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): November 7, 2019

 


 

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.)

 

875 Third Avenue, 28th 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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A common stock, par value $0.01 per share

 

FOCS

 

Nasdaq Global Select Market

 

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 November 7, 2019, Focus Financial Partners Inc. (the “Company”) issued a press release reporting results for its third quarter ended September 30, 2019. A copy of the press release is furnished with this Current Report on Form 8-K (this “Current Report”) as Exhibit 99.1.

 

Item 7.01                   Regulation FD Disclosure.

 

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

 

On November 7, 2019, the Company also posted a slide presentation entitled “2019 Third Quarter Earnings Release Supplement” dated November 7, 2019 to the “Events” section of the “Investor Relations” section of its website (www.focusfinancialpartners.com). A copy of the slide presentation is furnished with this Current Report as Exhibit 99.2.

 

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 November 7, 2019.

99.2

 

Focus Financial Partners Inc. Slide Presentation, dated November 7, 2019.

 

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:  November 7, 2019

 

3


Exhibit 99.1

 

 

Focus Financial Partners Reports Third Quarter 2019 Results

 

Year-Over-Year Revenue Growth above 30%
Strong Results Across All Key Metrics

 

New York, New York — November 7, 2019 — Focus Financial Partners Inc. (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 third quarter ended September 30, 2019.

 

Third Quarter 2019 Highlights

 

·                  Total revenues of $316.6 million, reflecting year-over-year growth of 34.3%

·                  Organic revenue growth(1) rate of 22.4% year-over-year

·                  GAAP net income of $0.4 million

·                  GAAP basic and diluted net income per share of $0.03

·                  Adjusted Net Income(2) of $45.6 million, 33.7% higher than the prior year quarter

·                  Adjusted Net Income Per Share(2) of $0.62, reflecting year-over-year growth of 34.8%

·                  Closed on incremental $350.0 million Term Loan, using proceeds to repay outstanding Revolver borrowings

·                  Re-affirming annual growth targets of 20% for revenues and Adjusted Net Income Per Share(2)

·                  Resetting targeted Net Leverage Ratio(3) of 3.5x — 4.5x

 


(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.

(3)         Please see footnote 6 under “How We Evaluate Our Business” later in this press release.

 

“We delivered excellent results in the third quarter of this year, capping a very strong first nine months,” said Rudy Adolf, Founder, CEO and Chairman. “We further extended our track record, increased our market share and generated revenue and earnings growth at industry-leading levels. We have an outstanding portfolio of 63 partner firms that excel in wealth management and are platforms for industry consolidation. Our firms are making solid progress against their strategic initiatives, which are centered on building scale to accelerate revenue growth and ensure high client and principal retention. We head into year-end with no shortage of high quality transactions and our momentum remains strong. We are excited about the growth prospects for our business in 2020.”

 

“We again generated year-over-year growth for the quarter in excess of 30% for revenues and Adjusted Net Income Per Share, well above our stated annual targets of 20% growth for each,” said Jim Shanahan, Chief Financial Officer. “Our results reflect our ongoing investment in wealth management businesses that create a strategic competitive advantage for Focus and our partner firms. We will continue to position our partner firms to achieve scale and deliver enduring value well into the future. As we begin to de-lever in 2020, with the goal of operating within a range of 3.5x to 4.5x, we will balance growth with managing our capital resources, while maintaining sufficient flexibility to invest in the future growth of our firm. We believe that 20% revenue and Adjusted Net Income Per Share growth rates are the appropriate annual targets for our business, on average and over time.”

 

1


 

Presentation

 

This press release presents our results of operations and financial position, including consolidation of our investment in Focus Financial Partners, LLC (“Focus LLC”), since July 30, 2018.  Prior to July 30, 2018, the closing date of our initial public offering (“IPO”), the financial statements included herein represent those of Focus LLC. The financial results of Focus Inc. prior to July 30, 2018 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 Focus Inc. would have been had Focus Inc.’s IPO and related transactions occurred prior to July 30, 2018.

 

2019 Third Quarter Financial Highlights

 

Total revenues were $316.6 million, 34.3%, or $80.9 million higher than the third quarter of the prior year.  The primary driver of this increase was revenue growth from our existing partner firms of approximately $55.2 million. The majority of this increase was driven by higher wealth management fees, which includes the effect of mergers completed by our partner firms in the last twelve months. The balance of the increase of $25.7 million was due to revenue from new partner firms acquired over the twelve months ended September 30, 2019.

 

An estimated 73%, or approximately $229.7 million of total revenues were correlated to the financial markets, of which 70%, or approximately $160.8 million, were generated from advance billings. The remaining 27%, or approximately $86.9 million, 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.

 

Year-over-year organic revenue growth(1) was 22.4%, higher than the 9.7% for the prior year quarter, reflecting the positive impact of the 26 mergers we completed over the twelve months ended September 30, 2019. We anticipate that our organic revenue growth for the fourth quarter of 2019 will be in excess of 15%.

 

GAAP net income increased to $0.4 million compared to a net loss of $38.9 million in the prior year quarter. Adjusted Net Income(2) was $45.6 million, an increase of 33.7%, or $11.5 million over the prior year quarter. Adjusted Net Income Per Share(2) was $0.62 per share, $0.16, or 34.8%, higher year-over-year, reflecting our acquisition momentum over the past year.

 

2019 Year-to-Date Financial Highlights

 

Total revenues were $878.1 million, 32.4%, or $214.7 million higher than the first nine months of the prior year. The primary driver of this increase was revenue growth from our existing partner firms of approximately $160.1 million. The majority of this growth was driven by higher wealth management fees, which includes 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 nine months of 2019 for partner firms that were acquired in the first nine months of 2018. The balance of the increase of $54.6 million was due to revenue from new partner firms acquired over the twelve months ended September 30, 2019.

 

Organic revenue growth(1) for the first nine months of 2019 was 13.8%, relatively consistent with 14.3% for the prior year period.

 

GAAP net income increased to $0.7 million compared to a net loss of $58.6 million in the prior year period. Adjusted Net Income(2) was $122.6 million, an increase of 38.4%, or $34.0 million over the prior year period. Adjusted Net Income Per Share(2) was $1.67 per share, $0.45 or 36.9%, higher year-over-year, reflecting our

 

2


 

acquisition momentum over the past year as well as the net reduction in interest expense, primarily related to the repayment of our $207.0 million Second Lien Term Loan in July 2018.

 


(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 September 30, 2019, cash and cash equivalents were $51.3 million and debt outstanding under the Company’s credit facilities was approximately $1.28 billion.

 

Of the total debt outstanding as of September 30, 2019, approximately $1.14 billion were borrowings under our First Lien Term Loan (“Term Loan”) and $140.0 million were borrowings under our First Lien Revolver (“Revolver”). Our Net Leverage Ratio(1) at September 30, 2019 was 4.27x, reflecting the impact of the Williams Jones closing.

 

In July 2019, we took advantage of the positive credit environment and closed on an incremental $350.0 million Term Loan (upsized by $50.0 million as a result of strong lender demand), the proceeds of which were used to reset our Revolver dry powder for M&A activity. 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 $2.0 million to $2.9 million.

 

Our net cash provided by operating activities for the trailing four quarters ended September 30, 2019 increased to $149.6 million from $93.6 million for the trailing four quarters ended September 30, 2018. This quarter we are introducing a new measure called Cash Flow Available for Capital Allocation(2), which is cash flow available to fund our M&A activity, contingent consideration and repayment of debt. Our Cash Flow Available for Capital Allocation(2) for the trailing four quarters ended September 30, 2019 increased to $127.0 million from $91.8 million for the trailing four quarters ended September 30, 2018. These increases reflect the growth of existing partner firms and the addition of new partner firms during the last twelve months.

 


(1)   Please see footnote 6 under “How We Evaluate Our Business” later in this press release.

(2)   Non-GAAP financial measure. See ‘‘Reconciliation of Non-GAAP Financial Measures—Cash Flow Available for Capital Allocation.”

 

Teleconference, Webcast and Presentation Information

 

Founder, CEO and Chairman, Rudy Adolf, and Chief Financial Officer, Jim Shanahan, will host a conference call today, November 7, 2019 at 8:30 a.m. Eastern Time to discuss the Company’s 2019 third 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 2382003.

 

A live, listen-only webcast, together with a slide presentation titled “2019 Third Quarter Earnings Release Supplement” dated November 7, 2019, will be available under “Events” in the “Investor Relations” section of the Company’s website, www.focusfinancialpartners.com. A webcast replay of the call will be available shortly after the event at the same address.

 

3


 

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 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. 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. 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 December 31, 2018 filed with the Securities and Exchange Commission.

 

Investor and Media Contact Information

 

Tina Madon

Head of Investor Relations & Corporate Communications

Tel: (646) 813-2909

tmadon@focuspartners.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 nine months ended September 30, 2018 and 2019 include the following:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2018

 

2019

 

2018

 

2019

 

 

 

(dollars in thousands, except per share data)

 

Revenue Metrics:

 

 

 

 

 

 

 

 

 

Revenues

 

$

235,701

 

$

316,641

 

$

663,365

 

$

878,110

 

Revenue growth (1) from prior period

 

30.8

%

34.3

%

40.2

%

32.4

%

Organic revenue growth (2) from prior period

 

9.7

%

22.4

%

14.3

%

13.8

%

 

 

 

 

 

 

 

 

 

 

Management Fees Metrics (operating expense):

 

 

 

 

 

 

 

 

 

Management fees

 

$

62,487

 

$

81,112

 

$

169,346

 

$

217,370

 

Management fees growth (3) from prior period

 

45.0

%

29.8

%

46.1

%

28.4

%

Organic management fees growth (4) from prior period

 

12.7

%

14.9

%

18.1

%

9.0

%

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Metrics:

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (5)

 

$

53,081

 

$

69,364

 

$

149,192

 

$

186,831

 

Adjusted EBITDA growth (5) from prior period

 

25.3

%

30.7

%

44.5

%

25.2

%

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Metrics:

 

 

 

 

 

 

 

 

 

Adjusted Net Income (5)

 

$

34,131

 

$

45,648

 

$

88,599

 

$

122,594

 

Adjusted Net Income growth (5) from prior period

 

43.4

%

33.7

%

40.1

%

38.4

%

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share Metrics:

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share (5)

 

$

0.46

 

$

0.62

 

$

1.22

 

$

1.67

 

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

 

39.4

%

34.8

%

38.6

%

36.9

%

Adjusted Shares Outstanding (5)

 

74,055,933

 

73,371,137

 

72,557,403

 

73,340,592

 

 

 

 

 

 

 

 

 

 

 

Other Metrics:

 

 

 

 

 

 

 

 

 

Net Leverage Ratio (6) at period end

 

3.19x

 

4.27x

 

3.19x

 

4.27x

 

Acquired Base Earnings (7)

 

$

11,200

 

$

16,500

 

$

37,750

 

$

35,138

 

Number of partner firms at period end (8)

 

58

 

63

 

58

 

63

 

 


(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 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 period-over-period 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 period-over-period growth in management fees earned by management companies related to partner firms, including growth related to acquisitions of wealth management

 

5


 

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)         Net Leverage Ratio represents the First Lien Leverage Ratio (as defined in our Credit Agreement), and means the ratio of amounts outstanding under the Term Loan and Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in our Credit Agreement).

 

(7)         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.

 

(8)         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.

 

6


 

Unaudited Condensed Consolidated Financial Statements

 

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of operations

(in thousands, except share and per share data)

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2018

 

2019

 

2018

 

2019

 

REVENUES:

 

 

 

 

 

 

 

 

 

Wealth management fees

 

$

220,235

 

$

299,348

 

$

620,886

 

$

825,728

 

Other

 

15,466

 

17,293

 

42,479

 

52,382

 

Total revenues

 

235,701

 

316,641

 

663,365

 

878,110

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Compensation and related expenses

 

107,382

 

111,829

 

262,004

 

318,808

 

Management fees

 

62,487

 

81,112

 

169,346

 

217,370

 

Selling, general and administrative

 

43,832

 

58,665

 

121,612

 

170,658

 

Management contract buyout

 

 

 

 

1,428

 

Intangible amortization

 

23,616

 

34,898

 

65,400

 

94,860

 

Non-cash changes in fair value of estimated contingent consideration

 

10,564

 

14,435

 

28,879

 

25,696

 

Depreciation and other amortization

 

2,077

 

2,797

 

6,121

 

7,535

 

Total operating expenses

 

249,958

 

303,736

 

653,362

 

836,355

 

INCOME (LOSS) FROM OPERATIONS

 

(14,257

)

12,905

 

10,003

 

41,755

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

432

 

291

 

809

 

827

 

Interest expense

 

(12,996

)

(15,852

)

(45,480

)

(43,135

)

Amortization of debt financing costs

 

(828

)

(919

)

(2,716

)

(2,483

)

Gain on sale of investment

 

 

 

5,509

 

 

Loss on extinguishment of borrowings

 

(7,060

)

 

(21,071

)

 

Other (expense) income—net

 

(525

)

9

 

(229

)

(695

)

Income from equity method investments

 

55

 

53

 

208

 

696

 

Total other expense—net

 

(20,922

)

(16,418

)

(62,970

)

(44,790

)

LOSS BEFORE INCOME TAX

 

(35,179

)

(3,513

)

(52,967

)

(3,035

)

INCOME TAX EXPENSE (BENEFIT)

 

3,745

 

(3,905

)

5,667

 

(3,701

)

NET INCOME (LOSS)

 

(38,924

)

392

 

(58,634

)

666

 

Non-controlling interest

 

28,726

 

881

 

48,436

 

(1,539

)

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(10,198

)

$

1,273

 

$

(10,198

)

$

(873

)

Income (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.24

)

$

0.03

 

$

(0.24

)

$

(0.02

)

Diluted

 

$

(0.24

)

$

0.03

 

$

(0.24

)

$

(0.02

)

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

42,351,043

 

47,044,507

 

42,351,043

 

46,653,820

 

Diluted

 

42,351,043

 

47,058,613

 

42,351,043

 

46,653,820

 

 

7


 

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated balance sheets

(in thousands, except share and per share data)

 

 

 

December 31,

 

September 30,

 

 

 

2018

 

2019

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

33,213

 

$

51,263

 

Accounts receivable less allowances of $576 at 2018 and $800 at 2019

 

98,596

 

130,384

 

Prepaid expenses and other assets

 

76,150

 

79,064

 

Fixed assets—net

 

24,780

 

40,227

 

Operating lease assets

 

 

167,866

 

Debt financing costs—net

 

12,340

 

10,319

 

Deferred tax assets—net

 

70,009

 

77,919

 

Goodwill

 

860,495

 

1,073,283

 

Other intangible assets—net

 

762,195

 

1,014,303

 

TOTAL ASSETS

 

$

1,937,778

 

$

2,644,628

 

LIABILITIES AND EQUITY

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Accounts payable

 

$

8,935

 

$

10,456

 

Accrued expenses

 

36,252

 

61,337

 

Due to affiliates

 

39,621

 

40,151

 

Deferred revenue

 

6,215

 

8,653

 

Other liabilities

 

158,497

 

204,173

 

Operating lease liabilities

 

 

183,491

 

Borrowings under credit facilities (stated value of $838,985 and $1,282,079 at December 31, 2018 and September 30, 2019, respectively)

 

836,582

 

1,275,551

 

Tax receivable agreements obligations

 

39,156

 

47,242

 

TOTAL LIABILITIES

 

1,125,258

 

1,831,054

 

EQUITY

 

 

 

 

 

Class A common stock, par value $0.01, 500,000,000 shares authorized; 46,265,903 and 47,255,907 shares issued and outstanding at December 31, 2018 and September 30, 2019, respectively

 

462

 

472

 

Class B common stock, par value $0.01, 500,000,000 shares authorized; 22,823,272 and 22,198,665 shares issued and outstanding at December 31, 2018 and September 30, 2019, respectively

 

228

 

222

 

Additional paid-in capital

 

471,386

 

502,341

 

Accumulated deficit

 

(590

)

(1,463

)

Accumulated other comprehensive loss

 

(1,824

)

(3,576

)

Total shareholders’ equity

 

469,662

 

497,996

 

Non-controlling interests

 

342,858

 

315,578

 

Total equity

 

812,520

 

813,574

 

TOTAL LIABILITIES AND EQUITY

 

$

1,937,778

 

$

2,644,628

 

 

8


 

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of cash flows

(in thousands)

 

 

 

For the nine months ended

 

 

 

September 30,

 

 

 

2018

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

 

$

(58,634

)

$

666

 

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

 

 

 

 

 

Intangible amortization

 

65,400

 

94,860

 

Depreciation and other amortization

 

6,121

 

7,535

 

Amortization of debt financing costs

 

2,716

 

2,483

 

Non-cash equity compensation expense

 

31,612

 

13,375

 

Non-cash changes in fair value of estimated contingent consideration

 

28,879

 

25,696

 

Income from equity method investments

 

(208

)

(696

)

Distributions received from equity method investments

 

739

 

668

 

Other non-cash items

 

787

 

117

 

Loss on extinguishment of borrowings

 

19,001

 

 

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

 

 

 

 

 

Accounts receivable

 

(30,172

)

(30,367

)

Prepaid expenses and other assets

 

(6,035

)

(4,820

)

Accounts payable

 

1,219

 

1,240

 

Accrued expenses

 

21,382

 

39,968

 

Due to affiliates

 

7,503

 

365

 

Other liabilities

 

(6,315

)

(21,964

)

Deferred revenue

 

2,223

 

794

 

Net cash provided by operating activities

 

86,218

 

129,920

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

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

 

(296,821

)

(494,336

)

Purchase of fixed assets

 

(6,326

)

(20,758

)

Investment and other

 

(24,300

)

 

Net cash used in investing activities

 

(327,447

)

(515,094

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Borrowings under credit facilities

 

250,000

 

939,125

 

Repayments of borrowings under credit facilities

 

(449,019

)

(496,906

)

Proceeds from issuance of common stock, net

 

565,160

 

 

Payments in connection with unit redemption, net

 

(61,539

)

 

Contingent consideration paid

 

(10,286

)

(20,514

)

Payments of debt financing costs

 

(4,612

)

(3,743

)

Proceeds from exercise of stock options

 

 

796

 

Payments on finance lease obligations

 

(147

)

(138

)

Distributions for unitholders

 

(1,308

)

(15,225

)

Net cash provided by financing activities

 

288,249

 

403,395

 

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

 

(97

)

(171

)

CHANGE IN CASH AND CASH EQUIVALENTS

 

46,923

 

18,050

 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

Beginning of period

 

51,455

 

33,213

 

End of period

 

$

98,378

 

$

51,263

 

 

9


 

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, 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; and

·                  To evaluate the effectiveness of our business strategies.

 

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.

 

10


 

Set forth below is a reconciliation of net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2018 and 2019:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2018

 

2019

 

2018

 

2019

 

 

 

(in thousands)

 

Net income (loss)

 

$

(38,924

)

$

392

 

$

(58,634

)

$

666

 

Interest income

 

(432

)

(291

)

(809

)

(827

)

Interest expense

 

12,996

 

15,852

 

45,480

 

43,135

 

Income tax expense (benefit)

 

3,745

 

(3,905

)

5,667

 

(3,701

)

Amortization of debt financing costs

 

828

 

919

 

2,716

 

2,483

 

Intangible amortization

 

23,616

 

34,898

 

65,400

 

94,860

 

Depreciation and other amortization

 

2,077

 

2,797

 

6,121

 

7,535

 

Non-cash equity compensation expense

 

24,057

 

4,276

 

31,612

 

13,375

 

Non-cash changes in fair value of estimated contingent consideration

 

10,564

 

14,435

 

28,879

 

25,696

 

Gain on sale of investment

 

 

 

(5,509

)

 

Loss on extinguishment of borrowings

 

7,060

 

 

21,071

 

 

Other expense (income), net

 

525

 

(9

)

229

 

695

 

Management contract buyout

 

 

 

 

1,428

 

Other one-time transaction expenses

 

6,969

 

 

6,969

 

1,486

 

Adjusted EBITDA

 

$

53,081

 

$

69,364

 

$

149,192

 

$

186,831

 

 

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,  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: (i) the weighted average shares of Class A common stock outstanding during the periods, (ii) the weighted average incremental shares of Class A common stock related to stock options and unvested Class A common stock, if any, outstanding during the periods, (iii) the weighted average number of Focus LLC common units outstanding during the periods (assuming that 100% of such Focus LLC common units have been exchanged for Class A common stock) and (iv) the weighted average number of common unit equivalents of Focus LLC vested and unvested incentive units outstanding during the periods based on the closing price of our Class A common stock on the last trading day of the periods (assuming that 100% of such Focus LLC common units have been exchanged for Class A common stock).

 

11


 

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.

 

Set forth below is a reconciliation of net income (loss) to Adjusted Net Income and Adjusted Net Income Per Share for the three and nine months ended September 30, 2018 and 2019:

 

12


 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2018

 

2019

 

2018

 

2019

 

 

 

(dollars in thousands, except per share data)

 

Net income (loss)

 

$

(38,924

)

$

392

 

$

(58,634

)

$

666

 

Income tax expense (benefit)

 

3,745

 

(3,905

)

5,667

 

(3,701

)

Amortization of debt financing costs

 

828

 

919

 

2,716

 

2,483

 

Intangible amortization

 

23,616

 

34,898

 

65,400

 

94,860

 

Non-cash equity compensation expense

 

24,057

 

4,276

 

31,612

 

13,375

 

Non-cash changes in fair value of estimated contingent consideration

 

10,564

 

14,435

 

28,879

 

25,696

 

Gain on sale of investment

 

 

 

(5,509

)

 

Loss on extinguishment of borrowings

 

7,060

 

 

21,071

 

 

Management contract buyout

 

 

 

 

1,428

 

Other one-time transaction expenses(1)

 

7,535

 

 

7,535

 

1,486

 

Subtotal

 

38,481

 

51,015

 

98,737

 

136,293

 

Pro forma income tax expense (27%)

 

(10,390

)

(13,774

)

(26,659

)

(36,799

)

Tax Adjustments(2)

 

6,040

 

8,407

 

16,521

 

23,100

 

Adjusted Net Income

 

$

34,131

 

$

45,648

 

$

88,599

 

$

122,594

 

Adjusted Shares Outstanding

 

74,055,933

 

73,371,137

 

72,557,403

 

73,340,592

 

Adjusted Net Income Per Share

 

$

0.46

 

$

0.62

 

$

1.22

 

$

1.67

 

Calculation of Adjusted Shares Outstanding:

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding—basic(3)

 

42,351,043

 

47,044,507

 

42,351,043

 

46,653,820

 

Adjustments:

 

 

 

 

 

 

 

 

 

Weighted average incremental shares of Class A common stock related to stock options and unvested Class A common stock(4)

 

130,411

 

14,106

 

130,411

 

15,773

 

Weighted average Focus LLC common units outstanding(5)

 

22,695,798

 

22,275,034

 

22,565,761

 

22,513,950

 

Weighted average common unit equivalent of Focus LLC incentive units outstanding(6)

 

8,878,681

 

4,037,490

 

7,510,188

 

4,157,049

 

Adjusted Shares Outstanding

 

74,055,933

 

73,371,137

 

72,557,403

 

73,340,592

 

 


(1)   In 2018, primarily relates to one-time expenses related to (a) cash compensation of $5,926, which were recorded in compensation and related expenses, in connection with the IPO and Reorganization Transactions and (b) transaction expenses of $648, which were recorded in selling, general and administrative expenses, associated with the acquisition of Loring Ward. In 2019, relates to one-time expenses related to (a) Loring Ward severance cash compensation of $280 during the three months ended March 31, 2019, which were recorded in compensation and related expenses and (b) transaction expenses of $786 and $420, associated with the acquisition of Loring Ward, which were recorded in selling, general and administrative expenses during the three months ended March 31, 2019 and June 30, 2019, respectively.

 

(2)   As of September 30, 2019, estimated tax adjustments from intangible asset related income tax benefits from closed acquisitions based on a pro forma 27% tax rate for the next 12 months is $34,532.

 

(3)   Represents our GAAP weighted average Class A common stock outstanding—basic.

 

(4)   The incremental shares for the three and nine months ended September  30, 2018 related to unvested Class A common stock and stock options as calculated using the treasury stock method were not included in the calculation of the GAAP weighted average shares of Class A common stock—diluted for the three and nine months ended September 30, 2018 as the result would have been anti-dilutive. The incremental shares for the nine months ended September 30, 2019 related to unvested Class A common stock as calculated using the treasury stock method were not included in the calculation of the GAAP weighted average shares of Class A common stock—diluted for the nine months ended September 30, 2019 as the result would have been anti-dilutive.

 

(5)   Assumes that 100% of the Focus LLC common units were exchanged for Class A common stock.

 

(6)   Assumes that 100% of the vested and unvested Focus LLC incentive units were converted into Focus LLC common units based on the closing price of our Class A common stock at the end of the respective period and such Focus LLC common units were exchanged for Class A common stock.

 

13


 

Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation

 

To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP liquidity measures on a trailing 4-quarter basis to analyze cash flows generated from our operations. We consider Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation to be liquidity measures that provide useful information to investors about the amount of cash generated by the business and are two factors in evaluating the amount of cash available to pay contingent consideration, make strategic acquisitions and repay outstanding borrowings. Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation do not represent our residual cash flow available for discretionary expenditures as they do not deduct our mandatory debt service requirements and other non-discretionary expenditures. We define Adjusted Free Cash Flow as net cash provided by operating activities, less purchase of fixed assets, distributions for unitholders and payments under tax receivable agreements (if any). We define Cash Flow Available for Capital Allocation as Adjusted Free Cash Flow plus the portion of contingent consideration paid which is classified as operating cash flows under GAAP. Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation are not defined under GAAP and should not be considered as alternatives to net cash from operating, investing or financing activities. In addition, Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation can differ significantly from company to company.

 

Set forth below is a reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation for the trailing 4-quarters ended September 30, 2018 and 2019:

 

 

 

Trailing 4-Quarters Ended

 

 

 

September 30,

 

 

 

2018

 

2019

 

 

 

(in thousands)

 

Net cash provided by operating activities

 

$

93,579

 

$

149,621

 

Purchase of fixed assets

 

(8,330

)

(23,538

)

Distributions for unitholders

 

(1,894

)

(16,661

)

Payments under tax receivable agreements

 

 

 

Adjusted Free Cash Flow

 

$

83,355

 

$

109,422

 

Portion of contingent consideration paid included in operating activities (1)

 

8,483

 

17,579

 

Cash Flow Available for Capital Allocation (2)

 

$

91,838

 

$

127,001

 

 


(1)         A portion of contingent consideration paid is classified as operating cash outflows in accordance with GAAP. Contingent consideration paid classified as operating cash outflows for each of the trailing 4-quarters ended September 30, 2018 was $0.8 million, $1.5 million, $1.6 million and $4.6 million, respectively, totaling $8.5 million for the trailing 4-quarters ended September 30, 2018.  Contingent consideration paid classified as operating cash outflows for each of the trailing 4-quarters ended September 30, 2019 was $3.6 million, $9.2 million, $4.0 million and $0.8 million, respectively, totaling $17.6 million for the trailing 4-quarters ended September 30, 2019.

 

(2)         Cash Flow Available for Capital Allocation excludes all contingent consideration that was included in either operating, investing or financing activities of our consolidated statements of cash flows.

 

14


 

Supplemental Information

 

Economic Ownership

 

The following table provides supplemental information regarding the economic ownership of Focus Financial Partners, LLC as of September 30, 2019:

 

 

 

September 30, 2019

 

 

 

Interest

 

%

 

Economic Ownership of Focus Financial Partners, LLC Interests:

 

 

 

 

 

Focus Financial Partners Inc. (1)

 

47,255,907

 

64.3

%

Non-Controlling Interests (2)

 

26,205,259

 

35.7

%

Total

 

73,461,166

 

100.0

%

 


(1)   Includes 106,578 unvested common units.

 

(2)   Includes 4,006,594 Focus LLC common units issuable upon conversion of the outstanding 17,748,891 vested and unvested incentive units (assuming vesting of the unvested incentive units and a September 30, 2019 period end value of the Focus LLC common units equal to $23.80).

 

Class A and Class B Common Stock Outstanding

 

The following table provides supplemental information regarding the Company’s Class A and Class B common stock:

 

 

 

Q3 2019 Weighted 
Average 
Outstanding

 

Number of Shares 
Outstanding at
September 30, 2019

 

Number of Shares 
Outstanding at 
November 5, 2019

 

Class A

 

47,044,507

 

47,255,907

 

47,255,907

 

Class B

 

22,275,034

 

22,198,665

 

22,198,665

 

 

Incentive Units

 

The following table provides supplemental information regarding the outstanding Focus LLC vested and unvested Incentive Units (“IUs”) at September 30, 2019. The vested IUs in future periods can be exchanged into shares of Class A common stock (after conversion into a number of Focus LLC common units that takes into account the then-current value of common units and such IUs aggregate hurdle amount), and therefore, the Company calculates the Class A common stock equivalent of such IUs for purposes of calculating Adjusted Net Income Per Share.  The period-end share price of the Company’s Class A common stock is used to calculate the intrinsic value of the outstanding Focus LLC IUs in order to calculate a Focus LLC common unit equivalent of the Focus LLC IUs.

 

15


 

Focus Financial Partners, LLC Incentive Units by Hurdle at September 30, 2019:

 

Hurdle
Rates

 

Number
Outstanding

 

$

1.42

 

175,421

 

$

5.50

 

97,798

 

$

6.00

 

56,702

 

$

7.00

 

482,545

 

$

9.00

 

1,984,779

 

$

11.00

 

1,218,595

 

$

12.00

 

520,000

 

$

13.00

 

831,416

 

$

14.00

 

56,205

 

$

16.00

 

168,552

 

$

17.00

 

80,000

 

$

19.00

 

865,633

 

$

21.00

 

3,975,500

 

$

22.00

 

1,289,667

 

$

23.00

 

524,828

 

$

27.00

 

29,484

 

$

28.50

 

1,646,766

 

$

33.00

 

3,715,000

 

$

36.64

 

30,000

 

 

 

17,748,891

 

 

16


Exhibit 99.2

 

2019 Third Quarter Earnings Release Supplement November 7, 2019

GRAPHIC

 

2 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, 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 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, loss on extinguishment of borrowings, other expense/income, net, 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: (i) 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, (ii) 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 (iii) 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 (i) as a measure of operating performance, (ii) for planning purposes, including the preparation of budgets and forecasts, (iii) to allocate resources to enhance the financial performance of our business, and (iv) to evaluate the effectiveness of our business strategies. 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: (i) Adjusted EBITDA does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments, (ii) Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs, and (iii) 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. 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, loss on extinguishment of borrowings, 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. 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: (i) 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, (ii) 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 (iii) 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: (i) Adjusted Net Income and Adjusted Net Income Per Share do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments, (ii) Adjusted Net Income and Adjusted Net Income Per Share do not reflect changes in, or cash requirements for, working capital needs, and (iii) 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. To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP liquidity measures on a trailing 4-quarter basis to analyze cash flows generated from our operations. We consider Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation to be liquidity measures that provide useful information to investors about the amount of cash generated by the business and are two factors in evaluating the amount of cash available to pay contingent consideration, make strategic acquisitions and repay outstanding borrowings. Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation do not represent our residual cash flow available for discretionary expenditures as they do not deduct our mandatory debt service requirements and other non-discretionary expenditures. We define Adjusted Free Cash Flow as net cash provided by operating activities, less purchase of fixed assets, distributions for unitholders and payments under tax receivable agreements (if any). We define Cash Flow Available for Capital Allocation as Adjusted Free Cash Flow plus the portion of contingent consideration paid which is classified as operating cash flows under GAAP. Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation are not defined under GAAP and should not be considered as alternatives to net cash from operating, investing or financing activities. In addition, Adjusted Free Cash Flow and Cash Flow Available for Capital Allocation can differ significantly from company to company.

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Table of Contents Pages Financial Summary and Q4 2019 Outlook 4-9 Revenues 10-13 M&A Activity 14-15 Leverage and Cash Flow Available for Capital Allocation 16-21 Appendix 22-28 3

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4 Financial Summary and Q4 2019 Outlook 4

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Strong Financial Performance Over the Long-Term Non-GAAP financial measure. See Appendix for reconciliations. 5 $55.7 $67.8 $75.4 $103.0 $145.2 $203.4 $186.8 2013 2014 2015 2016 2017 2018 2019 Q3 YTD Adjusted EBITDA (1) ($ in millions) CAGR: 29.6% $38.6 $46.7 $52.3 $68.6 $86.7 $125.3 $122.6 2013 2014 2015 2016 2017 2018 2019 Q3 YTD Adjusted Net Income (1) ($ in millions) CAGR: 26.6% $0.54 $0.65 $0.73 $0.95 $1.21 $1.74 $1.67 2013 2014 2015 2016 2017 2018 2019 Q3 YTD ANI Per Share (1) CAGR: 26.4% $268.9 $325.6 $382.3 $485.4 $662.9 $910.9 $878.1 2013 2014 2015 2016 2017 2018 2019 Q3 YTD Revenues ($ in millions) CAGR: 27.6%

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Revenues: $316.6 million, +34.3% year-over-year growth Organic revenue growth:(1) +22.4% Fee-based and recurring revenues: 95+% Revenue attributable to new partner firm closing: $7.4 million* * Relates to closing of Williams Jones on 8/1/19. Full quarter revenue contribution estimated to be over $11 million. 2019 Third Quarter Financial Snapshot Revenues Adjusted EBITDA Adjusted Net Income and ANI per Share Adjusted EBITDA:(2) $69.4 million, +30.7% year-over-year growth Adjusted EBITDA attributable to new partner firm closing: $2.9 million* Acquired Base Earnings:(3) $16.5 million * Relates to closing of Williams Jones on 8/1/19. Full quarter Adjusted EBITDA contribution estimated to be over $4 million. Adjusted Net Income:(2) $45.6 million, +33.7% year-over-year growth Adjusted Net Income Per Share:(2) $0.62, +34.8% year-over-year growth Adjusted Shares Outstanding for purposes of calculating ANI:(2) 73.4 million Organic revenue growth represents the period-over-period growth in revenues 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 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. 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. 6

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Delivering Strong Performance While Investing For Growth 7 Capitalized on an active market in Q3 2019 and invested in firms that create strategic competitive advantages for Focus and its partner firms Closed on Williams Jones, fiduciary wealth manager with ~$8 billion in client assets based in New York City, one of the largest wealth management markets in the U.S. Closed on 6 mergers for 6 partner firms. Increased geographic reach and enhanced client service capabilities, including multi-family office and business owner support services. Year to date, added $35.1 million in Acquired Base Earnings(1) through acquisition of 6 new partner firms. Momentum remains strong as we head into year-end Completed 4 mergers in Q4 2019 through November 7, 2019, including 2 mergers for The Colony Group. Long growth runway ahead and no shortage of high-quality transactions heading into 2020. M&A-driven growth remains central to capitalizing on the industry opportunity. Organic initiatives continue to be important to achieving future growth objectives. 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.

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Delivering Strong Performance While Investing For Growth 8 Which supports our plan for reducing net leverage ratio Begin gradual de-levering in 2020. Plan to operate at net leverage ratio(1) of 3.5x to 4.5x, providing flexibility to pursue growth strategy. Re-affirming targets of 20% annual growth for revenues and Adjusted Net Income Per Share(2). Have sufficient capital resources to meet growth and leverage targets without raising equity. And positions Focus to deliver superior shareholder value over the long-term Strong competitive positioning, combined with strong annual growth in revenues, Adjusted Net Income Per Share(2), Cash Flow Available for Capital Allocation(2) and lower net leverage ratio, will translate into superior shareholder value over time. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Agreement), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Agreement). Non-GAAP financial measure.

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Organic revenue growth(1) estimate of over 15% Incremental revenue from Q3 partner firm acquisition to be ~$3.7 million in Q4 2019 (due to Q3 intra quarter closing of Williams Jones) Revenue reduction of ~$5 million expected for seasonality in tax and other services No partner firms closing in Q4 2019 Estimated Adjusted EBITDA margin(2) of approximately 21.5%(5) Incremental Adjusted EBITDA(3) from Q3 partner acquisition to be ~$1.2 million in Q4 2019 (due to Q3 intra quarter closing of Williams Jones) Q4 2019 Outlook 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 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. Calculated as Adjusted EBITDA divided by revenues. Non-GAAP financial measure. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Agreement), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Agreement). The Company is not providing a quantitative reconciliation of its forward-looking estimate of Adjusted EBITDA margin to its most directly comparable GAAP financial measure because such GAAP measure, which is not included in the Company’s outlook, is difficult to reliably predict or estimate without unreasonable effort due to its dependency on future uncertainties such as the items noted under the heading “Disclaimer – Special Note Regarding Forward-Looking Statements.” In addition, we believe such a reconciliation could imply a degree of precision that might be confusing or misleading to investors. 9 Revenues Adjusted EBITDA ANI and ANI per Share Next twelve months intangible tax shield for Adjusted Net Income(3) of $34.5 million No equity issuance in connection with acquisition activity Net Leverage and Cash Flow Cash consideration at closing for Q4 acquisitions to date of $25.5 million Net leverage ratio(4) – ~4.3x Estimated cash earnouts of ~$3 million Final $12.5 million Loring Ward purchase price installment

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10 Revenues 10

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95%+ fee-based and recurring revenues Holistic wealth management fees tied to team-based service model Not a commission or interest revenue based model Diversified Sources Create a Natural Hedge to Market-Correlated Revenues Advance billing structure used by majority of partner firms gives visibility into subsequent quarter High diversification of billing practices across 63 partner firms is an embedded revenue hedge Non-correlated revenues typically include fixed fees for investment advice, tax fees and family office type services Diversification reduces market risk to revenue stream International sources provide some revenue diversification 5 partner firms across Australia, Canada, and the UK Q3 2019 Revenues by Source Q3 2019 Revenues by Region Q3 2019 Revenues Correlated to Markets 11 $299.3m , 94.5% $17.3m , 5.5% Wealth Management Fees Other $229.7m , 72.5% $86.9m , 27.5% Revenues Correlated to Markets Correlated to Markets Not Correlated to Markets $302.5m , 95.6% $14.1m , 4.4% Domestic International $160.8m , 70.0% $68.9m , 30.0% Billing Structure of Market - Correlated Revenues Advance Arrears

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Organic Revenue Growth Trend is Strong Q3 2019 year-over-year organic revenue growth1 was 22.4% and trailing 8 quarter average was 15.1%, reflecting strong growth dynamics across partner firm portfolio 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 Focus's partner firms and partner firms that have merged, that for the entire periods presented are included in Focus's consolidated statements of operations for the entire periods presented. Focus believes 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. 15.1% Average 12 17.9% 17.6% 16.7% 9.7% 10.7% 7.7% 18.0% 22.4% Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Quarterly Organic Revenue Growth 1 Percentage Organic Revenue Growth Average

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Mergers More Than Double Our Partner Firms’ Revenue Growth 13 Partner firms who grow through mergers in addition to traditional client acquisition strategies have transformed their businesses through accelerated growth Mergers enable efficient access to large pools of client assets, new spheres of influence, distribution channels and exceptional advisor talent The weightings are based on the September 30, 2019 LTM revenues of the respective partner firms. Inception means first full four quarters as a Focus partner firm and reflects activity through all market cycles during that time. The analysis includes the 49 firms since inception (out of the 63 firms) that have been with us for at least 2 years as of September 30, 2019 in order to determine a baseline revenue growth rate. If Focus partner firms merged together, their financials have been combined. The 49 partner firms have been with Focus for a weighted average of ~6 years and a median period of ~4 years. 49 partner firms represented ~79% of our LTM revenues (1) (1) (1) 5.5% 12.9% 9.0% 7.1% 15.2% 13.5% Firms that have not completed a merger (20 firms) Firms that have completed at least one merger (29 firms) Entire portfolio of 49 partner firms Revenue CAGR Since Inception (2) Median Revenue CAGR Weighted Average Revenue CAGR

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14 M&A Activity 14

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2019 Year-to-Date Deal Activity Has Been at Record Levels Highlights 2019 YTD Expanded partner firm portfolio to 63 firms Closed 34 transactions, exceeding 2018 full year volume by 36% Increased Acquired Base Earnings(1) by $35.1 million = 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. 15 3 4 7 6 10 8 6 4 12 14 12 15 17 28 7 16 21 18 25 25 34 2013 2014 2015 2016 2017 2018 2019 YTD New Partner Firms Mergers Type Acquiring Partner Firm Closing Date 1. Roof Advisory Group Fort Pitt Capital Group 10/1/19 2. Smiley TrinityPoint Wealth 10/1/19 3. Harvest Capital Management The Colony Group 10/1/19 4. Glass Malek The Colony Group 10/1/19 Partner Firm Acquisitions 1. Williams, Jones & Associates 8/1/19 1. Stevens First Principles Inv Advisors Benefit Financial Services Group 7/1/19 2. Catamount Management Group Crestwood Advisors 7/1/19 3. Hines & Warner Wealth Management Vista Wealth Management 7/1/19 4. Lodestar Investment Counsel Bartlett Wealth Management 7/1/19 5. TMD & Associates One Charles Private Wealth 7/1/19 6. HORNE Wealth Advisors Buckingham 7/1/19 Firm Name Q4 2019 (to date) Mergers Q3 2019 Mergers

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16 Leverage and Cash Flow Available for Capital Allocation 16

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Strong Credit and Liquidity Profile(1) Low debt cost ~4.5% weighted average interest rate on funded borrowings as of September 30, 2019 Limited duration risk ~5-year remaining to maturity for Term Loan (July 2024) Ample liquidity > $500 million undrawn revolver + $51 million cash Interest rates Favorable rate environment 95%+ fee-based and recurring revenues, variable management fees and earnings preference protect cash flows Downside protection 17 As of September 30, 2019

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Net Leverage Ratio Trend Since IPO Deleveraging at IPO Strategic acquisition of three large firms Williams, Jones & Associates Escala Partners Altman, Greenfield and Selvaggi (AGS) Added an estimated aggregate $90+ million of incremental annual revenues and $29.4 million in annual Adjusted EBITDA(1)(3) Pre-Focus, these three firms generated an average 3-year revenue CAGR of >10%(1)(3) Excluding solely these three acquisitions, Net Leverage Ratio would have been ~3.8x(2) 18 Historical and estimated data based on the unaudited pre-acquisition financial statements of the acquired companies prepared by the acquired companies prior to Focus acquisition. Such financial statements may not have been prepared in accordance with GAAP or pursuant to the rules and regulations of the SEC and may not be comparable to the presentation of such data after being acquired by Focus. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Agreement), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Agreement). We have over 60 partner firms located across the United States as well as the United Kingdom, Canada and Australia. This data may not be representative of our other partner firms and is not necessarily indicative of these firms’ future performance. 4.3x 5.6x 3.2x 3.3x 3.9x 4.1x Strategic acquisitions of Williams Jones, Escala, and AGS cumulatively impacted net leverage ratio by 0.5x Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19

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Leader in NYC market 30 years in business HNW/UHNW private client base Strong platform for organic & inorganic growth Clear strategy to capture share in high-growth NYC & FL markets Anchor investment with scarcity value Closed August 1, 2019 ~$8 Billion in Client Assets Fiduciary Wealth Manager New York City Closed January 1, 2019 Multi-Family Office Business Management Expertise in Entertainer Space New York City Closed April 1, 2019 Over $3 Billion in Client Assets Fiduciary Wealth Manager Melbourne, Australia Top firm in U.S. with strong visibility & brand recognition Unique HNW/UHNW client base Hard-to-replicate services that will add value to other partner firms Substantial benefit from Focus value-added services Anchor investment with scarcity value Leading Australian wealth manager Size & reach in HNW/UHNW space High visibility & brand recognition Strong organic & inorganic growth platform Well-defined strategy to capture share in Australia and Asia Anchor investment with scarcity value New Partner Firms Are Differentiated in Their Respective Markets(3) Historical and estimated data based on the unaudited pre-acquisition financial statements of the acquired companies prepared by the acquired companies prior to Focus acquisition. Such financial statements may not have been prepared in accordance with GAAP or pursuant to the rules and regulations of the SEC and may not be comparable to the presentation of such data after being acquired by Focus. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Agreement), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Agreement). We have over 60 partner firms located across the United States as well as the United Kingdom, Canada and Australia. This data may not be representative of our other partner firms and is not necessarily indicative of these firms’ future performance. 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. 19 Williams, Jones & Associates Escala Partners Altman, Greenfield & Selvaggi Estimated Annual Revenues: $90+ million(1)(3) Annual Acquired Base Earnings: $29.4 million(4) Average ‘15-’18 Revenue CAGR: >10%(1)(3) Incremental Net Leverage Ratio Impact: ~0.5x(2)

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Earnings Preference Provides Strong Downside Earnings Protection The analysis depicts the impact on our Net Leverage Ratio (as defined in the Credit Agreement) resulting from a hypothetical change in Q3 market correlated revenues only. All other revenues/expenses were kept constant except management fees, which are tied to the profitability of our partner firms. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Agreement), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Agreement), which in the above table is referred to as “Covenant EBITDA.” Net Debt represents amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents. 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. Reflects one-quarter impact to revenues and Covenant EBITDA(1)(2) Assumes all other revenues sources and expenses remain unchanged except for management fees In the event of a multi-quarter downturn Partner firms would reduce their cost structures M&A activity would moderate 20 Equity market decline (20)% (40)% Assumed Client Portfolio Allocation to Equities 50% 50% Decline in market-correlated revenues (1) (10)% (20)% ($ in millions) Reported Q3'19 Market-Correlated Revenues 229.7 $ 206.7 $ 183.8 $ Q3'19 Non-Correlated Revenues 86.9 $ 86.9 $ 86.9 $ Total Revenue 316.6 $ 293.6 $ 270.7 $ Covenant EBITDA (2) 288.3 $ 278.9 $ 272.2 $ Net Debt (3) 1,231.7 $ 1,231.7 $ 1,231.7 $ Net Leverage Ratio (2) 4.27x 4.42x 4.52x Change from Q3 Reported 0.15x 0.25x Sensitivity Analysis (Illustrative Only) $7m $15m $44m $44m $47m $71m $82m $82m $94m $101m $117m Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Cumulative Acquired Base Earnings (4) Since 2017

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Next 12 Months Primary Uses, Excluding Future M&A Activities Strong Cash Flow Characteristics As % of Adjusted EBITDA(1) 48% 53% Cash Flow Available for Capital Allocation(1)(3) Estimated cash earnouts of $60+ million(2) Q4 2019 final Loring Ward installment payment of $12.5 million Required term loan amortization of $11.6 million (~$2.9 million per quarter) ($ in millions) Non-GAAP financial measure. See Appendix for reconciliations. Based on certain assumptions that could change materially. There have been no historical tax receivable agreements payments. For the next 12 months, no significant tax receivable agreements payments are expected. 21 Next 12 Months Capital Allocation Priorities Strategic M&A to continue capitalizing on industry consolidation Fund earnout payments Gradual de-leveraging $91.8 $127.0 Q3'18 LTM Q3'19 LTM

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22 Appendix 22

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2019 YTD Acquisitions 23 * Continued on following page Type Acquiring Partner Firm Closing Date Primary Office Location 1. Roof Advisory Group Fort Pitt Capital Group 10/1/19 Harrisburg, PA 2. Smiley TrinityPoint Wealth 10/1/19 Charlotte, NC 3. Harvest Capital Management The Colony Group 10/1/19 Concord, NH 4. Glass Malek The Colony Group 10/1/19 Los Angeles, CA Partner Firm Acquisitions 1. Williams, Jones & Associates 8/1/19 New York, NY 1. Stevens First Principles Inv Advisors Benefit Financial Services Group 7/1/19 Newport Beach, CA 2. Catamount Management Group Crestwood Advisors 7/1/19 Westport, CT 3. Hines & Warner Wealth Management Vista Wealth Management 7/1/19 Portland, OR 4. Lodestar Investment Counsel Bartlett Wealth Management 7/1/19 Chicago, IL 5. TMD & Associates One Charles Private Wealth 7/1/19 Scottsdale, AZ 6. HORNE Wealth Advisors Buckingham 7/1/19 Ridgeland, MS Firm Name Q4 2019 (to date) Mergers Q3 2019 Mergers

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2019 YTD Acquisitions 24 Type Acquiring Partner Firm Closing Date Primary Office Location 1. Escala Partners 4/1/19 Melbourne, Australia 2. Sound View Wealth Advisors 4/1/19 Savannah, GA 1. MacGuire, Cheswick & Tuttle Crestwood Advisors 4/1/19 Darien, CT 2. Weatherstone Capital Management Carnick & Kubik Group 4/1/19 Denver, CO 3. Bullard, McLeod and Associates Atlas Private Wealth Management 4/1/19 Albany, NY 4. Anthony Smith Advisors Patton Albertson Miller Group 4/1/19 Atlanta, GA 5. Skeet Kaye Hopkins Gelfand, Rennert & Feldman 4/2/19 London, UK 6. Massingale Summit Financial 5/1/19 Ruston, LA 7. Steinberg Global Asset Management The Colony Group 5/1/19 Boca Raton, FL 8. Lake Mary Wealth Management Buckingham 6/1/19 Maitland, FL 9. Collings The Colony Group 6/18/19 Boston, MA 1. Altman, Greenfield & Selvaggi 1/1/19 New York, NY 2. Prime Quadrant 2/15/19 Toronto, Canada 3. Foster Dykema Cabot 3/1/19 Boston, MA 1. Griffon Financial Planning Buckingham 1/1/19 Bend, OR 2. Northern Capital Management Kovitz Investment Group 1/1/19 Madison, WI 3. Alpern Wealth Management Buckingham 1/1/19 Pittsburgh, PA 4. David Weise & Associates NKSFB 1/1/19 Encino, CA 5. WG&S, LLP Gelfand, Rennert & Feldman 1/1/19 Los Angeles, CA 6. Aurora Financial Advisors The Colony Group 2/1/19 Wellesley, MA 7. Dan Goldie Financial Services Buckingham 2/1/19 Palo Alto, CA 8. Insero Wealth Strategies Buckingham 3/1/19 Buffalo, NY 9. Neuman + Associates NKSFB 3/1/19 Encino, CA Firm Name Q2 2019 Partner Firm Acquisitions Mergers Q1 2019 Partner Firm Acquisitions Mergers

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Net Income (Loss) to Adjusted EBITDA Reconciliation 25 Represents one-time expenses primarily related to an acquisition and our IPO and Reorganization Transactions. Refer to our 10-Q and 10-K filings for additional details. 25 ($ in thousands) 2013 2014 2015 2016 2017 2018 September 30, 2018 September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 September 30, 2019 Net income (loss) 8,677 $ 11,996 $ 9,321 $ 15,722 $ (48,359) $ (41,087) $ (38,924) $ 392 $ (58,634) $ 666 $ (68,324) $ 18,213 $ Interest income (80) (104) (90) (88) (222) (1,266) (432) (291) (809) (827) (957) (1,284) Interest expense 7,297 6,994 9,977 21,327 41,861 56,448 12,996 15,852 45,480 43,135 60,003 54,103 Income tax expense (benefit) 975 212 649 981 (1,501) 9,450 3,745 (3,905) 5,667 (3,701) 2,885 82 Amortization of debt financing costs 1,267 1,599 1,770 2,482 4,084 3,498 828 919 2,716 2,483 4,074 3,265 Intangible amortization and impairments 29,910 28,549 35,421 50,942 64,367 90,381 23,616 34,898 65,400 94,860 83,747 119,841 Depreciation and other amortization 4,259 4,667 5,327 5,680 6,686 8,370 2,077 2,797 6,121 7,535 7,981 9,784 Non-cash equity compensation expense 3,277 4,319 13,537 8,520 34,879 44,468 24,057 4,276 31,612 13,375 35,092 26,231 Non-cash changes in fair value of estimated contingent consideration 1,239 7,395 (160) (1,143) 22,294 6,638 10,564 14,435 28,879 25,696 43,946 3,455 Gain on sale of investment — — — — — (5,509) — — (5,509) — (5,509) — Loss on extinguishment of borrowings — — — — 8,106 21,071 7,060 — 21,071 — 21,071 — Other expense (income), net (1,104) 328 (310) (1,385) 3,191 2,350 525 (9) 229 695 214 2,816 Delayed offering cost expense — — — — 9,840 — — — — — — — Management contract buyout — 1,800 — — — — — — — 1,428 — 1,428 Other one-time transaction expenses(1) — — — — — 8,590 6,969 — 6,969 1,486 6,969 3,107 Adjusted EBITDA 55,717 $ 67,755 $ 75,442 $ 103,038 $ 145,226 $ 203,402 $ 53,081 $ 69,364 $ 149,192 $ 186,831 $ 191,192 $ 241,041 $ Three months ended Nine months ended Trailing 4-Quarters ended

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Net Income (Loss) to Adjusted Net Income and Adjusted Net Income Per Share Reconciliation 26 * Refer to slide 27 for footnotes 26 2013 2014 2015 2016 2017 2018 September 30, 2018 September 30, 2019 September 30, 2018 September 30, 2019 ($ in thousands, except share and per share data) Net income (loss) 8,677 $ 11,996 $ 9,321 $ 15,722 $ (48,359) $ (41,087) $ (38,924) $ 392 $ (58,634) $ 666 $ Income tax expense (benefit) 975 212 649 981 (1,501) 9,450 3,745 (3,905) 5,667 (3,701) Amortization of debt financing costs 1,267 1,599 1,770 2,482 4,084 3,498 828 919 2,716 2,483 Intangible amortization and impairments 29,910 28,549 35,421 50,942 64,367 90,381 23,616 34,898 65,400 94,860 Non-cash equity compensation expense 3,277 4,319 13,537 8,520 34,879 44,468 24,057 4,276 31,612 13,375 Non-cash changes in fair value of estimated contingent consideration 1,239 7,395 (160) (1,143) 22,294 6,638 10,564 14,435 28,879 25,696 Gain on sale of investment — — — — — (5,509) — — (5,509) — Loss on extinguishment of borrowings — — — — 8,106 21,071 7,060 — 21,071 — Delayed offering cost expense — — — — 9,840 — — — — — Management contract buyout — 1,800 — — — — — — — 1,428 Other one-time transaction expenses (1) — — — — 2,843 11,529 7,535 — 7,535 1,486 Subtotal 45,345 55,870 60,538 77,504 96,553 140,439 38,481 51,015 98,737 136,293 Pro forma tax (27%) (2) (12,243) (15,085) (16,345) (20,926) (26,069) (37,919) (10,390) (13,774) (26,659) (36,799) Tax adjustments (2)(3) 5,455 5,919 8,080 11,991 16,217 22,828 6,040 8,407 16,521 23,100 Adjusted Net Income 38,557 $ 46,704 $ 52,273 $ 68,569 $ 86,701 $ 125,348 $ 34,131 $ 45,648 $ 88,599 $ 122,594 $ Adjusted Shares Outstanding (4) 71,843,916 71,843,916 71,843,916 71,843,916 71,843,916 71,960,540 74,055,933 73,371,137 72,557,403 73,340,592 Adjusted Net Income Per Share 0.54 $ 0.65 $ 0.73 $ 0.95 $ 1.21 $ 1.74 $ 0.46 $ 0.62 $ 1.22 $ 1.67 $ Calculation of Adjusted Shares Outstanding(4): Weighted average shares of Class A common stock outstanding—basic (5) — — — — — 43,122,782 42,351,043 47,044,507 42,351,043 46,653,820 Adjustments: Shares of Class A common stock issued in connection with the IPO and Reorganization Transactions (6) 42,529,651 42,529,651 42,529,651 42,529,651 42,529,651 — — — — — Weighted average incremental shares of Class A common stock related to stock options and unvested Class A common stock (7) — — — — — 102,549 130,411 14,106 130,411 15,773 Weighted average Focus LLC common units outstanding (8) 22,499,665 22,499,665 22,499,665 22,499,665 22,499,665 22,630,668 22,695,798 22,275,034 22,565,761 22,513,950 Weighted average common unit equivalent of Focus LLC incentive units outstanding (9) 6,814,600 6,814,600 6,814,600 6,814,600 6,814,600 6,104,541 8,878,681 4,037,490 7,510,188 4,157,049 Adjusted Shares Outstanding (4) 71,843,916 71,843,916 71,843,916 71,843,916 71,843,916 71,960,540 74,055,933 73,371,137 72,557,403 73,340,592 Three months ended Full Year Nine months ended

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27 * These footnotes refer to the table on slide 26 Represents one-time expenses primarily related to an acquisition and our IPO and Reorganization Transactions. Refer to our 10-Q and 10-K filings for additional details. For periods ended prior to the closing of the IPO and consummation of the related Reorganization Transactions on July 30, 2018, certain tax related adjustments are being made for comparative purposes only. As of September 30, 2019, the estimated tax adjustments from intangible asset related income tax benefits from closed acquisitions based on a pro forma 27% tax rate for the next 12 months is $34.5 million. For periods ended prior to the closing of the IPO and the consummation of the Reorganization Transactions on July 30, 2018, the Adjusted Shares Outstanding are deemed to be outstanding for comparative purposes only. Represents our GAAP weighted average Class A common stock outstanding – basic. The issuance of Class A common stock that occurred upon closing of the IPO and the consummation of the Reorganization Transactions on July 30, 2018 is assumed to have occurred as of January 1, 2013 for comparative purposes. Represents the incremental shares related to stock options and unvested Class A common stock as calculated under the treasury stock method. Assumes that 100% of the Focus LLC common units were exchanged for Class A common stock. Assumes that 100% of the vested and unvested Focus LLC incentive units were converted into Focus LLC common units based on the closing price of our Class A common stock at the end of the respective period and such Focus LLC common units were exchanged for Class A common stock. For the periods ending prior to July 30, 2018, the conversion to Focus LLC common units was based on the $33.00 IPO price. 27 Net Income (Loss) to Adjusted Net Income and Adjusted Net Income Per Share Reconciliation

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Reconciliation of Cash Flow Available for Capital Allocation 28 A portion of contingent consideration paid is classified as operating cash outflows in accordance with GAAP, and therefore is a reconciling item to arrive at Cash Flow Available for Capital Allocation. Cash Flow Available for Capital Allocation excludes all contingent consideration that was included in either operating, investing or financing activities of our consolidated statements of cash flows. ($ in thousands) Dec. 31, 2017 March 31, 2018 June 30, 2018 Sept. 30, 2018 Dec. 31, 2018 March 31, 2019 June 30, 2019 Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Net cash provided by operating activities 7,361 $ 12,725 $ 24,427 $ 49,066 $ 19,701 $ 15,913 $ 39,305 $ 74,702 $ 93,579 $ 149,621 $ Purchase of fixed assets (2,004) (2,312) (2,117) (1,897) (2,780) (1,875) (8,185) (10,698) (8,330) (23,538) Distributions for unitholders (586) (138) (368) (802) (1,436) (596) (11,138) (3,491) (1,894) (16,661) Payments under tax receivable agreements — — — — — — — — — — Adjusted Free Cash Flow 4,771 $ 10,275 $ 21,942 $ 46,367 $ 15,485 $ 13,442 $ 19,982 $ 60,513 $ 83,355 $ 109,422 $ Portion of contingent consideration paid included in operating activities(1) 793 1,468 1,648 4,574 3,572 9,170 4,012 825 8,483 17,579 Cash Flow Available for Capital Allocation(2) 5,564 $ 11,743 $ 23,590 $ 50,941 $ 19,057 $ 22,612 $ 23,994 $ 61,338 $ 91,838 $ 127,001 $ Three months ended Trailing 4-Quarters ended

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