10-Q 1 focs-20220630x10q.htm 10-Q
12034104654423890001651052--12-312022Q2false65320124114390190001651052us-gaap:CommonClassBMember2022-05-012022-05-310001651052us-gaap:CommonClassAMember2022-05-012022-05-310001651052us-gaap:CommonClassAMember2022-03-012022-03-310001651052us-gaap:CommonClassBMember2022-04-012022-04-300001651052us-gaap:CommonClassBMember2022-02-012022-02-280001651052us-gaap:RetainedEarningsMember2022-06-300001651052us-gaap:ParentMember2022-06-300001651052us-gaap:NoncontrollingInterestMember2022-06-300001651052us-gaap:AdditionalPaidInCapitalMember2022-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001651052us-gaap:RetainedEarningsMember2022-03-310001651052us-gaap:ParentMember2022-03-310001651052us-gaap:NoncontrollingInterestMember2022-03-310001651052us-gaap:AdditionalPaidInCapitalMember2022-03-310001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100016510522022-03-310001651052us-gaap:RetainedEarningsMember2021-12-310001651052us-gaap:ParentMember2021-12-310001651052us-gaap:NoncontrollingInterestMember2021-12-310001651052us-gaap:AdditionalPaidInCapitalMember2021-12-310001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001651052us-gaap:RetainedEarningsMember2021-06-300001651052us-gaap:ParentMember2021-06-300001651052us-gaap:NoncontrollingInterestMember2021-06-300001651052us-gaap:AdditionalPaidInCapitalMember2021-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001651052us-gaap:RetainedEarningsMember2021-03-310001651052us-gaap:ParentMember2021-03-310001651052us-gaap:NoncontrollingInterestMember2021-03-310001651052us-gaap:AdditionalPaidInCapitalMember2021-03-310001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100016510522021-03-310001651052us-gaap:RetainedEarningsMember2020-12-310001651052us-gaap:ParentMember2020-12-310001651052us-gaap:NoncontrollingInterestMember2020-12-310001651052us-gaap:AdditionalPaidInCapitalMember2020-12-310001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-06-300001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-03-310001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-03-310001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-12-310001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-12-310001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-06-300001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-03-310001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-03-310001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-12-310001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-12-310001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2022-06-300001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2021-12-310001651052us-gaap:RestrictedStockUnitsRSUMember2022-06-300001651052focs:FocusLLCRestrictedCommonUnitsMember2022-06-300001651052us-gaap:RestrictedStockUnitsRSUMember2021-12-310001651052focs:FocusLLCRestrictedCommonUnitsMember2021-12-310001651052focs:MarketConditionBasedAwardsMemberus-gaap:CommonClassAMember2018-07-012018-07-310001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonStockMember2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate9.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate7.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate6.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate58.50Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate5.50Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate44.71Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate43.50Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate43.07Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate36.64Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate33.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate30.48Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate28.50Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate27.90Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate27.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate26.26Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate23.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate22.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate21.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate19.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate17.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate16.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate14.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate13.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate12.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate11.00Member2022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate1.42Member2022-06-300001651052focs:IncentiveUnitsMember2022-06-300001651052focs:TimeBasedIncentiveUnitsMember2022-01-012022-06-300001651052focs:TimeBasedAwardsMember2022-01-012022-06-300001651052us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001651052us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001651052focs:FocusLLCRestrictedCommonUnitsMember2022-01-012022-06-300001651052us-gaap:NonUsMember2022-04-012022-06-300001651052focs:WealthManagementServicesMember2022-04-012022-06-300001651052focs:OtherServicesMember2022-04-012022-06-300001651052country:US2022-04-012022-06-300001651052us-gaap:NonUsMember2022-01-012022-06-300001651052focs:WealthManagementServicesMember2022-01-012022-06-300001651052focs:OtherServicesMember2022-01-012022-06-300001651052country:US2022-01-012022-06-300001651052us-gaap:NonUsMember2021-04-012021-06-300001651052focs:WealthManagementServicesMember2021-04-012021-06-300001651052focs:OtherServicesMember2021-04-012021-06-300001651052country:US2021-04-012021-06-300001651052us-gaap:NonUsMember2021-01-012021-06-300001651052focs:WealthManagementServicesMember2021-01-012021-06-300001651052focs:OtherServicesMember2021-01-012021-06-300001651052country:US2021-01-012021-06-300001651052srt:ChiefExecutiveOfficerMember2022-04-012022-06-300001651052srt:ChiefExecutiveOfficerMember2022-01-012022-06-300001651052srt:ChiefExecutiveOfficerMember2021-04-012021-06-300001651052srt:ChiefExecutiveOfficerMember2021-01-012021-06-300001651052us-gaap:RetainedEarningsMember2022-04-012022-06-300001651052us-gaap:RetainedEarningsMember2022-01-012022-06-300001651052us-gaap:RetainedEarningsMember2021-04-012021-06-300001651052us-gaap:RetainedEarningsMember2021-01-012021-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001651052us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMemberus-gaap:SubsequentEventMember2022-07-012022-08-040001651052us-gaap:FairValueInputsLevel1Member2022-06-300001651052focs:FirstLienRevolvingCreditFacilityMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownTwoMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownOneMember2022-04-012022-04-300001651052focs:FirstLienRevolvingCreditFacilityMember2022-04-300001651052us-gaap:StandbyLettersOfCreditMember2022-01-012022-06-300001651052us-gaap:StandbyLettersOfCreditMember2021-01-012021-12-310001651052us-gaap:StandbyLettersOfCreditMember2022-06-300001651052us-gaap:StandbyLettersOfCreditMember2021-12-310001651052us-gaap:InterestRateSwapMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-04-300001651052us-gaap:OtherIntangibleAssetsMember2022-06-300001651052us-gaap:CustomerRelationshipsMember2022-06-300001651052us-gaap:ContractBasedIntangibleAssetsMember2022-06-300001651052us-gaap:OtherIntangibleAssetsMember2021-12-310001651052us-gaap:CustomerRelationshipsMember2021-12-310001651052us-gaap:ContractBasedIntangibleAssetsMember2021-12-310001651052focs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-310001651052focs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-310001651052us-gaap:InterestRateSwapMember2022-01-012022-06-300001651052us-gaap:InterestRateSwapMember2020-04-012020-04-300001651052us-gaap:InterestRateSwapMember2022-06-300001651052focs:FloatingToFixedInterestRateSwapAgreementTwoMember2020-04-300001651052focs:FloatingToFixedInterestRateSwapAgreementOneMember2020-04-300001651052us-gaap:InterestRateSwapMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-06-300001651052focs:FirstLienTermLoanTrancheMember2022-06-300001651052focs:FirstLienTermLoanTrancheBMember2022-06-300001651052focs:FirstLienTermLoanTrancheMember2021-12-310001651052focs:FirstLienTermLoanTrancheBMember2021-12-310001651052focs:FirstLienRevolvingCreditFacilityMember2021-12-310001651052focs:FirstLienTermLoanTrancheMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheBMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheMemberus-gaap:FairValueInputsLevel2Member2022-06-300001651052focs:FirstLienTermLoanTrancheBMemberus-gaap:FairValueInputsLevel2Member2022-06-300001651052focs:FirstLienTermLoanTrancheMemberus-gaap:FairValueInputsLevel2Member2021-12-310001651052focs:FirstLienTermLoanTrancheBMemberus-gaap:FairValueInputsLevel2Member2021-12-310001651052focs:FirstLienTermLoanMember2022-06-300001651052focs:FirstLienTermLoanMemberus-gaap:InterestRateSwapMember2020-04-300001651052focs:FirstLienRevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-04-012022-04-300001651052focs:FirstLienRevolvingCreditFacilityMemberus-gaap:BaseRateMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownTwoMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownTwoMemberus-gaap:BaseRateMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownThreeMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownThreeMemberus-gaap:BaseRateMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownOneMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-04-012022-04-300001651052focs:FirstLienRevolverStepDownOneMemberus-gaap:BaseRateMember2022-04-012022-04-300001651052focs:FirstLienTermLoanTrancheMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheMemberus-gaap:BaseRateMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheBMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheBMemberus-gaap:BaseRateMember2022-01-012022-06-300001651052focs:FirstLienTermLoanTrancheBMemberfocs:LiborFloorMember2022-01-012022-06-300001651052us-gaap:CommonClassBMember2022-06-300001651052us-gaap:CommonClassAMember2022-06-300001651052us-gaap:CommonClassBMember2021-12-310001651052us-gaap:CommonClassAMember2021-12-3100016510522021-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMemberus-gaap:OtherIntangibleAssetsMember2022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMemberus-gaap:CustomerRelationshipsMember2022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMemberus-gaap:ContractBasedIntangibleAssetsMember2022-06-300001651052srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueOptionPricingModelMember2022-06-300001651052srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-06-300001651052srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueOptionPricingModelMember2022-06-300001651052srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-06-300001651052srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueOptionPricingModelMember2021-12-310001651052srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2021-12-310001651052srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueOptionPricingModelMember2021-12-310001651052srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2021-12-310001651052us-gaap:FairValueInputsLevel3Member2022-06-300001651052focs:ContingentConsiderationAndOtherLiabilitiesMember2022-06-300001651052us-gaap:FairValueInputsLevel3Member2021-12-310001651052focs:ContingentConsiderationAndOtherLiabilitiesMember2021-12-310001651052focs:FocusFinancialPartnersLLCMemberus-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2022-01-012022-06-300001651052focs:PrepaidExpensesAndOtherAssetsMemberus-gaap:InterestRateSwapMember2022-06-300001651052focs:PrepaidExpensesAndOtherAssetsMemberus-gaap:InterestRateSwapMember2021-12-310001651052focs:MarketBasedStockOptionsMember2022-04-012022-06-300001651052focs:MarketBasedStockOptionsMember2022-01-012022-06-300001651052focs:MarketBasedStockOptionsMember2021-04-012021-06-300001651052focs:MarketBasedStockOptionsMember2021-01-012021-06-300001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2022-04-012022-06-300001651052focs:IncentiveUnitsMember2022-04-012022-06-300001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2022-01-012022-06-300001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2021-04-012021-06-300001651052focs:IncentiveUnitsMember2021-04-012021-06-300001651052us-gaap:EmployeeStockOptionMemberus-gaap:CommonClassAMember2021-01-012021-06-300001651052focs:IncentiveUnitsMember2021-01-012021-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialAssetAcquisitionsMemberus-gaap:OtherIntangibleAssetsMember2022-01-012022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialAssetAcquisitionsMemberus-gaap:CustomerRelationshipsMember2022-01-012022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialAssetAcquisitionsMemberus-gaap:ContractBasedIntangibleAssetsMember2022-01-012022-06-300001651052us-gaap:CommonClassBMember2022-03-012022-03-310001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-04-012022-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-04-012022-06-300001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-01-012022-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-01-012022-06-300001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-04-012021-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-04-012021-06-300001651052us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-01-012021-06-300001651052us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-01-012021-06-300001651052focs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-04-012022-06-300001651052focs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-01-012022-06-300001651052focs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-04-012021-06-300001651052focs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-01-012021-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-04-012022-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-04-012022-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-01-012022-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2022-01-012022-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-04-012021-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-04-012021-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs80OrLessMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-01-012021-06-300001651052focs:ShareBasedCompensationArrangementHighest90DayVwapIs110OrMoreMemberfocs:MarketBasedStockOptionsMemberus-gaap:IPOMember2021-01-012021-06-300001651052focs:MarketConditionBasedAwardsMember2018-07-012018-07-310001651052focs:IncentiveUnitsMemberfocs:HurdleRate9.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate7.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate6.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate58.50Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate5.50Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate44.71Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate43.50Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate43.07Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate36.64Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate33.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate30.48Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate28.50Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate27.90Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate27.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate26.26Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate23.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate22.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate21.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate19.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate17.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate16.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate14.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate13.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate12.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate11.00Member2022-01-012022-06-300001651052focs:IncentiveUnitsMemberfocs:HurdleRate1.42Member2022-01-012022-06-300001651052focs:FocusLlcIncentiveUnitsMember2021-12-310001651052focs:FocusLlcIncentiveUnitsMember2022-06-300001651052focs:FocusLlcIncentiveUnitsMember2022-01-012022-06-300001651052focs:IncentiveUnitsMember2022-01-012022-06-300001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingDateOfVestingMemberfocs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingDateOfVestingMemberfocs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052us-gaap:SeriesOfIndividuallyImmaterialAssetAcquisitionsMember2022-01-012022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialAssetAcquisitionsMember2021-01-012021-06-3000016510522020-03-3100016510522018-07-310001651052us-gaap:InterestRateSwapMember2020-04-300001651052focs:FirstLienRevolvingCreditFacilityMember2022-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2021-01-012021-12-310001651052us-gaap:CommonClassAMember2022-04-012022-06-300001651052us-gaap:CommonClassAMember2022-01-012022-06-300001651052us-gaap:CommonClassAMember2021-04-012021-06-300001651052us-gaap:CommonClassAMember2021-01-012021-06-300001651052focs:MarketBasedIncentiveUnitsMember2018-07-012018-07-3100016510522020-12-310001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingSecondAnniversaryOfDateOfVestingInJuly2026Memberfocs:MarketConditionBasedAwardsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingSecondAnniversaryOfDateOfVestingInJuly2026Memberfocs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingFirstAnniversaryOfDateOfVestingInJuly2025Memberfocs:MarketBasedIncentiveUnitsMemberus-gaap:IPOMember2022-03-012022-03-310001651052focs:ShareBasedCompensationArrangementExercisesOnAndFollowingFirstAnniversaryOfDateOfVestingInJuly2025Memberfocs:MarketConditionBasedAwardsMember2022-03-012022-03-3100016510522022-06-300001651052us-gaap:LineOfCreditMember2022-06-300001651052focs:FocusFinancialPartnersLLCMember2022-05-012022-05-310001651052focs:FocusFinancialPartnersLLCMember2022-03-012022-03-310001651052focs:FocusFinancialPartnersLLCMember2022-06-300001651052focs:FocusFinancialPartnersLLCMember2021-06-300001651052us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2022-01-012022-06-3000016510522021-12-310001651052us-gaap:ParentMember2022-04-012022-06-300001651052us-gaap:NoncontrollingInterestMember2022-04-012022-06-300001651052us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000016510522022-04-012022-06-300001651052us-gaap:ParentMember2022-01-012022-06-300001651052us-gaap:NoncontrollingInterestMember2022-01-012022-06-300001651052us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001651052us-gaap:ParentMember2021-04-012021-06-300001651052us-gaap:NoncontrollingInterestMember2021-04-012021-06-300001651052us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000016510522021-04-012021-06-300001651052us-gaap:ParentMember2021-01-012021-06-300001651052us-gaap:NoncontrollingInterestMember2021-01-012021-06-300001651052us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-3000016510522021-01-012021-06-3000016510522021-01-012021-12-310001651052srt:MaximumMemberus-gaap:LineOfCreditMember2022-01-012022-06-300001651052us-gaap:LineOfCreditMember2022-01-012022-06-300001651052us-gaap:CommonClassBMember2022-08-010001651052us-gaap:CommonClassAMember2022-08-0100016510522022-01-012022-06-30xbrli:sharesxbrli:pureiso4217:USDiso4217:USDxbrli:sharesfocs:agreementfocs:item

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-38604

Focus Financial Partners Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

47-4780811

(State or Other Jurisdiction
of Incorporation or Organization)

(I.R.S. Employer
Identification No.)

875 Third Avenue, 28th Floor

New York, NY

10022

(Address of Principal Executive Offices)

(Zip Code)

(646519-2456

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

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. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No 

As of August 1, 2022, the registrant had 65,448,434 shares of Class A common stock and 12,035,266 shares of Class B common stock outstanding.

FOCUS FINANCIAL PARTNERS INC.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2022

    

Page No.

PART I: FINANCIAL INFORMATION

Item 1.

Financial Statements

2

Unaudited condensed consolidated balance sheets

2

Unaudited condensed consolidated statements of operations

3

Unaudited condensed consolidated statements of comprehensive income

4

Unaudited condensed consolidated statements of cash flows

5

Unaudited condensed consolidated statements of changes in equity

7

Notes to unaudited condensed consolidated financial statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

44

Item 4.

Controls and Procedures

44

PART II: OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 6.

Exhibits

46

SIGNATURES

46

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated balance sheets

(In thousands, except share and per share amounts)

    

December 31, 

    

June 30, 

2021

2022

ASSETS

 

  

 

  

Cash and cash equivalents

$

310,684

$

221,049

Accounts receivable less allowances of $3,255 at 2021 and $4,201 at 2022

 

198,827

 

206,909

Prepaid expenses and other assets

 

123,826

 

165,711

Fixed assets—net

 

47,199

 

46,856

Operating lease assets

249,850

254,853

Debt financing costs—net

 

4,254

 

4,169

Deferred tax assets—net

267,332

236,040

Goodwill

 

1,925,315

 

2,050,297

Other intangible assets—net

 

1,581,719

 

1,624,878

TOTAL ASSETS

$

4,709,006

$

4,810,762

LIABILITIES AND EQUITY

 

  

LIABILITIES

 

  

Accounts payable

$

11,580

$

16,228

Accrued expenses

 

72,572

 

91,885

Due to affiliates

 

105,722

 

53,905

Deferred revenue

 

10,932

 

10,117

Contingent consideration and other liabilities

 

468,284

 

370,775

Deferred tax liabilities

31,973

35,682

Operating lease liabilities

277,324

283,852

Borrowings under credit facilities (stated value of $2,407,302 and $2,494,954 at December 31, 2021 and June 30, 2022, respectively)

 

2,393,669

 

2,482,697

Tax receivable agreements obligations

219,542

216,765

TOTAL LIABILITIES

 

3,591,598

 

3,561,906

COMMITMENTS AND CONTINGENCIES (Note 12)

 

  

EQUITY

Class A common stock, par value $0.01, 500,000,000 shares authorized; 65,320,124 and 65,442,389 shares issued and outstanding at December 31, 2021 and June 30, 2022, respectively

653

654

Class B common stock, par value $0.01, 500,000,000 shares authorized; 11,439,019 and 12,034,104 shares issued and outstanding at December 31, 2021 and June 30, 2022, respectively

114

120

Additional paid-in capital

841,753

910,222

Retained earnings

24,995

87,180

Accumulated other comprehensive income

3,029

15,859

Total shareholders' equity

870,544

1,014,035

Non-controlling interest

246,864

234,821

Total equity

1,117,408

1,248,856

TOTAL LIABILITIES AND EQUITY

$

4,709,006

$

4,810,762

See notes to unaudited condensed consolidated financial statements

2

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, 

    

2021

    

2022

    

2021

    

2022

REVENUES:

  

  

  

  

Wealth management fees

$

404,970

$

517,421

$

779,815

$

1,032,600

Other

 

20,385

 

21,790

 

39,715

 

43,178

 

Total revenues

 

425,355

 

539,211

 

819,530

 

1,075,778

 

OPERATING EXPENSES:

 

 

 

 

 

Compensation and related expenses

 

139,045

 

178,131

 

280,088

 

359,931

 

Management fees

 

116,205

 

136,802

 

218,277

 

274,641

 

Selling, general and administrative

 

69,018

 

94,771

 

132,844

 

183,421

 

Intangible amortization

 

44,003

 

64,649

 

86,986

 

124,925

 

Non-cash changes in fair value of estimated contingent consideration

 

34,062

 

(42,757)

 

59,998

 

(51,742)

 

Depreciation and other amortization

 

3,606

 

3,805

 

7,213

 

7,438

 

Total operating expenses

 

405,939

 

435,401

 

785,406

 

898,614

 

INCOME FROM OPERATIONS

 

19,416

 

103,810

 

34,124

 

177,164

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

Interest income

 

57

 

17

 

104

 

20

 

Interest expense

 

(10,829)

 

(19,892)

 

(21,350)

 

(37,508)

 

Amortization of debt financing costs

 

(902)

 

(949)

 

(1,754)

 

(2,050)

 

Other expense—net

 

(534)

 

(1,451)

 

(531)

 

(1,487)

 

Income from equity method investments

140

11

423

106

Total other expense—net

 

(12,068)

 

(22,264)

 

(23,108)

 

(40,919)

 

INCOME BEFORE INCOME TAX

 

7,348

81,546

 

11,016

 

136,245

 

INCOME TAX EXPENSE

 

2,174

32,228

 

3,360

 

47,845

 

NET INCOME

5,174

49,318

7,656

88,400

Non-controlling interest

(3,197)

(16,235)

(5,423)

(26,215)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

1,977

$

33,083

$

2,233

$

62,185

Income per share of Class A common stock:

Basic

$

0.04

$

0.51

$

0.04

$

0.95

Diluted

$

0.04

$

0.50

$

0.04

$

0.95

Weighted average shares of Class A common stock outstanding:

Basic

55,710,666

65,389,642

53,965,045

65,360,667

Diluted

56,162,822

65,596,377

54,418,520

65,682,081

See notes to unaudited condensed consolidated financial statements

3

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of comprehensive income

(In thousands)

For the three months ended

For the six months ended

 

June 30, 

June 30, 

    

2021

    

2022

    

2021

    

2022

 

Net income

$

5,174

$

49,318

$

7,656

$

88,400

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Foreign currency translation adjustments

 

(378)

 

(11,175)

 

(819)

 

(7,425)

Unrealized gain on interest rate swaps designated as cash flow hedges

254

5,335

5,505

24,101

Comprehensive income

5,050

43,478

12,342

105,076

Less: Comprehensive income attributable to non-controlling interest

(3,256)

(15,005)

(7,208)

(30,061)

Comprehensive income attributable to common shareholders

$

1,794

$

28,473

$

5,134

$

75,015

See notes to unaudited condensed consolidated financial statements

4

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of cash flows

(In thousands)

For the six months ended

June 30, 

    

2021

    

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net income

$

7,656

$

88,400

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

 

 

  

Intangible amortization

 

86,986

 

124,925

Depreciation and other amortization

 

7,213

 

7,438

Amortization of debt financing costs

 

1,754

 

2,050

Non-cash equity compensation expense

 

18,631

 

14,210

Non-cash changes in fair value of estimated contingent consideration

 

59,998

 

(51,742)

Income from equity method investments

 

(423)

 

(106)

Distributions received from equity method investments

 

403

 

776

Deferred taxes and other non-cash items

 

1,425

 

29,576

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

 

 

  

Accounts receivable

 

(10,038)

 

(9,398)

Prepaid expenses and other assets

 

(14,450)

 

(9,776)

Accounts payable

 

(527)

 

4,778

Accrued expenses

 

16,883

 

21,446

Due to affiliates

 

(9,765)

 

(51,962)

Contingent consideration and other liabilities

 

(13,986)

 

(40,201)

Deferred revenue

 

200

 

(1,122)

Net cash provided by operating activities

 

151,960

 

129,292

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

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

 

(82,106)

 

(252,056)

Purchase of fixed assets

 

(4,318)

 

(6,429)

Investment and other, net

 

(19,132)

 

(5,232)

Net cash used in investing activities

 

(105,556)

 

(263,717)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Borrowings under credit facilities

 

524,375

 

100,000

Repayments of borrowings under credit facilities

 

(413,347)

 

(12,348)

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)

(3,856)

Contingent consideration paid

 

(57,030)

 

(21,397)

Payments of debt financing costs

 

(2,700)

 

(1,111)

Proceeds from exercise of stock options

4,017

422

Distributions for unitholders

(19,108)

(15,956)

Other

(39)

375

Net cash provided by financing activities

 

31,745

 

46,129

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

 

(26)

 

(1,339)

CHANGE IN CASH AND CASH EQUIVALENTS

 

78,123

 

(89,635)

CASH AND CASH EQUIVALENTS:

 

  

 

  

Beginning of period

 

65,858

 

310,684

End of period

$

143,981

$

221,049

See Note 13 for supplemental cash flow disclosure

See notes to unaudited condensed consolidated financial statements

5

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of changes in equity

Three months ended June 30, 2021 and 2022

(In thousands, except share amounts)

Accumulated

 

Class A

Class B

Additional

Other

Total

Common Stock

Common Stock

Paid-In

Retained

Comprehensive

Shareholders’

Non-controlling

    

Shares

    

Amount

    

Shares

    

Amount

    

 Capital

    

Earnings

    

Income

    

Equity

    

Interest

    

Total  Equity

Balance at April 1, 2021

55,114,842

$

551

17,019,104

$

170

$

590,022

$

14,839

$

917

$

606,499

$

271,148

$

877,647

Net income

1,977

1,977

3,197

5,174

Issuance of units in connection with an acquisition and contingent consideration

168,392

1

1

1

Issuance (cancellation) of common stock in connection with offering, net

3,927,729

39

(3,845,569)

(38)

195,875

195,876

195,876

Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights

649,187

6

(649,187)

(6)

32,907

32,907

32,907

Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights

64,167

1

3,252

3,253

3,253

Exercise of stock options

36,964

1

1,153

1,154

1,154

Change in non-controlling interest allocation

(183,649)

(183,649)

(44,015)

(227,664)

Non-cash equity compensation expenses

1,126

1,126

1,126

Currency translation adjustment-net of tax

(469)

(469)

91

(378)

Unrealized gain (loss) on interest rate swaps designated as cash flow hedges-net of tax

286

286

(32)

254

Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions

9,735

9,735

9,735

Balance at June 30, 2021

59,792,889

$

598

12,692,740

$

127

$

650,421

$

16,816

$

734

$

668,696

$

230,389

$

899,085

Balance at April 1, 2022

65,362,389

653

11,601,814

116

865,857

54,097

20,469

$

941,192

$

241,426

$

1,182,618

Net income

33,083

33,083

16,235

49,318

Issuance of units in connection with an acquisition

512,290

5

5

5

Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights

80,000

1

(80,000)

(1)

3,016

3,016

3,016

Change in non-controlling interest allocation

40,862

40,862

(21,610)

19,252

Non-cash equity compensation expenses

2,105

2,105

2,105

Currency translation adjustment-net of tax

(8,823)

(8,823)

(2,352)

(11,175)

Unrealized gain on interest rate swaps designated as cash flow hedges-net of tax

4,213

4,213

1,122

5,335

Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions

(1,618)

(1,618)

(1,618)

Balance at June 30, 2022

65,442,389

$

654

12,034,104

$

120

$

910,222

$

87,180

$

15,859

$

1,014,035

$

234,821

$

1,248,856

See notes to unaudited condensed consolidated financial statements

6

FOCUS FINANCIAL PARTNERS INC.

Unaudited condensed consolidated statements of changes in equity

Six months ended June 30, 2021 and 2022

(In thousands, except share amounts)

Accumulated

Class A

Class B

Additional

Other

Total

Common Stock

Common Stock

Paid-In

Retained

Comprehensive

Shareholders’

Non-controlling

    

Shares

    

Amount

    

Shares

    

Amount

    

 Capital

    

Earnings

    

Income

    

Equity

    

Interest

    

Total Equity

Balance at January 1, 2021

51,158,712

$

512

20,661,595

$

207

$

526,664

$

14,583

$

(2,167)

$

539,799

$

319,080

$

858,879

Net income

2,233

2,233

5,423

7,656

Issuance of units in connection with an acquisition and contingent consideration

168,392

1

1

1

Issuance (cancellation) of common stock in connection with offering, net

6,568,098

65

(6,306,301)

(63)

317,858

317,860

317,860

Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights

1,830,946

18

(1,830,946)

(18)

87,776

87,776

87,776

Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights

134,632

2

6,523

6,525

6,525

Exercise of stock options

100,501

1

3,175

3,176

3,176

Change in non-controlling interest allocation

(309,485)

(309,485)

(95,899)

(405,384)

Non-cash equity compensation expenses

2,290

2,290

2,290

Currency translation adjustment-net of tax

(781)

(781)

(38)

(819)

Unrealized gain on interest rate swaps designated as cash flow hedges-net of tax

3,682

3,682

1,823

5,505

Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions