is adjustments our results also nature XX% in In and stream, regardless share predictability adjustments which net income, of tax and results of value $X.XX the tax per performance, growth These revenues market being respectively. and value partnership. the conditions. our were recurring. reflect drives of stability XX.X%, revenue function financial The recurring our of firms of

transactions last Australia, inclusive Canada, XX of the XX footprint XX However, made firms mergers as a We XXXX year, the UK. was on for momentum, year of including opportunity we this capitalized disciplined a expanded closed a and way. in our acceleration eight industry Connectus, mergers, and what M&A which in consolidation standout the record partner

diversifying to client of our seasoned reach array an geographic complimentary and firms, to leader each strong by management relationships. further capabilities outstanding and flow. talented continued business, added a and our investment add advisors, and partner management Each including teams, revenues cash partnership, We new an industry longstanding expertise, with wealth deep, and

value-added strongly, services, the is highest in firms many we of industry. continue of market at capital, our to As December proposition resonates us in the Day, and Investor the entrepreneurship, permanent our attracting discussed performing core enabling value unique and

in the long-term by of Every this strategic stronger adding the of us. time is value consistently This our the firms. process our ensuring high XXXX, clients to Kodialam, firm businesses, programmatic the continual us is a Central our that of to and to my to we our was many we scale the Day, resources, will are of partnership. value right heard, them expertise, better, and XX intellectual you generating. in our joined proposition it As At describe what partner, the validates firms are decision the service further faster Investor advantages, Rajini add heard you at become M&A. the we join partners the caliber Focus a approach that with attractiveness investment as drives is grow Co-Founder, that created of partner returns their having help state, core

the an unique differentiator the particular, are benefit assets. Last reach firms practices, a to business our RIAs insights increasingly to can Co-Founder, that that growth our trust, firms. with become platform differentiator. In range our CAIS, wealth leverage insurance, complexity to upgrade partners the expanded value-add excellent. alternative partners. important scale last were each stay And key our year of enhance to areas, such offerings a value-added based profitability those we through position concurrently of partner to we essential client enable excluding partnership important investment our our behalf My organic provided very all needs we organic their continually of to our our explained Day in the Our to value-added meet vary our alternative This our on we has that need in customized Investor enhance we Chang, and have and well partner their lending, business firms areas, client needs, allow important questions to provide to in RIAs their investment Lenny further and helping skill to structured to answer which evolving we both also valuation rates, the of mergers, need us received. and partners week, themselves as services as an these disclosures and We solutions. clients. to services feedback announced We solutions. strategies on has of to competitive, add meet growth. our gives on the our all the our areas the services of investor partner will of seamlessly will partnership, gotten access platform of their and help have most. been long-term The And

at us weighted on average a excluding of portfolio As been organic generated mergers, that XXXX, basis. for for partnership X.X%, September our two our XX, years, have rate a RIAs, firms growth of since-inception XX.X% and with US of least

were viewed joined size such firms XXXX of XX%, returns, levered with also XX% by of quality panel on the discussions. Our Most XX% importantly, for our who depth many partnership at update IRRs the very investment positively, and us of Day. stability our and excess the generating of in our as partners with impressed investors demonstrated Investor was compared by

substantial with model. made of our our we in XXXX the financial targets and reinforcing increased this. have We of reflect crisis our to the progress evolution business COVID stability And business, resiliency the

can't strong growth Perhaps M&A trajectory XX% revenue strongly growth is leadership consistently Our discipline, the we within takeaway continues are outstanding by management record we execution, and delivering wealth and emphasize this independent position enough. executing and that are growth, investment by most organic point sector. important the volumes to plus annual nimbleness. supported our I widening accelerate, on

beginning, multi-trillion-dollar we for At in highlighted longstanding bears firms in our value relationships, positioned in succession we adjusted merger that will growth, market partner global span provide many Investor approximately Day, in client and Although annual last an revenue representing XX% a that anticipate XX.X% this opportunity is is XXXX, and and EBITDA industry years, industry shift, uniquely are some experiencing plus if by a EBITDA consolidation expect despite repeated level financial a the to margin advice also decade volatility driven the for and this year. activity this of the our the It that of we solid adjusted in foundation years, Similar and not need several of outlook. or scale. a more. transformational increase that we just XXXX,

exclusive focus, value but our double and targets supported we years’ on EBITDA is of that adjusted about reasons of targets, XXXX We adjusted by dynamics, we achievable. It these while To approximately about of that billion, adjusted more believe EBITDA, increasing revenues size in these EBITDA track firms. XXX number we our our billion, the that company we updated we are of Given $X the XX%, to margin XX%. have $X.X by for a will targets that record, and these firms partnership the partner reach result shareholders. best significant is than aggressive, financial time, requires of future and four scale, these our capitalize believe for approximately positioned believe industry in world creation the including, in of Focus which revenues

Our growth for advantages, growing to near our Jim. strong enduring Jim? creates reinforcing many that, sustainability about both global call our With let very years and diverse me outlook, come. excited and partnership, long-term. the turn over I'm to scale of the

Jim Shanahan

the well. everyone. our exceptionally for QX In Good performed and morning, year, full XXXX business

the strong, partner continued value-add for a activity, We financial new our transactions, invest closed our and growth value important generation, Our record adjusted achieved, revenue XX M&A in our cash to delivered world. year-over-year flow around growth as accretive in performance we capabilities services, our were in enhanced and expansion. and many strong We drove our new growth EBITDA areas. increasing international opportunities very our firms The results. excellent substantially adding flexibility

our strong for firms increase, behalf our an achieving, future. the important partners consistently our cash of and our partner results new updated December the we Day. shield is the growth completed further Investor growth we quality XXXX you partner the last was The flows. financial are the we business continued year, and for firms Our the catalysts on targets continued our are to mergers partnership shared The acquired, high and in tax of with performance at performance delivering, in also of which position enabler our

sources. view, important As our XXXX the we of made, is are we to element we targets longer-term that will laid consistently recurrent we Rudy remember is and market point important business of central a This that near-term our provides in to annual which revenues and of a it on XX%, our XX% support current coming noted, levels growth over Rudy growth, full adjusted that delivering. EBITDA that year the excess and further Based business, believe is of with adjusted revenue context. our relationship-based, margin from growth out deliver also EBITDA high XX.X%. To emphasize trajectory XXXX the approximately

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

were estimated and a X% reflecting $XXX year-over-year above revenues our Our top of million. the $XXX.X million, of range end $XXX million QX increase of XX%, to

$XX approximately was associated million in revenue the guidance to end well QX. rate by XX.X%, which This repeat of managed Our primarily organic growth XX% above will our funds not top of investment QX some reflects fees XX%. alternative performance our firms, year-over-year with in outperformance of partner

EBITDA. and our EBITDA adjusted approximate million the compared adjusted up excluding line Reflecting was tax strong per performance period. our QX net just year was adjusted with prior XX.X% adjusted The outlook. And approximately the XX.X% contributed the in to period. XX.X%, was growth Our $XXX mentioned, income, I increasing our our EBITDA QX $X.XX, fees of in year million, margin business, share, $X profitability from prior adjustments XX%

share our higher $X.XX, organic driven approximately rate year, revenues revenue Our billion, On growth basis, of year-over-year. prior were per our full XX.X% XX.X% the $X.X tax adjustments higher year by XX%. a than were

year. year XX.X% million, percentage And Our partner XX.X%, full $XXX.X Full up XX.X% reflecting year share of leverage. of was higher our for adjusted the new year-over-year per growth prior addition adjusted reflecting And operating adjustments higher, excluding was than X.X EBITDA were was and period. the firms share, adjusted same points the tax per XX.X%. net our $X.XX, margin EBITDA income, tax adjustments $X.XX,

benefits $X.X December As this partner value our record had which shield, M&A we billion, shield proposition, by firms we the gross activity, in offer tax scale XXXX of and approximately attractiveness XX, of last details make, the $XXX of for underscoring our are every in supplement. earning unamortized value increases which the our tax year Almost in over acquisition a was year of the alone. grew our We million globally. the

two EBITDA, A including consideration including of a firms million adjusted and eight quarter B partner margin As shares on firm mergers, Approximately respectively. $XX.X partner were million we transactions. remaining of amount On shares, XX,XXX XXXX. closed and XX revenue In Connectus, new In adjusted connection transactions, the we approximately nine in full Class adjusted of a nine $X.X million, firms. of total Rudy on partner these for partner are XX XXX,XXX as approximately of with estimated million with contribute paid. revenue noted, December, basis, in XX were The closed an new QX, of and contributed the of XX.X% QX mergers units, for firms Class XXX,XXX and part to with firms $XX EBITDA, XX and equivalent issued acquisitions, these LLC $XX.X in we shares. EBITDA

As unique These our part for our we by prior capital shares we equity as walls, adjusted of have approximately our share outstanding issuances, on LLC shares. public transactions, acquisition shares, the will as million December our attractive as highlighted use offering, average to consideration. X ability have well increase equity QX weighted our

set is at our strong. we discussed is Industry Day, our Investor increase, activity the internationally momentum to opportunity As very and M&A continues growing. Rudy also highlighted, XXXX, have into M&A heading and

anticipation be deals will into partner that completed expenses we in globally. primary the equity to their particularly lower, QX, additional use provide has our This efficiently a of firms substantial, robust its offering raised growth substantial further, While that we will XXXX will in pipeline in our and QX our number synthetic and December, M&A it'll our growing is anticipate working $XXX.X late of global through increases. also as capital amount the secondary. mergers we issuance activity, pipeline million of Connectus net M&A to given levels opportunities of XXXX. expand close for capital flexibility with us accelerate footprint In capture M&A expand and a of

on comments cashflow. XX.X% million in and revenue, line few our or with fees expenses for quarter. our Management QX QX a prior $XXX our were Now, of

expenses of and therefore reminder, effect partner volatility highly revenue second management As operating a increases largest or are our because fees operating EBITDA. adjusted are They profitability to they our limit our are in expense, firms, the of variable. tied on the

of QX of non-cash in revenues. approximately equity Our will our our with was estimated expectation, expense X.X% be revenues, we X.X% this compensation and expense line expect QX

paid reflecting which of LTM XX, that December cash year-over-year We as well capital cash in available of firms million, approximately the of performance a as our addition $XX and during mergers estimate. obligations QX our within flow the million, our we strong XX growth partnership, partner XX we estimate And QX, period. for sustained the LTM earnouts earnout was XX.X%, was of of QX cash As $XXX.X pay $XX.X million. will financial allocation and of increase

our million Now, be growth P&L be XXX XX%. the EBITDA We will to of QX in let turn to estimate We range our expectations. organic XX% QX be QX our that that rate estimate margin our to We me revenues in will range that adjusted XX%. revenue will $XXX anticipate approximately of the million.

recur $XX both for year-end and QX, rate, outlook revenue million fees revenues in performance the our revenue approximate will organic for which not Our growth QX. exclude in

QX. non-correlated revenues, to relative million of XX Additionally, QX, due by estimate to seasonal will our impact we approximately revenues lower in be the

of of backdrop revenues, volatility, of revenues important to of revenue to equity our QX note the diversity is effects approximately limits it our correlated that stream. recent financial markets, the heightened unsettled our volatility and market XX% the the With with the not on market conditions

dynamic to risk at COVID preference, our Additionally, actively firms’ our exposure limit the earning The classes, in These of performance managed across allocated client our the partner revenues our most limit our the are with nature equity together which downside variable and portfolios of market was profitability. recent example highly height characteristics, expenses, to XXXX this helps and uncertainty. turbulence. of investment and their financial

in under of term our We $X.X $XXX for in feature our X.XX lower on with of $XXX the few loan. generated billion sheet. delay the we a incremental comments with to inclusive net a December million debt leverage outstanding, draw ended the Now, due of adjusted tapped the anticipated ratio approximately year QX of million We QX, we raise. equity balance times, than and entered EBITDA our

X.X to that net which leverage constant at range, ratio business. and between appropriate times. will be stay the Assuming nature We the anticipate committed times, that levels, given our range highly remain acquisitive X.X net our four to of believe most times is markets times we we ratio X.XX current our leverage of QX

remained low interest the rate environment. low been costs beneficiary in as borrowing of Our XXXX, we’ve a

XXX-basis we will rates, interest raising of While begins swapped this Fed expect the to of $XXX as expense or approximately our point increase that a approximately rate inclusive XX% borrowings, fixed are year the million, X.X%, of spread. our

borrowings our significantly billion, the consideration with of years. of have floor. carry $XXX.X we than that costs higher Additionally, hedge, acquisitions excess closed of in the million annual In $X our in a incurred point past XX-basis XXXX, upon deployment LIBOR

we hand activity in million undrawn million $XXX globally. of and As for revolver, year M&A of our anticipation another over on year-end, cash strong had firepower of between exceptionally $XXX

always, return As for a acquisitions our are that our stringent are partnership. pursuing about we only meet criteria, and good fit

closing, discussions As firms These substantial partner advantages, you capital. permanent best the December acquire capitalize we and discipline, and with reflect resources, excellent growth our are consistent firms from have Day, growing XXXX. strong opportunity, our in Investor value-creating the results and the to in benefit another heard our that business financial as not our entrepreneurial has These also value-add delivered to but we positioned growth are through potential. scale In QX market grown. quarter in large our year on panel only ability an

another delivered financial Our partner performance of firms year. last exceptional year

well-designed business proposition solutions. by value Our and of a portfolio resonated strongly, client supported

of substantial generate of profiles. we the believe stewards grow in hallmarks that which capital, our and our in shareholders investing new firms we for sector, business, by growth our These the careful attractive XXXX are value in in which of will be come. billion manage in with $X.X the $X adjusted to way continue We are approximately leaders trajectory adjusted most the billion a growth financial that growth reinforced compelling We our XX% our and believe EBITDA targets, in years margin. is EBITDA, one to revenue, service

are With optimistic on that, let our outlook, our capitalize and secular we are industry. positioned the me about our dynamics financial operator the Q&A. call We strategy that believe growth operator? uniquely turn to for for to we and the over shaping

Operator

from Our your of of proceed America. with question question. Craig line Siegenthaler comes Instructions] Please with [Operator the first Bank

Craig Siegenthaler

Jim. good Hope both Rudy, morning, doing Hey, well. you're

from partnership Abbiati’s some were we the his that CAIS also remember from provides Day, to the SCS, interested I in alts last And presentation Investor of your affiliates. So, week. also announcement partner firm, Tony

SCS work forward, the dominant going be CAIS to to of the going of CAIS is is how going So, more is sort with work? to Focus? of from or alts going center provider Like that

Rudy Adolf

management way, But Yes. frankly question worth and of of Hi net worth alternatives clients. have net on complex Craig, saying. an the my excellent because important are she'll for we quite quite are firms in Rajini, phone, number element what wealth co-founder, ultra-high partner high to and increasingly excellent that Craig. I'm And strategies. alternative we’ve by add managing a the obviously And

ability frankly, to basically something? capabilities they see capacity when And want with tap what other can then of one very COVID add and they firms, was they partners, and or strategies. managers, there's but a CAIS this Rajini, sophisticated, a basically basically sophisticated partner partner core, firms, if platform, largest probably their highly the of proprietary are did the some these into create our these whether So, this partner in also add the industry, all good at quite it’s whether where other our solely choice SCS, including fit other programs it’s when we of to to have you in our platform. alternative firms, strategies

Rajini Kodialam

Rudy. Thanks,

a platform three Craig, So, CAIS, fintech that's things. for doing is us

could curated firm. not SCS be partnership. partner all, firms, such as a other can both could mentioned, be platform third-party just And Focus platform, be providers, of on others, as First could firms well are It's curated. as SCS. focus all off-the-shelf the completely avail to the of our access firm. the - of another and Rudy platform, It the like as It for it's it

it is, for Focus beauty Within the of customized that firm. it platform CAIS for the is is each curated Focus, partner

logs their an a in, to SCS logs they’re funds are different seeing, completely Colony when So, what experience happens when in, or Bordeaux logs than in.

diligence, comprehensive So, for Each have comprehensive. three It's due collaborative how each it, want hand sure partnership. providers, the each This I'm addition management to it's our But mix, education, one heard themes, the it's reporting access, it, and of on a the with services. with custodians, to straddle, add are a decides that aspect they Focus. focused It's the client they tried it. the open value architecture. of most It’s helps to that proposition RIA efficient beauty And extension you've but alts. who is, expand of firm and customized around within issues streamline to process. here. truly of truly into cumbersome starting onto is important - it we this leveraging the the connectivity want their also party that's curated for an access an is, advisors. We're connectivity space a is to with alts the because the something increasing alts partner the it's third partners one And nature. community value-added asset beautiful our in not client solutions, Focus very

tremendous it all is other the because business efficiency. solutions provides Focus about hand, advisor it On

So, it's a straddle.

Craig Siegenthaler

earnings in a refine my seen recent we've could just though than my more on expanded that of Got into deal this new prepared accretion And translates pipeline. Jim, me, for heard some that interpretation good sort capital years, up, even XXXX follow it. in your of comment had deployed, to comments Is little I Maybe you correct? more more the And kind really of bit. just deals, recent have years. expected you

Jim Shanahan

your Craig. Thanks Yes, question. to

hard we - a on strong don't closed had that projections EBITDA our about will and topline you XX revenue future as the as in because transactions guidance but to of we'd very kind we have quite a in LOIs M&A of QX for here grow predict. year, terms year we a and the deployment lighter, activity due XX% QX. and there's over ‘XX, we're At little know, We of well. for in this very ‘XX. adjusted of our capital said right be number bright is diligence middle We of QX. the now, end transactions is So,

Craig Siegenthaler

you, Thank Jim.

Operator

Thank you.

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

Ryan Bailey

It's Rudy, Jim, and morning, Rajini. Ryan for on Good Alex.

So, question firstly, course and maybe maybe you growth the It's XX% on stocks sort just you're dilution The was in this about revenue issuing regular in thinking through year. repurchase. the XX% teens, business. wondering is this NTMP growth months. of between time, EBITDA neutralizing a and ahead and really few about low and down Rudy. over for philosophical deals I At stock that both trading about EEB. you're targeting the of just last investing the you're just you, the potentially strong in of how tradeoffs of And see effects the pipeline thinking same

Rudy Adolf

capital, the probably share Ryan. have is is, we important business, demonstrated not and returns our attractive. Day, the are we what obviously Thanks, Investor deploy And the are very, very first price. we Well, managing most foremost, as when Yes. in

that's get of close continue IRR that's interest our growing billion deploy just again, of in in capital. also ahead $X And the there's doing flawless to EBITDA, believe opportunistic when excess not if keep of are needs level quite of in is that far to before, way on. quite equity do record transaction the best average conservative and to partners. XXXX this XX%, you in tremendous have transaction of to just weighted frankly, lot said as targets, track a ultimately in revenues, that, or generate ultimately, to on is right frankly trajectory XX% a to are of returns, we by capital But margin. us And with has and Jim and and use deployment billion the a the of - capital $X.X a adjusted we we we Our business I mean, levered math. very that the use in capital the us. we opportunities our very

Ryan Bailey

it. Got

on Okay. And makes us That if Beryllus. update you could sense. maybe give an

about year I the a think initiative approaching started. we're since

the office thinking So, wondering, the Asia and what's in potentially, about set like both are tapping I Europe platform? through how you was family just and opportunity space, that into

Rudy Adolf

course, team the of venture. of are there. doing. is worth strong joint and and it what just They're different of ultra-high than kind ultra, have net rest the a of small segment, assembled so dynamics. in about different start different the a They very Beryllus deal It's more - It’s of kind little Yes. follows bit deals linkages. a we somewhat

will no. the are you We markets. model, at you the transactions. foundation Asian our, entry one of be the that's in want, if into would is. markets So, core frankly, and Beryllus not any quite of where we point holding use opportunity see And operating, company that

that's In really That's still this You things the business very, is obviously will And scheme emphasis at is. of the point. where here, very see traditional transactions. essence Connectus Beryllus the of our merger transactions. And model. then course, small you of see greater will

Ryan Bailey

Okay. Thank you.

Operator

Thank you.

with Lau comes your of with & Our proceed line Oppenheimer next Owen from question Company. Please question.

Owen Lau

outside international us you think update How you taking Thank on morning, Good Could give expansion? my the contribution and acquisitions States you. should we and about of XXXX? in for questions. thank an please United

Rudy Adolf

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

million. and the Day, doing benefits additional to into diversification. over simply more is regulatory time proposition. a services markets there model Europe the these and So, attractive real markets. ultimately, our US. similar dynamics else of. we unheard now proposition, we we And is XX%, in What then run now. number markets. I value will And the and don't That's from makes opportunities UK, it than think US. towards international. because call only about a there's the world. credibly it's There where stated major are in the attractive way of scale get at a one of want of very But value on just tremendous number international number Australia value-added of model, Investor Owen, in where existing number more a a it's so of this the doing know is markets, But of it's a the and QX, numbers claim just in kind creates the actually call right this can then are Canada entrepreneurship in I'm our capital, get it consolidation. step are just always moving it our our And fiduciary of we that's gradually markets, and are expand over there $XXX advantage. to anybody rate, today XX% is revenues our X.X%, fiduciary change. Still of the anybody whole permanent about competitive unique I wealth And in management very would more course,

Owen Lau

helpful. a your That's value-add credit on little update, cash you services, maybe it. another then on Got please particular program you. bit and could and provide Thank more solutions? trust color on And in also

Rudy Adolf

or sheet often an customer about firms me, frankly, partner change quite if is give partner Jim it’s a, And - currently the is really client recent absolutely. of from - a in ultimately want firms, Yes, sometimes I you have but of on a seeing acquisition becoming, reality using credit. are absolutely numbers, will I it to which you balance our we lucky cash that tremendous, really a a the but client a guess is - And some instrument. it's Very - starting be surprise more the you the engagement is, to and feedback, and optimization. hear

capabilities, these - actually our really using is are powerful. really, We

so, very we are And clear.

partner the adding We can game that hundreds partners. this with part to firms. was it's it. is scale. just trust We the is industry. of them. here. our else side, our talked I anybody of growth that the just work also, than leveraging partner excess in strength this yesterday, a for this tool are it's a that area help ultimately a ultimately earlier millions particular just But still sophistication power, using ultimately our of we our about in of capabilities purchasing have the But for And days unique launched more ultimately with simply that real where clients is of dollar capability going changer firm to basically our That true - trust with multi On

Owen Lau

very Got Thank it. you much.

Operator

you. Thank

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

Matt Moon

highlight just Moon Matt on-year and I the Kyle. longer-term targets, know your both positive underlying this playing this EBITDA mix adjusted of year, and actually on curious Connectus and model, for assumptions acquisition might other the had the want Hi. to factors just and But margin you This didn't and and types impacts expense base I and for for unchanged inflation, the the how trajectory year, overall, core for between out P&E else be change one a the maybe of on there. overall anything story. was any on role you is year- I the here. remains

Jim Shanahan

Yes, thanks, Matt.

So, a put out obviously detailed QX guidance. we've

the last to lot The people come to started quarters, cost slight think the to you QX. was a what's QX started two have costs happened about back the in SG&A of over If there a travel. to have from uptick P&L in

firms with in we forth. of all Sort so of our QX that's business, compensation our our partner run and and a embedded as the terms of in rate our of guidance well. That's budgets do but

the and XX% we know, generally economics respective a buy flow as to XX% partner firm. cash you of As between

about So, margin we've of those ranges which made XXXX. year with EBITDA about ‘XX. goal for business versus of is year, And of adjusted this our XX.X% for focus, XXXX assumption towards the output leverage ultimate XX%. an XX% in heading up the operating the calendar that's targeting And

and that value-adds we CAIS margin like help types earlier, and all see provide what and long-term will those our get we So, things the goal. our like are, partner we where we time initiatives and us question of towards the over firms,

Rudy Adolf

of as kinds is advice. experiencing, just a think very those of looked in as perspective, and out single us, perspective, much, you we growth increase management earnings, times which performance this. very number any we a And the course, but dynamic our discussion with in important Matt, this partner seen and in XXXX material thing, extraordinary allocation and where coming very as Matt, a about a impact in of our our a our and important inflation. is do the you that industry, are no on I'm obviously a again clients, quite growth there's this, of largest important if are very predicted from maybe from part asset QX in you uncertainty of consideration your the tremendous quite excellent the also economics. have part And and need of using. basically at topic to inflation the about inflation? the I very for many has of that for second of the industry, that and have what's had seen firm one But going portfolio course, frankly, pattern firms way, the to we proud our and basically by was again ultimately related recently have just inflation be how frankly, there's crisis. that XXXX, question the like it's business this impact? polled And client people our them; the construction partners seen partners of ask concerns And who

Matt Moon

just a cited Got of performance the maybe you in platforms some alternative are clean-up a up, the that it. of follow question, quarter of Great. $XX some partner already million And then to on. as fees more firms your in

we full sounds the or for and perform should, in the in XQ But include you fees well. these here the is some accounting. it growth is performance fourth guys, though this the true-up But wondering and sort assuming, revenue mechanics as year. expect if an I not the just does alternatives something for the just of should ongoing as on if guess, quarters, curious guidance this was basis, hopefully on So,

Jim Shanahan

Yes.

based we fees here was those performance, year-end do the projections when Even QX still and we it's include sitting there providing and things. November they're because in were Matt, impossible performance on type uncertainty. to guidance, generally, estimate not of So,

the million guidance for why to them above But us include these $XX realized. that's they're So, do kind not top impossible ’XX, for estimate we and until our in of end of came the guidance.

Rudy Adolf

the of out in there excellent for partners just many they are complex markets getting And our what course, strategies. is, strategies the what's question are it. to extraordinarily that a that of before. now. frankly, In quite us there's cases, value we these do a just despite particularly number happening thanks right really But just But of are are Yes. of in in see managing well and types these times,

Matt Moon

Great. you. Thank

Operator

Thank you.

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

Michael Young

Wanted in good question. guys strongest the with with, XX have morning. Hey, acquisitions a really firm the taking had you guys for to partner year in as Thanks strong had. XXXX, terms of start you

to more this expect should more just that Should it partner Day, into of do that acquisitions year? every forward bucket, expect we more look we as wanted like consolidations. So, downstream to shift firm XXXX, kind to given Investor downstream the presenting, we mix seemed was

Rudy Adolf

Yes, you're right.

reasons firms therefore, record and is and join in beneficiaries supporting why One And of industry drivers directly us big consolidations. of being them mergers. track of the partner benefiting our you’re

of So, at will about firms one three be deals doing have quarters our and done partner point. deals

proposition. So, of that an important part is our value

our value-added because is to more our whenever We agnostic we it's and from the really, was transactions, looking a I, makes of last reason sense just performance. deployed But really make than this. perspective. of yes, are don't it capital Quite an and course, many Rajini, or reality sense, program. it upstairs doesn't simply, for an strong. M&A joined Lenny, before. are capital part current we year just said, need it’s We virtually mergers year when huge frankly, ever economics But preference partners from do to I us do extraordinary deploy an as downstairs. a it's and have at pipeline, simply But We

but is be very it's hard strong, I strong year to M&A, another have this us. of M&A so, that predict, to believe going And our we ahead

Michael Young

more Connectus the you're those of with in by to be volume economics for there least maybe would M&A more better of as just mergers helpful. And getting types that's and firms, better at slightly or Okay, kind potential, economics I a follow generating assume partner of much up, kind deals.

and helpful. expect be growth closer towards any with these the comment M&A? should we maybe be point a acquisitions of that kind us returns self-capitalized to would increasing on on So, moving of

Rudy Adolf

the strong cash selectively markets cash the and course, debt programs, have that value-added use million our at I Well, who in are and very plus through it’s shown for we we selective Investor attractive guess, Days, that we’ve performance we got TTM are very extraordinarily strong, flow - M&A as financing free firms flow growth equity. terms we our to we business simply of just and eye, because is us. Then good through our the course, a are $XXX of and partner join have the - generating, of the access of

it think created what So, than even higher that I here. would - we to I optimistic returns think get too don't have can be you

absolutely our I levels before is think sustaining our these at I objective said That's here as pipeline exciting. is what is, vast. is. terrific. And It's

can we extremely are a works future. There in too the far tuned. not bunch of are and We be, stay announcements the in

Michael Young

Rudy. Thanks, Okay.

Operator

Thank you.

comes Roswell Please from proceed RBC with Capital Markets. your Our question. line Matthew next question with of

Matthew Roswell

a still be couple I the of Yes. higher question. organic morning, little a I last bit sort to but Might nicely has been was over growth of of have theoretical quarters. Good running a the is the And Congratulations. everyone. difficult out, tease we the from at of higher sort driven are question in shift that recovery firms, there's by if seeing the pandemic? partner M&A a being or wondering sense. of permanent it activity organic or growth, makes Hopefully, some

Rudy Adolf

the total I No, understand question. makes It sense. Yes.

We quarters. kind happens are of focused less in individual on what

provide. Although, of regular disclosure is a course we that it

average, I based ups some downs, think the XX.X% the better always number that's the on. kind to yes, focus side. are and of be and to them on merger there's the going is of some

And basically numbers. gross, during organic management excluding focus true is the is showed revenue RIAs, this that over business, course Day, on is base, XX.X%. our where the And an new Investor our generates of of impressive wealth US cycle. most this US we are which that piece of vast we to provided disclosure I our that these mergers, majority the think

no in there's So, this. M&A

the add you grows XX%. If firms M&A, our then is partner of same-store

growth attractive. then here very, very higher add can partner this of to of very, described. just another grow we XX.X strong of our from year, they mergers a XX portfolio XX% I partners. course their almost lines So, the along which growth have just through And very on growth-oriented own, here is firms, our Yes, what

Jim Shanahan

Yes.

just a of year out that, coming I we're of the obviously, base as to think so add to XXXX. -

Rudy doing accretive syncs But Obviously, the lot as So, average, mentioned, have sort and obviously, them, XX%. with we guidance of interested tuck-in XX XX.X% to our of quarters last there's they're QX XX of that in of growth. the sort a XX% has now more been for acquisition. firms, of on

XX-quarter with will towards normalizing that. continue average towards guidance we're the the more But QX. that So, to contribute in

Matthew Roswell

then equity firm’s of And question do it the a pandemic? Is question, makes merger? to partner the earlier from up part I you an Okay. quick of choice? your decide the choice, sort use follow as when recovery to guess a as that sense. Hopefully,

Rudy Adolf

Yes.

in So, business that we speaks the our model. have to one features that unique of

then makes now And so, driven it yes, very our for in? prospect And company are deals, basically sheet much equity. it's What start holding a needs interested balance the of by there, we are to they we sense, where we of are are some cycle? if what whenever add And ours. delighted

do in that a and occasionally a very course, good firm, very mergers, the it's stock join LLC, attractive. tight have that the but hoc use in firms can is this and partner which a firm these formula. Of management an not merger. negotiation, of between which also The we our course, And it's merges yes, another equity, through alignment they partners will the (sacred) rare, that's a stock, to downstairs through basis, on a equity. own for with our really cash, to upstairs And thing. third very, creates but really, and yes? - they when That's do partners class we stock a is like Manco, our of new our their of continue use, can company, our and we we some can actually ad our

of is this, on the and and is this of flexibility the classes think, this I holding partners, company works kind our have nimbleness to unique, model. but of very basically initiative, that we firm down business just a decision the and collaborative, in through up joint course, Of And foremost, consideration, all whenever partner absolutely formulaic of this they the and merger. this advantage want our real highly their not equity, is how first a

Matthew Roswell

Thank very much. Okay. you

Operator

you. Thank

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

Patrick O'Shaughnessy

bit beat to little horse a apologies but on And another morning. of a use question equity. dead good potential here, Hey,

all guys XXXX, to in were think or as that could you through expect that you in capital to debt did manage do you additional you much or as flow? If deploy would financing, more XXXX, financing you towards acquisitions require and equity cash

Rudy Adolf

I the firepower Well, are current mentioned $X obviously. of almost billion. cash, that Jim million lot That's we went of before. $XXX generating And a through a

a for or is lot an equity, partners, got such prior prospects, will And for question, flexibility. just not think from strategic and makes reasons, reasons, we’ve financial important our it but the So, or join as interest of us. we rather said in if use we when of they when it sense

of negotiation the really and of a it think strategic that's and driver. primary tool, tool more So,

market As and we one it raise we almost in $XXX QX, very it and demonstrated quite trade overnight received million, the could was well.

optimize good is good consideration prudent way the of cash the stewards being shareholder it to it's Jim capital I if have and flows and of Focus, the So, very opportunities, mix our flexibility, have this how to in one job, we invest of but and careful the return be ultimately to value. highest use

Jim Shanahan

growth year, for revenue past this topline guidance XX% the we EBITDA XXXX and grew XX%, Patrick, adjusted but plus and objective EBITDA. Obviously, is Yes. XX%

tax-efficient to amortized allocation. grow, access structure billion you whenever But a which shield capital to where is LTM available we the to mentioned, capital year-end. as is $XXX disproportionately accretive million And way transactions a $X.X have grow continue growing alternatives. transactions one especially now all on million over was then Rudy well thing $XXX we're an our over for tax appreciate revolver, cash that, cash billion, $X cash you we our have of our million, beyond I So, basis. flow, at to $XXX evaluate have to really that continues That going as in

Rudy Adolf

is by I Actually, kind markets, think. of this underappreciated I the think Patrick,

it. just Jim said So,

free million for this converting XX.X% allocation, $XXX our just And generating available we'll number way capital EBITDA now cash prior it XX% use in this flow. are are generative tremendous This up We a and And of versus we important the obviously, into we can. is is cash free capability year. most advantage. cash flow

Patrick O'Shaughnessy

Appreciate appreciate guys XXXX. continued that the I XXXX entirety Great. consideration expect just has the But end detail. guidance XXXX $XXX in from to continued higher for grew And that end would consideration of to of your the provided. than substantially you at that at million the as XXXX, first going the million then the that you built? quarter of $XXX related to balance be cash flow is year, already balance

Jim Shanahan

the over therefore Obviously, all, did transactions first period. our this that highest of Well, we earnout increases. firms comes in better, generally balance a incremental the XX with our history, and year, six-year is performed consideration, and which

So, that's not just earmarked for calendar year XXXX.

Rudy Adolf

terrific We love earnouts. use We ultimately for we threshold earnouts. relatively to mean pay these Earnouts transaction. high ultimately a a partners to make did

the reflection of the and partner strengths organic see health a firms increase organic number. our frankly, this this you quite really of it's whereby So, the the growth and in of growth

Patrick O'Shaughnessy

you Thank much. very Great.

Operator

floor ladies to gentlemen, concludes comments. back our for the final Adolf Mr. turn you. question-and-answer I'll Thank session. and that

Rudy Adolf

like enthusiasm. of resources our services, of reiterate are to outstanding to to appreciate tremendous also year. closing, hard and expertise, demonstrated thank industry competitive new XX%. year of and targets company These provide firms our potential partnership we your their last expanding are $X.X approximately of billion want proposition, the employees for margin and deep focus EBITDA, that able business advantages adjusted very enhancing importance unique Yes, creativity, diversity we our client and scale, our like and I performance, the XXXX EBITDA in enduring work, of our value financial growth $X billion my leadership, thank persistence, support our XXXX. partnership. In substantial partners. earnings the the We adjusted revenue, our a our intellectual much in holding to and I and partner other I'd you for all. would to in appreciation for express our value-added in

which, fundamentals you enable of XXXX the for will Thank continue terrific superior business, believe We combined your we interest. have our entered when value. driving strong in with us growth with and shareholder substantial all momentum, creating to performance, turn

Operator

Thank you. conference. today's This concludes

participation. you may for disconnect time. Thank at your this You your lines

Focus Financial Partners (FOCS) 17 Feb 222021 Q4 Earnings call transcript