UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): August 28, 2018

 


 

FOCUS FINANCIAL PARTNERS INC.

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-38604

 

47-4780811

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

825 Third Avenue, 27th Floor
New York, NY 10022

(Address of principal executive offices)
(Zip Code)

 

(646) 519-2456

Registrant’s Telephone Number, Including Area Code

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

 

 

 



 

Item 2.02                   Results of Operations and Financial Condition.

 

On August 28, 2018, Focus Financial Partners Inc. (the “Company”) issued a press release reporting results for its second quarter ended June 30, 2018. The Company also posted a slide presentation entitled “Q2 and Year-To-Date 2018 Earnings Release Supplement” dated August 2018 to the “News & Events” section of the “Investor Relations” section of its website (www.focusfinancialpartners.com). A copy of the press release and slide presentation are furnished with this Current Report on Form 8-K (this “Current Report”) as Exhibits 99.1 and 99.2, respectively.

 

Item 7.01                   Regulation FD Disclosure.

 

The information set forth under Item 2.02 is incorporated by reference as if fully set forth herein.

 

The information in this Current Report, being furnished pursuant to Items 2.02, 7.01 and 9.01, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01                   Financial Statements and Exhibits.

 

(d)         Exhibits.

 

Exhibit No.

 

Description

99.1

 

Focus Financial Partners Inc. Press Release, dated August 28, 2018.

99.2

 

Focus Financial Partners Inc. Slide Presentation, dated August 2018.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

By:

/s/ J. Russell McGranahan

 

 

J. Russell McGranahan

 

 

General Counsel

 

 

Dated: August 28, 2018

 

 

3


Exhibit 99.1

 

 

Focus Financial Partners Reports Second Quarter 2018 Results

 

Revenue growth of 47% driven by robust organic performance and new partner firm additions

 

·                  Total revenues of $231.4 million, an increase of 47.2%

 

·                  Net loss of $7.7 million

 

·                  Adjusted Net Income* of $29.0 million, an increase of 37.6%

 

·                  Adjusted Net Income Per Share* of $0.40, an increase of 37.6%

 

All comparisons are versus second quarter 2017 unless otherwise noted.

 

NEW YORK, August 28, 2018 — Focus Financial Partners Inc. (Nasdaq: FOCS), (“Focus Inc.”, “we”, “us” or “our”), a leading partnership of independent, fiduciary wealth management firms, today reported results for its second quarter ended June 30, 2018.

 

“Following our successful initial public offering (“IPO”) in July, we are very pleased to report record financial performance”, said Chairman and Chief Executive Officer, Rudy Adolf. “Revenue growth of 47.2% and Adjusted Net Income Per Share growth of 37.6% were driven by robust organic growth, as well as new partner firm additions. During the three months ended June 30, 2018, we added three partner firms — Bartlett Wealth Management, Campbell Deegan Financial and Nigro Karlin Segal Feldstein & Bolno — with $23.8 million in combined acquired base earnings. Since the conclusion of the company’s second fiscal quarter through the date of this press release, three additional partner firms have joined us: Asset Advisors, Edge Capital Group and Vista Wealth Management with $11.2 million in combined acquired base earnings. Our performance this quarter is consistent with our historical track record of producing double-digit growth in revenues and earnings.”

 

Mr. Adolf continued, “We believe the strength of our second-quarter performance demonstrates the value proposition of our unique, differentiated partnership model and fiduciary approach to wealth management. Also, during the quarter, we continued to enhance the value-added services we provide to our partner firms by completing a minority investment in Financial Insight Technology Inc., also known as SmartAsset. SmartAsset is a New York-based FinTech company that connects prospective clients with financial advisors and provides tools to help individuals make financial decisions.”

 

Presentation

 

This press release presents historical results for the periods presented of Focus Financial Partners, LLC (“Focus LLC”), the predecessor of Focus Inc. for financial reporting purposes. The financial results of Focus Inc. have not been included in the press release as it had not engaged in any business activities during the periods presented. Accordingly, these historical results do not purport to reflect what the results of operations of Focus Inc. would have been had Focus Inc.’s IPO and related transactions occurred prior to such periods.

 


* Non-GAAP financial measures. Please see “Reconciliation of Non-GAAP Financial Measures” below for a reconciliation and more information on these measures.

 

1



 

Second-Quarter Financial and Operating Highlights

 

For the second quarter of 2018, we reported total revenues of $231.4 million, an increase of 47.2% or $74.2 million compared to the second quarter of the prior year. Partner firms added subsequent to June 30, 2017 that are included in our results of operations for the three months ended June 30, 2018 include SCS Financial Services, Brownlie & Braden, Eton Advisors, Cornerstone Wealth, Fortem Financial, Bartlett Wealth Management, Campbell Deegan Financial and Nigro Karlin Segal Feldstein & Bolno. These partner firms contributed approximately $47.9 million in revenue during the three months ended June 30, 2018. The balance of the increase of $26.3 million was due to the revenue growth at our existing partner firms.

 

·            Organic revenue growth** was 16.7% compared to 11.9% in the second quarter of 2017

·            Income from operations of $11.7 million was up 375.6%, as compared to $2.5 million in the second quarter of 2017

·            Net loss in the second quarter of 2018 was $7.7 million, as compared to a net loss of $5.2 million in the second quarter of 2017

 

Year-to-Date Financial and Operating Highlights

 

For the six months ended June 30, 2018, we reported total revenues of $427.7 million, an increase of 46.1% or $134.9 million compared to the prior year. Partner firms added subsequent to June 30, 2017 that are included in our results of operations for the six months ended June 30, 2018 include SCS Financial Services, Brownlie & Braden, Eton Advisors, Cornerstone Wealth, Fortem Financial, Bartlett Wealth Management, Campbell Deegan Financial and Nigro Karlin Segal Feldstein & Bolno. These partner firms contributed approximately $68.2 million in revenue during the six months ended June 30, 2018. The balance of the increase of $66.7 million was due to the revenue growth at our existing partner firms.

 

·            Organic revenue growth** was 16.9% compared to 10.7% during the first six months of 2017

·            Income from operations of $24.3 million was up 75.1%, as compared to $13.9 million in the first six months of 2017

·            Net loss in the first six months of 2018 was $19.7 million, as compared to a net loss of $0.8 million for the first six months of 2017

 

Balance Sheet and Liquidity

 

As of June 30, 2018, Focus LLC had cash and cash equivalents of $32.6 million, as compared to $51.5 million at December 31, 2017. Focus LLC had $1,195.5 million stated value outstanding on its credit facilities at June 30, 2018, as compared to $1,000.0 million at December 31, 2017.

 

Amended Credit Facilities and Initial Public Offering

 

On July 30, 2018, we closed on an amendment to our credit facility that became effective in connection with the closing of the IPO. The amendments reduced the interest rate margin on our term loan and revolver, and increased the borrowing capacity under our revolver facility from $250.0 million to $650.0 million.

 

On July 30, 2018, we closed our IPO of 18,648,649 shares of Class A common stock, including 2,432,432 shares of Class A common stock sold in connection with the full exercise of the option to purchase additional shares granted to the underwriters, at $33.00 per share. Upon closing of the IPO and related transactions, there was a total of 42,529,651 shares of Class A common stock outstanding, zero shares of Class A common stock issuable upon exercise of 890,409 vested non-compensatory stock options and unvested compensatory stock options (assuming vesting of unvested compensatory stock options and a then-current value of the Class A common stock equal to the $33.00 IPO price), 22,499,665 shares of Class B common stock and Focus LLC common units outstanding and 6,814,600 Focus LLC common units issuable upon conversion of the outstanding 17,114,670 vested and unvested incentive units (assuming vesting of the unvested incentive units and a then-current value of the Focus LLC common units equal to the $33.00 IPO price) in connection with exercise of an exchange right.

 


** See footnote 2 under “How We Evaluate Our Business”.

 

2



 

We received estimated net proceeds from the IPO of approximately $564.8 million, including $74.7 million in connection with the full exercise of the option to purchase additional shares granted to the underwriters, after deducting underwriting discounts and other estimated IPO expenses. We used the net proceeds to repurchase outstanding Focus LLC units, retire our $207.0 million Second Lien Term Loan, pay down approximately $185.5 million of our First Lien Term Loan to $803.0 million, and will use the remainder for general corporate purposes, including potential acquisitions.

 

Following the IPO and related transactions, the economic interests outstanding were as follows:

 

 

 

As of July 30, 2018

 

Economic Ownership of Focus Financial Partners Inc.:

 

Interest

 

%

 

Class A Common Stock(1)

 

42,529,651

 

59.2

%

Stock Issuable upon Exchange of Focus Financial Partners, LLC Units(2)

 

29,314,265

 

40.8

%

Total

 

71,843,916

 

100.0

%

 


(1)         Includes zero shares of Class A common stock issuable upon exercise of 890,409 vested non-compensatory stock options and unvested compensatory stock options (assuming vesting of the unvested stock options and a then-current value of the Class A common stock equal to the $33.00 IPO price).

(2)         Includes 6,814,600 Focus LLC common units issuable upon conversion of the outstanding 17,114,670 vested and unvested incentive units (assuming vesting of the unvested incentive units and a then-current value of the Focus LLC common units equal to the $33.00 IPO price) in connection with exercise of an exchange right.

 

Teleconference, Webcast and Presentation Information

 

Chairman and Chief Executive Officer, Rudy Adolf, and Chief Financial Officer, Jim Shanahan, will host a conference call for the investment community on August 29, 2018 at 8:00 a.m. ET to discuss the Company’s second-quarter results. Investors, analysts, and members of the media interested in listening to the call are encouraged to participate by dialing into the toll-free line at (877) 504-6131 or the international line at (786) 815-8445 and entering the passcode 6890824.

 

A live, listen-only webcast will also be available in the investor relations section of www.focusfinancialpartners.com. A webcast replay of the call will be available shortly after the event in the investor relations section of the Company’s website.  The webcast replay will be available until September 12, 2018.

 

About Focus Financial Partners Inc.

 

Focus Financial Partners is a leading partnership of independent, fiduciary wealth management firms. 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 Statement 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. 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

 

3



 

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. 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 filings with the Securities and Exchange Commission.

 

Investor and Media Contact Information

 

Steve Calk or Sam Gibbons

Tel: (646) 561-3226

FOCS@alpha-ir.com

 

4



 

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 June 30, 2017 and 2018 include the following:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2017

 

2018

 

2017

 

2018

 

 

 

(dollars in thousands, except share and per share data)

 

Revenue Metrics:

 

 

 

 

 

 

 

 

 

Revenue growth (1) from prior period

 

31.0

%

47.2

%

24.2

%

46.1

%

Organic revenue growth (2) from prior period

 

11.9

%

16.7

%

10.7

%

16.9

%

 

 

 

 

 

 

 

 

 

 

Management Fees Metrics (operating expense):

 

 

 

 

 

 

 

 

 

Management fees growth (3) from prior period

 

42.6

%

53.1

%

34.3

%

46.8

%

Organic management fees growth (4) from prior period

 

23.1

%

22.1

%

20.1

%

22.4

%

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Metrics:

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (5)

 

$

32,650

 

$

51,890

 

$

60,848

 

$

96,111

 

Adjusted EBITDA growth (5) from prior period

 

30.2

%

58.9

%

24.0

%

58.0

%

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Metrics:

 

 

 

 

 

 

 

 

 

Adjusted Net Income (5) 

 

$

21,089

 

$

29,012

 

$

39,433

 

$

54,468

 

Adjusted Net Income growth (5) from prior period

 

21.3

%

37.6

%

19.7

%

38.1

%

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share Metrics:

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share (5)

 

$

0.29

 

$

0.40

 

$

0.55

 

$

0.76

 

Adjusted Net Income Per Share growth (5) from prior period

 

21.3

%

37.6

%

19.7

%

38.1

%

Adjusted Shares Outstanding (5)

 

71,843,916

 

71,843,916

 

71,843,916

 

71,843,916

 

 

 

 

 

 

 

 

 

 

 

Other Metrics:

 

 

 

 

 

 

 

 

 

Acquired Base Earnings (6)

 

$

8,573

 

$

23,800

 

$

15,366

 

$

26,550

 

Number of partner firms at period end (7)

 

48

 

56

 

48

 

56

 

 


(1)                   Represents growth in our GAAP revenue.

 

(2)                   Organic revenue growth represents the year-over-year 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 interim periods presented, are included in our consolidated statements of operations for each of the entire interim periods presented. 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 interim growth in GAAP management fees earned by management companies. While an expense, we believe that growth in management fees reflect the strength of the partnership.

 

(4)                   Organic management fees growth represents the year over-year 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 interim periods presented, are included in our consolidated statements of operations for each of the entire interim 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 ‘‘—Adjusted EBITDA’’ and ‘‘—Adjusted Net Income and Adjusted Net Income Per Share’’.

 

5



 

(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. 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 potential partner firms that merged with existing partner firms prior to the last day of the period.

 

Pro Forma Financial Information

 

We believe that the historical results of operations and financial condition prior to the IPO and related transactions, are not comparable to the results of operations and financial condition for subsequent periods. As such, we have presented select pro forma financial information in the tables below to provide a more meaningful basis for comparison of future financial results.

 

The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2018 gives effect to the IPO and related transactions described in the prospectus filed with the SEC on July 27, 2018, as if each had occurred on January 1, 2018. The unaudited pro forma consolidated financial data is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the IPO and related transactions been consummated on the dates indicated and do not purport to be indicative of results of operations as of any future date or for any future period.

 

6



 

FOCUS FINANCIAL PARTNERS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(dollars in thousands, except share and per share data)

 

 

 

Focus Financial
Partners, LLC

 

Pro Forma
Adjustments

 

Pro Forma
Adjustments
Notes

 

Focus
Financial
Partners Inc.
Pro Forma

 

REVENUES:

 

 

 

 

 

 

 

 

 

Wealth management fees

 

$

400,651

 

$

 

 

 

$

400,651

 

Other

 

27,013

 

 

 

 

27,013

 

Total revenues

 

427,664

 

 

 

 

427,664

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Compensation and related expenses

 

154,622

 

24,495

 

(a)

 

179,117

 

Management fees

 

106,859

 

 

 

 

106,859

 

Selling, general and administrative

 

77,780

 

 

 

 

77,780

 

Intangible amortization

 

41,784

 

 

 

 

41,784

 

Non-cash changes in fair value of estimated contingent consideration

 

18,315

 

 

 

 

18,315

 

Depreciation and other amortization

 

4,044

 

 

 

 

4,044

 

Total operating expenses

 

403,404

 

24,495

 

 

 

427,899

 

INCOME (LOSS) FROM OPERATIONS

 

24,260

 

(24,495

)

 

 

(235

)

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

377

 

 

 

 

377

 

Interest expense

 

(32,484

)

13,780

 

(b)

 

(18,704

)

Amortization of debt financing costs

 

(1,888

)

(8

)

(b)

 

(1,896

)

Gain on sale of investment

 

5,509

 

 

 

 

5,509

 

Loss on extinguishment of borrowings

 

(14,011

)

(7,116

)

(b)

 

(21,127

)

Other (expense) income—net

 

296

 

 

 

 

296

 

Income from equity method investments

 

153

 

 

 

 

153

 

Total other expense—net

 

(42,048

)

6,656

 

 

 

(35,392

)

LOSS BEFORE INCOME TAX

 

(17,788

)

(17,839

)

 

 

(35,627

)

INCOME TAX EXPENSE (BENEFIT)

 

1,922

 

(710

)

(c)

 

1,212

 

Net loss

 

(19,710

)

(17,129

)

 

 

(36,839

)

Less: net loss attributable to non-controlling interests

 

 

 

13,314

 

(d)

 

13,314

 

NET LOSS ATTRIBUTABLE TO FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

 

 

$

(23,525

)

 

 

 

 

 

 

 

 

 

 

Net loss per share of Class A common stock:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

$

(0.55

)

Diluted

 

 

 

 

 

 

 

$

(0.55

)

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

42,529,651

 

Diluted

 

 

 

 

 

 

 

42,529,651

 

 


(a)         Reflects additional compensation expense related to the vesting and exchange of certain incentive units that occurred in connection with the IPO and related transactions.

 

(b)         Reflects adjustments to interest expense and loss on extinguishment of borrowings related to the reduction of indebtedness ($207.0 million second lien payoff and approximately $185.5 million payment on the first lien term loan) under our credit facilities, reduction in the assumed interest rate to 4.75%, the increase in the First Lien Revolver and amortization of debt financing costs in connection with the July 2018 amendment to the credit facility. Also reflects the amortization of estimated debt financing costs in connection with the July 2018 amendment to the credit facility.

 

(c)          Reflects the impact of U.S. federal, state, local and foreign income taxes on the income of Focus Inc. The pro forma effective income tax rate is estimated to be approximately 27% and was determined by combining the projected U.S. federal, state, local and foreign income taxes.

 

(d)         Represents the non-controlling interest allocation of 40.8% of the net loss of Focus Inc. to the continuing owners. The percentage is based on the common units and incentive units (on a common unit equivalent basis using the IPO per share of $33.00) of Focus LLC outstanding after the IPO.

 

7



 

FOCUS FINANCIAL PARTNERS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2018

(dollars in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2017

 

2018

 

2017

 

2018

 

REVENUES:

 

 

 

 

 

 

 

 

 

Wealth management fees

 

$

145,355

 

$

216,328

 

$

269,217

 

$

400,651

 

Other

 

11,875

 

15,107

 

23,559

 

27,013

 

Total revenues

 

157,230

 

231,435

 

292,776

 

427,664

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Compensation and related expenses

 

56,418

 

81,273

 

105,513

 

154,622

 

Management fees

 

39,553

 

60,559

 

72,798

 

106,859

 

Selling, general and administrative

 

40,721

 

41,493

 

67,944

 

77,780

 

Intangible amortization

 

14,292

 

22,290

 

27,490

 

41,784

 

Non-cash changes in fair value of estimated contingent consideration

 

2,175

 

11,944

 

2,097

 

18,315

 

Depreciation and other amortization

 

1,608

 

2,162

 

3,077

 

4,044

 

Total operating expenses

 

154,767

 

219,721

 

278,919

 

403,404

 

INCOME FROM OPERATIONS

 

2,463

 

11,714

 

13,857

 

24,260

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

26

 

235

 

42

 

377

 

Interest expense

 

(7,051

)

(18,212

)

(13,042

)

(32,484

)

Amortization of debt financing costs

 

(691

)

(929

)

(1,382

)

(1,888

)

Gain on sale of investment

 

 

 

 

5,509

 

Loss on extinguishment of borrowings

 

 

 

 

(14,011

)

Other (expense) income—net

 

(120

)

203

 

(247

)

296

 

Income from equity method investments

 

416

 

79

 

708

 

153

 

Total other expense—net

 

(7,420

)

(18,624

)

(13,921

)

(42,048

)

LOSS BEFORE INCOME TAX

 

(4,957

)

(6,910

)

(64

)

(17,788

)

INCOME TAX EXPENSE

 

282

 

746

 

724

 

1,922

 

NET LOSS

 

$

(5,239

)

$

(7,656

)

$

(788

)

$

(19,710

)

 

8



 

FOCUS FINANCIAL PARTNERS, LLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2017, AND JUNE 30, 2018

(dollars in thousands)

 

 

 

December 31,

 

June 30,

 

 

 

2017

 

2018

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

51,455

 

$

32,572

 

Accounts receivable less allowances of $505 at 2017 and $1,143 at 2018

 

73,513

 

94,145

 

Prepaid expenses and other assets

 

37,423

 

75,089

 

Fixed assets—net

 

21,397

 

22,767

 

Debt financing costs—net

 

13,278

 

11,804

 

Goodwill

 

515,489

 

639,599

 

Other intangible assets—net

 

522,282

 

626,734

 

TOTAL ASSETS

 

$

1,234,837

 

$

1,502,710

 

LIABILITIES, MEZZANINE EQUITY, AND MEMBERS’ DEFICIT:

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Accounts payable

 

$

5,752

 

$

9,106

 

Accrued expenses

 

23,626

 

37,209

 

Due to affiliates

 

33,698

 

25,709

 

Deferred revenue

 

6,094

 

5,826

 

Other liabilities

 

99,077

 

131,049

 

Borrowings under credit facilities (stated value of $1,000,012 and $1,195,535 at December 31, 2017 and June 30, 2018)

 

980,502

 

1,188,605

 

TOTAL LIABILITIES

 

 

1,148,749

 

 

1,397,504

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

Redeemable common and incentive units

 

166,249

 

166,249

 

Convertible preferred units

 

698,500

 

698,500

 

TOTAL MEZZANINE EQUITY

 

864,749

 

864,749

 

 

 

 

 

 

 

MEMBERS’ DEFICIT

 

(778,661

)

(759,543

)

TOTAL LIABILITIES, MEZZANINE EQUITY, AND MEMBERS’ DEFICIT

 

$

1,234,837

 

$

1,502,710

 

 

9



 

FOCUS FINANCIAL PARTNERS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018

(dollars in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2017

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net loss

 

$

(788

)

$

(19,710

)

Adjustments to reconcile net loss to net cash provided provided by operating activities—net of effect of acquisitions:

 

 

 

 

 

Intangible amortization

 

27,490

 

41,784

 

Depreciation and other amortization

 

3,077

 

4,044

 

Amortization of debt financing costs

 

1,382

 

1,888

 

Non-cash equity compensation expense

 

3,779

 

7,555

 

Non-cash changes in fair value of estimated contingent consideration

 

2,097

 

18,315

 

Income from equity method investments

 

(708

)

(153

)

Distributions received from equity method investments

 

571

 

613

 

Other non-cash items

 

325

 

(203

)

Loss on extinguishment of borrowings

 

 

14,011

 

Changes in cash resulting from changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(17,483

)

(21,467

)

Prepaid expenses and other assets

 

5,248

 

(14,791

)

Accounts payable

 

196

 

3,324

 

Accrued expenses

 

(3,812

)

12,358

 

Due to affiliates

 

(5,250

)

(7,548

)

Other liabilities

 

(5,915

)

(2,600

)

Deferred revenue

 

(311

)

(268

)

Net cash provided by operating activities

 

9,898

 

37,152

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Cash paid for acquisitions and contingent consideration—net of cash acquired

 

(114,189

)

(215,332

)

Purchase of fixed assets

 

(2,720

)

(4,429

)

Investment and other

 

(500

)

(24,300

)

Net cash used in investing activities

 

(117,409

)

(244,061

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Borrowings under credit facilities

 

173,000

 

200,000

 

Repayments of borrowings under credit facilities

 

(54,167

)

(4,477

)

Contingent consideration paid

 

(3,179

)

(4,814

)

Payments of debt financing costs

 

 

(1,981

)

Payments on capital lease obligations

 

(107

)

(116

)

Distributions for unitholders

 

(2,168

)

(506

)

Net cash provided by financing activities

 

113,379

 

188,106

 

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

 

68

 

(80

)

CHANGE IN CASH AND CASH EQUIVALENTS

 

5,936

 

(18,883

)

CASH AND CASH EQUIVALENTS

 

 

 

 

 

Beginning of period

 

16,508

 

51,455

 

End of period

 

$

22,444

 

$

32,572

 

 

10



 

Reconciliation of Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is defined as net income (loss) excluding interest income, interest expense, income tax expense (benefit), amortization of debt financing costs, intangible amortization and impairments, if any, depreciation and other amortization, non-cash equity compensation expense, non-cash changes in fair value of estimated contingent consideration, gain on sale of investment, loss on extinguishment of borrowings, other expense/income, net, delayed offering cost expense, other one-time transaction expenses, and management contract buyout, if any. We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides additional useful information to investors regarding our performance and overall results of operations for various reasons, including the following:

 

·                  Non-cash equity grants made to employees or non-employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; stock-based compensation expense is not a key measure of our operating performance;

·                  Contingent consideration or earn outs can vary substantially from company to company and depending upon each company’s growth metrics and accounting assumption methods; the non-cash changes in fair value of estimated contingent consideration is not considered a key measure in comparing our operating performance; and

·                  Amortization expenses can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; the amortization of intangible assets obtained in acquisitions are not considered a key measure in comparing our operating performance.

 

We use Adjusted EBITDA:

 

·                  As a measure of operating performance;

·                  For planning purposes, including the preparation of budgets and forecasts;

·                  To allocate resources to enhance the financial performance of our business;

·                  To evaluate the effectiveness of our business strategies; and

·                  As a consideration in determining compensation for certain employees.

 

Adjusted EBITDA does not purport to be an alternative to net income (loss) or cash flows from operating activities. The term Adjusted EBITDA is not defined under GAAP, and Adjusted EBITDA is not a measure of net income (loss), operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

·                  Adjusted EBITDA does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

·                  Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and

·                  Adjusted EBITDA does not reflect the interest expense on our debt or the cash requirements necessary to service interest or principal payments.

 

In addition, Adjusted EBITDA can differ significantly from company to company depending on strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We compensate for these limitations by relying also on the GAAP results and using Adjusted EBITDA as supplemental information.

 

11



 

Set forth below is a reconciliation of historical net loss to Adjusted EBITDA for the three and six months ended June 30, 2017 and 2018 and a reconciliation of pro forma net loss to pro forma Adjusted EBITDA for the six months ended June 30, 2018:

 

 

 

Focus Financial Partners, LLC

 

Focus Financial
Partners Inc.

 

 

 

Three Months
Ended June 30,

 

Six Months
Ended June 30,

 

Six Months
Ended June 30,

 

 

 

2017

 

2018

 

2017

 

2018

 

2018
Pro Forma

 

 

 

(dollars in thousands)

 

Net loss

 

$

(5,239

)

$

(7,656

)

$

(788

)

$

(19,710

)

$

(36,839

)

Interest income

 

(26

)

(235

)

(42

)

(377

)

(377

)

Interest expense

 

7,051

 

18,212

 

13,042

 

32,484

 

18,704

 

Income tax expense

 

282

 

746

 

724

 

1,922

 

1,212

 

Amortization of debt financing costs

 

691

 

929

 

1,382

 

1,888

 

1,896

 

Intangible amortization

 

14,292

 

22,290

 

27,490

 

41,784

 

41,784

 

Depreciation and other amortization

 

1,608

 

2,162

 

3,077

 

4,044

 

4,044

 

Non-cash equity compensation expense

 

1,856

 

3,701

 

3,779

 

7,555

 

26,124

 

Non-cash changes in fair value of estimated contingent consideration

 

2,175

 

11,944

 

2,097

 

18,315

 

18,315

 

Gain on sale of investment

 

 

 

 

(5,509

)

(5,509

)

Loss on extinguishment of borrowings

 

 

 

 

14,011

 

21,127

 

Other expense (income), net

 

120

 

(203

)

247

 

(296

)

(296

)

Delayed offering cost expense

 

9,840

 

 

9,840

 

 

 

Other one-time transaction expenses

 

 

 

 

 

5,926

 

Adjusted EBITDA

 

$

32,650

 

$

51,890

 

$

60,848

 

$

96,111

 

$

96,111

 

 

Adjusted Net Income and Adjusted Net Income Per Share

 

We analyze our performance using Adjusted Net Income and Adjusted Net Income Per Share. Adjusted Net Income and Adjusted Net Income Per Share are non-GAAP measures. We define Adjusted Net Income as net income (loss) excluding income tax expense (benefit), amortization of debt financing costs, intangible amortization and impairments, if any, non-cash equity compensation expense, non-cash changes in fair value of estimated contingent consideration, gain on sale of investment, loss on extinguishment of borrowings, delayed offering cost expense, management contract buyout, if any, and other one-time transaction expenses. The calculation of Adjusted Net Income also includes adjustments to reflect (i) a pro forma 27% income tax rate assuming all earnings of Focus LLC were recognized by Focus Inc. and no earnings were attributable to non-controlling interests and (ii) tax adjustments from intangible asset related income tax benefits from acquisitions based on a pro forma 27% tax rate.

 

Adjusted Net Income per share is calculated by dividing Adjusted Net Income by the Adjusted Shares Outstanding. Adjusted Shares Outstanding includes all shares of Class A common stock issued in connection with the IPO and related transactions, assumes that all vested non-compensatory stock options and unvested compensatory stock options have been exercised (assuming vesting of unvested compensatory stock options and a then-current value of the Class A common stock equal to the $33.00 IPO price) and assumes that 100% of the Focus LLC common units and vested and unvested incentive units following the IPO have been exchanged for Class A common stock (assuming vesting of the unvested incentive units and a then-current value of the Focus LLC common units equal to the $33.00 IPO price).

 

We believe that Adjusted Net Income and Adjusted Net Income Per Share, viewed in addition to, and not in lieu of, our reported GAAP results, provide additional useful information to investors regarding our performance and overall results of operations for various reasons, including the following:

 

12



 

·                  Non-cash equity grants made to employees or non-employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; stock-based compensation expense is not a key measure of our operating performance;

·                  Contingent consideration or earn outs can vary substantially from company to company and depending upon each company’s growth metrics and accounting assumption methods; the non-cash changes in fair value of estimated contingent consideration is not considered a key measure in comparing our operating performance; and

·                  Amortization expenses can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; the amortization of intangible assets obtained in acquisitions are not considered a key measure in comparing our operating performance.

 

Adjusted Net Income and Adjusted Net Income Per Share do not purport to be an alternative to net income (loss) or cash flows from operating activities. The terms Adjusted Net Income and Adjusted Net Income Per Share are not defined under GAAP, and Adjusted Net Income and Adjusted Net Income Per Share are not a measure of net income (loss), operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, Adjusted Net Income and Adjusted Net Income Per Share have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

·                  Adjusted Net Income and Adjusted Net Income Per Share do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

·                  Adjusted Net Income and Adjusted Net Income Per Share do not reflect changes in, or cash requirements for, working capital needs; and

·                  Other companies in the financial services industry may calculate Adjusted Net Income and Adjusted Net Income Per Share differently than we do, limiting its usefulness as a comparative measure.

 

In addition, Adjusted Net Income and Adjusted Net Income Per Share can differ significantly from company to company depending on strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We compensate for these limitations by relying also on the GAAP results and use Adjusted Net Income and Adjusted Net Income Per Share as supplemental information.

 

13



 

Set forth below is a reconciliation of historical net loss to Adjusted Net Income and Adjusted Net Income Per Share for the three and six months ended June 30, 2017 and 2018 and a reconciliation of pro forma net loss to pro forma Adjusted Net Income and pro forma Adjusted Net Income Per Share for the six months ended June 30, 2018:

 

 

 

Focus Financial Partners, LLC

 

Focus Financial
Partners Inc.

 

 

 

Three Months
Ended June 30,

 

Six Months
Ended June 30,

 

Six Months
Ended June 30,

 

 

 

2017

 

2018

 

2017

 

2018

 

2018
Pro Forma

 

 

 

(dollars in thousands, except share and per share data)

 

Net loss

 

$

(5,239

)

$

(7,656

)

$

(788

)

$

(19,710

)

$

(36,839

)

Income tax expense

 

282

 

746

 

724

 

1,922

 

1,212

 

Amortization of debt financing costs

 

691

 

929

 

1,382

 

1,888

 

1,896

 

Intangible amortization

 

14,292

 

22,290

 

27,490

 

41,784

 

41,784

 

Non-cash equity compensation expense

 

1,856

 

3,701

 

3,779

 

7,555

 

26,124

 

Non-cash changes in fair value of estimated contingent consideration

 

2,175

 

11,944

 

2,097

 

18,315

 

18,315

 

Gain on sale of investment

 

 

 

 

(5,509

)

(5,509

)

Loss on extinguishment of borrowings

 

 

 

 

14,011

 

21,127

 

Delayed offering cost expense

 

9,840

 

 

9,840

 

 

 

Other one time transaction expenses

 

 

 

 

 

5,926

 

Subtotal

 

$

23,897

 

$

31,954

 

$

44,524

 

$

60,256

 

$

74,036

 

Income tax expense (27%) (1)

 

(6,452

)

(8,628

)

(12,021

)

(16,269

)

(19,990

)

Tax Adjustments (1)

 

3,644

 

5,686

 

6,930

 

10,481

 

10,481

 

Adjusted Net Income

 

$

21,089

 

$

29,012

 

$

39,433

 

$

54,468

 

$

64,527

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Shares Outstanding (2)

 

71,843,916

 

71,843,916

 

71,843,916

 

71,843,916

 

71,843,916

 

Adjusted Net Income per share

 

$

0.29

 

$

0.40

 

$

0.55

 

$

0.76

 

$

0.90

 

 


(1)         For historical periods ended prior to the closing of the IPO and the consummation of the related transactions on July 30, 2018, these adjustments are being made for comparative purposes only.

(2)         For historical periods ended prior to the closing of the IPO and the consummation of the related transactions on July 30, 2018, the Adjusted Shares Outstanding are deemed to be outstanding for comparative purposes only.

 

14


Exhibit 99.2

Focus Financial Partners Q2 and Year-To-Date 2018 Earnings Release Supplement August 2018

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Disclaimer Special Note Regarding Forward-Looking Statements Some of the information in this presentation may contain forward-looking statements. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” “continue,” “will” and similar expressions are used to identify forward-looking statements. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this presentation. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include fluctuations in wealth management fees, regulatory assets under management, our reliance on our partner firms and the principals who manage their businesses, our ability to make successful acquisitions, unknown liabilities of or poor performance by acquired businesses, harm to our reputation, our inability to facilitate smooth succession planning at our partner firms, our inability to compete, our reliance on key personnel, our inability to attract, develop and retain talented wealth management professionals, our inability to retain clients following an acquisition, write down of goodwill and other intangible assets, our failure to maintain and properly safeguard an adequate technology infrastructure, cyber-attacks, our inability to recover from business continuity problems, inadequate insurance coverage, the termination of management agreements by management companies, our inability to generate sufficient cash to service all of our indebtedness, the failure of our partner firms to comply with applicable U.S. and non-U.S. regulatory requirements, legal proceedings and governmental inquiries and certain other factors. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. Our forward-looking statements speak only as of the date of this presentation or as of the date as of which they are made. Except as required by applicable law, including federal securities laws, we do not intend to update or revise any forward-looking statements. Non-GAAP Financial Measures We analyze our performance using Adjusted Net Income and Adjusted Net Income Per Share. Adjusted Net Income and Adjusted Net Income Per Share are non-GAAP measures. We define Adjusted Net Income as net income (loss) excluding income tax expense (benefit), amortization of debt financing costs, intangible amortization and impairments, if any, non-cash equity compensation expense, non-cash changes in fair value of estimated contingent consideration, gain on sale of investment, loss on extinguishment of borrowings, delayed offering cost expense, management contract buyout, if any, and other one-time transaction expenses. The calculation of Adjusted Net Income also includes adjustments to reflect (i) a pro forma 27% income tax rate assuming all earnings of Focus Financial Partners, LLC (“Focus LLC”) were recognized by Focus Financial Partners Inc. (“Focus Inc.”) and no earnings were attributable to non-controlling interests and (ii) tax adjustments from intangible asset related income tax benefits from acquisitions based on a pro forma 27% tax rate. Adjusted Net Income per share is calculated by dividing Adjusted Net Income by the Adjusted Shares Outstanding. Adjusted Shares Outstanding includes all shares of Class A common stock issued in connection with the IPO and related transactions, assumes that all vested non-compensatory stock options and unvested compensatory stock options have been exercised (assuming vesting of unvested compensatory stock options and a then-current value of the Class A common stock equal to the $33.00 IPO price) and assumes that 100% of the Focus LLC common units and vested and unvested incentive units following the IPO have been exchanged for Class A common stock (assuming vesting of the unvested incentive units and a then-current value of the Focus LLC common units equal to the $33.00 IPO price). We believe that Adjusted Net Income and Adjusted Net Income Per Share, viewed in addition to, and not in lieu of, our reported GAAP results, provide additional useful information to investors regarding our performance and overall results of operations for various reasons, including the following: Non-cash equity grants made to employees or non-employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; stock-based compensation expense is not a key measure of our operating performance; Contingent consideration or earn outs can vary substantially from company to company and depending upon each company’s growth metrics and accounting assumption methods; the non-cash changes in fair value of estimated contingent consideration is not considered a key measure in comparing our operating performance; and Amortization expenses can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; the amortization of intangible assets obtained in acquisitions are not considered a key measure in comparing our operating performance. Adjusted Net Income and Adjusted Net Income Per Share do not purport to be an alternative to net income (loss) or cash flows from operating activities. The terms Adjusted Net Income and Adjusted Net Income Per Share are not defined under GAAP, and Adjusted Net Income and Adjusted Net Income Per Share are not a measure of net income (loss), operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, Adjusted Net Income and Adjusted Net Income Per Share have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: Adjusted Net Income and Adjusted Net Income Per Share do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments; Adjusted Net Income and Adjusted Net Income Per Share do not reflect changes in, or cash requirements for, working capital needs; and Other companies in the financial services industry may calculate Adjusted Net Income and Adjusted Net Income Per Share differently than we do, limiting its usefulness as a comparative measure. In addition, Adjusted Net Income and Adjusted Net Income Per Share can differ significantly from company to company depending on strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We compensate for these limitations by relying also on the GAAP results and use Adjusted Net Income and Adjusted Net Income Per Share as supplemental information. A reconciliation of these measures to the most recent comparable GAAP measure is available in the appendix of this presentation. 2

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Second Quarter 2018 Highlights Organic revenue growth represents the year-over-year 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 interim periods presented, are included in our consolidated statements of operations for each of the entire interim periods presented. 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. Non-GAAP financial measure. See Appendix for reconciliations. Our Strategy . . . Executing on Our Long-Term Growth Objective of 20% Revenue Growth and 20% Adjusted Net Income Per Share Growth on Average and Over Time Strong Second Quarter 2018 Financial Results Revenue Growth of 47.2% to $231.4 million Significant “Same Store” Sales / Organic Revenue(1) Growth of 16.7% Adjusted Net Income(2), and Adjusted Net Income Per Share(2) Growth of 37.6% $29.0 million Adjusted Net Income(2) and $0.40 Adjusted Net Income Per Share(2) M&A Momentum: New Partner Firms $23.8 million in Combined Acquired Base Earnings From 3 New Partner Firm Additions: Bartlett Wealth Management (Cincinnati, OH: Presence in the Midwest focused on high-net-worth clients) Campbell Deegan Financial (Focus Independence Advised; Richmond, VA) Nigro Karlin Segal Feldstein & Bolno (Los Angeles, CA: Representing many of the world’s top entertainers, musicians, producers, athletes, executives, high net worth individuals and entrepreneurs) 3 Strong Financial Performance

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Recent Developments Represents net leverage based on covenant compliant EBITDA at June 30, 2018. Continued Momentum Credit Facility Amendment Successful Initial Public Offering De-Levering at Time of IPO From July 1, 2018 to August 28, 2018 we added three additional partner firms: HQ: Augusta, GA Southeast presence focused on high-net-worth clients HQ: Atlanta, GA Southeast and Southwest presence focused on ultra-high-net-worth clients HQ: Palo Alto, CA Silicon Valley presence focused on ultra-high-net-worth clients 1st Lien term loan reduced to $803 million and 2nd Lien term loan paid off at IPO Revolver borrowing capacity increased from $250 million to $650 million Interest rate margins reduced to LIBOR + 2.50% on our term loan, and new revolver grid with step downs from LIBOR + 2.00% to LIBOR + 1.25%, subject to net leverage ratio Raised $615 million in gross proceeds, including the exercise of the underwriters overallotment option Decreasing 4 (1) 5.58x <4.00x Q2 2018 Post IPO

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Q2 2018 Results Totals may not foot due to rounding. Non-GAAP financial measure. See Appendix for reconciliations. Organic revenue growth represents the year-over-year 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 interim periods presented, are included in our consolidated statements of operations for each of the entire interim periods presented. 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. Number of Partner Firms at Period End Adjusted Net Income(2) ($mm) Revenue(1) ($mm) Commentary 17% Growth Wealth Management Other 47% Growth 38% Growth Revenue growth driven by strong performance from both new and existing partner firms: Total revenues grew 47.2% to $231.4 million Wealth management fees grew 48.8% to $216.3 million Over 90% fee based recurring revenue “Same store” sales / organic revenue(3) growth 16.7% In addition to top line revenue growth, we achieved 37.6% adjusted net income(2) growth 5 48 56 Q2 2017 Q2 2018 $11.9 $15.1 $145.4 $216.3 $157.2 $231.4 Q2 2017 Q2 2018 $21.1 $29.0 Q2 2017 Q2 2018

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Year-to-Date Q2 2018 Results Non-GAAP financial measure. See Appendix for reconciliations. Organic revenue growth represents the year-over-year 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 interim periods presented, are included in our consolidated statements of operations for each of the entire interim periods presented. 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. Number of Partner Firms at Period End Adjusted Net Income(1) ($mm) Revenue ($mm) Commentary 17% Growth Wealth Management Other 46% Growth 38% Growth 6 Revenue growth driven by strong performance from both new and existing partner firms: Total revenues grew 46.1% to $427.7 million Wealth management fees grew 48.8% to $400.7 million Over 90% fee based recurring revenue “Same store” sales / organic revenue(2) growth 16.9% In addition to top line revenue growth, we achieved 38.1% adjusted net income(2) growth 48 56 Q2 2017 Q2 2018 $23.6 $27.0 $269.2 $400.7 $292.8 $427.7 Q2 2017 YTD Q2 2018 YTD $39.4 $54.5 Q2 2017 YTD Q2 2018 YTD

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Appendix

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Net Loss to Adjusted Net Income and Adjusted Net Income Per Share Reconciliation For historical periods ended prior to the closing of the IPO and the consummation of the related transactions on July 30, 2018, these adjustments are being made for comparative purposes only. For historical periods ended prior to the closing of the IPO and the consummation of the related transactions on July 30, 2018, the Adjusted Shares Outstanding are deemed to be outstanding for comparative purposes only. Three Months Ended June 30, Six Months Ended June 30, ($ in thousands) 2017 2018 2017 2018 Net Loss ($5,239) ($7,656) ($788) ($19,710) Income Tax Expense 282 746 724 1,922 Amortization of Debt Financing Costs 691 929 1,382 1,888 Intangible Amortization 14,292 22,290 27,490 41,784 Non-Cash Equity Compensation Expense 1,856 3,701 3,779 7,555 Non-Cash Changes in Fair Value of Estimated Contingent Consideration 2,175 11,944 2,097 18,315 Gain on Sale of Investment – – – (5,509) Loss on Extinguishment of Borrowings – – – 14,011 Delayed Offering Cost Expense 9,840 – 9,840 – Subtotal $23,897 $31,954 $44,524 $60,256 Income Tax Expense (27%)(1) (6,452) (8,628) (12,021) (16,269) Tax Adjustments(1) 3,644 5,686 6,930 10,481 Adjusted Net Income $21,089 $29,012 $39,433 $54,468 Adjusted Shares Outstanding(2) 71,843,916 71,843,916 71,843,916 71,843,916 Adjusted Net Income Per Share $0.29 $0.40 $0.55 $0.76 8

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