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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): August 5, 2021

 

 

 

FOCUS FINANCIAL PARTNERS INC.

(Exact name of registrant as specified in its charter)

 

Delaware 001-38604 47-4780811
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) 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):

 

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

 

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

 

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

 

¨ 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 ¨

 

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. ¨

 

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 5, 2021, Focus Financial Partners Inc. (the “Company”) issued a press release reporting results for its second quarter ended June 30, 2021. 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 August 5, 2021, the Company also posted a slide presentation entitled “Second Quarter 2021 Earnings Release Supplement” dated August 5, 2021 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 August 5, 2021.
99.2   Focus Financial Partners Inc. Slide Presentation, dated August 5, 2021.
104   Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the inline XBRL document.

 

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SIGNATURES

 

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

 

  FOCUS FINANCIAL PARTNERS INC.
   
  By: /s/ J. Russell McGranahan
    J. Russell McGranahan
    General Counsel

 

Dated: August 5, 2021

 

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Exhibit 99.1

 

 

Focus Financial Partners Reports Second Quarter Results

Strong Growth and Financial Performance with Record M&A Momentum

 

New York, New York – August 5, 2021 – 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 second quarter ended June 30, 2021.

 

Second Quarter 2021 Highlights

 

· Total revenues of $425.4 million, 35.8% year over year growth
· Organic revenue growth(1) rate of 28.8% year over year
· GAAP net income of $5.2 million
· GAAP basic and diluted net income per share attributable to common shareholders of $0.04
· Adjusted Net Income Excluding Tax Adjustments(2) of $67.8 million and Tax Adjustments of $11.0 million
· Adjusted Net Income Excluding Tax Adjustments Per Share(2) of $0.84 and Tax Adjustments Per Share(2) of $0.14
· Net Leverage Ratio(3) of 3.54x
· Net cash provided by operating activities for the trailing 4-quarters ended June 30, 2021 of $298.9 million, 46.6% higher than the prior year period
· LTM Cash Flow Available for Capital Allocation(2) for the trailing 4-quarters ended June 30, 2021 of $266.0 million, 38.2% higher than the prior year period
· Closed secondary offering of 7.4 million shares, including 7.1 million shares sold by KKR who fully exited their remaining position in Focus
· Closed new 7-year term loan tranche on July 1, 2021, raising $800 million of debt capital to finance record M&A pipeline

 

(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 8 under “How We Evaluate Our Business” later in this press release.

 

“Our second quarter results were strong by any measure, extending our track record of continued growth and financial performance,” said Rudy Adolf, Founder, CEO and Chairman. “Our core value proposition of entrepreneurship, permanent capital and value-added services resonates strongly, enabling us to attract many of the highest performing firms in the industry. Every time a market leader joins us, it not only strengthens our partnership and expands our global footprint, but also further validates the attractiveness of our value proposition. As a result, our M&A pipeline is at record levels and continues to build, positioning us for strong growth and the creation of meaningful incremental and sustainable value for our shareholders.”

 

“We delivered strong results in the 2021 second quarter and we are very pleased with the acceleration in the growth and momentum of our business,” said Jim Shanahan, Chief Financial Officer. “We are attracting many of the highest regarded firms in the industry who will benefit from our scale advantages, as well as access to our permanent growth capital and value-added services. Our portfolio of existing partner firms is performing well, delivering excellent organic growth. The growth trajectory of our business remains very strong and joining the Focus partnership is exceptionally attractive to wealth managers looking at their next steps.”

 

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Second Quarter 2021 Financial Highlights

 

Total revenues were $425.4 million, 35.8%, or $112.2 million higher than the 2020 second quarter. The primary driver of this increase was revenue growth from our existing partner firms of approximately $90.6 million. The majority of this growth was driven by higher wealth management fees, which includes the effect of mergers completed by our partner firms. The balance of the increase of $21.6 million was due to revenues from new partner firms acquired during the last twelve months. Our year-over-year organic revenue growth rate(1) was 28.8%, slightly above our estimated 23% to 26% range for the quarter.

 

An estimated 77.7%, or $330.4 million, of total revenues in the quarter were correlated to the financial markets. Of this amount, 66.8%, or $220.6 million, were generated from advance billings generally based on market levels in the 2021 first quarter. The remaining 22.3%, or $95.0 million, were not correlated to the markets. These revenues typically consist of family office type services, tax advice and fixed fees for investment advice.

 

GAAP net income was $5.2 million compared to $3.3 million in the prior year quarter. GAAP basic and diluted net income per share attributable to common shareholders were both $0.04, as compared to $0.05 and $0.03 for basic and diluted net income per share attributable to common shareholders, respectively, in the prior year quarter.

 

Adjusted EBITDA(2) was $107.8 million, 44.2%, or $33.0 million higher than the prior year period, and our Adjusted EBITDA margin(3) was 25.3%, in line with our outlook of approximately 25.5% for the quarter.

 

Adjusted Net Income Excluding Tax Adjustments(2) was $67.8 million and Tax Adjustments were $11.0 million. Adjusted Net Income Excluding Tax Adjustments Per Share(2) was $0.84, up 42.4% compared to the prior year period, and Tax Adjustments Per Share(2) was $0.14, up 16.7% compared to the prior year period.

 

(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) Calculated as Adjusted EBITDA divided by Revenues.

 

2021 Year-to-Date Financial Highlights

 

Total revenues were $819.5 million, 26.0%, or $169.4 million higher than the first six months of 2020. The primary driver of this increase was revenue growth from our existing partner firms of approximately $134.2 million. The majority of this growth was driven by higher wealth management fees, which includes the effect of mergers completed by our partner firms. The balance of the increase of $35.2 million was due to revenues from new partner firms acquired during the last twelve months. Our year-over-year organic revenue growth rate(1) was 20.2%.

 

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GAAP net income was $7.7 million compared to $37.3 million in the prior year period. GAAP basic and diluted net income per share attributable to common shareholders were both $0.04, as compared to $0.48 for both basic and diluted net income per share in the prior year period.

 

Adjusted EBITDA(2) was $208.8 million, 36.7%, or $56.0 million higher than the prior year period, and our Adjusted EBITDA margin(3) was 25.5%.

 

Adjusted Net Income Excluding Tax Adjustments(2) was $131.2 million and Tax Adjustments were $21.5 million. Adjusted Net Income Excluding Tax Adjustments Per Share(2) was $1.62, up 36.1% compared to the prior year period, and Tax Adjustments Per Share(2) was $0.27, up 12.5% compared to the prior year period.

 

 

(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) Calculated as Adjusted EBITDA divided by Revenues.

 

Balance Sheet and Liquidity

 

As of June 30, 2021, cash and cash equivalents were $144.0 million and debt outstanding under our credit facilities was approximately $1.6 billion, all of which were borrowings under our First Lien Term Loan. There were no outstanding borrowings under our First Lien Revolver. Our Net Leverage Ratio(1) at June 30, 2021 was 3.54x. We remain committed to maintaining our Net Leverage Ratio(1) between 3.5x to 4.5x and believe this is the appropriate range for our business given our highly acquisitive nature.

 

As of June 30, 2021, $850 million, or approximately 52%, of our First Lien Term Loan was swapped from a floating rate to a weighted average fixed rate of 2.62%. The residual amount of approximately $769.3 million under the First Lien Term Loan remains at floating rates.

 

On July 1, 2021, we added a 7-year, $800 million tranche to our First Lien Term Loan. Of this amount, $650 million was drawn at closing and the remaining $150 million is available on a six-month, delayed basis. The interest rate on the new tranche is LIBOR + 250 basis points with LIBOR subject to a 50 basis point floor. The transaction priced at 99.25. The drawn proceeds will be used to fund M&A transactions over the next few quarters.

 

Our net cash provided by operating activities for the trailing four quarters ended June 30, 2021 increased 46.6% to $298.9 million from $203.9 million for the comparable period ended June 30, 2020. Our Cash Flow Available for Capital Allocation(2) for the trailing four quarters ended June 30, 2021 increased 38.2% to $266.0 million from $192.4 million for the comparable period ended June 30, 2020. These increases reflect the earnings growth of our partner firms, the addition of new partner firms and the increase in our Adjusted EBITDA margin. In the 2021 second quarter, we paid $65.2 million of cash earn-out obligations and $4.2 million of required amortization under our First Lien Term Loan.

 

(1) Please see footnote 8 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” later in this press release.

 

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Teleconference, Webcast and Presentation Information

 

Founder, CEO and Chairman, Rudy Adolf, and Chief Financial Officer, Jim Shanahan, will host a conference call today, August 5, 2021 at 8:30 a.m. Eastern Time to discuss the Company’s 2021 second quarter results and outlook. The call can be accessed by dialing +1-877-407-0989 (inside the U.S.) or +1-201-389-0921 (outside the U.S.).

 

A live, listen-only webcast, together with a slide presentation titled “Second Quarter 2021 Earnings Release Supplement” dated August 5, 2021 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. Registration for the call will begin 20 minutes prior to the start of the call, using the following link.

 

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.

 

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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, including the impact and duration of the outbreak of Covid-19, 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, 2020 filed and our other filings with the Securities and Exchange Commission.

 

Investor and Media Contacts

Tina Madon

Senior Vice President

Head of Investor Relations & Corporate Communications

Tel: (646) 813-2909

tmadon@focuspartners.com

 

Charlie Arestia

Vice President

Investor Relations & Corporate Communications

Tel: (646) 560-3999

carestia@focuspartners.com

 

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How We Evaluate Our Business

 

We focus on several key financial metrics in evaluating the success of our business, the success of our partner firms and our resulting financial position and operating performance. Key metrics for the three and six months ended June 30, 2020 and 2021 include the following:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2020     2021     2020     2021  
                         
    (dollars in thousands, except per share data)  
Revenue Metrics:                                
Revenues   $ 313,109     $ 425,355     $ 650,163     $ 819,530  
Revenue growth (1) from prior period     3.8 %     35.8 %     15.8 %     26.0 %
Organic revenue growth (2) from prior period     (0.3 )%     28.8 %     9.8 %     20.2 %
                                 
Management Fees Metrics (operating expense):                                
Management fees   $ 76,987     $ 116,205     $ 160,680     $ 218,277  
Management fees growth (3) from prior period     (2.9 )%     50.9 %     17.9 %     35.8 %
Organic management fees growth (4)                                
from prior period     (8.2 )%     43.4 %     9.7 %     29.0 %
                                 
Net Income Metrics:                                
Net income   $ 3,328     $ 5,174     $ 37,347     $ 7,656  
Net income growth from prior period     7.3 %     55.5 %     *       (79.5 )%
Income per share of Class A common stock:                                
Basic   $ 0.05     $ 0.04     $ 0.48     $ 0.04  
Diluted   $ 0.03     $ 0.04     $ 0.48     $ 0.04  
Income per share of Class A common stock                                
growth from prior period:                                
Basic     150.0 %     (20.0 )%     *       (91.7 )%
Diluted     50.0 %     33.3 %     *       (91.7 )%
                                 
Adjusted EBITDA Metrics:                                
Adjusted EBITDA (6)   $ 74,756     $ 107,789     $ 152,776     $ 208,784  
Adjusted EBITDA growth (6) from prior period     18.7 %     44.2 %     30.1 %     36.7 %
                                 
Adjusted Net Income Excluding Tax Adjustments Metrics:                                
Adjusted Net Income Excluding Tax Adjustments (5)(6)   $ 45,118     $ 67,800     $ 90,633     $ 131,249  
Adjusted Net Income Excluding Tax Adjustments                                
growth (5)(6) from prior period     34.4 %     50.3 %     45.6 %     44.8 %
                                 
Tax Adjustments                                
Tax Adjustments (5)(6)(7)   $ 9,175     $ 11,038     $ 18,110     $ 21,530  
Tax Adjustments growth from prior period (5)(6)(7)     19.6 %     20.3 %     23.3 %     18.9 %
                                 

 

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    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2020     2021     2020     2021  
                         
    (dollars in thousands, except per share data)  
Adjusted Net Income Excluding Tax Adjustments Per Share and Tax Adjustments Per Share Metrics:                                
Adjusted Net Income Excluding Tax Adjustments Per Share (5)(6)   $ 0.59     $ 0.84     $ 1.19     $ 1.62  
Tax Adjustments Per Share (5)(6)(7)   $ 0.12     $ 0.14     $ 0.24     $ 0.27  
Adjusted Net Income Excluding Tax Adjustments Per Share growth (5)(6) from prior period     31.1 %     42.4 %     43.4 %     36.1 %
Tax Adjustments Per Share growth from prior period (5)(6)(7)     20.0 %     16.7 %     20.0 %     12.5 %
Adjusted Shares Outstanding                                
Adjusted Shares Outstanding (6)     76,239,848       81,076,423       76,256,932       81,020,580  
                                 
Other Metrics:                                
Net Leverage Ratio (8) at period end     3.85 x     3.54 x     3.85 x     3.54 x
Acquired Base Earnings (9)   $ 1,045     $ 10,300     $ 4,235     $ 10,963  
Number of partner firms at period end (10)     65       74       65       74  

 

*              Not meaningful

 

(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, including Connectus, 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 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.

 

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(5) In disclosures, including filings with the SEC, made prior to the quarter ended September 30, 2020, “Adjusted Net Income Excluding Tax Adjustments” and “Tax Adjustments” were presented together as “Adjusted Net Income.” Additionally, “Adjusted Net Income Excluding Tax Adjustments Per Share” and “Tax Adjustments Per Share” were presented together as “Adjusted Net Income Per Share.”

 

(6) For additional information regarding Adjusted EBITDA, Adjusted Net Income Excluding Tax Adjustments, Adjusted Net Income Excluding Tax Adjustments Per Share, Tax Adjustments, Tax Adjustments Per Share and Adjusted Shares Outstanding, including a reconciliation of Adjusted EBITDA, Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share to the most directly comparable GAAP financial measure, please read “—Adjusted EBITDA” and “—Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share.”

 

(7) Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for tax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where we received a step-up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15-year period. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplemental economic benefit. The tax benefit from amortization is included to show the full economic benefit of deductions for acquired intangible assets with the step-up in tax basis. As of June 30, 2021, estimated Tax Adjustments from intangible asset related income tax benefits from closed acquisitions based on a pro forma 27% income tax rate for the next 12 months is $44.2 million.

 

(8) Net Leverage Ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility), 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 Facility).

 

(9) 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 collective preferred position in Base Earnings or comparable measures. 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.

 

(10) Represents the number of partner firms on the last day of the period presented.

 

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Unaudited Condensed Consolidated Financial Statements

 

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of operations

(in thousands, except share and per share amounts)

 

    For the three months ended     For the six months ended  
    June 30,     June 30,  
    2020     2021     2020     2021  
REVENUES:                                
Wealth management fees   $ 295,119     $ 404,970     $ 613,722     $ 779,815  
Other     17,990       20,385       36,441       39,715  
Total revenues     313,109       425,355       650,163       819,530  
OPERATING EXPENSES:                                
Compensation and related expenses     113,914       139,045       231,758       280,088  
Management fees     76,987       116,205       160,680       218,277  
Selling, general and administrative     52,752       69,018       115,347       132,844  
Intangible amortization     36,012       44,003       71,735       86,986  
Non-cash changes in fair value of estimated contingent consideration     16,472       34,062       (14,901 )     59,998  
Depreciation and other amortization     3,029       3,606       6,011       7,213  
Total operating expenses     299,166       405,939       570,630       785,406  
INCOME FROM OPERATIONS     13,943       19,416       79,533       34,124  
OTHER INCOME (EXPENSE):                                
Interest income     66       57       351       104  
Interest expense     (10,057 )     (10,829 )     (23,643 )     (21,350 )
Amortization of debt financing costs     (709 )     (902 )     (1,491 )     (1,754 )
Loss on extinguishment of borrowings                 (6,094 )      
Other income (expense)—net     70       (534 )     682       (531 )
Income from equity method investments     52       140       116       423  
Total other expense—net     (10,578 )     (12,068 )     (30,079 )     (23,108 )
INCOME BEFORE INCOME TAX     3,365       7,348       49,454       11,016  
INCOME TAX EXPENSE     37       2,174       12,107       3,360  
NET INCOME     3,328       5,174       37,347       7,656  
Non-controlling interest     (919 )     (3,197 )     (14,542 )     (5,423 )
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS   $ 2,409     $ 1,977     $ 22,805     $ 2,233  
Income per share of Class A                                
common stock:                                
Basic   $ 0.05     $ 0.04     $ 0.48     $ 0.04  
Diluted   $ 0.03     $ 0.04     $ 0.48     $ 0.04  
Weighted average shares of Class A common stock outstanding:                                
Basic     47,847,756       55,710,666       47,642,156       53,965,045  
Diluted     73,418,108       56,162,822       47,651,057       54,418,520  

 

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FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated balance sheets

(in thousands, except share and per share amounts)

 

    December 31,     June 30,  
    2020     2021  
ASSETS                
Cash and cash equivalents   $ 65,858     $ 143,981  
Accounts receivable less allowances of $2,178 at 2020 and $2,372 at 2021     169,220       178,300  
Prepaid expenses and other assets     65,581       126,855  
Fixed assets—net     49,209       46,994  
Operating lease assets     229,748       228,617  
Debt financing costs—net     6,950       5,602  
Deferred tax assets—net     107,289       229,031  
Goodwill     1,255,559       1,316,160  
Other intangible assets—net     1,113,467       1,111,014  
TOTAL ASSETS   $ 3,062,881     $ 3,386,554  
LIABILITIES AND EQUITY                
LIABILITIES                
Accounts payable   $ 9,634     $ 8,595  
Accrued expenses     53,862       70,011  
Due to affiliates     66,428       56,747  
Deferred revenue     9,190       9,630  
Other liabilities     222,911       288,410  
Operating lease liabilities     253,295       255,324  
Borrowings under credit facilities (stated value of $1,507,622 and $1,619,275 at December 31, 2020 and June 30, 2021, respectively)     1,507,119       1,615,930  
Tax receivable agreements obligations     81,563       182,822  
TOTAL LIABILITIES     2,204,002       2,487,469  
EQUITY                
Class A common stock, par value $0.01, 500,000,000 shares authorized; 51,158,712 and 59,792,889 shares issued and outstanding at December 31, 2020 and June 30, 2021, respectively     512       598  
Class B common stock, par value $0.01, 500,000,000 shares authorized; 20,661,595 and 12,692,740 shares issued and outstanding at December 31, 2020 and June 30, 2021, respectively     207       127  
Additional paid-in capital     526,664       650,421  
Retained earnings     14,583       16,816  
Accumulated other comprehensive income (loss)     (2,167 )     734  
Total shareholders' equity     539,799       668,696  
Non-controlling interest     319,080       230,389  
Total equity     858,879       899,085  
TOTAL LIABILITIES AND EQUITY   $ 3,062,881     $ 3,386,554  

 

10

 

 

 

 

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of cash flows

(in thousands)

    For the six months ended  
    June 30,  
    2020     2021  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income   $ 37,347     $ 7,656  
Adjustments to reconcile net income to net cash provided by operating activities—net of effect of acquisitions:                
Intangible amortization     71,735       86,986  
Depreciation and other amortization     6,011       7,213  
Amortization of debt financing costs     1,491       1,754  
Non-cash equity compensation expense     10,282       18,631  
Non-cash changes in fair value of estimated contingent consideration     (14,901 )     59,998  
Income from equity method investments     (116 )     (423 )
Distributions received from equity method investments     52       403  
Deferred taxes and other non-cash items     3,333       1,425  
Loss on extinguishment of borrowings     6,094        
Changes in cash resulting from changes in operating assets and liabilities:                
Accounts receivable     (15,905 )     (10,038 )
Prepaid expenses and other assets     2,780       (14,450 )
Accounts payable     (981 )     (527 )
Accrued expenses     7,600       16,883  
Due to affiliates     (31,225 )     (9,765 )
Other liabilities     (18,406 )     (13,986 )
Deferred revenue     (813 )     200  
Net cash provided by operating activities     64,378       151,960  
CASH FLOWS FROM INVESTING ACTIVITIES:                
Cash paid for acquisitions and contingent consideration—net of cash acquired     (59,000 )     (82,106 )
Purchase of fixed assets     (5,947 )     (4,318 )
Investment and other, net           (19,132 )
Net cash used in investing activities     (64,947 )     (105,556 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
Borrowings under credit facilities     285,000       524,375  
Repayments of borrowings under credit facilities     (270,783 )     (413,347 )
Proceeds from issuance of common stock, net           25,767  
Payments in connection with unit redemption, net           (25,767 )
Payments in connection with tax receivable agreements           (4,423 )
Contingent consideration paid     (34,992 )     (57,030 )
Payments of debt financing costs     (634 )     (2,700 )
Proceeds from exercise of stock options     167       4,017  
Payments on finance lease obligations     (59 )     (39 )
Distributions for unitholders     (7,643 )     (19,108 )
Net cash provided by (used in) financing activities     (28,944 )     31,745  
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS     (336 )     (26 )
CHANGE IN CASH AND CASH EQUIVALENTS     (29,849 )     78,123  
CASH AND CASH EQUIVALENTS:                
Beginning of period     65,178       65,858  
End of period   $ 35,329     $ 143,981  

 

11

 

 

 

 

 

Reconciliation of Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is defined as net income excluding interest income, interest expense, income tax expense, 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 (income) expense–net, and secondary offering expenses, if any. We believe that Adjusted EBITDA, viewed in addition to and not in lieu of, our reported GAAP results, provides additional useful information to investors regarding our performance and overall results of operations for various reasons, including the following:

 

· non-cash equity grants made to employees or non-employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; stock-based compensation expense is not a key measure of our operating performance;
· contingent consideration or earn outs can vary substantially from company to company and depending upon each company’s growth metrics and accounting assumption methods; the non-cash changes in fair value of estimated contingent consideration is not considered a key measure in comparing our operating performance; and
· amortization expenses can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; the amortization of intangible assets obtained in acquisitions are not considered a key measure in comparing our operating performance.

 

We use Adjusted EBITDA:

 

· as a measure of operating performance;
· for planning purposes, including the preparation of budgets and forecasts;
· to allocate resources to enhance the financial performance of our business;
· to evaluate the effectiveness of our business strategies; and
· as a consideration in determining compensation for certain employees.

 

12

 

 

 

 

Adjusted EBITDA does not purport to be an alternative to net income 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, 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.

 

Set forth below is a reconciliation of net income to Adjusted EBITDA for the three and six months ended June 30, 2020 and 2021:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2020     2021     2020     2021  
                         
    (in thousands)  
Net income   $ 3,328     $ 5,174     $ 37,347     $ 7,656  
Interest income     (66 )     (57 )     (351 )     (104 )
Interest expense     10,057       10,829       23,643       21,350  
Income tax expense     37       2,174       12,107       3,360  
Amortization of debt financing costs     709       902       1,491       1,754  
Intangible amortization     36,012       44,003       71,735       86,986  
Depreciation and other amortization     3,029       3,606       6,011       7,213  
Non-cash equity compensation expense     5,248       6,275       10,282       18,631  
Non-cash changes in fair value of estimated contingent consideration     16,472       34,062       (14,901 )     59,998  
Loss on extinguishment of borrowings                 6,094        
Other (income) expense – net     (70 )     534       (682 )     531  
Secondary offering expenses           287             1,409  
Adjusted EBITDA   $ 74,756     $ 107,789     $ 152,776     $ 208,784  

 

13

 

 

 

 

Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share

 

We analyze our performance using Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share. Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share are non-GAAP measures. We define Adjusted Net Income Excluding Tax Adjustments as net income excluding income tax expense, 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 and secondary offering expenses, if any. The calculation of Adjusted Net Income Excluding Tax Adjustments also includes adjustments to reflect a pro forma 27% income tax rate reflecting the estimated U.S. Federal, state, local and foreign income tax rates applicable to corporations in the jurisdictions we conduct business.

 

Adjusted Net Income Excluding Tax Adjustments Per Share is calculated by dividing Adjusted Net Income Excluding Tax Adjustments 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 outstanding during the periods, (iii) the weighted average incremental shares of Class A common stock related to unvested Class A common stock outstanding during the periods, (iv) the weighted average incremental shares of Class A common stock related to restricted stock units outstanding during the periods, (v) 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), (vi) the weighted average number of Focus LLC restricted common units outstanding during the periods (assuming that 100% of such Focus LLC restricted common units have been exchanged for Class A common stock) and (vii) 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).

 

We believe that Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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.

 

14

 

 

 

 

Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share do not purport to be an alternative to net income or cash flows from operating activities. The terms Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share are not defined under GAAP, and Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share are not a measure of net income, operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;
· Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share differently than we do, limiting its usefulness as a comparative measure.

 

In addition, Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share as supplemental information.

 

15

 

 

 

 

Tax Adjustments and Tax Adjustments Per Share

 

Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for tax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where we received a step-up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15-year period. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplemental economic benefit. The tax benefit from amortization is included to show the full economic benefit of deductions for acquired intangible assets with the step-up in tax basis.

 

Tax Adjustments Per Share is calculated by dividing Tax Adjustments by the Adjusted Shares Outstanding.

 

16

 

 

 

 

 

Set forth below is a reconciliation of net income to Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share for the three and six months ended June 30, 2020 and 2021:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2020     2021     2020     2021  
                         
    (dollars in thousands, except per share data)  
Net income   $ 3,328     $ 5,174     $ 37,347     $ 7,656  
Income tax expense     37       2,174       12,107       3,360  
Amortization of debt financing costs     709       902       1,491       1,754  
Intangible amortization     36,012       44,003       71,735       86,986  
Non-cash equity compensation expense     5,248       6,275       10,282       18,631  
Non-cash changes in fair value of estimated                                
contingent consideration     16,472       34,062       (14,901 )     59,998  
Loss on extinguishment of borrowings                 6,094        
Secondary offering expenses (1)           287             1,409  
Subtotal     61,806       92,877       124,155       179,794  
Pro forma income tax expense (27%) (2)     (16,688 )     (25,077 )     (33,522 )     (48,545 )
Adjusted Net Income Excluding Tax Adjustments   $ 45,118     $ 67,800     $ 90,633     $ 131,249  
                                 
Tax Adjustments (3)   $ 9,175     $ 11,038     $ 18,110     $ 21,530  
                                 
Adjusted Net Income Excluding Tax Adjustments Per Share   $ 0.59     $ 0.84     $ 1.19     $ 1.62  
Tax Adjustments Per Share (3)   $ 0.12     $ 0.14     $ 0.24     $ 0.27  
                                 
Adjusted Shares Outstanding     76,239,848       81,076,423       76,256,932       81,020,580  
                                 
Calculation of Adjusted Shares Outstanding:                                
Weighted average shares of Class A common                                
stock outstanding—basic (4)     47,847,756       55,710,666       47,642,156       53,965,045  
Adjustments:                                
Weighted average incremental shares of                                
Class A common stock related to stock                                
options, unvested Class A common stock and                                
restricted stock units     13,184       452,156       8,901       453,475  
Weighted average Focus LLC common units                                
outstanding (5)     21,672,585       16,537,585       21,846,354       18,121,604  
Weighted average Focus LLC restricted                                
common units outstanding (6)           71,374             71,374  
Weighted average common unit equivalent of                                
Focus LLC incentive units outstanding (7)     6,706,323       8,304,642       6,759,521       8,409,082  
Adjusted Shares Outstanding     76,239,848       81,076,423       76,256,932       81,020,580  

 

17

 

 

 

 

(1) Relates to offering expenses associated with the March 2021 and June 2021 secondary offerings.

 

(2) The pro forma income tax rate of 27% reflects the estimated U.S. Federal, state, local and foreign income tax rates applicable to corporations in the jurisdictions we conduct business.

 

(3) Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for tax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where we received a step-up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15-year period. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplemental economic benefit. The tax benefit from amortization is included to show the full economic benefit of deductions for acquired intangible assets with the step-up in tax basis. As of June 30, 2021, estimated Tax Adjustments from intangible asset related income tax benefits from closed acquisitions based on a pro forma 27% income tax rate for the next 12 months is $44.2 million.

 

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

 

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

 

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

 

(7) 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.

 

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 Focus LLC 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. The balance of such contingent consideration is classified as investing and financing cash flows under GAAP; therefore, we add back the amount included in operating cash flows so that the full amount of contingent consideration payments is treated consistently. 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.

 

18

 

 

 

 

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 June 30, 2020 and 2021:

 

    Trailing 4-Quarters Ended  
    June 30,  
    2020     2021  
             
    (in thousands)  
Net cash provided by operating activities   $ 203,934     $ 298,943  
Purchase of fixed assets     (21,359 )     (17,720 )
Distributions for unitholders     (16,550 )     (33,922 )
Payments under tax receivable agreements           (4,423 )
Adjusted Free Cash Flow   $ 166,025     $ 242,878  
Portion of contingent consideration paid included in operating activities (1)     26,353       23,081  
Cash Flow Available for Capital Allocation (2)   $ 192,378     $ 265,959  

 

(1) A portion of contingent consideration paid is classified as operating cash outflows in accordance with GAAP, with the balance reflected in investing and financing cash outflows. Contingent consideration paid classified as operating cash outflows for each of the trailing 4-quarters ended June 30, 2020 was $0.8 million, $0.8 million $8.4 million and $16.4 million, respectively, totaling $26.4 million for the trailing 4-quarters ended June 30, 2020. Contingent consideration paid classified as operating cash outflows for each of the trailing 4-quarters ended June 30, 2021 was $3.8 million, $2.4 million, $5.3 million and $11.6 million, respectively, totaling $23.1 million for the trailing 4-quarters ended June 30, 2021.

 

(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.

 

19

 

 

 

 

Supplemental Information

 

Economic Ownership

The following table provides supplemental information regarding the economic ownership of Focus Financial Partners, LLC as of June 30, 2021:

    June 30, 2021  
Economic Ownership of Focus Financial Partners, LLC Interests:   Interest     %  
Focus Financial Partners Inc.     59,792,889       74.1 %
Non-Controlling Interests (1)     20,952,046       25.9 %
Total     80,744,935       100.0 %

 

(1) Includes 8,187,932 Focus LLC common units issuable upon conversion of the outstanding 16,464,675 vested and unvested incentive units (assuming vesting of the unvested incentive units and a June 30, 2021 period end value of the Focus LLC common units equal to $48.50) and includes 71,374 Focus LLC restricted common units.

 

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:

 

    Q2 2021 Weighted Average
Outstanding
    Number of Shares
Outstanding at
June 30, 2021
    Number of Shares
Outstanding at
August 2, 2021
 
Class A     55,710,666       59,792,889       59,800,243  
Class B     16,537,585       12,692,740       12,692,740  

 

20

 

 

 

 

Incentive Units

The following table provides supplemental information regarding the outstanding Focus LLC vested and unvested Incentive Units (“IUs”) at June 30, 2021. 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 per share data. 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.

 

Hurdle
Rates
    Number
Outstanding
 
$ 1.42       421  
$ 5.50       798  
$ 6.00       386  
$ 7.00       1,081  
$ 9.00       1,323,708  
$ 11.00       815,443  
$ 12.00       520,000  
$ 13.00       540,000  
$ 14.00       10,098  
$ 16.00       45,191  
$ 17.00       20,000  
$ 19.00       527,928  
$ 21.00       3,376,012  
$ 22.00       836,417  
$ 23.00       524,828  
$ 26.26       18,750  
$ 27.00       20,136  
$ 27.90       1,929,424  
$ 28.50       1,440,230  
$ 30.48       30,000  
$ 33.00       3,617,500  
$ 36.64       30,000  
$ 43.50       30,000  
$ 44.71       806,324  
          16,464,675  

 

21

 

 

Exhibit 99.2

 

Focus Financial Partners Inc. Second Quarter 2021 Earnings Release Supplement August 5, 2021

 

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 the impact and duration of the outbreak of the novel coronavirus, 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, gain on sale of investment, loss on extinguishment of borrowings, other expense/income, net, impairment of equity method investment, management contract buyout, delayed offering cost expense, secondary offering expenses and other one time transaction expenses . 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share . Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share are non - GAAP measures . We define Adjusted Net Income Excluding Tax Adjustments 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, delayed offering cost expense, secondary offering expenses and other one time transaction expenses . The calculation of Adjusted Net Income Excluding Tax Adjustments also includes adjustments to reflect a pro forma 27 % income tax rate reflecting the estimated U . S . Federal, state, local and foreign income tax rates applicable to corporations in the jurisdictions we conduct business . We believe that Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share do not purport to be an alternative to net income (loss) or cash flows from operating activities . The terms Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share are not defined under GAAP, and Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments, (ii) Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share differently than we do, limiting its usefulness as a comparative measure . In addition, Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments 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 .

 

Table of Contents 3 Pages Long - Term Growth Trends 4 - 8 Second Quarter 2021 Recap 9 - 18 Third Quarter 2021 Outlook 19 - 20 Leverage 21 - 24 Cash Flows 25 - 27 Appendix 28 - 32

 

Long - Term Growth Trends 4

 

$45.9 $46.7 $45.8 $57.8 $68.7 $75.2 $39.7 $336.5 $438.8 $617.1 $853.0 $1,149.7 $1,286.1 $779.8 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD 88.0% 90.4% 93.1% 93.6% 94.4% 94.5% 95.2% Wealth Management Fees Allocation ($ in millions (3) , % of Revenues) 1. Non - GAAP financial measure. See Appendix for reconciliations. 2. Calculated as Adjusted EBITDA divided by revenues. 3. The sum of wealth management fees and other revenues as presented in this chart may not agree to total revenues as presented due to rounding. Strong and Sustained Revenue and Adjusted EBITDA Growth… 5 Revenues ($ in millions) Adjusted EBITDA (1) ($ in millions) Adjusted EBITDA Margin (2) (% o f Revenues) Wealth management fees Other revenues $382.3 $485.4 $662.9 $910.9 $1,218.3 $1,361.3 $819.5 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 28.9% $75.4 $103.0 $145.2 $203.4 $269.8 $321.8 $208.8 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 33.7% 19.7% 21.2% 21.9% 22.3% 22.1% 23.6% 25.5% FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD Margin: +3.9%

 

1. Non - GAAP financial measure. See Appendix for reconciliations. 2. Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for t ax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where the Company received a step - up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15 - year period. Due to the Company’s acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplemental economic benefit. The tax benefit from amortization is identified to show the full economic benefit of deduction s f or acquired intangible assets with the step - up in tax basis. … Drives Strong Bottom - Line Performance Enhanced by a Tax Efficient Structure 6 Adjusted Net Income Excluding Tax Adjustments (1) ($ in millions) ANI Excluding Tax Adjustments Per Share (1) Tax Adjustments (2) ($ in millions) Tax Adjustments Per Share (1) $44.2 $56.6 $70.5 $102.5 $146.7 $195.6 $131.2 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 34.6% $8.1 $12.0 $16.2 $22.8 $31.9 $37.3 $21.5 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 35.8% $0.62 $0.78 $0.98 $1.42 $1.96 $2.46 $1.62 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 31.7% $0.11 $0.17 $0.23 $0.32 $0.42 $0.47 $0.27 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Q2 21 YTD CAGR: 33.7%

 

1. The weightings are based on the June 30, 2021 LTM revenues of the respective partner firms. 2. Inception means first full four quarters as a Focus partner firm and reflects activity through all market cycles during that tim e. The analysis includes the 63 firms since inception (out of the 74 firms) that have been with us for at least 2 years as of June 30, 2021 in order to determine a baseline revenue growth rate. If Focus partner firms merged together, their financials have been combined. 3. The 63 partner firms have been with Focus for a weighted average of ~7 years and a median period of ~5 years. 6.7% 14.4% 9.6% 8.3% 15.1% 13.7% Firms that have not completed a merger (26 firms) Firms that have completed at least one merger (37 firms) Entire portfolio of 63 partner firms Revenue CAGR Since Inception (2) Median Revenue CAGR Weighted Average Revenue CAGR Mergers Substantially Accelerate Our Partner Firms’ Revenue Growth 7 ▪ 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. 63 partner firms (3) represented ~93% of our Q2 2021 LTM revenues (1) (1) (1)

 

Organic Revenue Trend Demonstrates Strong Partner Firm Revenue Growth and Resilience ▪ Organic growth has been consistently strong, with an average of 14.5% over the last 16 quarters 1. 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, including Connectus , 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 us eful 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 fi rms that are acquired during the comparable periods. 8 14.4% 17.9% 17.6% 16.7% 9.7% 10.7% 7.7% 18.0% 22.4% 25.2% 21.2% (0.3%) 2.4% 7.3% 12.2% 28.8% -30% -20% -10% 0% 10% 20% 30% Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Quarterly Organic Revenue Growth (1) Percentage Organic Revenue Growth Quarterly Average: 14.5% Average: 14.5%

 

Second Quarter 2021 Recap 9

 

Robust Year - Over - Year Financial Performance Despite Pandemic Uncertainties 10 Adjusted Net Income Excluding Tax Adjustments (1) ($ in millions) 1. Non - GAAP financial measure. See Appendix for reconciliations. 2. Refer to footnote 2 on slide 6. Revenues ($ in millions) Adjusted EBITDA (1) ($ in millions) ANI Excluding Tax Adjustments Per Share (1) Tax Adjustments (2) ($ in millions) Tax Adjustments Per Share (1) $313.1 $425.4 Q2 2020 Q2 2021 35.8 % $74.8 $107.8 Q2 2020 Q2 2021 44.2 % $45.1 $67.8 Q2 2020 Q2 2021 50.3 % $9.2 $11.0 Q2 2020 Q2 2021 20.3% $0.59 $0.84 Q2 2020 Q2 2021 42.4% $0.12 $0.14 Q2 2020 Q2 2021 16.7%

 

▪ Adjusted EBITDA: (2) $107.8 million, +44.2% year - over - year growth ▪ Adjusted EBITDA margin: (3) 25.3 % ▪ Adjusted EBITDA attributable to new partner firm closings: $3.0 million* ▪ Acquired Base Earnings: (4) $10.3 million * Relates to the closing of Prairie Capital Management and Rollins Financial on 4/1/21. ▪ Revenues: $ 425.4 million, +35.8% year - over - year growth ▪ Organic revenue growth rate: (1) + 28.8% year - over - year growth ▪ Revenue attributable to new partner firm closings: $7.1 million* * Relates to the closing of Prairie Capital Management and Rollins Financial on 4/1/21. ▪ GAAP Net Income: $5.2 million, compared to net income of $3.3 million in Q2 2020 ▪ GAAP basic and diluted net income per share attributable to common shareholders: $0.04 and $0.04 ▪ Adjusted Net Income Excluding Tax Adjustments: (2) $67.8 million, +50.3% year - over - year growth ▪ Tax Adjustments: (5) $11.0 million, +20.3% year - over - year growth ▪ Adjusted Net Income Excluding Tax Adjustments Per Share: (2) $0.84, +42.4% year - over - year growth ▪ Tax Adjustments Per Share: (2) $0.14, +16.7% year - over - year Adjusted EBITDA Q2 2021 Financial Snapshot Revenues Net Income and Per Share Amounts 1. Organic revenue growth represents the period - over - period growth in revenues related to partner firms, including growth related t o acquisitions of wealth management practices and customer relationships by our partner firms, including Connectus , and partner firms that have merged, that for the entire periods presented, are included in our consolidated statements of o per ations 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 th e effect of the partial period results of partner firms that are acquired during the comparable periods. 2. Non - GAAP financial measure. See Appendix for reconciliations. 3. Calculated as Adjusted EBITDA divided by revenues. 4. The terms of our management agreements entitle the management companies to management fees typically consisting of all future EB PC 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 collective preferred posit ion in Base Earnings or comparable measures. 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 var iou s business or contractual matters. 5. Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for t ax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where the Company received a step - up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15 - year period. Due to the Company’s acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplem ent al economic benefit. The tax benefit from amortization is identified to show the full economic benefit of deductions for acquired intangible assets with the step - up in tax basis. 6. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility) and means the ratio of amount s o utstanding 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) min us unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). 11 Net Leverage & Cash Flow ▪ Net Leverage Ratio: (6) 3 .54x ▪ Net cash provided by operating activities: $298.9 million (LTM Q2 2021), +46.6% year - over - year ▪ Cash Flow Available for Capital Allocation: (2) $ 266.0 million (LTM Q2 2021), +38.2% year - over - year ▪ Unamortized Gross Tax Shield at June 30, 2021 of $1.8+ billion ▪ Tax receivable agreement payments: $0.3 million

 

$405.0m , 95.2% $20.4m , 4.8% Wealth Management Fees Other ▪ Holistic wealth management fees tied to team - based service model ▪ Not a commission or interest revenue based model We Have Multiple Sources of Revenue Diversification $330.4m , 77.7% $95.0m , 22.3% Revenues Correlated to Markets Correlated to Markets Not Correlated to Markets ▪ Advance billing structure used by majority of partner firms gives visibility into subsequent quarter ▪ High diversification of billing practices across 74 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 ▪ 7 partner firms across Australia, Canada, and the UK, together with partner firm Connectus , are platforms for growth $399.2m , 93.8% $26.2m , 6.2% Domestic International Q2 2021 Revenues by Source Q2 2021 Revenues by Region Q2 2021 Revenues Correlated to Markets 12 $220.6m , 66.8% $109.8m , 33.2% Billing Structure of Market - Correlated Revenues Advance Arrears

 

Strong Business Growth and Financial Results, Reinforced by Robust M&A Activity 13 Q2 2021 results demonstrated strong year - over - year growth and business performance ▪ Revenues were $425.4 million, above the top end of our $405 to $415 million Q2 outlook. ▪ Adjusted EBITDA margin (1) was 25.3%, in line with our Q2 outlook of ~25.5%. ▪ Net Leverage Ratio (2) was 3.54x as of June 30, 2021, at the low end of our Q2 outlook of 3.5x to 3.75x. ▪ Cash Flow Available for Capital Allocation (3) was $266.0 million (LTM Q2 2021), up 38.2% year - over - year. Our year - to - date M&A momentum has been strong and is accelerating ▪ Record pipeline that is accelerating in 2H21 as our value proposition continues to resonate in the market. ▪ As of August 1, 2021: ▪ Closed: 14 transactions, including 5 new partner firms and 9 mergers, including 3 for Connectus ▪ Signed and pending close: 3 transactions, one new partner firm and 2 mergers, including one for Connectus ▪ Established Connectus’ Canadian presence through recent announcement of Gavin, the 8 th transaction for Connectus since its international expansion began in Q4 2020. We raised $800 million under our Term Loan to pre - fund our record M&A pipeline ▪ Launched a new 7 - year $800 million term loan tranche, inclusive of a $150 million six - month delayed draw feature. ▪ Closed on July 1 st , 2021 in a heavily oversubscribed transaction with a substantial increase in new lenders. ▪ Proceeds are expected to be used to fund acquisitions over the next few quarters. ▪ We reaffirmed our 3.5x to 4.5x Net Leverage Ratio (2) target. 1. Calculated as Adjusted EBITDA divided by revenues. 2. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility) and means the ratio of amount s o utstanding 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 unpai d d rawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). 3. Non - GAAP financial measure. See appendix for reconciliations.

 

Closed August 1, 2021 ~$ 4.3 Billion in Client Assets Fiduciary Wealth Manager Seattle, WA New Partner Firms Further Diversify Our Portfolio (1) 14 » UHNW/HNW client base » Unique access to differentiated alternative investments » Distinguished management team and nationwide clientele » Clear strategy to capture share in the Midwest » HNW client base » Energetic management team with strong growth mindset » Family office for HNW individuals » Clear strategy to capture share in Florida » HNW client base » Strong track record of growth » Comprehensive wealth planning offering » Clear strategy to capture share in the Southeast » UHNW/HNW client base » One of the premiere RIAs in the Pacific Northwest » Long history and well - established business » Multigenerational management team Closed April 1, 2021 ~$4.7 Billion in Client Assets Fiduciary Wealth Manager Kansas City, MO Closed July 1, 2021 ~$ 0.7 Billion in Client Assets Fiduciary Wealth Manager St. Petersburg, FL Closed April 1, 2021 ~$ 1.0 Billion in Client Assets Fiduciary Wealth Manager Atlanta , GA 1. We have over 70 partner firms located across the United States as well as the United Kingdom, Canada and Australia. This data ma y not be representative of our other partner firms and is not necessarily indicative of these firms’ future performance. 2. 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. 3. The terms of our management agreements entitle the management companies to management fees typically consisting of all future EB PC 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 t o o ur collective preferred position in Base Earnings or comparable measures. We are entitled to receive these earnings notwithstanding any earnings that we are entitled to receive in excess of Ta rget Earnings. Base Earnings may change in future periods for various business or contractual matters. Prairie Capital Management Rollins Financial ARS Wealth Advisors Estimated Annual Revenues: > $60 million ( 1)(2) Annual Acquired Base Earnings: $23.6 million (3) Average ‘18 - ’20 Revenue CAGR: 9 % , despite the 2020 Covid related market headwinds (1)(2) Badgley Phelps Wealth Managers Sonora Investment Management Estimated late Q3 close ~$ 1.3 Billion in Client Assets Fiduciary Wealth Manager Phoenix, AZ » HNW client base » Customized portfolio construction specialist » Expertise in active fixed income and equity management » Founder led with 30 - year presence in the Southwest

 

Record Pipeline and Accelerating M&A Momentum into 2H 2021 15 * Signed and pending deal. 7 6 10 8 6 7 6 14 12 15 17 28 18 11 21 18 25 25 34 25 17 2015 2016 2017 2018 2019 2020 2021 YTD New Partner Firms Mergers Type Acquiring Partner Firm Closing Date Primary Office Location 1. ARS Wealth Advisors 7/1/2021 St. Petersburg, FL 2. Badgley Phelps Wealth Managers 8/1/2021 Seattle, WA 3. Sonora Investment Management * Phoenix, AZ 1. Carolina Capital Consulting Buckingham Strategic Wealth 7/1/2021 Charlotte, NC 2. Integer Wealth Advisors Group JFS Wealth Advisors 7/1/2021 Philadelphia, PA 3. George Ferizis Group Connectus 7/1/2021 Sydney, Australia 4. Pitt Escala Partners 7/12/2021 Melbourne, Australia 5. New Providence Asset Management The Colony Group 8/1/2021 New York, NY 6. Collins Investment Group XML Financial Group * Bethesda, MD 7. Gavin Group Connectus * Toronto, Canada 1. Prairie Capital Management 4/1/2021 Kansas City, MO 2. Rollins Financial 4/1/2021 Atlanta, GA 1. Matheys Lane Capital Management SCS Financial 4/1/2021 Providence, RI 2. Investment Counsel LaFleur & Godfrey 5/1/2021 Petoskey, MI 3. Aspiri Financial Services Connectus 5/1/2021 Brisbane, Australia Partner Firm Acquisitions 1. Hill Investment Group 3/1/2021 St. Louis, MO Mergers 1. Watterson Financial Planning Connectus 2/1/2021 Cheshire, UK Firm Name Q1 2021 Partner Firm Acquisitions Mergers Partner Firm Acquisitions Q2 2021 Mergers Q3 2021

 

Three Elements of Our M&A Approach That are Key to Our Success 16 Extensive network of long - standing relationships x ~ 1,000 firms in the U.S. that could become partner firms and ~ 5,000 firms that could become mergers x Significant number of relationships built over a long period of time x Established presence in key international markets, including Australia, Canada and the United Kingdom Consistent Acquisition Structure and Honed Due Diligence Process x Unique value proposition with interests of the entrepreneur at its core x Entrepreneurship + permanent capital + value - added services x Completed more than 225 transactions Broad Array of Value - Added Services That Continues to Evolve x Best practices build through oversight of over 75 partner firms x Scale provides unique insights, purchasing power and access x Profitability to continually evolve offering in the areas important to our partner firms

 

Our Business Model Has Multiple Elements Which Contribute to its Strength and Resiliency ~95%+ (1) of Revenues are Fee - Based and Recurring with No Interest Income Dependency Preference Creates Downside Earnings Protection 22.3 % (1) of Revenues Not Correlated to the Markets Client Portfolios are Balanced and Allocated Across Asset Classes UHNW - HNW Client Base is Sticky ~70 Partner Firms Have Their Own Investment Philosophies Management Fees are Tied to Partner Firm Profitability Highly Variable and Cap - Ex Light Cost Structure 17 1. For Q2 2021.

 

We are Well Positioned for Strong Growth Over the Long Term Due t o Our… 18 Industry - Leading Scale Leading Partnership of 70+ Independent Fiduciary Firms 16 - Year Track Record High Growth, Resilient Business Model Strong Financial Fundamentals Ample Growth Capital 1 6 2 5 3 4

 

19 Third Quarter 2021 Outlook

 

▪ Net Leverage Ratio (6) ~3.5x - 3.75x ▪ Estimated cash earnout payments of ~$35 million in Q3 and ~$60 million in the second half of 2021 based on current market levels and acquisition activities ▪ Interest expense estimated to increase by ~$5.6 million sequentially from Q2 21 to Q3 21 due to the new July 2021 $650 million drawn and $150 million undrawn term loan tranche ▪ Estimated Adjusted EBITDA (2) margin (3) of approximately ~2 5 % ▪ Estimated Adjusted EBITDA (2) attributable to new partner firms closing: ~$2 million** ▪ Estimated Acquired Base Earnings (4) : $13.3 million** ** Relates to closing of ARS Wealth Advisors on 7/1/21, Badgley Phelps on 8/1/21 and estimated closing of Sonora in late Q3. Aggregate full quarter Adjusted EBITDA contribution estimated to be ~$3.3 million. ▪ Estimated revenues of ~$ 440 to $ 450 million ▪ Estimated organic revenue growth of ~24 to 27% (1) ; ▪ Estimated revenue attributable to new partner firms closing: $5.8 million* * Relates to closing of ARS Wealth Advisors on 7/1/21, Badgley Phelps on 8/1/21 and estimated closing of Sonora in late Q3. Aggregate full quarter revenue contribution estimated to be ~$9 million. ▪ Next twelve months Tax Adjustments (5) of ~$44.2 million Q3 2021 Outlook 1. 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, including Connectus , and partner firms that have merged, that for the entire periods presented, are included in our consolidated statements of o per ations 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 th e effect of the partial period results of partner firms that are acquired during the comparable periods. 2. Non - GAAP financial measure. The Company is not providing a quantitative reconciliation of its forward - looking estimate of Adjust ed EBITDA or 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 witho ut unreasonable effort due to its dependency on future uncertainties such as the items noted under the heading “Special Note Regarding Forward - Looking Statements.” In addition, we believe such a reconciliation could imply a deg ree of precision that might be confusing or misleading to investors. 3. Calculated as Adjusted EBITDA divided by revenues. 4. The terms of our management agreements entitle the management companies to management fees typically consisting of all future EB PC 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 collective prefe rre d position in Base Earnings or comparable measures. 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 pe riods for various business or contractual matters. 5. See note 5 on page 11 for additional information regarding Tax Adjustments. Based on a 27.0% tax rate. 6. Net Leverage Ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility), and means the ratio of amoun ts 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) min us unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). 20 Revenues Adjusted EBITDA Tax Adjustments Net Leverage and Cash Flow

 

Leverage 21

 

Strong Credit and Liquidity Profile Creates an Important Margin of Safety Low debt cost ~2.4% weighted average interest rate on funded borrowings Limited duration risk ~3 years remaining to maturity for Term Loan (July 2024) ~2 years remaining to maturity for Revolver (July 2023) Interest rates Beneficiary of favorable rate environment 95%+ fee - based and recurring revenues, variable management fees and earnings preference protect cash flows Downside protection 22 Ample liquidity ~$0.6 billion undrawn revolver + ~$144 million cash As of June 30, 2021:

 

July 1, 2021 – Closed New $800 million 7 - Year Term Loan Tranche 23 ▪ We have financial flexibility to support further growth ▪ We closed a new $800 million 7 - year term loan tranche on July 1 st to pre - fund our record M&A pipeline ▪ We reaffirmed our 3.5x – 4.5x target Net Leverage Ratio (1) range First Lien Term Loan Tranche A First Lien Term Loan Tranche B Revolver Amount: $ 1 , 619 . 3 million $800 million ($650 million drawn 7/1 plus $150 million 6 month delayed draw) $0 million drawn ($650 million facility size) Maturity: July 2024 June 2028 July 2023 Margin: $769.3 million at L+200 bps / $850 million hedged at ~2.62% L+250 bps L+175 bps on drawn and 50 bps undrawn between 3.50x and 4.00x LIBOR Floor: 0.00% 0.50% 0.00% Amortization: 1.00% / $16.7 million per annum 1.00% / $8.0 million per annum when fully drawn n/a Covenant: 6.25x 1. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility) and means the ratio of amount s o utstanding 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 unp aid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). 2. Non - GAAP financial measure. See Appendix for reconciliations. $800 million new term loan tranche >$1.8 billion Fire Power $144 million in cash on the Q2 21 balance sheet $650 million unfunded revolver facility $266 million LTM Cash Flow Available for Capital Allocation (2)

 

Equity market decline (20)% (40)% Assumed Client Portfolio Allocation to Equities 50% 50% Decline in market-correlated revenues (1) (10)% (20)% ($ in millions) Reported Q2'21 Market-Correlated Revenues 330.4$ 297.4$ 264.3$ Q2'21 Non-Correlated Revenues 95.0$ 95.0$ 95.0$ Total Revenue - Q2 425.4$ 392.4$ 359.3$ Covenant EBITDA (2) - LTM 417.2$ 399.4$ 382.5$ Net Debt (3) 1,475.4$ 1,475.4$ 1,475.4$ Net Leverage Ratio (2) 3.54x 3.69x 3.86x Change from Q2 Reported 0.15x 0.32x Sensitivity Analysis (Illustrative Only) Earnings Preference Provides Strong Downside Earnings Protection 1. The analysis depicts the impact on our Net Leverage Ratio (as defined in the Credit Facility) resulting from a hypothetical c han ge in Q2 market correlated revenues only. All other revenues/expenses were kept constant except management fees, which are tied to the profitability of our partner firms. 2. Net leverage ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility), and means the ratio of amoun ts 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) min us unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility), which in the above table is referred to as “Covenant EBITDA.” 3. Net Debt represents amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt ob lig ations 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. 4. The terms of our management agreements entitle the management companies to management fees typically consisting of all future EB PC 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 collective prefe rre d position in Base Earnings or comparable measures. 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 pe riods for various business or contractual matters. ▪ Reflects one - quarter impact to revenues and Covenant EBITDA (1)(2) ▪ Assumes all other revenue sources and expenses remain unchanged except for management fees ▪ In the event of a multi - quarter downturn ▪ Partner firms would further reduce their cost structure ▪ M&A activity would moderate ▪ Cash flow would be available for debt r epayment ▪ Significant head room on covenant ▪ Q2 Covenant EBITDA - LTM (2) would need to drop to $263.1 million, or decline by 43.4 %, to reach 6.25x net leverage ratio covenant 24 $12m $19m $35m $35m $38m $39m $39m $57m $58m $68m Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Cumulative Acquired Base Earnings (4) Q1 2019 to Q2 2021

 

Cash Flows 25

 

$203.9 $192.4 $298.9 $266.0 Net cash provided by operating activities Cash Flow Available for Capital Allocation Q2 2020 LTM Q2 2021 LTM Q3 2021 Supplemental Cash Flow Disclosures Sustained Strong Growth in Cash Flow As % of Adjusted EBITDA (1) 63 % 70% Cash Flows ▪ Q3 2021 estimated cash earnouts of ~$35 million and ~$60 million in the second half of 2021 based on current market levels and acquisition activities (2) ▪ Tax Receivable Agreements (“TRA”) payments: ▪ No TRA payments expected in Q3 or the remainder of the year ▪ TRA liability will be paid out over 15+ years, subject to utilization of tax deductions ▪ Q3 2021 required term loan amortization of ~$5.8 million ($23.2 million per year) ▪ Based on the terms of the Credit Facility, no excess cash flow payments required in 2021 ($ in millions) 1. Non - GAAP financial measure. See Appendix for reconciliations. 2. Based on certain assumptions that could change materially. 26 Q3 2021 Capital Allocation Priorities ▪ Strategic M&A to continue capitalizing on industry consolidation ▪ Fund earnout payments +47% (1) + 38 %

 

Over $1.8 Billion Tax Shield Created by Tax Efficient Transaction Structure 27 $82 $161 $156 $1,421 2H2021 2022 2023 2024 & Thereafter Gross Unamortized Intangible Tax Asset Shield (1) ($ in millions) 1. As of June 30, 2021. Assumes sufficient future taxable income. 2. 15 year life required under Internal Revenue Code Section 197. ▪ Focus generally acquires intangible assets ▪ Wealth management firms typically have limited tangible assets ▪ Focus purchases customer lists + management contracts + goodwill ▪ Consideration is typically paid in cash ▪ Each incremental M&A transaction creates an additional tax shield which generates substantial value for shareholders and enhances our cash flows ▪ Each tax shield is amortized over 15 years (2) ▪ As of June 30, 2021, $1.8+bn estimated gross tax shield to be utilized over next 14+ years, resulting in ~$500m benefit based on 27% income tax rate ▪ Example: Purchase Price $15 million Tax Shield Created $15 million (assumes no tangible assets) $1 million annually (for 15 years) Annual Tax Deduction $270,000 annually (for 15 years) Annual Benefit for Shareholders

 

Appendix 28

 

Net Income (Loss) to Adjusted EBITDA Reconciliation 1. 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. 29 ($ in thousands) 2015 2016 2017 2018 2019 2020 June 30, 2020 June 30, 2021 June 30, 2020 June 30, 2021 Net income (loss) 9,321$ 15,722$ (48,359)$ (41,087)$ (12,025)$ 48,965$ 3,328$ 5,174$ 37,347$ 7,656$ Interest income (90) (88) (222) (1,266) (1,164) (453) (66) (57) (351) (104) Interest expense 9,977 21,327 41,861 56,448 58,291 41,658 10,057 10,829 23,643 21,350 Income tax expense (benefit) 649 981 (1,501) 9,450 7,049 20,660 37 2,174 12,107 3,360 Amortization of debt financing costs 1,770 2,482 4,084 3,498 3,452 2,909 709 902 1,491 1,754 Intangible amortization 35,421 50,942 64,367 90,381 130,718 147,783 36,012 44,003 71,735 86,986 Depreciation and other amortization 5,327 5,680 6,686 8,370 10,675 12,451 3,029 3,606 6,011 7,213 Non-cash equity compensation expense 13,537 8,520 34,879 44,468 18,329 22,285 5,248 6,275 10,282 18,631 Non-cash changes in fair value of estimated contingent consideration (160) (1,143) 22,294 6,638 38,797 19,197 16,472 34,062 (14,901) 59,998 Gain on sale of investment — — — (5,509) — — — — — — Loss on extinguishment of borrowings — — 8,106 21,071 — 6,094 — — 6,094 — Other expense (income), net (310) (1,385) 3,191 2,350 1,049 214 (70) 534 (682) 531 Impairment of equity method investment — — — — 11,749 — — — — — Management contract buyout — — — — 1,428 — — — — — Delayed offering cost expense — — 9,840 — — — — — — — Secondary offering expenses — — — — — — — 287 — 1,409 Other one-time transaction expenses (1) — — — 8,590 1,486 — — — — — Adjusted EBITDA 75,442$ 103,038$ 145,226$ 203,402$ 269,834$ 321,763$ 74,756$ 107,789$ 152,776$ 208,784$ Three months ended Six months ended

 

Net Income (Loss) to Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share Reconciliation * Refer to the following pages for footnotes 30 2015 2016 2017 2018 2019 2020 June 30, 2020 June 30, 2021 June 30, 2020 June 30, 2021 ($ in thousands, except share and per share data) Net income (loss) 9,321$ 15,722$ (48,359)$ (41,087)$ (12,025)$ 48,965$ 3,328$ 5,174$ 37,347$ 7,656$ Income tax expense (benefit) 649 981 (1,501) 9,450 7,049 20,660 37 2,174 12,107 3,360 Amortization of debt financing costs 1,770 2,482 4,084 3,498 3,452 2,909 709 902 1,491 1,754 Intangible amortization 35,421 50,942 64,367 90,381 130,718 147,783 36,012 44,003 71,735 86,986 Non-cash equity compensation expense 13,537 8,520 34,879 44,468 18,329 22,285 5,248 6,275 10,282 18,631 Non-cash changes in fair value of estimated contingent consideration (160) (1,143) 22,294 6,638 38,797 19,197 16,472 34,062 (14,901) 59,998 Gain on sale of investment — — — (5,509) — — — — — — Loss on extinguishment of borrowings — — 8,106 21,071 — 6,094 — — 6,094 — Impairment of equity method investment — — — — 11,749 — — — — — Delayed offering cost expense — — 9,840 — — — — — — — Management contract buyout — — — — 1,428 — — — — — Secondary offering expenses — — — — — — — 287 — 1,409 Other one-time transaction expenses (1) — — 2,843 11,529 1,486 — — — — — Subtotal 60,538 77,504 96,553 140,439 200,983 267,893 61,806 92,877 124,155 179,794 Pro forma income tax (27%) (2) (16,345) (20,926) (26,069) (37,919) (54,265) (72,331) (16,688) (25,077) (33,522) (48,545) Adjusted Net Income Excluding Tax Adjustments 44,193$ 56,578$ 70,484$ 102,520$ 146,718$ 195,562$ 45,118$ 67,800$ 90,633$ 131,249$ Tax Adjustments (3) 8,080$ 11,991$ 16,217$ 22,828$ 31,860$ 37,254$ 9,175$ 11,038$ 18,110$ 21,530$ Adjusted Net Income Excluding Tax Adjustments Per Share 0.62$ 0.78$ 0.98$ 1.42$ 1.96$ 2.46$ 0.59$ 0.84$ 1.19$ 1.62$ Tax Adjustments Per Share (3) 0.11$ 0.17$ 0.23$ 0.32$ 0.42$ 0.47$ 0.12$ 0.14$ 0.24$ 0.27$ Adjusted Shares Outstanding (4) 71,843,916 71,843,916 71,843,916 71,960,540 75,039,357 79,397,568 76,239,848 81,076,423 76,256,932 81,020,580 Calculation of Adjusted Shares Outstanding: Weighted average shares of Class A common stock outstanding—basic (5) — — — 43,122,782 46,792,389 48,678,584 47,847,756 55,710,666 47,642,156 53,965,045 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 — — — — — — — Weighted average incremental shares of Class A common stock related to stock options, unvested Class A common stock and restricted stock units (7) — — — 102,549 20,428 118,029 13,184 452,156 8,901 453,475 Weighted average Focus LLC common units outstanding (8) 22,499,665 22,499,665 22,499,665 22,630,668 22,424,378 21,461,080 21,672,585 16,537,585 21,846,354 18,121,604 Weighted average Focus LLC restricted common units outstanding (9) — — — — — 5,005 — 71,374 — 71,374 Weighted average common unit equivalent of Focus LLC incentive units outstanding (10) 6,814,600 6,814,600 6,814,600 6,104,541 5,802,162 9,134,870 6,706,323 8,304,642 6,759,521 8,409,082 Adjusted Shares Outstanding 71,843,916 71,843,916 71,843,916 71,960,540 75,039,357 79,397,568 76,239,848 81,076,423 76,256,932 81,020,580 Three months ended Six months ended

 

* These footnotes refer to the tables on the previous pages. 1. In 2017, related to insurance fees associated with the investment by our private equity investors. In 2018 and 2019, represen ts 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. 2. The pro forma income tax rate of 27% reflects the estimated U.S. Federal, state, local and foreign income tax rates applicabl e t o corporations in the jurisdictions we conduct business. 3. Tax Adjustments represent the tax benefits of intangible assets, including goodwill, associated with deductions allowed for t ax amortization of intangible assets in the respective periods based on a pro forma 27% income tax rate. Such amounts were generated from acquisitions completed where we received a step - up in basis for tax purposes. Acquired intangible assets may be amortized for tax purposes, generally over a 15 - year period. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets provide additional significant supplemental economic benefit. The tax benefit from amortization is included to show the full economic benefit of deductions for acquired intangible assets with the step - up in tax basis. As of Jun e 30, 2021, estimated Tax Adjustments from intangible asset related income tax benefits from closed acquisitions based on a pro forma 27% income tax rate for the next 12 months is $44.2 million. 4. 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. 5. Represents our GAAP weighted average Class A common stock outstanding – basic. 6. 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, 2015 for comparative purposes. 7. Represents the incremental shares related to stock options, unvested Class A common stock and restricted stock units as calculated under the treasury stock method. 8. Assumes that 100% of the Focus LLC common units were exchanged for Class A common stock. 9. Assumes that 100% of the Focus LLC restricted common units were exchanged for Class A common stock. 10. 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. 31 Net Income (Loss) to Adjusted Net Income Excluding Tax Adjustments and Adjusted Net Income Excluding Tax Adjustments Per Share Reconciliation

 

Reconciliation of Cash Flow Available for Capital Allocation 32 1. 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. 2. Cash Flow Available for Capital Allocation excludes all contingent consideration that was included in either operating, inves tin g or financing activities of our consolidated statements of cash flows. 3. Net cash provided by operating activities for the three months ended March 31, 2020 and 2021, respectively, include cash outf low s related to due to affiliates (i.e. management fees). A portion of management fees were paid in Q1 post the issuance of the respective annual audit include d i n our Form 10 - K. ($ in thousands) Sept. 30, 2019 Dec. 31, 2019 March 31, 2020 (3) June 30, 2020 Sept. 30, 2020 Dec. 31, 2020 Mar. 31, 2021 (3) June 30, 2021 June 30, 2020 June 30, 2021 Net cash provided by operating activities 74,702$ 64,854$ 3,382$ 60,996$ 74,089$ 72,894$ 34,128$ 117,832$ 203,934$ 298,943$ Purchase of fixed assets (10,698) (4,714) (3,188) (2,759) (6,744) (6,658) (2,835) (1,483) (21,359) (17,720) Distributions for unitholders (3,491) (5,416) (4,567) (3,076) (8,122) (6,692) (9,055) (10,053) (16,550) (33,922) Payments under tax receivable agreements — — — — — — (4,112) (311) — (4,423) Adjusted Free Cash Flow 60,513$ 54,724$ (4,373)$ 55,161$ 59,223$ 59,544$ 18,126$ 105,985$ 166,025$ 242,878$ Portion of contingent consideration paid included in operating activities (1) 825 815 8,344 16,369 3,806 2,394 5,276 11,605 26,353 23,081 Cash Flow Available for Capital Allocation (2) 61,338$ 55,539$ 3,971$ 71,530$ 63,029$ 61,938$ 23,402$ 117,590$ 192,378$ 265,959$ Trailing 4-Quarters endedThree months ended