Focus Financial Partners said it made a total of 38 deals with registered investment advisory firms in 2021, including 14 partner firm acquisitions and 24 mergers. In the fourth quarter alone, the firm closed 22 deals, including nine partner firm acquisitions and 13 mergers.
On a call with analysts Thursday morning, CEO Rudy Adolph said the firm’s pipeline of deals remains strong in 2022, and it is on track to achieve its goals set at its Investor Day in December. That’s when Focus said it expects to grow to 125 partner firms, up from 84 currently, with $4 billion in revenue, $1.1 billion in EBITDA and a 28% margin.
Adolf said Thursday that while it expects some level of market volatility this year, Focus anticipates annual revenue and adjusted EBITDA growth of more than 20%, as well as adjusted EBITDA margin of 25.5% this year. .
“The value of financial advice and longstanding client relationships provide a solid foundation for this approach,” Adolf said. “We are uniquely positioned in a multi-trillion-dollar global industry that is experiencing a transformational change, driven by the need for succession and scale.”
Focus posted fourth-quarter revenue of $523.9 million, up 38% year-over-year, beating analysts’ expectations by nearly $40 million. The firm said that was driven by $111.6 million in revenue growth from existing partner firms. Fourth-quarter non-GAAP earnings per share was $1.10, which beat analysts’ expectations by 7 cents. Adjusted EBITDA during the quarter was $129 million, up approximately 42% from the prior year.
Organic revenue growth in the fourth quarter was 26.6% year-over-year.
Focus last week announced a new partnership with alternative investment platform CAIS to bring a customized version of its platform to Focus partner firms.
On the earnings call, Adolf detailed the firms’ plans to grow internationally. The firm currently has a presence in Canada, the United Kingdom and Australia, and will do more in those markets. But the firm will also venture into new countries, he said.
At present, the share of international business in the focus revenue is just 5.8 per cent. But Adolf wants to get it to 20-25% over time, so that they can get the real benefits of diversification.
“Our model and our value proposition—entrepreneurship, value-added services and fixed capital—are very unique in the US,” Adolf said. “In these international markets, this is simply unheard of. There is consolidation, there is regulatory change, there is a whole number of dynamics where markets are moving more towards a fiduciary model.
“This always creates tremendous opportunities because ultimately we know more about fiduciary wealth management at our scale than anyone else in the world,” he said. “It’s a major competitive advantage.”