Focus Financial Partners Ipo Date

Focus financial partners ipo date

Year-Over-Year Revenue Growth above 30%
for the Fifth Consecutive Quarter Reporting as a
Growth Supported by Strong M&A Activity

, (GLOBE NEWSWIRE) -- (Nasdaq: FOCS) (“Focus Inc.”, “Focus”, the “Company”, “we”, “us” or “our”), a leading partnership of independent, fiduciary wealth management firms, today reported results for its second quarter ended .

Second Quarter 2019 Highlights

  • Total revenues of , reflecting year-over-year growth of 30.3%
  • Organic revenue growth(1) rate of 18% year-over-year
  • GAAP net income of
  • GAAP basic and diluted net income per share of
  • Adjusted Net Income(2) of , 42.1% higher than the prior year quarter
  • Adjusted Net Income Per Share(2) of , reflecting year-over-year growth of 37.5%
  • Closed on two new partner firms, added acquired base earnings(1) of
  • Closed on nine mergers for existing partner firms
  1. Please see footnotes 2 and 6 under “How We Evaluate Our Business” later in this press release
  2. Non-GAAP financial measures.

    Please see “Reconciliation of Non-GAAP Financial Measures” later in this press release for a reconciliation and more information on these measures.

“We had an excellent second quarter and first half of 2019, characterized by the strong performance of our partner firms and access to highly attractive opportunities to deploy our capital,” said , Founder, CEO and Chairman.

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“Our model continues to resonate with wealth management firms and our momentum is excellent. We participate in a multi-trillion dollar industry that is experiencing rapid secular growth and consolidation. We are a significant beneficiary and driver of this evolution because we have the advantage of a long-standing track record and access to inexpensive debt capital, as well as industry-leading M&A expertise and the benefits of scale.

We believe that we have established a unique position in this market with an enviable partnership of firms. We are excited about the future of our business.”

“Our business again generated year-over-year growth in excess of 30% for revenues and adjusted net income per share, well above our stated annual targets of 20% for each,” said , Chief Financial Officer.

“Our IPO further raised our visibility, generating a far greater number of M&A opportunities than we had initially anticipated. We are capitalizing on these transactions because they represent substantial future growth and diversification benefits for our business, in turn creating attractive, incremental value for our shareholders.

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Year-to-date through th, we closed 30 transactions, including 6 direct acquisitions and 24 mergers. We have already exceeded our 2018 full-year deal volume by 20% and our second half transactional momentum remains strong.”

Presentation

This press release presents our results of operations and financial position, including consolidation of our investment in (“Focus LLC”), since , 2018.

Prior to , the closing date of our initial public offering (“IPO”), the financial statements included herein represent those of . The financial results of prior to have not been included in these financial statements as it had not engaged in any business activities during such period. Accordingly, these results do not purport to reflect what the results of operations of would have been had Focus Inc.’s IPO and related transactions occurred prior to .

2019 Second Quarter Financial Highlights

Total revenues were , 30.3%, or higher than the second quarter of the prior year.

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The primary driver of this increase was revenue growth from our existing partner firms of approximately . The majority of this growth was the result of higher wealth management fees, which included the effect of mergers completed by our partner firms in the last twelve months. The balance of the increase of was due to revenue from new partner firms acquired over the twelve months ended .

An estimated 70%, or approximately , of revenues were correlated to the financial markets, primarily equities and fixed income, of which 70%, or approximately , were generated from advance billings.

The remaining 30%, or approximately , of revenues were not correlated to the markets. These revenues typically consist of fixed fees for investment advice, tax fees and family office type services, primarily for high and ultra-high net worth clients.

In excess of 95% of total revenues were fee-based and recurring.

Organic revenue growth(1) was 18.0%, higher than the 16.7% for the prior year quarter, reflecting the positive impact of the 27 mergers we have completed since . We anticipate that our organic revenue growth for the third quarter of 2019 will be in excess of 15%.

GAAP net income increased to compared to a net loss of in the prior year quarter.

Adjusted Net Income(2) was , an increase of 42.1%, or over the prior year quarter. Adjusted Net Income Per Share(2) was per share, , or 37.5%, higher year-over-year, reflecting acquisition activity completed over the past year as well as strong organic growth and the net reduction in interest expense primarily related to the repayment of our Second Lien Term Loan in .

2019 First Half Financial Highlights

Total revenues were , 31.3%, or higher than the first six months of the prior year.

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The primary driver of this increase was revenue growth from our existing partner firms of approximately . The majority of this growth was the result of higher wealth management fees, which include the effect of mergers completed by our partner firms in the last twelve months, as well as a full period of revenue recognized during the first half of 2019 for partner firms that were acquired in the first half of 2018.

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The balance of the increase of was due to revenue from new partner firms acquired over the twelve months ended .

Organic revenue growth(1) was 11.0%, compared to 16.9% for the prior year period. Organic growth in the first half of 2019 was strong despite the effect of the 2018 fourth quarter decline in the financial markets and the advanced billing structure utilized by certain of our partner firms.

GAAP net income increased to compared to a net loss of in the prior year period.

Focus financial partners ipo date

Adjusted Net Income(2) was , an increase of 41.3%, or over the prior year period. Adjusted Net Income Per Share(2) was per share, , or 35.5%, higher year-over-year, reflecting acquisition activity completed over the past year as well as strong organic growth and the net reduction in interest expense primarily related to the repayment of our Second Lien Term Loan in .

  1. Please see footnote 2 under “How We Evaluate Our Business” later in this press release.
  2. Non-GAAP financial measures.

    Please see “Reconciliation of Non-GAAP Financial Measures” later in this press release for a reconciliation and more information on these measures.

Balance Sheet and Liquidity

As of , cash and cash equivalents were and debt outstanding under the Company’s credit facilities was approximately .

Of the total debt outstanding as of , approximately were borrowings under our First Lien Term Loan (“Term Loan”) and were borrowings under our First Lien Revolver (“Revolver”).

Our net leverage ratio at was 4.05x, reflecting our continued strong M&A momentum during the second quarter.

At the end of , we took advantage of the positive credit environment and closed on an incremental Term Loan (upsized by as a result of strong lender demand), the proceeds of which were used to reset our Revolver dry powder for M&A activity.

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There were no changes to the existing terms of our Term Loan or Revolver as a result of this transaction, other than an increase in the Term Loan quarterly amortization payment from . While we continue to prudently manage our credit and leverage profile, this transaction will increase our flexibility to capitalize on the secular tailwinds shaping the RIA industry and position our business for future growth.

Teleconference, Webcast and Presentation Information

Founder, CEO and Chairman, , and Chief Financial Officer, , will host a conference call today, at to discuss the Company’s 2019 second quarter results and outlook.

The call can be accessed by dialing +1-877-504-6131 (inside the U.S.) or +1-786-815-8445 (outside the U.S.) and entering the passcode 7789612.

A live, listen-only webcast, together with a slide presentation titled “2019 Second Quarter Earnings Release Supplement” dated , will be available under “Events” in the “Investor Relations” section of the Company’s website, www.focusfinancialpartners.com.

Focus Financial Partners

A webcast replay of the call will be available shortly after the event at the same address.

About

is a leading partnership of independent, fiduciary wealth management firms.

Focus Financial CEO: Computers won't replace financial planning anytime soon

Focus provides access to best practices, resources, and continuity planning for its partner firms who serve individuals, families, employers and institutions with comprehensive wealth management services.

Focus partner firms maintain their operational independence, while they benefit from the synergies, scale, economics and best practices offered by Focus to achieve their business objectives.

Cautionary Note Concerning Forward-Looking Statements

The foregoing information contains certain forward-looking statements that reflect the Company's current views with respect to certain current and future events and financial performance.

Focus financial partners ipo date

These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the Company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release.

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The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized.

Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's annual report on Form 10-K for the year ended filed with the .

Investor and Media Contact Information


Head of Investor Relations & Corporate Communications
Tel: (646) 813-2909
[email protected]

How We Evaluate Our Business

We focus on several key financial metrics in evaluating the success of our business, the success of our partner firms and our resulting financial position and operating performance.

Key metrics for the three and six months ended and 2019 include the following: 

Three Months EndedSix Months Ended
June 30,June 30,
2018201920182019
(dollars in thousands, except share and per share data)
Revenue Metrics:
Revenues$  231,435 $  301,545 $  427,664 $  561,469 
Revenue growth (1) from prior period 47.2%30.3%46.1%31.3%
Organic revenue growth (2) from prior period16.7%18.0%16.9%11.0%
Management Fees Metrics (operating expense):
Management fees$  60,559 $  79,252 $  106,859 $  136,258 
Management fees growth (3) from prior period 53.1%30.9%46.8%27.5%
Organic management fees growth (4) from prior period 22.1%16.5%22.4%6.6%
Adjusted EBITDA Metrics:
Adjusted EBITDA (5)$  51,890 $  62,953 $  96,111 $  117,467 
Adjusted EBITDA growth (5) from prior period58.9%21.3%58.0%22.2%
Adjusted Net Income Metrics:
Adjusted Net Income (5) $  29,012 $  41,232 $  54,468 $  76,946 
Adjusted Net Income growth (5) from prior period 37.6%42.1%38.1%41.3%
Adjusted Net Income Per Share Metrics:
Adjusted Net Income Per Share (5)$  0.40 $  0.55 $  0.76 $  1.03 
Adjusted Net Income Per Share growth (5) from prior period37.6%37.5%38.1%35.5%
Adjusted Shares Outstanding (5)71,843,916 74,444,102 71,843,916 74,422,405 
Other Metrics:
Acquired Base Earnings (6)$  23,800 $  6,725 $  26,550 $  18,638 
Number of partner firms at period end (7)  56   62   56   62 
  1. Represents period-over-period growth in our GAAP revenue.
  2. Organic revenue growth represents the period-over-period growth in revenue related to partner firms, including growth related to acquisitions of wealth management practices and customer relationships by our partner firms and partner firms that have merged, that for the entire periods presented, are included in our consolidated statements of operations for each of the entire periods presented.

    We do all of this while preserving your autonomy.

    We believe these growth statistics are useful in that they present full-period revenue growth of partner firms on a ‘‘same store’’ basis exclusive of the effect of the partial period results of partner firms that are acquired during the comparable periods.

  3. The terms of our management agreements entitle the management companies to management fees typically consisting of all Earnings Before Partner Compensation (“EBPC”) in excess of Base Earnings up to Target Earnings, plus a percentage of any EBPC in excess of Target Earnings.

    Management fees growth represents the growth in GAAP management fees earned by management companies.

    Focus financial partners ipo date

    While an expense, we believe that growth in management fees reflect the strength of the partnership.

  4. Organic management fee growth represents the period-over-period growth in management fees earned by management companies related to partner firms, including growth related to acquisitions of wealth management practices and customer relationships by our partner firms and partner firms that have merged, that for the entire periods presented, are included in our consolidated statements of operations for each of the entire periods presented.

    We believe that these growth statistics are useful in that they present full-period growth of management fees on a ‘‘same store’’ basis exclusive of the effect of the partial period results of partner firms that are acquired during the comparable periods.

  5. For additional information regarding Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share and Adjusted Shares Outstanding, including a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Share to the most directly comparable GAAP financial measure, please read ‘‘Reconciliation of Non-GAAP Financial Measures—Adjusted EBITDA’’ and ‘‘Reconciliation of Non-GAAP Financial Measures —Adjusted Net Income and Adjusted Net Income Per Share’’.
  6. The terms of our management agreements entitle the management companies to management fees typically consisting of all future EBPC of the acquired wealth management firm in excess of Base Earnings up to Target Earnings, plus a percentage of any EBPC in excess of Target Earnings.

    Acquired Base Earnings is equal to our retained cumulative preferred position in Base Earnings. We are entitled to receive these earnings notwithstanding any earnings that we are entitled to receive in excess of Target Earnings.

    Focus Financial Partners Inc.

    Base Earnings may change in future periods for various business or contractual matters. For example, from time to time when a partner firm consummates an acquisition, the management agreement among the partner firm, the management company and the principals is amended to adjust Base Earnings and Target Earnings to reflect the projected post-acquisition earnings of the partner firm.

  7. Represents the number of partner firms on the last day of the period presented.

    The number includes new partner firms acquired during the period reduced by any partner firms that merged with existing partner firms prior to the last day of the period.

FOCUS FINANCIAL PARTNERS INC.
Unaudited condensed consolidated statements of operations
(In thousands, except share and per share data)
Three Months EndedSix Months Ended
June 30,June 30,
2018201920182019
REVENUES:
Wealth management fees$  216,328$  283,296$  400,651$  526,380
Other15,10718,24927,01335,089
Total revenues231,435301,545427,664561,469
OPERATING EXPENSES:
Compensation and related expenses 81,273105,531154,622206,979
Management fees 60,55979,252106,859136,258
Selling, general and administrative 41,49359,73677,780111,993
Management contract buyout1,428
Intangible amortization 22,29031,22141,78459,962
Non-cash changes in fair value of estimated
  contingent consideration
11,9443,84718,31511,261
Depreciation and other amortization 2,1622,4254,0444,738
Total operating expenses219,721282,012403,404532,619
INCOME FROM OPERATIONS 11,71419,53324,26028,850
OTHER INCOME (EXPENSE):
Interest income 235339377536
Interest expense (18,212)(14,424)(32,484)(27,283)
Amortization of debt financing costs (929)(782)(1,888)(1,564)
Gain on sale of investment 5,509
Loss on extinguishment of borrowings (14,011)
Other income (expense) —net 203(468)296(704)
Income from equity method investments 79329153643
Total other expense—net (18,624)(15,006)(42,048)(28,372)
INCOME (LOSS) BEFORE INCOME TAX (6,910)4,527(17,788)478
INCOME TAX EXPENSE7461,4251,922204
NET INCOME (LOSS)$  (7,656)3,102$  (19,710)274
Non-controlling interest  (2,306)  (2,420)
NET INCOME (LOSS) ATTRIBUTABLE TO 
COMMON SHAREHOLDERS$  796$  (2,146)
Income (loss) per share of Class A common stock:

Focus financial partners ipo date