Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Feb. 13, 2023 | Jun. 30, 2022 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Entity File Number | 001-38604 | ||
Entity Registrant Name | Focus Financial Partners Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 47-4780811 | ||
Entity Address, Address Line One | 875 Third Avenue, 28th Floor | ||
Entity Address, City or Town | New York | ||
Entity Address, State or Province | NY | ||
Entity Address, Postal Zip Code | 10022 | ||
City Area Code | 646 | ||
Local Phone Number | 519-2456 | ||
Title of 12(b) Security | Class A common stock, par value $0.01 per share | ||
Trading Symbol | FOCS | ||
Security Exchange Name | NASDAQ | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Auditor Name | DELOITTE & TOUCHE LLP | ||
Auditor Firm ID | 34 | ||
Auditor Location | New York, New York | ||
Entity Central Index Key | 0001651052 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 1,963,340,301 | ||
Class A common stock | |||
Document and Entity Information | |||
Entity Common Stock, Shares Outstanding | 65,935,962 | ||
Class B common stock | |||
Document and Entity Information | |||
Entity Common Stock, Shares Outstanding | 11,827,321 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
ASSETS | ||
Cash and cash equivalents | $ 139,973 | $ 310,684 |
Accounts receivable less allowances of $3,255 at 2021 and $3,862 at 2022 | 217,219 | 198,827 |
Prepaid expenses and other assets | 151,356 | 123,826 |
Fixed assets-net | 54,748 | 47,199 |
Operating lease assets | 258,697 | 249,850 |
Debt financing costs-net | 7,590 | 4,254 |
Deferred tax assets-net | 230,130 | 267,332 |
Goodwill | 2,167,917 | 1,925,315 |
Other intangible assets-net | 1,639,124 | 1,581,719 |
TOTAL ASSETS | 4,866,754 | 4,709,006 |
LIABILITIES | ||
Accounts payable | 12,213 | 11,580 |
Accrued expenses | 80,679 | 72,572 |
Due to affiliates | 70,974 | 105,722 |
Deferred revenue | 10,726 | 10,932 |
Contingent consideration and other liabilities | 335,033 | 468,284 |
Deferred tax liabilities | 29,579 | 31,973 |
Operating lease liabilities | 288,895 | 277,324 |
Borrowings under credit facilities (stated value of $2,407,302 and $2,563,970 at December 31, 2021 and December 31, 2022, respectively) | 2,510,749 | 2,393,669 |
Tax receivable agreements obligations | 224,611 | 219,542 |
TOTAL LIABILITIES | 3,563,459 | 3,591,598 |
COMMITMENTS AND CONTINGENCIES (Note 14) | ||
EQUITY | ||
Additional paid-in capital | 918,044 | 841,753 |
Retained earnings | 116,779 | 24,995 |
Accumulated other comprehensive income | 18,318 | 3,029 |
Total shareholders' equity | 1,053,918 | 870,544 |
Non-controlling interest | 249,377 | 246,864 |
Total equity | 1,303,295 | 1,117,408 |
TOTAL LIABILITIES AND EQUITY | 4,866,754 | 4,709,006 |
Class A common stock | ||
EQUITY | ||
Common stock | 659 | 653 |
Class B common stock | ||
EQUITY | ||
Common stock | $ 118 | $ 114 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Accounts receivable, allowances | $ 3,862 | $ 3,255 |
Borrowings under credit facilities, stated value | $ 2,563,970 | $ 2,407,302 |
Class A common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 500,000,000 |
Common stock, issued shares | 65,929,644 | 65,320,124 |
Common stock, outstanding shares | 65,929,644 | 65,320,124 |
Class B common stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 500,000,000 | 500,000,000 |
Common stock, issued shares | 11,827,321 | 11,439,019 |
Common stock, outstanding shares | 11,827,321 | 11,439,019 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
REVENUES: | |||
Total revenues | $ 2,143,321 | $ 1,797,951 | $ 1,361,319 |
OPERATING EXPENSES: | |||
Compensation and related expenses | 729,891 | 591,121 | 476,208 |
Management fees | 530,329 | 491,433 | 349,475 |
Selling, general and administrative | 376,417 | 297,636 | 236,377 |
Intangible amortization | 261,842 | 187,848 | 147,783 |
Non-cash changes in fair value of estimated contingent consideration | (64,747) | 112,416 | 19,197 |
Depreciation and other amortization | 15,281 | 14,625 | 12,451 |
Total operating expenses | 1,849,013 | 1,695,079 | 1,241,491 |
INCOME FROM OPERATIONS | 294,308 | 102,872 | 119,828 |
OTHER INCOME (EXPENSE): | |||
Interest income | 791 | 422 | 453 |
Interest expense | (99,887) | (55,001) | (41,658) |
Amortization of debt financing costs | (3,999) | (3,958) | (2,909) |
Loss on extinguishment of borrowings | (1,807) | (6,094) | |
Other expense-net | (11,370) | (337) | (214) |
Income from equity method investments | 319 | 524 | 219 |
Total other expense-net | (115,953) | (58,350) | (50,203) |
INCOME BEFORE INCOME TAX | 178,355 | 44,522 | 69,625 |
INCOME TAX EXPENSE | 53,077 | 20,082 | 20,660 |
NET INCOME | 125,278 | 24,440 | 48,965 |
Non-controlling interest | (33,494) | (14,028) | (20,920) |
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 91,784 | 10,412 | 28,045 |
Wealth management fees | |||
REVENUES: | |||
Total revenues | 2,056,328 | 1,717,365 | 1,286,130 |
Other | |||
REVENUES: | |||
Total revenues | $ 86,993 | $ 80,586 | $ 75,189 |
Class A common stock | |||
Income per share of Class A common stock: | |||
Basic (in dollars per share) | $ 1.40 | $ 0.18 | $ 0.58 |
Diluted (in dollars per share) | $ 1.39 | $ 0.18 | $ 0.57 |
Weighted average shares of Class A common stock outstanding: | |||
Basic (in shares) | 65,552,592 | 57,317,477 | 48,678,584 |
Diluted (in shares) | 65,810,215 | 57,831,151 | 48,796,613 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $ 125,278 | $ 24,440 | $ 48,965 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation adjustments | (10,255) | (5,332) | 7,555 |
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges | 30,145 | 13,212 | (8,596) |
Comprehensive income | 145,168 | 32,320 | 47,924 |
Less: Comprehensive income attributable to noncontrolling interest | (38,095) | (16,712) | (20,747) |
Comprehensive income attributable to common shareholders | $ 107,073 | $ 15,608 | $ 27,177 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 125,278 | $ 24,440 | $ 48,965 |
Adjustments to reconcile net income to net cash provided by operating activities-net of effect of acquisitions: | |||
Intangible amortization | 261,842 | 187,848 | 147,783 |
Depreciation and other amortization | 15,281 | 14,625 | 12,451 |
Amortization of debt financing costs | 3,999 | 3,958 | 2,909 |
Non-cash equity compensation expense | 30,453 | 31,602 | 22,285 |
Non-cash changes in fair value of estimated contingent consideration | (64,747) | 112,416 | 19,197 |
Income from equity method investments | (319) | (524) | (219) |
Distributions received from equity method investments | 1,396 | 1,143 | 231 |
Deferred taxes and other non-cash items | 32,243 | (8,568) | 2,618 |
Loss on extinguishment of borrowings | 1,807 | 6,094 | |
Changes in cash resulting from changes in operating assets and liabilities: | |||
Accounts receivable | (16,778) | (32,006) | (37,913) |
Prepaid expenses and other assets | (245) | 2,103 | 74 |
Accounts payable | (82) | 486 | 606 |
Accrued expenses | 10,445 | 14,444 | 10,876 |
Due to affiliates | (35,060) | 38,831 | 7,650 |
Contingent consideration and other liabilities | (74,765) | (77,423) | (29,683) |
Deferred revenue | (2,149) | 543 | (2,563) |
Net cash provided by operating activities | 288,599 | 313,918 | 211,361 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Cash paid for acquisitions and contingent consideration-net of cash acquired | (461,522) | (979,062) | (348,674) |
Purchase of fixed assets | (21,017) | (11,018) | (19,349) |
Investments and other, net | 7,358 | (17,232) | (4,950) |
Net cash used in investing activities | (475,181) | (1,007,312) | (372,973) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Borrowings under credit facilities | 1,998,900 | 1,318,375 | 555,000 |
Repayments of borrowings under credit facilities | (1,873,332) | (425,320) | (326,566) |
Proceeds from issuance of common stock, net | 219,636 | ||
Payments in connection with unit redemption, net | (57,735) | ||
Payments in connection with tax receivable agreements | (3,856) | (4,423) | |
Contingent consideration paid | (62,025) | (78,092) | (49,891) |
Payments of deferred acquisition consideration | (1,484) | ||
Payments of debt financing costs | (19,072) | (8,282) | (634) |
Proceeds from exercise of stock options | 1,158 | 8,350 | 6,912 |
Equity awards withholding | (685) | (1,343) | (386) |
Other | 372 | (58) | (147) |
Distributions for unitholders | (22,984) | (32,311) | (22,457) |
Net cash provided by financing activities | 16,992 | 938,797 | 161,831 |
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (1,121) | (577) | 461 |
CHANGE IN CASH AND CASH EQUIVALENTS | (170,711) | 244,826 | 680 |
CASH AND CASH EQUIVALENTS: | |||
Beginning of period | 310,684 | 65,858 | 65,178 |
End of period | $ 139,973 | $ 310,684 | $ 65,858 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Total Shareholders' Equity | Common Stock Class A common stock | Common Stock Class B common stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interest | Total |
Beginning balance at Dec. 31, 2019 | $ 484,120 | $ 474 | $ 221 | $ 498,186 | $ (13,462) | $ (1,299) | $ 319,850 | $ 803,970 |
Beginning balance (in shares) at Dec. 31, 2019 | 47,421,315 | 22,075,749 | ||||||
Increase (Decrease) in shareholders' equity | ||||||||
Net income | 28,045 | 28,045 | 20,920 | 48,965 | ||||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights | 43,235 | $ 14 | $ (14) | 43,235 | 43,235 | |||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights (in shares) | 1,414,154 | (1,414,154) | ||||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights | 69,457 | $ 21 | 69,436 | 69,457 | ||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights (in shares) | 2,058,146 | |||||||
Forfeiture of unvested Class A common stock | (27) | (27) | (27) | |||||
Forfeiture of unvested Class A common stock (in shares) | (834) | |||||||
Exercise of stock options | 7,801 | $ 2 | 7,799 | 7,801 | ||||
Exercise of stock options (in shares) | 251,913 | |||||||
Restricted stock units vesting and related withholdings | (386) | $ 1 | (387) | (386) | ||||
Restricted stock units vesting and related withholdings (in shares) | 14,018 | |||||||
Change in non-controlling interest allocation | (96,443) | (96,443) | (21,517) | (117,960) | ||||
Non-cash equity compensation expenses | 4,798 | 4,798 | 4,798 | |||||
Currency translation adjustment - net of tax | 4,689 | 4,689 | 2,866 | 7,555 | ||||
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges-net of tax | (5,557) | (5,557) | (3,039) | (8,596) | ||||
Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | 67 | 67 | 67 | |||||
Ending balance at Dec. 31, 2020 | 539,799 | $ 512 | $ 207 | 526,664 | 14,583 | (2,167) | 319,080 | 858,879 |
Ending Balance (in shares) at Dec. 31, 2020 | 51,158,712 | 20,661,595 | ||||||
Increase (Decrease) in shareholders' equity | ||||||||
Net income | 10,412 | 10,412 | 14,028 | 24,440 | ||||
Issuance of common stock in connection with an acquisition and contingent consideration | 3,520 | $ 1 | $ 5 | 3,514 | 3,520 | |||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 58,657 | 614,362 | ||||||
Issuance (cancellation) of common stock in connection with offering, net | 511,728 | $ 100 | $ (63) | 511,691 | 511,728 | |||
Issuance (cancellation) of common stock in connection with offering, net (in shares) | 10,114,939 | (6,306,301) | ||||||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights | 194,410 | $ 35 | $ (35) | 194,410 | 194,410 | |||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights (in shares) | 3,542,853 | (3,542,853) | ||||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights | 9,400 | $ 2 | 9,398 | 9,400 | ||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights (in shares) | 185,563 | |||||||
Exercise of stock options | 7,461 | $ 3 | 7,458 | 7,461 | ||||
Exercise of stock options (in shares) | 235,684 | |||||||
Restricted stock units vesting and related withholdings | (971) | (971) | (971) | |||||
Restricted stock units vesting and related withholdings (in shares) | 23,716 | |||||||
Restricted common units vesting (in shares) | 12,216 | |||||||
Change in non-controlling interest allocation | (434,901) | (434,901) | (88,928) | (523,829) | ||||
Non-cash equity compensation expenses | 6,036 | 6,036 | 6,036 | |||||
Currency translation adjustment - net of tax | (4,175) | (4,175) | (1,157) | (5,332) | ||||
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges-net of tax | 9,371 | 9,371 | 3,841 | 13,212 | ||||
Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | 18,454 | 18,454 | 18,454 | |||||
Ending balance at Dec. 31, 2021 | 870,544 | $ 653 | $ 114 | 841,753 | 24,995 | 3,029 | 246,864 | 1,117,408 |
Ending Balance (in shares) at Dec. 31, 2021 | 65,320,124 | 11,439,019 | ||||||
Increase (Decrease) in shareholders' equity | ||||||||
Net income | 91,784 | 91,784 | 33,494 | 125,278 | ||||
Issuance of common stock in connection with an acquisition and contingent consideration | 9 | $ 9 | 9 | |||||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 839,184 | |||||||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights | 19,657 | $ 5 | $ (5) | 19,657 | 19,657 | |||
Issuance (cancellation) of common stock in connection with exercise of Focus LLC common unit exchange rights (in shares) | 488,258 | (488,258) | ||||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights | 1,735 | $ 1 | 1,734 | 1,735 | ||||
Issuance of common stock in connection with exercise of Focus LLC incentive unit exchange rights (in shares) | 43,720 | |||||||
Exercise of stock options | 1,158 | 1,158 | 1,158 | |||||
Exercise of stock options (in shares) | 42,076 | |||||||
Restricted stock units vesting and related withholdings | (763) | (763) | (763) | |||||
Restricted stock units vesting and related withholdings (in shares) | 35,466 | |||||||
Restricted common units vesting (in shares) | 37,376 | |||||||
Change in non-controlling interest allocation | 53,127 | 53,127 | (35,582) | 17,545 | ||||
Non-cash equity compensation expenses | 8,726 | 8,726 | 8,726 | |||||
Currency translation adjustment - net of tax | (8,336) | (8,336) | (1,919) | (10,255) | ||||
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges-net of tax | 23,625 | 23,625 | 6,520 | 30,145 | ||||
Adjustments of deferred taxes, net of amounts payable under tax receivable agreements and changes from Focus LLC interest transactions | (7,348) | (7,348) | (7,348) | |||||
Ending balance at Dec. 31, 2022 | $ 1,053,918 | $ 659 | $ 118 | $ 918,044 | $ 116,779 | $ 18,318 | $ 249,377 | $ 1,303,295 |
Ending Balance (in shares) at Dec. 31, 2022 | 65,929,644 | 11,827,321 |
GENERAL
GENERAL | 12 Months Ended |
Dec. 31, 2022 | |
GENERAL | |
GENERAL | 1. GENERAL Organization Focus Financial Partners Inc. (“Focus Inc.”) is a holding company that was formed as a Delaware corporation on July 29, 2015. Focus Inc. is the managing member of Focus Financial Partners, LLC (“Focus LLC”) and operates and controls the businesses and affairs of Focus LLC. Focus LLC is a Delaware limited liability company that was formed in November 2004. Focus LLC’s subsidiaries commenced revenue generating and acquisition activities in January 2006. Focus LLC’s activities are governed by its Fourth Amended and Restated Operating Agreement, as amended (the “Operating Agreement”). The consolidated financial statements reflect the results of operations and financial position of Focus Inc. and its subsidiaries (the “Company”). Business The Company is in the business of acquiring and overseeing independent fiduciary wealth management and related businesses. The Company typically acquires 100% of the net assets or equity of the wealth management businesses on terms that are generally consistent for each acquisition. To determine the acquisition price, the Company first estimates the operating cash flow of the business to be acquired based on current and projected levels of revenue and expenses. For this purpose, the Company defines operating cash flow as cash revenue of the business, less cash expenses, other than compensation and benefits to the selling entrepreneurs or individuals who typically become principals of the management entities discussed below. The Company refers to the estimated operating cash flow earnings before partner compensation as target earnings (“Target Earnings”). The acquisition price is a multiple of a portion of the Target Earnings, referred to as base earnings (“Base Earnings”). At the date of each of the respective acquisitions, the Company typically enters into a management agreement (“Management Agreement”) with a management company (“Management Company”) that is owned substantially by the selling principals of the acquired businesses. The Management Company earns management fees to manage the daily operations of the acquired business. The terms of the Management Agreements are generally six years with automatic renewals for consecutive one-year terms, unless terminated by either the Management Company or the Company. Under the Management Agreement, the Management Company is entitled to management fees typically consisting of all future earnings of the acquired business in excess of the Base Earnings up to Target Earnings, plus a percentage of any earnings in excess of Target Earnings. The Company, through its respective operating subsidiary, retains a preferred position in the Base Earnings. To the extent earnings of an acquired business in any year are less than the Base Earnings, in the following year the Company, through its respective operating subsidiary, is entitled to receive the Base Earnings together with the prior years’ shortfall before any management fees are earned by the Management Company. Since each Management Company is neither acquired nor consolidated, management fees are included in the Company’s consolidated statements of operations as operating expenses. Estimated management fees due are included in due to affiliates in the accompanying consolidated balance sheets. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates Focus LLC and its subsidiaries’ financial statements and records the interests in Focus LLC consisting of common units, restricted common units and the common unit equivalent of incentive units of Focus LLC that the Company does not own as non-controlling interests, see Note 3. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Income Per Share Income per share is computed in accordance with Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share Revenue Recognition Wealth Management Fees The Company recognizes revenue from wealth management fees, which are primarily composed of fees earned for advising on the assets of clients, financial and tax planning fees, consulting fees, tax return preparation fees, fees for family office services, and fees for wealth management and operational support services provided to third-party wealth management firms. Client arrangements may contain one of the services or multiple services, resulting in either a single or multiple performance obligations within the same client arrangement, each of which are separately identifiable and priced, and accounted for as the related services are provided and consumed over time. Fees are primarily based either on a contractual percentage of the client’s assets based on the market value of the client’s assets on the predetermined billing date, a flat fee, an hourly rate based on predetermined billing rates or a combination of such fees and are billed either in advance or arrears on a monthly, quarterly, or semiannual basis. Revenue is recognized over the respective service period based on time elapsed or hours expended, as the case may be, which is deemed to be the most faithful depiction of the transfer of services as clients benefit from services over the respective period. Revenue for wealth management and operational support services provided to third party wealth management firms is presented net since these services are performed in an agent capacity. Client agreements typically do not have a specified term and may be terminated at any time by either party subject to the respective termination and notification provisions in each agreement. A majority of the Company’s wealth management fees are correlated to the markets, and therefore are considered variable consideration. The Company’s market-correlated fees are dependent on the market and, thus, are susceptible to factors outside the Company’s control. Therefore, at inception of the contractual service period for fees which are based on the market values at the end of the service period, the Company cannot conclude that it is probable that a reversal in the cumulative revenue recognized would not occur if the estimate was included in the transaction price at that time. However, at each quarterly reporting date, the Company updates its estimate of the transaction price as the market uncertainty is typically resolved. The Company can then reasonably conclude that a reversal of the variable consideration will not occur for those services already provided. Wealth management fees are recorded when: (i) an arrangement with a client has been identified; (ii) the performance obligations have been identified; (iii) the fee or other transaction price has been determined; (iv) the fee or other transaction price has been allocated to each performance obligation based on standalone fee rates; and (v) the Company has satisfied the applicable performance obligation. Other Other revenue includes fees earned for recordkeeping and administration services provided to employee benefit plans as well as commissions and distribution fees and outsourced services. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Recordkeeping and administration and outsourced services revenue, in accordance with the same five criteria above, are recognized over the period in which services are provided. Commissions and distribution fees are recognized when earned. The Company disaggregates revenue based on the above two categories. The Company does not allocate revenue by the type of service provided in connection with providing holistic wealth management client services. The Company generally manages its business based on the operating results of the enterprise taken as a whole, not by geographic region. The following table disaggregates the revenues based on the location of the partner firm legal entities that generate the revenues, and therefore may not be reflective of the geography in which clients are located, for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Domestic revenue $ 1,291,630 $ 1,691,345 $ 2,016,845 International revenue 69,689 106,606 126,476 Total revenue $ 1,361,319 $ 1,797,951 $ 2,143,321 International revenue consists of revenue generated by partner firm legal entities primarily in Australia, Canada, Switzerland, the United Kingdom and in other non-US jurisdictions. Deferred Revenue Fees collected in advance are deferred and recognized in revenue over the period earned with the unrecognized portion of fees collected in advance recorded as deferred revenue in the accompanying consolidated balance sheets. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Accounts Receivable Accounts receivable are stated at their net realizable value. Allowances for uncollectible accounts are maintained for estimated losses resulting from the inability of customers to make required payments. In determining these estimates, historical write-offs, the aging of the receivables and other factors, such as overall economic conditions, are considered. Fixed Assets Fixed assets are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives for fixed assets, primarily consisting of computers, equipment and furniture fixtures three Debt Financing Costs Direct costs incurred with obtaining debt financing are capitalized or recorded as a reduction of the underlying debt. The costs are amortized over the respective term of the underlying debt and are included in amortization of debt financing costs in the accompanying consolidated statements of operations. Business Acquisitions Business acquisitions are accounted for in accordance with ASC Topic 805: Business Combinations The Company has incorporated contingent consideration, or earn out provisions, into the structure of its business acquisitions. These arrangements may result in the payment of additional purchase price consideration to the sellers based on the growth of certain financial thresholds for periods following the closing of the respective acquisition. The additional purchase price consideration is payable in the form of cash and, in some cases, equity. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in exchange for the acquired business. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying consolidated statements of operations. The results of the acquired businesses have been included in the Company’s consolidated financial statements from the respective dates of acquisition. Investments The equity method of accounting is applied to investments where the Company has the ability to exercise significant influence over operating and financial matters. During the years ended December 2021 and 2022, the Company acquired minority equity interests in wealth management firms for $1,632 and $5,232 in cash that are accounted for using the equity method of accounting. The Company records other equity investments that do not have readily determinable fair values at cost less impairment, if any, plus or minus changes resulting from observable price changes. Investments are periodically reviewed for impairment. During the year ended December 31, 2021, the Company invested $18,000 in a publicly traded mutual fund that was sold during the year ended December 31, 2022. Unrealized and realized gains and losses are recognized in other expense-net in the consolidated statements of operations. The Company’s investments are included in prepaid expenses and other assets in the consolidated balance sheets. Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is deemed to have an indefinite useful life and is not amortized. Intangible and other long-lived assets are amortized over their respective estimated useful lives. The Company has no indefinite-lived intangible assets. Goodwill is tested annually for impairment as of October 1, or more frequently if events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company compares the fair value of the reporting unit to the carrying value of the net assets of the reporting unit. The fair value of the reporting unit is determined using a market approach. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit no further consideration is necessary. If the carrying value exceeds the fair value of the reporting unit, the Company would record an impairment charge for the amount that the carrying value exceeds the fair value of the reporting unit. Intangible assets and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the asset might be impaired or that the estimated useful life should be changed prospectively. If impairment indicators are present, the recoverability of these assets is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined using a discounted cash flow approach. Fair Value of Financial Instruments The carrying amounts of substantially all of the Company’s financial assets and liabilities are considered to approximate their fair values because of their short-term nature. The carrying amount of First Lien Revolver borrowings (as defined below) and First Lien Term Loan A borrowings (as defined below) under the Credit Facility (as defined below) approximates fair value, as the debt bears interest at selected short-term variable market rates. The Company measures the implied fair value of its First Lien Term Loan B (as defined below) and interest rate swap agreements using trading levels and the relevant interest rate forward curves obtained from third-party service providers; accordingly, they are classified within Level 2 of the valuation hierarchy. The fair value of the Company’s investment in a mutual fund was determined using quoted market prices within Level 1 of the valuation hierarchy. See Note 7 for further information regarding the Company’s fair value measurements. Derivatives The Company uses derivative instruments for purposes other than trading. Derivative instruments are accounted for in accordance with ASC Topic No. 815, Derivatives and Hedging as hedges and have been designated as part of a hedging relationship for accounting purposes do not impact earnings until the hedged item is recognized in earnings. The Company uses interest rate swaps to manage its mix of fixed and floating rate debt. These instruments have been designated as cash flow hedges at inception and are measured for effectiveness both at inception and on an ongoing basis. In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London InterBank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. The Company applied the provisions of ASU No. 2020-04 in connection with the November 2022 amendment to the Credit Facility and related modification of its derivative contracts (See Notes 8 and 9). Income Taxes Focus Inc. is a holding company whose most significant asset is a membership interest in Focus LLC. Focus Inc. is subject to U.S. federal, state and local income taxes on Focus Inc.’s allocable portion of taxable income from Focus LLC. Focus LLC is treated as a partnership for U.S. federal income tax purposes. Accordingly, Focus LLC is generally not and has not been subject to U.S. federal and certain state income taxes at the entity level, although it has been subject to the New York City Unincorporated Business Tax and certain of its subsidiaries have been subject to U.S. federal and certain state and local or foreign income taxes. Instead, for U.S. federal and certain state income tax purposes, the income, deductions, losses and credits of Focus LLC are passed through to its unitholders, including Focus Inc. Focus LLC makes tax distribution payments to the extent of available cash, in accordance with the Operating Agreement. The Company files income tax returns with the U.S. federal government as well as various state and local jurisdictions. The asset and liability method is applied for deferred income taxes. Deferred tax assets and liabilities are recognized on a net basis for each tax paying component for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Valuation allowances, if any, are recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized. The Company reviews and evaluates tax positions in its major tax jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition. Based on this review, no reserves for uncertain tax positions were recorded at December 31, 2021 and 2022. Segment Reporting Management has determined that the Company operates in one operating segment, as a wealth management focused organization, which is consistent with its structure and how the Company manages the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and the Company’s businesses are subject to a similar regulatory framework. Furthermore, the Company’s Chief Operating Decision Maker, which is the Company’s Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources. Translation of Non-U.S. Currency Amounts Assets and liabilities of non-U.S. subsidiaries that have a foreign currency as their functional currency are re-measured to U.S. dollars at year-end exchange rates, and revenues and expenses are re-measured at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in other expense—net in the consolidated statements of operations. Consolidation Considerations ASC Topic 810, Consolidations The Company’s subsidiaries have Management Agreements with the respective Management Company, which causes these Company subsidiaries to be VIEs. The Company has assessed whether or not it is the primary beneficiary for these subsidiaries and has concluded that it is the primary beneficiary. Accordingly, the results of these subsidiaries have been consolidated. Certain of the Company’s subsidiaries have variable interests in certain investment funds that are deemed voting interest entities. Due to substantive kick-out rights possessed by the limited partners of these funds, the Company does not consolidate the investment funds. From time to time, the Company enters into option agreements with wealth management businesses (the “Optionee”). In exchange for payment of an option premium, the option agreement allows the Company, at its sole discretion, to acquire the Optionee at a predetermined time and at a predetermined purchase price formula. If the Company chooses to exercise its option to acquire the Optionee, the acquisition and the corresponding Management Agreement would be executed in accordance with the Company’s typical acquisition structure as discussed in Note 1. The Company has determined that the option agreements with the Optionees qualify the Optionees as VIEs. The Company has determined that it is not the primary beneficiary of the Optionees and does not consolidate the results of the Optionees. An option premium of $2,000 was paid by the Company to a Singapore based wealth management firm during the year ended December 31, 2022 and is included in prepaid expenses and other assets in the consolidated balance sheets as of December 31, 2022. There were no option premiums as of December 31, 2021. Stock Based Compensation Costs Compensation cost for Focus LLC incentive units and Focus Inc. stock option awards is measured based on the fair value of awards determined by the Black-Scholes option pricing model or the Monte Carlo Simulation Model on the date that the awards are granted or modified, and is adjusted for the estimated number of awards that are expected to be forfeited. Compensation cost for unvested Class A common stock and restricted stock units, as well as Focus LLC restricted common units, is measured based on the market value of the Company’s Class A common stock on the date that the awards are granted and is adjusted for the estimated number of awards that are expected to be forfeited. The compensation cost is recognized on a straight-line basis over the requisite service period. Non-cash equity compensation expense, associated with employees and non-employees, including principals in the management companies, is included in compensation and related expenses in the consolidated statements of operations. The Company estimates forfeitures at the time of the respective grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate forfeitures and records non-cash equity compensation expense only for those awards that are expected to vest. Leases The Company leases office space in various locations under noncancelable lease agreements with various expiration dates. The Company determines if a contract contains a lease at inception. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Many of these lease agreements provide for tenant improvement allowances, rent increases, and/or rent-free periods. Operating lease expense is recognized on a straight-line basis commencing with the possession date of the property, which is typically the earlier of the lease commencement date or the date when the Company takes possession of the property. Operating lease costs are included in selling, general and administrative expenses in the consolidated statements of operations. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is an estimated incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Leases with an initial term of 12 months or less, which are immaterial to the consolidated financial statements, are not recorded on the balance sheet. The Company has a limited number of finance leases which are not material to the consolidated financial statements. |
NON-CONTROLLING INTERESTS AND I
NON-CONTROLLING INTERESTS AND INCOME PER SHARE | 12 Months Ended |
Dec. 31, 2022 | |
NON-CONTROLLING INTERESTS AND INCOME PER SHARE | |
NON-CONTROLLING INTERESTS AND INCOME PER SHARE | 3. NON-CONTROLLING INTERESTS AND INCOME PER SHARE The calculation of controlling and non-controlling interest is as follows as of December 31, 2021 and 2022: 2021 2022 Focus LLC common units 11,439,019 11,827,321 Focus LLC restricted common units 193,625 296,548 Common unit equivalents of outstanding vested and unvested Focus LLC incentive units(1) 8,996,789 5,196,288 Total common units, restricted common units and common unit equivalents attributable to non-controlling interest 20,629,433 17,320,157 Total common units, restricted common units and common unit equivalents of incentive units outstanding 85,949,557 83,249,801 Non-controlling interest allocation 24.0 % 20.8 % Company’s interest in Focus LLC 76.0 % 79.2 % (1) Focus LLC common units issuable upon conversion of 16,146,524 and 16,602,886 (see Note 10) vested and unvested Focus LLC incentive units outstanding as of December 31, 2021 and 2022, respectively, were calculated using the common unit equivalent of vested and unvested Focus LLC incentive units based on the closing price of the Company’s Class A common stock on the last trading day of the period. Basic income per share is calculated utilizing net income attributable to common shareholders divided by the weighted average number of shares of Class A common stock outstanding during the same period. The calculation of basic income per share for the years ended December 31, 2020, 2021 and 2022 is as follows: 2020 2021 2022 Basic income per share: Net income attributable to common shareholders $ 28,045 $ 10,412 $ 91,784 Weighted average shares of Class A common stock outstanding 48,678,584 57,317,477 65,552,592 Basic income per share $ 0.58 $ 0.18 $ 1.40 Diluted income per share is calculated utilizing net income attributable to common shareholders divided by the weighted average number of shares of Class A common stock outstanding during the same periods plus the effect, if any, of the potentially dilutive shares of the Company’s Class A common stock from stock options, unvested Class A Common Stock, restricted stock units and Focus LLC common units, including contingently issuable Focus LLC common units, if any, restricted common units and incentive units as calculated using the treasury stock method. The calculation of diluted income per share for the years ended December 31, 2020, 2021 and 2022 is as follows: 2020 2021 2022 Diluted income per share: Net income attributable to common shareholders $ 28,045 $ 10,412 $ 91,784 Weighted average shares of Class A common stock outstanding 48,678,584 57,317,477 65,552,592 Effect of dilutive stock options 77,302 461,306 235,187 Effect of dilutive unvested Class A common stock 23,822 — — Effect of dilutive restricted stock units 16,905 52,368 22,436 Total 48,796,613 57,831,151 65,810,215 Diluted income per share $ 0.57 $ 0.18 $ 1.39 Diluted income per share for the years ended December 31, 2020, 2021 and 2022 excludes shares related to market-based stock options and Focus LLC incentive units, as modified, that vest on the sixth anniversary of the pricing of the Company’s initial public offering (“IPO”) with vesting based on the highest volume weighted average per share price for any ninety-calendar day period (“90-day VWAP”) prior to the anniversary, with 0% vesting if the highest 90-day VWAP is $80.00 or less and 100% vesting if the highest 90-day VWAP is $110.00 or more, with linear interpolation in between (see Note 10). These market-based stock options and Focus LLC incentive units will also vest upon a change of control linearly based on the share price used in the transaction with 100% vesting if the price used is $110.00, 0% vesting if the price used is equal to or less than $33.00, and linear interopolation in between, except as governed by the employment agreements entered into with the Company’s executive officers. Such market-based and other criteria were not met during the years ended December 31, 2020, 2021 and 2022. Focus LLC common units and vested incentive units may be exchanged for Class A common stock, subject to certain limitations (see Note 10). In computing the dilutive effect, if any, that the exchange would have on net income per share, net income attributable to Class A common shareholders would be adjusted due to the elimination of the non-controlling interests (including any associated tax impact). For the years ended December 31, 2020, 2021 and 2022, such exchange is not reflected in diluted income per share as the assumed exchange is not dilutive. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2022 | |
ACQUISITIONS | |
ACQUISITIONS | 4. ACQUISITIONS Business Acquisitions The purchase price associated with business acquisitions and the allocation thereof during the years ended December 31, 2020, 2021 and 2022, is summarized as follows: 2020 2021 2022 Number of business acquisitions closed 21 36 18 Consideration: Cash due at closing $ 327,722 $ 983,240 $ 450,943 Estimated working capital adjustments and other (174) (577) 1,127 Cash due subsequent to closing at net present value — 86,778 9,611 Fair market value of Focus LLC common units issued — 23,118 28,992 Fair market value of Class A common stock issued — 3,515 — Fair market value of estimated contingent consideration 46,918 212,074 56,604 Total consideration $ 374,466 $ 1,308,148 $ 547,277 Allocation of purchase price: Total tangible assets $ 21,216 $ 61,854 $ 29,991 Total liabilities assumed (31,680) (83,444) (32,551) Customer relationships 215,686 616,283 287,172 Management contracts 7,774 33,350 11,414 Goodwill 160,341 677,195 249,677 Other acquired intangibles 1,129 2,910 1,574 Total allocated consideration $ 374,466 $ 1,308,148 $ 547,277 Management believes approximately $461,746 of tax goodwill and intangibles related to business acquisitions completed during the year ended December 31, 2022 will be deductible for tax purposes over a 15 year period. Additional tax goodwill may be deductible when estimated contingent consideration is earned and paid. A portion of the cash due at closing for one of the Company’s 2021 business acquisitions was placed in escrow for the satisfaction of certain indemnifications and other related items, if any. The accompanying consolidated statement of operations for the year ended December 31, 2022 includes revenue and income from operations for business acquisitions that are new subsidiary partner firms from the date they were acquired of $29,883 and $3,140, respectively. Asset Acquisitions The Company also separately purchases customer relationships and other intangible assets. These purchases are accounted for as asset acquisitions as they do not qualify as business acquisitions pursuant to ASC Topic 805, Business Combinations December 31, 2020, 2021 and 2022, the Company paid $2,451, $4,577 and $9,071, respectively, of additional purchase price consideration related to asset acquisitions. Intangible assets acquired in asset acquisitions for the years ended December 31, 2020, 2021 and 2022 were as follows: 2020 2021 2022 Customer relationships $ 24,851 $ 2,916 $ 12,297 Other acquired intangibles 1,308 125 495 Total $ 26,159 $ 3,041 $ 12,792 The weighted-average useful life of intangibles acquired during the years ended December 31, 2020, 2021 and 2022 through business acquisitions and asset acquisitions are as follows: 2020 2021 2022 Management contracts 18 14 7 Customer relationships 9 9 9 Other acquired intangibles 5 5 5 Weighted-average useful life of all intangibles acquired 9 9 9 From January 1, 2023 to February 16, 2023, the Company completed wealth management business acquisitions for cash consideration of $28,771 at closing, deferred cash consideration of $2,366, plus contingent consideration. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 5. GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the change in the goodwill balances for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Balance beginning of period: Goodwill $ 1,112,855 $ 1,278,183 $ 1,947,939 Cumulative impairment losses (22,624) (22,624) (22,624) 1,090,231 1,255,559 1,925,315 Goodwill acquired 160,341 677,195 249,677 Other 4,987 (7,439) (7,075) 165,328 669,756 242,602 Balance end of period: Goodwill 1,278,183 1,947,939 2,190,541 Cumulative impairment losses (22,624) (22,624) (22,624) $ 1,255,559 $ 1,925,315 $ 2,167,917 There were no goodwill impairment losses during the years ended December 31, 2020, 2021 and 2022. The following table summarizes the amortizing acquired intangible assets at December 31, 2021: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 2,228,461 $ (787,016) $ 1,441,445 Management contracts 191,578 (57,153) 134,425 Other acquired intangibles 10,911 (5,062) 5,849 Total $ 2,430,950 $ (849,231) $ 1,581,719 The following table summarizes the amortizing acquired intangible assets at December 31, 2022: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 2,530,062 $ (1,029,197) $ 1,500,865 Management contracts 202,479 (70,624) 131,855 Other acquired intangibles 13,416 (7,012) 6,404 Total $ 2,745,957 $ (1,106,833) $ 1,639,124 Management contracts and other acquired intangibles are amortized on a straight-line basis over their estimated useful lives ranging from 2 to 20 years. Customer relationships are amortized on a straight-line basis over their estimated useful lives of 4 to 10 years. Estimated amortization expense for each of the next five years is as follows: Years Ending December 31, Amount 2023 $ 270,828 2024 254,749 2025 241,575 2026 217,115 2027 181,401 |
FIXED ASSETS
FIXED ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
FIXED ASSETS | |
FIXED ASSETS | 6. FIXED ASSETS Fixed assets consist of the following at December 31, 2021 and 2022: 2021 2022 Leasehold improvements $ 46,252 $ 51,926 Computers, software development and equipment 39,074 44,612 Furniture and fixtures 20,834 24,689 Subtotal 106,160 121,227 Less accumulated depreciation and amortization (58,961) (66,479) Total $ 47,199 $ 54,748 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2022 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 7. FAIR VALUE MEASUREMENTS ASC Topic 820, Fair Value Measurement The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows: Level 1 Level 2 Level 3 First Lien Term Loan B The implied fair value of the Company’s First Lien Term Loan B (as defined below) based on Level 2 inputs is as follows as of December 31, 2021 and 2022: 2021 2022 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan B - Tranche A $ 1,610,928 $ 1,598,846 $ 1,755,600 $ 1,735,850 First Lien Term Loan B - Tranche B 796,374 792,392 788,370 772,603 Derivatives At December 31, 2021 and 2022, the fair value of the Company’s $850,000 notional amount interest rate swap agreements was $5,810 and $44,219, respectively, which are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The fair value was based on Level 2 inputs which included the relevant interest rate forward curves. Business acquisitions For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on unobservable (Level 3) inputs. At December 31, 2021 and 2022, deferred cash consideration in connection with business acquisitions of $114,156 and $122,079, respectively, are included in contingent consideration and other liabilities in the consolidated balance sheets at present value. At December 31, 2022, amounts due are as follows: $19,357 in 2023, $21,947 in 2024, $8,157 in 2025, $0 in 2026, $4,748 in 2027, $0 in 2028 and $67,870 in 2029. The following table represents changes in the fair value of estimated contingent consideration for business acquisitions for the years ended December 31, 2021 and 2022: 2021 2022 Balance at January 1, $ 169,670 $ 350,027 Additions to estimated contingent consideration 212,074 56,604 Assumed estimated contingent consideration obligation — 12,637 Payments of contingent consideration (143,107) (148,638) Non-cash changes in fair value of estimated contingent consideration 112,416 (64,747) Other (1,026) (1,575) Balance at December 31, $ 350,027 $ 204,308 Estimated contingent consideration is included in contingent consideration and other liabilities in the accompanying consolidated balance sheets. During the year ended December 31, 2021, the Company paid $131,827 in cash and issued $11,280 in Focus LLC common units as contingent consideration associated with business acquisitions. During the the year ended December 31, 2022, the Company paid $138,940 in cash and issued $9,698 in Focus LLC common units as contingent consideration associated with business acquisitions During the years ended December 31, 2021 and 2022, the Company paid cash of $4,577 and $9,071 , respectively, as contingent consideration associated with asset acquisitions. These amounts are included in cash paid for acquisitions and contingent consideration—net of cash acquired in investing activities in the consolidated statement of cash flows. In determining fair value of the estimated contingent consideration, the acquired business’s future performance is estimated using financial projections for the acquired business. These financial projections, as well as alternative scenarios of financial performance, are measured against the performance targets specified in each respective acquisition agreement. In addition, discount rates are established based on the cost of debt and the cost of equity. The Company uses the Monte Carlo Simulation Model to determine the fair value of the Company’s estimated contingent consideration. The significant unobservable inputs used in the fair value measurement of the Company’s estimated contingent consideration are the forecasted growth rates over the measurement period and discount rates. Significant increases or decreases in the Company’s forecasted growth rates over the measurement period or discount rates would result in a higher or lower fair value measurement. Inputs used in the fair value measurement of estimated contingent consideration at December 31, 2021 and 2022 are summarized below: Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2021 Techniques Inputs Ranges $ 350,027 Monte Carlo Simulation Model Forecasted growth rates 0.7% - 20.1 % Discount rates 9.0% - 15.0 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2022 Techniques Inputs Ranges $ 204,308 Monte Carlo Simulation Model Forecasted growth rates (7.8)% - 32.4 % Discount rates 13.0% - % |
CREDIT FACILITY
CREDIT FACILITY | 12 Months Ended |
Dec. 31, 2022 | |
CREDIT FACILITY. | |
CREDIT FACILITY | 8. As of December 31, 2022, Focus LLC’s credit facility (the “Credit Facility”) consisted of a $2,543,970 first lien term loan B (the “First Lien Term Loan B”), consisting of a $1,755,600 tranche A (“First Lien Term Loan B - Tranche A”) and $788,370 tranche B (“First Lien Term Loan B - Tranche B”), a $240,000 delayed draw first lien term loan A (the “First Lien Term Loan A”), and a $650,000 first lien revolving credit facility (the “First Lien Revolver”). In April 2022, Focus LLC amended the First Lien Revolver to extend the maturity date to June 2024 and change the benchmark interest rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”). In November 2022, Focus LLC amended the Credit Facility to, among other things, (i) repay the then existing $1,598,408 First Lien Term Loan B - Tranche A and issue $1,760,000 stated value First Lien Term Loan B - Tranche A with a maturity date of June 2028, (ii) change the First Lien Term Loan B - Tranche B benchmark interest rate from LIBOR to SOFR, (iii) issue $240,000 delayed draw First Lien Term Loan A with a maturity date of November 2027 and (iv) change the maturity date of the First Lien Revolver to November 2027. The First Lien Term Loan B - Tranche A bears interest (at Focus LLC’s option) at: (i) SOFR plus a margin of 3.25% with a 0.50% SOFR floor or (ii) the lender’s Base Rate (as defined in the Credit Facility) plus a margin of 2.25%. The First Lien Term Loan B - Tranche A requires quarterly installment repayments of $4,400 and has a maturity date of June 2028. The refinanced debt was issued at a discount of 1.75% or $30,800 which is being amortized to interest expense over the term of the First Lien Term Loan B - Tranche A. The First Lien Term Loan B - Tranche A also requires a prepayment penalty of 1%, of the then outstanding principal amount of the First Lien Term Loan B - Tranche A if repaid prior to May 2023. The First Lien Term Loan B - Tranche B bears interest (at Focus LLC’s option) at: (i) SOFR plus a margin of 2.50% with a 0.50% SOFR floor or (ii) the lender’s Base Rate plus a margin of 1.50%. The First Lien Term Loan B - Tranche B requires quarterly installment repayments of $2,001 and has a maturity date of June 2028. The First Lien Term Loan A bears interest (at Focus LLC’s option) at: (i) SOFR plus a margin of 2.50% with a 0.50% SOFR floor or (ii) the lender’s Base Rate plus a margin of 1.50% . The First Lien Term Loan A has a nine month delayed draw feature, which expires in August 2023. The delayed draw feature has a ticking fee with respect to the undrawn commitments with (i) of the interest rate margin for the First Lien Term Loan A after 121 days of the closing date. The First Lien Term Loan A, when drawn, will be issued at a discount of which will be amortized to interest expense over the remaining term from the date that it is drawn. When drawn, the First Lien Term Loan A will require quarterly installment repayments equal to 2025 As amended, the First Lien Revolver bears interest (at Focus LLC’s option) at SOFR plus a margin of 2.25% with step downs to 2.00% and 1.75% or the lender’s Base Rate plus a margin of 1.25% with step downs to 1.00% and 0.75%, based on achievement of a specified First Lien Leverage Ratio. The First Lien Revolver unused commitment fee is 0.50% with step downs to 0.375% and 0.25% based on achievement of a specified First Lien Leverage Ratio. Up to $30,000 of the First Lien Revolver is available for the issuance of letters of credit, subject to certain limitations. The First Lien Revolver has a maturity date of November 2027. Focus LLC’s obligations under the Credit Facility are collateralized by the majority of Focus LLC’s assets. The Credit Facility contains various customary covenants, including, but not limited to: (i) incurring additional indebtedness or guarantees, (ii) creating liens or other encumbrances on property or granting negative pledges, (iii) entering into a merger or similar transaction, (iv) selling or transferring certain property and (v) declaring dividends or making other restricted payments. Focus LLC is required to maintain a First Lien Leverage Ratio (as defined in the Credit Facility) of not more than 6.25:1.00 as of the last day of each fiscal quarter. At December 31, 2022, Focus LLC's First Lien Leverage Ratio was 4.19:1.00, which satisfied the maximum ratio of 6.25:1.00. First Lien Leverage Ratio means the ratio of amounts outstanding under the Credit Facility 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). Consolidated EBITDA for purposes of the Credit Facility was $578,396 at December 31, 2022. Focus LLC is also subject on an annual basis to contingent principal payments based on an excess cash flow calculation (as defined in the Credit Facility) for any fiscal year if the First Lien Leverage Ratio exceeds 3.75:1.00. No contingent principal payments were required to be made during the years ended December 31, 2021 and 2022. Based on the excess cash flow calculation for the year ended December 31, 2022, no contingent principal payments are required to be made during the year ending December 31, 2023. In connection with the April 2022 and November 2022 amendments, Focus LLC paid $1,111 and $17,961, respectively, in debt financing costs and recognized a loss on extinguishment of borrowings of $1,807 in connection with the November 2022 amendment. The Company defers and amortizes its debt financing costs and original issue discounts over the respective terms of the borrowings. The debt financing costs related to the First Lien Term Loan B and First Lien Term Loan A are recorded as a reduction of the carrying amounts of the respective borrowings in the consolidated balance sheets. The debt financing costs related to the First Lien Revolver are recorded in debt financing costs-net in the consolidated balance sheets. The following is a reconciliation of principal amounts outstanding under the Credit Facility to borrowings under the Credit Facility recorded in the consolidated balance sheets at December 31, 2021 and 2022: 2021 2022 First Lien Term Loan B - Tranche A $ 1,610,928 $ 1,755,600 First Lien Term Loan B - Tranche B 796,374 788,370 First Lien Term Loan A — 20,000 First Lien Revolver — — Unamortized debt financing costs (7,523) (17,750) Unamortized discount (6,110) (35,471) Total $ 2,393,669 $ 2,510,749 At December 31, 2021 and 2022, unamortized debt financing costs associated with the First Lien Revolver of $4,254 and $7,590, respectively, were recorded in debt financing costs-net in the consolidated balance sheets. In connection with January 2021 and July 2021 amendments to its First Lien Term Loan B Focus LLC paid $8,282 in debt financing costs. For the years ended December 31, 2021 and 2022, weighted-average interest rates for borrowings were approximately 3% and 4%, respectively. As of December 31, 2021 and 2022, the First Lien Revolver available unused commitment line was $642,085 and $639,997 respectively. As of December 31, 2021 and 2022, Focus LLC was contingently obligated for letters of credit in the amount of $7,915 and $10,003, respectively, each bearing interest at an annual rate of approximately 2%. |
DERIVATIVES
DERIVATIVES | 12 Months Ended |
Dec. 31, 2022 | |
DERIVATIVES | |
DERIVATIVES | 9. DERIVATIVES In connection with the November 2022 amendment to the Credit Facility, the Company terminated its three then existing interest rate swaps, with notional amounts of $400,000, $250,000 and $200,000, which provided the Company pay interest to the counterparty each month at a rate of 0.713%, 0.537% and 0.5315%, respectively, and receive interest from each of the counterparties each month at the 1 month LIBOR rate, subject to a 0.0% floor (the “LIBOR Swaps”), and entered into the SOFR Swaps (as defined below) with the same notional amounts. At December 31, 2022, the Company has three floating to fixed interest rate swap agreements with notional amounts of $400,000, $250,000 and $200,000, the terms of which provide that the Company pay interest to the counterparty each month at a rate of 0.619%, 0.447% and 0.440%, respectively, and receive interest from each of the counterparties each month at the 1 month USD Term SOFR rate, subject to a 0.50% floor (the "SOFR Swaps"). The interest rate swaps effectively fix the variable interest rate applicable to the first $850,000 of the Company’s variable interest rate borrowings outstanding. The Company designated these swaps as cash flow hedges of the Company’s exposure to the variability of the payment of interest on this portion of its borrowings. At December 31, 2021, the fair value of the LIBOR Swaps was $5,810, and at December 31, 2022, the fair value of the SOFR Swaps was $44,219. These amounts are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The interest rate swaps continue to be effective hedges, and as such, the offsetting adjustment to the fair value is recorded in accumulated other comprehensive income (loss), net of tax of $1,194 and $9,458 at December 31, 2021 and 2022, respectively. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2022 | |
EQUITY | |
EQUITY | 10. EQUITY The following is a summary of the capital stock of the Company: Class A Common Stock Voting Rights Holders of shares of the Company’s Class A common stock are entitled to one vote per share held of record on all matters to be voted upon by the shareholders. The holders of Class A common stock do not have cumulative voting rights in the election of directors. Dividend Rights Holders of shares of the Company’s Class A common stock are entitled to ratably receive dividends when and if declared by the Company’s Board of Directors (the “Board”) out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding preferred stock. Liquidation Rights Upon the Company’s liquidation, dissolution, distribution of assets or other winding up, the holders of Class A common stock are entitled to receive ratably the assets available for distribution to the shareholders after payment of liabilities and the liquidation preference of any of the Company’s outstanding shares of preferred stock. Other Matters The shares of the Company’s Class A common stock have no preemptive or conversion rights and are not subject to further calls or assessment by the Company. There are no redemption or sinking fund provisions applicable to the Class A common stock. All outstanding shares of the Company’s Class A common stock are fully paid and non-assessable. Class B Common Stock Voting Rights Holders of shares of the Company’s Class B common stock are entitled to one vote per share held of record on all matters to be voted upon by the shareholders. Holders of shares of the Company’s Class A common stock and Class B common stock vote together as a single class on all matters presented to the Company’s shareholders for their vote or approval, except the amendment of certain provisions of the Company’s certificate of incorporation that would alter or change the powers, preferences or special rights of the Class B common stock so as to affect them adversely must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a single class, or as otherwise required by applicable law. Dividend and Liquidation Rights Holders of the Company’s Class B common stock do not have any right to receive dividends, unless the dividend consists of shares of the Company’s Class B common stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class B common stock paid proportionally with respect to each outstanding share of our Class B common stock and a dividend consisting of shares of Class A common stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class A common stock on equivalent terms is simultaneously paid to the holders of Class A common stock. Holders of the Company’s Class B common stock do not have any right to receive a distribution upon a liquidation, dissolution or winding up of the Company. Preferred Stock The Company’s certificate of incorporation authorizes the Board, subject to any limitations prescribed by law, without further shareholder approval, to establish and to issue from time to time one or more classes or series of preferred stock, par value $0.01 per share, covering up to an aggregate of 500,000,000 shares of preferred stock. Each class or series of preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of shareholders. Other In February 2022, Focus LLC issued 187,795 common units and Focus Inc. issued a corresponding number of shares of Class B common stock in connection with a contingent consideration payment. In April 2022, Focus LLC issued 512,290 common units and Focus Inc. issued a corresponding number of shares of Class B common stock in connection with an acquisition. In November 2022, Focus LLC issued 139,099 common units and Focus Inc. issued a corresponding number of shares of Class B common stock in connection with an acquisition. 2018 Omnibus Incentive Plan On July 30, 2018, the Board adopted the Focus Financial Partners Inc. 2018 Omnibus Incentive Plan (the “Omnibus Plan”) for the employees, consultants and the directors of the Company and its affiliates who perform services for it. The Omnibus Plan provides for potential grants of the following awards with respect to shares of the Company’s Class A common stock, to the extent applicable: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) non-qualified stock options or any other form of stock options; (iii) restricted stock awards; (iv) phantom stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) annual cash incentive awards; (ix) any of the foregoing award types (other than incentive stock options) as awards related to Focus LLC’s units; and (x) incentive units in Focus LLC. The maximum aggregate number of shares of the Company’s Class A common stock that may be issued pursuant to awards under the Omnibus Plan shall not exceed 6,000,000 shares (including such number of Focus LLC’s units or other securities which can be exchanged or converted into shares of Class A common stock). The reserve pool is subject to adjustment due to recapitalization or reorganization, or related to forfeitures or the expiration of awards, as provided under the Omnibus Plan. If the shares or units subject to any award are not issued or transferred, or cease to be issuable or transferable for any reason, including (but not exclusively) because shares or units are withheld or surrendered in payment of taxes or any exercise or purchase price relating to an award or because an award is forfeited, terminated, expires unexercised, is settled in cash or is otherwise terminated without a delivery of shares or units, those shares or units will again be available for issue, transfer or exercise pursuant to awards under the Omnibus Plan to the extent allowable by law. The Omnibus Plan also contains a provision that will add an additional number of shares of Class A common stock equal to the lesser of (a) 3,000,000 shares, (b) 5% of the outstanding (vested and unvested) shares of Class A common stock and Focus LLC units on the last day of the previous year, and (c) an amount determined by the Board, each year between 2019 and 2028. Stock Options The following table provides information relating to the status of, and changes in, the Company’s stock options granted during years ended December 31, 2020, 2021 and 2022: Stock Weighted Average Options Exercise Price Outstanding—January 1, 2020 1,832,966 $ 30.42 Granted 286,081 44.71 Exercised (251,913) 30.97 Forfeited (21,817) 29.27 Outstanding—December 31, 2020 1,845,317 32.57 Vested—December 31, 2020 785,257 31.36 Granted 357,141 58.50 Exercised (235,684) 31.65 Forfeited (34,906) 32.65 Outstanding—December 31, 2021 1,931,868 37.47 Vested—December 31, 2021 852,579 31.56 Granted 686,130 44.82 Exercised (42,076) 27.54 Forfeited (114,605) 47.27 Outstanding—December 31, 2022 2,461,317 39.24 Vested—December 31, 2022 1,172,105 33.53 For the purpose of calculating equity-based compensation expense for time-based stock option awards, the grant date fair value was determined using the Black-Scholes model with the following weighted average assumptions for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Expected term 6.3 years 6.3 years 6.3 years Expected stock price volatility 34 % 34 % 34 % Risk-free interest rate 0.54 % 1.29 % 2.78 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 15.37 $ 20.89 $ 17.27 Time-based stock options generally vest ratably over a four-year period commencing on the grant date. In connection with the IPO, the Company granted market-based stock options to purchase an aggregate of 155,000 shares of Class A common stock that would have vested on the fifth anniversary of the IPO if the 90-day 90-day 90-day 90-day or more, with linear interpolation in between. The vested stock options can only be exercised in accordance with the following schedule: (i) a total of Restricted stock units The following table provides information relating to the status of, and changes in, the Company’s restricted stock units granted during the year ended December 31, 2020, 2021 and 2022: Weighted Restricted Average Stock Grant Date Units Fair Value Outstanding—January 1, 2020 98,061 $ 27.90 Granted 73,310 44.71 Forfeited (7,707) 27.90 Vested (22,569) 27.90 Outstanding—December 31, 2020 141,095 36.63 Granted 92,420 58.46 Forfeited (6,954) 34.46 Vested (38,805) 35.53 Outstanding—December 31, 2021 187,756 47.69 Granted 138,708 37.59 Forfeited (17,245) 46.49 Vested (56,500) 44.16 Outstanding—December 31, 2022 252,719 43.02 Restricted stock units generally vest ratably over a four-year period commencing on the grant date. The Company recognized $5,485, $6,036 and $8,727 of non-cash equity compensation expense in relation to stock options, unvested Class A common stock and restricted stock units during the years ended December 31, 2020, 2021 and 2022, respectively. Total unrecognized expense, adjusted for estimated forfeitures, related to unvested stock options at December 31, 2022 was $17,078 and is expected to be recognized over a weighted-average period of 3.1 years. Total unrecognized expense, adjusted for estimated forfeitures, related to restricted stock units at December 31, 2022 was $10,252, and is expected to be recognized over a period of 3.2 years. Focus LLC Common Units As of December 31, 2022, Focus LLC had 11,827,321 common units that had a corresponding share of the Company’s Class B common stock outstanding. Each common unit holder, restricted common unit holder and incentive unitholder of Focus LLC (other than the Company), subject to certain limitations, has the right to cause Focus LLC to redeem all or a portion of their vested common units and vested incentive units (“Exchange Right”). Upon an exercise of an Exchange Right with respect to vested incentive units, such incentive units will first be converted into a number of common units that takes into account the then-current value of the common units and such incentive units’ aggregate hurdle amount. Upon an exercise of an Exchange Right with respect to vested common units, and immediately after the conversion of vested incentive units into common units, Focus LLC will acquire each tendered common unit for, at its election, (i) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions, or (ii) an equivalent amount of cash. In addition, in connection with any redemption of vested common units (other than common units received upon a conversion of incentive units as described in this paragraph), the corresponding shares of Class B common stock will be cancelled. Alternatively, upon the exercise of any Exchange Right, the Company (instead of Focus LLC) will have the right to acquire each tendered common unit (and corresponding share of Class B common stock, as applicable) from the exchanging unitholder for, at its election, (i) one share of Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions, or (ii) an equivalent amount of cash. The Exchange Rights are subject to certain limitations and restrictions intended to ensure that Focus LLC will continue to be treated as a partnership for U.S. federal income tax purposes. In March 2022, the Company issued an aggregate of 26,956 shares of Class A common stock and retired 25,000 shares of Class B common stock and 4,250 incentive units in Focus LLC and acquired 26,956 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. In May 2022, the Company issued an aggregate of 80,000 shares of Class A common stock and retired 80,000 shares of Class B common stock and acquired 80,000 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. In August 2022, the Company issued an aggregate of 396,731 shares of Class A common stock and retired 381,573 shares of Class B common stock and 36,357 incentive units in Focus LLC and acquired 396,731 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. In November 2022, the Company issued an aggregate of 28,291 shares of Class A common stock and retired 1,685 shares of Class B common stock and 71,176 incentive units in Focus LLC and acquired 28,291 common units in Focus LLC, in each case as part of the regular quarterly exchanges offered to holders of units in Focus LLC. Focus LLC Restricted Common Units The following table provides information relating to the changes in Focus LLC restricted common units during the years ended December 31, 2020, 2021 and 2022: Weighted Restricted Average Common Grant Date Units Fair Value Outstanding—January 1, 2020 — $ — Granted 73,276 44.71 Outstanding—December 31, 2020 73,276 44.71 Granted 140,258 58.50 Forfeited (1,902) 44.71 Vested (18,007) 44.71 Outstanding—December 31, 2021 193,625 54.70 Granted 157,057 37.59 Vested (54,134) 53.91 Outstanding—December 31, 2022 296,548 45.78 Restricted common units generally vest ratably over a four-year period commencing on the grant date. Focus LLC Incentive Units Focus LLC’s Operating Agreement provides for the granting of incentive units. Grants are designed as profits interests, which entitle a holder to receive distributions in excess of a specific hurdle amount, subject to the provisions of Focus LLC’s Operating Agreement. The following table provides information relating to the status of, and changes in, Focus LLC incentive units granted during the years ended December 31, 2020, 2021 and 2022: Weighted Average Incentive Units Hurdle Price Outstanding—January 1, 2020 19,754,450 $ 21.59 Granted 855,006 44.21 Forfeited (3,153,308) 12.51 Forfeited (221,651) 24.67 Outstanding—December 31, 2020 17,234,497 24.34 Vested—December 31, 2020 8,509,652 18.31 Granted 692,277 57.85 Exchanged (1,580,792) 17.65 Forfeited (199,458) 23.22 Outstanding—December 31, 2021 16,146,524 26.44 Vested—December 31, 2021 9,804,757 20.44 Granted 568,145 38.17 Exchanged (111,783) 24.93 Outstanding—December 31, 2022 16,602,886 26.86 Vested—December 31, 2022 11,021,925 22.15 The Company uses the Black-Scholes option-pricing model to determine the fair value of time-based incentive units. The determination of the fair value using the Black-Scholes option-pricing model is affected by the Company’s estimated common unit price, as well as by assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected unit price volatility over the term of the incentive unit, expected term, risk-free interest rates and expected dividend yield. The estimated grant-date fair values of the 2020, 2021 and 2022 time-based incentive unit grants were calculated based on the following weighted-average assumptions: 2020 2021 2022 Expected term 5.0 years 5.0 years 5.0 years Expected unit price volatility 35 % 34 % 36 % Risk-free interest rate 0.39 % 1.19 % 3.58 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 13.72 $ 18.35 $ 14.30 Incentive units generally vest ratably over a four-year period commencing on the grant date. In connection with the IPO, Focus LLC granted 3,845,000 market-based incentive units with a hurdle rate of $33.00 that would have vested on the fifth anniversary of the IPO if the 90-day 90-day 90-day 90-day or more, with linear interpolation in between. The vested incentive units can only be exchanged for Class A common stock in accordance with the following schedule: (i) a total of in July 2025, and (iii) an additional 50% (for a total of 100%) of the vested incentive units may be exchanged on and following the second anniversary of the date of vesting in July 2026. These market-based incentive units will also vest upon a change of control linearly based on the share price used in the transaction with 100% vesting if the price used is $110.00, 0% vesting if the price used is equal to or less than $33.00, and linear interopolation in between, except as governed by the employment agreements entered into with the Company’s executive officers. In connection with the modification, the Company will recognize incremental non-cash equity compensation expense of $10,144, less any forfeitures, from the modification date through July 2024, the sixth anniversary of the IPO. In February 2021, the compensation committee of the Company applied its discretion to provide for a new measurement period for 1,162,500 incentive units of certain officers of the Company. As a result of the modification, 896,230 units were vested based on the weighted average price per share for the seven days prior to February 23, 2021, with vesting calculated based on the same stock price hurdles that were to apply on the third anniversary of the IPO. This vesting criteria provided that if the specified weighted average price per share was: (i) less than all period immediately preceding the third anniversary of the Company’s IPO. In July 2021, the third anniversary of the Company’s IPO, In connection with the modification that resulted in the vesting of 896,230 units, the Company recognized additional non-cash equity compensation expense of $6,439 during the year ended December 31, 2021. In connection with the modification of the vesting terms of the 266,270 incentive units, the Company recognized incremental non-cash equity compensation expense of $1,544 during the year ended December 31, 2021. Incentive units outstanding and vested at December 31, 2022 were as follows: Number Vested Incentive Hurdle Rates Outstanding Units $1.42 421 421 5.50 798 798 6.00 386 386 7.00 1,081 1,081 9.00 708,107 708,107 11.00 813,001 813,001 12.00 513,043 513,043 13.00 540,000 540,000 14.00 10,098 10,098 16.00 45,191 45,191 17.00 20,000 20,000 19.00 527,928 527,928 21.00 3,017,692 3,017,692 22.00 796,417 796,417 23.00 524,828 524,828 26.26 12,500 6,250 27.00 12,484 12,484 27.90 1,890,440 1,395,592 28.50 1,424,225 1,424,225 30.48 30,000 20,000 33.00 3,617,500 7,500 36.64 30,000 30,000 37.59 508,145 — 43.07 60,000 — 43.50 30,000 30,000 44.71 806,324 406,279 58.50 662,277 170,604 16,602,886 11,021,925 The Company has recorded $16,800, $25,566 and $21,726 of non-cash equity compensation expense for incentive units and restricted common units during the years ended December 31, 2020, 2021 and 2022, respectively. Total unrecognized expense, adjusted for estimated forfeitures, related to restricted common units at December 31, 2022, was $13,113 and is expected to be recognized over a weighted-average period of 3.3 years. Total unrecognized expense, adjusted for estimated forfeitures, related to unvested incentive units at December 31, 2022, was $27,427 and is expected to be recognized over a weighted-average period of 2.5 years. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES Income tax expense for year ended December 31, 2022 is primarily related to U.S. federal, state and local income taxes imposed on Focus Inc.’s allocable portion of taxable income from Focus LLC. The allocable portion of taxable income primarily differs from the net income attributable to Focus Inc. due to permanent differences such as non-deductible equity-based compensation expense of Focus LLC. The following represents the U.S. and foreign components of income before income tax for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Income before income tax: United States $ 65,472 $ 36,274 $ 163,923 Foreign 4,153 8,248 14,432 Total income before income tax $ 69,625 $ 44,522 $ 178,355 The following represents the U.S. and foreign components of income tax expense for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Current provision: Federal $ 10,363 $ 19,742 $ 12,373 State and local 5,355 7,855 8,221 Foreign 4,169 6,906 8,726 Subtotal 19,887 34,503 29,320 Deferred provision (benefit): Federal 1,854 (7,958) 19,913 State and local 580 (3,674) 8,065 Foreign (1,661) (2,789) (4,221) Subtotal 773 (14,421) 23,757 Total income tax expense $ 20,660 $ 20,082 $ 53,077 At December 31, 2021 and 2022, tax effects of book/tax temporary differences give rise to deferred tax assets (liabilities) as follows: 2021 2022 Deferred tax assets: Investment in Focus LLC, net $ 254,454 $ 224,004 Federal net operating loss carryforwards 11,561 5,289 Business interest carryforwards — 6,494 Deferred rent and other 2,353 2,479 Gross deferred tax assets 268,368 238,266 Valuation allowance — (6,494) Deferred tax assets: 268,368 231,772 Deferred tax liabilities: Intangible assets (32,483) (30,811) Fixed assets and other (526) (410) Gross deferred tax liabilities (33,009) (31,221) Net deferred tax assets $ 235,359 $ 200,551 A reconciliation of the differences between the U.S. federal statutory tax rate and the effective tax rate for the years ended December 31, 2020, 2021 and 2022 is as follows: 2020 2021 2022 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Income passed through to individual members (7.6) (6.1) (4.7) Foreign income taxes 3.6 9.2 2.5 Non-cash equity compensation expense 3.5 7.7 1.8 Non-cash changes in fair value of estimated contingent consideration — — (1.5) Other non-deductible expenses 0.9 2.7 0.3 State and local income taxes, net of U.S. federal tax benefit 7.0 8.1 6.6 Valuation allowance — — 3.6 Other 1.3 2.5 0.2 Effective income tax rate 29.7 % 45.1 % 29.8 % At December 31, 2022, the Company had $25,185 of U.S. federal net operating loss carryforwards. At December 31, 2022, the Company had $24,053 of business interest carryforwards. These net operating loss carryforwards and business interest carryforwards have an indefinite carryforward period. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Due to the uncertainty regarding the Company’s ability to utilize certain deferred tax assets in the future, the Company provided a valuation allowance of $6,494 at December 31, 2022 against certain of its deferred tax assets, which more than likely will not be realized. The Company files tax returns in U.S. federal, local and state jurisdictions and certain of the Company’s subsidiaries file income tax returns in foreign jurisdictions. The Company is no longer subject to income tax examinations for years prior to 2019. In addition, open tax years related to local, state and foreign jurisdictions remain subject to examination, but are not considered material to the Company’s consolidated financial position, results of operations or cash flows. The Company is not aware of any tax position for which it is reasonably possible that the total amount of unrecognized benefits will change materially in the next 12 months. |
TAX RECEIVABLE AGREEMENTS
TAX RECEIVABLE AGREEMENTS | 12 Months Ended |
Dec. 31, 2022 | |
TAX RECEIVABLE AGREEMENTS | |
TAX RECEIVABLE AGREEMENTS | 12. TAX RECEIVABLE AGREEMENTS In connection with the IPO and the reorganization transactions that occurred in connection with the IPO, Focus Inc. entered into two tax receivable agreements: one with certain entities affiliated with the private equity investors of Focus LLC and the other with certain other continuing and former owners of Focus LLC. In March 2020, Focus Inc. entered into an additional tax receivable agreement (the three agreements, collectively, the “Tax Receivable Agreements”) for tax receivable agreement holders that join Focus LLC as members after the closing of the IPO (the parties to the Tax Receivable Agreements, collectively, the “TRA Holders”). New Focus LLC owners in the future may also become party to this additional Tax Receivable Agreement. The Tax Receivable Agreements generally provide for the payment by Focus Inc. to each TRA holder of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that Focus Inc. actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in connection with the reorganization transactions that occurred in connection with the IPO and in periods after the IPO or after entering into the Tax Receivable Agreements, as applicable, as a result of certain increases in tax bases and certain tax benefits attributable to imputed interest. Focus Inc. will retain the benefit of the remaining 15% of these cash savings. The Company had a liability of $219,542 and $224,611 relating to its obligations under the Tax Receivable Agreements as of December 31, 2021 and 2022, respectively. During the years ended December 31, 2021 and 2022, payments totaling |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2022 | |
LEASES | |
LEASES | 13. LEASES The future minimum lease payments under operating leases in place as of December 31, 2022 were as follows: Year ending December 31, Amount 2023 $ 60,113 2024 56,357 2025 49,917 2026 43,387 2027 37,541 2028 and thereafter 99,413 346,728 Less: present value discount (57,833) Operating lease liabilities at December 31, 2022 $ 288,895 at December 31, 2021 and 2022. The weighted average remaining lease term at December 31, 2021 and 2022 was approximately Other information pertaining to leases for the years ended December 31, 2021 and 2022 consists of the following: 2021 2022 Operating lease costs included in selling, general and administrative expenses $ 74,340 $ 61,057 Operating cash flows from operating leases 73,481 59,090 Operating lease assets obtained in exchange for operating lease obligations 61,750 72,012 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES Credit Risk The Company’s broker-dealer subsidiaries clear all transactions through clearing brokers on a fully disclosed basis. Pursuant to the terms of the agreements between the Company’s broker-dealer subsidiaries and their clearing brokers, the clearing brokers have the right to charge the Company’s broker-dealer subsidiaries for losses that result from a counterparty’s failure to fulfill its contractual obligations. This right applies to all trades executed through its clearing brokers, and therefore, the Company believes there is no maximum amount assignable to the right of the clearing brokers. Accordingly, at December 31, 2021 and 2022, the Company had recorded no liabilities in connection with this right. In addition, the Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. The Company monitors the credit standing of the clearing brokers and counterparties with which they conduct business. The Company is exposed to credit risk for accounts receivable from clients. Such credit risk is limited to the amount of accounts receivable. The Company maintains its cash in bank depository accounts, which, at times, may exceed federally insured limits. The Company selects depository institutions based, in part, upon management’s review of the financial stability of the institution. At December 31, 2021 and 2022, a significant portion of cash and cash equivalents were held at a single institution. Contingent Consideration Arrangements As discussed in Notes 2 and 7, contingent consideration is payable in the form of cash, and in some cases, equity. Since the contingent consideration to be paid is based on forecasted growth rates over the measurement period, the Company cannot calculate the maximum contingent consideration that may be payable under these arrangements. Legal and Regulatory Matters In the ordinary course of business, the Company and its subsidiaries are involved in lawsuits, regulatory matters and other claims. The Company has insurance to cover certain losses that arise in such matters; however, this insurance may not be sufficient to cover these losses. Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability, if any, arising out of any existing legal matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows. From time to time, the Company and its subsidiaries receive requests for information from governmental authorities regarding business activities. The Company continues to believe that the resolution of any governmental inquiry will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. Indemnifications In the ordinary course of business, the Company enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined. Management believes that the likelihood of any liability arising under these indemnification provisions is remote. Management cannot estimate any potential maximum exposure due to both the remoteness of any potential claims and the fact that items that would be included within any such calculated claim would be beyond the control of the Company. Consequently, no liability has been recorded in the consolidated balance sheets. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2022 | |
EMPLOYEE BENEFIT PLANS | |
EMPLOYEE BENEFIT PLANS | 15. EMPLOYEE BENEFIT PLANS The Company and its subsidiaries have defined contribution retirement plans, including 401(k) and profit-sharing plans covering eligible employees. During the years ended December 31, 2020, 2021 and 2022, the amounts recorded in expense relating to these plans were $9,357, $13,628 and $16,726, respectively, and are included in compensation and related expenses in the consolidated statements of operations. |
NET CAPITAL REQUIREMENTS
NET CAPITAL REQUIREMENTS | 12 Months Ended |
Dec. 31, 2022 | |
NET CAPITAL REQUIREMENTS | |
NET CAPITAL REQUIREMENTS | 16. NET CAPITAL REQUIREMENTS Certain of the Company’s regulated subsidiaries are subject to minimum net capital requirements. As of December 31, 2021 and 2022, all regulated subsidiaries subject to minimum net capital requirements individually had net capital in excess of minimum net capital requirements. As of December 31, 2021, these subsidiaries had aggregate net capital of $19,520, which was $15,853 in excess of aggregate minimum net capital requirements of $3,667. As of December 31, 2022, these subsidiaries had aggregate net capital of $25,318 which was $20,280 in excess of aggregate minimum net capital requirements of $5,038. |
CASH FLOW INFORMATION
CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2022 | |
CASH FLOW INFORMATION | |
CASH FLOW INFORMATION | 17. CASH FLOW INFORMATION Year Ended December 31, 2020 2021 2022 Supplemental disclosures of cash flow information—cash paid for: Interest $ 41,352 $ 53,721 $ 93,851 Income taxes $ 18,927 $ 36,806 $ 33,212 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 46,918 $ 212,074 $ 56,604 |
RELATED PARTIES
RELATED PARTIES | 12 Months Ended |
Dec. 31, 2022 | |
RELATED PARTIES | |
RELATED PARTIES | 18. RELATED PARTIES The Company’s Chief Executive Officer, through an entity owned and controlled by him, owns a personal aircraft that was acquired without Company resources that he uses for business travel. The Company reimburses the Company’s Chief Executive Officer for certain costs and third-party payments associated with the use of his personal aircraft for Company-related business travel. The Company also pays pilot fees for such business travel flights. During the years ended December 31, 2020, 2021 and 2022, the Company recognized expenses of $1,280, $2,326 and $3,678, respectively, related to these reimbursements. Given the geography of the Company’s partner firms and prospects, the Company believes that the use of private aircraft creates efficiencies to enhance the productivity of the Company’s Chief Executive Officer and certain other authorized personnel. Certain Company employees perform outsourced accounting services to an affiliated entity. In connection with these services, the Company recognized revenues of $12,298, $12,384 and $12,459 during the years ended December 31, 2020, 2021 and 2022, respectively. Affiliates of current and former holders of the Company’s Class A common stock and Class B common stock earned underwriting fees of $5,644 in connection with equity offerings during the year ended December 31, 2021. At December 31, 2022, affiliates of current holders of the Company’s Class A common stock and Class B common stock are lenders under the First Lien Term Loan B. During the years ended December 31, 2021 and 2022, certain current and former affiliates received $394 and $1,000 in fees, respectively, in connection with amendments to the Credit Facility. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates Focus LLC and its subsidiaries’ financial statements and records the interests in Focus LLC consisting of common units, restricted common units and the common unit equivalent of incentive units of Focus LLC that the Company does not own as non-controlling interests, see Note 3. Intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Income Per Share | Income Per Share Income per share is computed in accordance with Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share |
Revenue Recognition | Revenue Recognition Wealth Management Fees The Company recognizes revenue from wealth management fees, which are primarily composed of fees earned for advising on the assets of clients, financial and tax planning fees, consulting fees, tax return preparation fees, fees for family office services, and fees for wealth management and operational support services provided to third-party wealth management firms. Client arrangements may contain one of the services or multiple services, resulting in either a single or multiple performance obligations within the same client arrangement, each of which are separately identifiable and priced, and accounted for as the related services are provided and consumed over time. Fees are primarily based either on a contractual percentage of the client’s assets based on the market value of the client’s assets on the predetermined billing date, a flat fee, an hourly rate based on predetermined billing rates or a combination of such fees and are billed either in advance or arrears on a monthly, quarterly, or semiannual basis. Revenue is recognized over the respective service period based on time elapsed or hours expended, as the case may be, which is deemed to be the most faithful depiction of the transfer of services as clients benefit from services over the respective period. Revenue for wealth management and operational support services provided to third party wealth management firms is presented net since these services are performed in an agent capacity. Client agreements typically do not have a specified term and may be terminated at any time by either party subject to the respective termination and notification provisions in each agreement. A majority of the Company’s wealth management fees are correlated to the markets, and therefore are considered variable consideration. The Company’s market-correlated fees are dependent on the market and, thus, are susceptible to factors outside the Company’s control. Therefore, at inception of the contractual service period for fees which are based on the market values at the end of the service period, the Company cannot conclude that it is probable that a reversal in the cumulative revenue recognized would not occur if the estimate was included in the transaction price at that time. However, at each quarterly reporting date, the Company updates its estimate of the transaction price as the market uncertainty is typically resolved. The Company can then reasonably conclude that a reversal of the variable consideration will not occur for those services already provided. Wealth management fees are recorded when: (i) an arrangement with a client has been identified; (ii) the performance obligations have been identified; (iii) the fee or other transaction price has been determined; (iv) the fee or other transaction price has been allocated to each performance obligation based on standalone fee rates; and (v) the Company has satisfied the applicable performance obligation. Other Other revenue includes fees earned for recordkeeping and administration services provided to employee benefit plans as well as commissions and distribution fees and outsourced services. Client arrangements may contain a single or multiple performance obligations, each of which are separately identifiable and accounted for as the related services are provided and consumed over time. Recordkeeping and administration and outsourced services revenue, in accordance with the same five criteria above, are recognized over the period in which services are provided. Commissions and distribution fees are recognized when earned. The Company disaggregates revenue based on the above two categories. The Company does not allocate revenue by the type of service provided in connection with providing holistic wealth management client services. The Company generally manages its business based on the operating results of the enterprise taken as a whole, not by geographic region. The following table disaggregates the revenues based on the location of the partner firm legal entities that generate the revenues, and therefore may not be reflective of the geography in which clients are located, for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Domestic revenue $ 1,291,630 $ 1,691,345 $ 2,016,845 International revenue 69,689 106,606 126,476 Total revenue $ 1,361,319 $ 1,797,951 $ 2,143,321 International revenue consists of revenue generated by partner firm legal entities primarily in Australia, Canada, Switzerland, the United Kingdom and in other non-US jurisdictions. Deferred Revenue Fees collected in advance are deferred and recognized in revenue over the period earned with the unrecognized portion of fees collected in advance recorded as deferred revenue in the accompanying consolidated balance sheets. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at their net realizable value. Allowances for uncollectible accounts are maintained for estimated losses resulting from the inability of customers to make required payments. In determining these estimates, historical write-offs, the aging of the receivables and other factors, such as overall economic conditions, are considered. |
Fixed Assets | Fixed Assets Fixed assets are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives for fixed assets, primarily consisting of computers, equipment and furniture fixtures three |
Debt Financing Costs | Debt Financing Costs Direct costs incurred with obtaining debt financing are capitalized or recorded as a reduction of the underlying debt. The costs are amortized over the respective term of the underlying debt and are included in amortization of debt financing costs in the accompanying consolidated statements of operations. |
Business Acquisitions | Business Acquisitions Business acquisitions are accounted for in accordance with ASC Topic 805: Business Combinations The Company has incorporated contingent consideration, or earn out provisions, into the structure of its business acquisitions. These arrangements may result in the payment of additional purchase price consideration to the sellers based on the growth of certain financial thresholds for periods following the closing of the respective acquisition. The additional purchase price consideration is payable in the form of cash and, in some cases, equity. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in exchange for the acquired business. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying consolidated statements of operations. The results of the acquired businesses have been included in the Company’s consolidated financial statements from the respective dates of acquisition. |
Investments | Investments The equity method of accounting is applied to investments where the Company has the ability to exercise significant influence over operating and financial matters. During the years ended December 2021 and 2022, the Company acquired minority equity interests in wealth management firms for $1,632 and $5,232 in cash that are accounted for using the equity method of accounting. The Company records other equity investments that do not have readily determinable fair values at cost less impairment, if any, plus or minus changes resulting from observable price changes. Investments are periodically reviewed for impairment. During the year ended December 31, 2021, the Company invested $18,000 in a publicly traded mutual fund that was sold during the year ended December 31, 2022. Unrealized and realized gains and losses are recognized in other expense-net in the consolidated statements of operations. The Company’s investments are included in prepaid expenses and other assets in the consolidated balance sheets. |
Goodwill, Intangible Assets and Other Long-Lived Assets | Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is deemed to have an indefinite useful life and is not amortized. Intangible and other long-lived assets are amortized over their respective estimated useful lives. The Company has no indefinite-lived intangible assets. Goodwill is tested annually for impairment as of October 1, or more frequently if events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company compares the fair value of the reporting unit to the carrying value of the net assets of the reporting unit. The fair value of the reporting unit is determined using a market approach. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit no further consideration is necessary. If the carrying value exceeds the fair value of the reporting unit, the Company would record an impairment charge for the amount that the carrying value exceeds the fair value of the reporting unit. Intangible assets and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the asset might be impaired or that the estimated useful life should be changed prospectively. If impairment indicators are present, the recoverability of these assets is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined using a discounted cash flow approach. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of substantially all of the Company’s financial assets and liabilities are considered to approximate their fair values because of their short-term nature. The carrying amount of First Lien Revolver borrowings (as defined below) and First Lien Term Loan A borrowings (as defined below) under the Credit Facility (as defined below) approximates fair value, as the debt bears interest at selected short-term variable market rates. The Company measures the implied fair value of its First Lien Term Loan B (as defined below) and interest rate swap agreements using trading levels and the relevant interest rate forward curves obtained from third-party service providers; accordingly, they are classified within Level 2 of the valuation hierarchy. The fair value of the Company’s investment in a mutual fund was determined using quoted market prices within Level 1 of the valuation hierarchy. See Note 7 for further information regarding the Company’s fair value measurements. |
Derivatives | Derivatives The Company uses derivative instruments for purposes other than trading. Derivative instruments are accounted for in accordance with ASC Topic No. 815, Derivatives and Hedging as hedges and have been designated as part of a hedging relationship for accounting purposes do not impact earnings until the hedged item is recognized in earnings. The Company uses interest rate swaps to manage its mix of fixed and floating rate debt. These instruments have been designated as cash flow hedges at inception and are measured for effectiveness both at inception and on an ongoing basis. In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London InterBank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. The Company applied the provisions of ASU No. 2020-04 in connection with the November 2022 amendment to the Credit Facility and related modification of its derivative contracts (See Notes 8 and 9). |
Income Taxes | Income Taxes Focus Inc. is a holding company whose most significant asset is a membership interest in Focus LLC. Focus Inc. is subject to U.S. federal, state and local income taxes on Focus Inc.’s allocable portion of taxable income from Focus LLC. Focus LLC is treated as a partnership for U.S. federal income tax purposes. Accordingly, Focus LLC is generally not and has not been subject to U.S. federal and certain state income taxes at the entity level, although it has been subject to the New York City Unincorporated Business Tax and certain of its subsidiaries have been subject to U.S. federal and certain state and local or foreign income taxes. Instead, for U.S. federal and certain state income tax purposes, the income, deductions, losses and credits of Focus LLC are passed through to its unitholders, including Focus Inc. Focus LLC makes tax distribution payments to the extent of available cash, in accordance with the Operating Agreement. The Company files income tax returns with the U.S. federal government as well as various state and local jurisdictions. The asset and liability method is applied for deferred income taxes. Deferred tax assets and liabilities are recognized on a net basis for each tax paying component for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Valuation allowances, if any, are recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized. The Company reviews and evaluates tax positions in its major tax jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition. Based on this review, no reserves for uncertain tax positions were recorded at December 31, 2021 and 2022. |
Segment Reporting | Segment Reporting Management has determined that the Company operates in one operating segment, as a wealth management focused organization, which is consistent with its structure and how the Company manages the business. The Company’s acquired businesses have similar economic and business characteristics. The services provided are wealth management related and the Company’s businesses are subject to a similar regulatory framework. Furthermore, the Company’s Chief Operating Decision Maker, which is the Company’s Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources. |
Translation of Non-U.S. Currency Amounts | Translation of Non-U.S. Currency Amounts Assets and liabilities of non-U.S. subsidiaries that have a foreign currency as their functional currency are re-measured to U.S. dollars at year-end exchange rates, and revenues and expenses are re-measured at average rates of exchange prevailing during the year. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in other expense—net in the consolidated statements of operations. |
Consolidation Considerations | Consolidation Considerations ASC Topic 810, Consolidations The Company’s subsidiaries have Management Agreements with the respective Management Company, which causes these Company subsidiaries to be VIEs. The Company has assessed whether or not it is the primary beneficiary for these subsidiaries and has concluded that it is the primary beneficiary. Accordingly, the results of these subsidiaries have been consolidated. Certain of the Company’s subsidiaries have variable interests in certain investment funds that are deemed voting interest entities. Due to substantive kick-out rights possessed by the limited partners of these funds, the Company does not consolidate the investment funds. From time to time, the Company enters into option agreements with wealth management businesses (the “Optionee”). In exchange for payment of an option premium, the option agreement allows the Company, at its sole discretion, to acquire the Optionee at a predetermined time and at a predetermined purchase price formula. If the Company chooses to exercise its option to acquire the Optionee, the acquisition and the corresponding Management Agreement would be executed in accordance with the Company’s typical acquisition structure as discussed in Note 1. The Company has determined that the option agreements with the Optionees qualify the Optionees as VIEs. The Company has determined that it is not the primary beneficiary of the Optionees and does not consolidate the results of the Optionees. An option premium of $2,000 was paid by the Company to a Singapore based wealth management firm during the year ended December 31, 2022 and is included in prepaid expenses and other assets in the consolidated balance sheets as of December 31, 2022. There were no option premiums as of December 31, 2021. |
Stock Based Compensation Costs | Stock Based Compensation Costs Compensation cost for Focus LLC incentive units and Focus Inc. stock option awards is measured based on the fair value of awards determined by the Black-Scholes option pricing model or the Monte Carlo Simulation Model on the date that the awards are granted or modified, and is adjusted for the estimated number of awards that are expected to be forfeited. Compensation cost for unvested Class A common stock and restricted stock units, as well as Focus LLC restricted common units, is measured based on the market value of the Company’s Class A common stock on the date that the awards are granted and is adjusted for the estimated number of awards that are expected to be forfeited. The compensation cost is recognized on a straight-line basis over the requisite service period. Non-cash equity compensation expense, associated with employees and non-employees, including principals in the management companies, is included in compensation and related expenses in the consolidated statements of operations. The Company estimates forfeitures at the time of the respective grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate forfeitures and records non-cash equity compensation expense only for those awards that are expected to vest. |
Leases | Leases The Company leases office space in various locations under noncancelable lease agreements with various expiration dates. The Company determines if a contract contains a lease at inception. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Many of these lease agreements provide for tenant improvement allowances, rent increases, and/or rent-free periods. Operating lease expense is recognized on a straight-line basis commencing with the possession date of the property, which is typically the earlier of the lease commencement date or the date when the Company takes possession of the property. Operating lease costs are included in selling, general and administrative expenses in the consolidated statements of operations. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is an estimated incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. We generally use the base, non-cancelable, lease term when determining the lease assets and liabilities. Lease assets also include any prepaid lease payments and lease incentives. Leases with an initial term of 12 months or less, which are immaterial to the consolidated financial statements, are not recorded on the balance sheet. The Company has a limited number of finance leases which are not material to the consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregated revenues based on the location of the partner firm | 2020 2021 2022 Domestic revenue $ 1,291,630 $ 1,691,345 $ 2,016,845 International revenue 69,689 106,606 126,476 Total revenue $ 1,361,319 $ 1,797,951 $ 2,143,321 |
NON-CONTROLLING INTERESTS AND_2
NON-CONTROLLING INTERESTS AND INCOME PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
NON-CONTROLLING INTERESTS AND INCOME PER SHARE | |
Schedule of controlling and non-controlling interest | 2021 2022 Focus LLC common units 11,439,019 11,827,321 Focus LLC restricted common units 193,625 296,548 Common unit equivalents of outstanding vested and unvested Focus LLC incentive units(1) 8,996,789 5,196,288 Total common units, restricted common units and common unit equivalents attributable to non-controlling interest 20,629,433 17,320,157 Total common units, restricted common units and common unit equivalents of incentive units outstanding 85,949,557 83,249,801 Non-controlling interest allocation 24.0 % 20.8 % Company’s interest in Focus LLC 76.0 % 79.2 % (1) Focus LLC common units issuable upon conversion of 16,146,524 and 16,602,886 (see Note 10) vested and unvested Focus LLC incentive units outstanding as of December 31, 2021 and 2022, respectively, were calculated using the common unit equivalent of vested and unvested Focus LLC incentive units based on the closing price of the Company’s Class A common stock on the last trading day of the period. |
Schedule of calculation of basic income per share | 2020 2021 2022 Basic income per share: Net income attributable to common shareholders $ 28,045 $ 10,412 $ 91,784 Weighted average shares of Class A common stock outstanding 48,678,584 57,317,477 65,552,592 Basic income per share $ 0.58 $ 0.18 $ 1.40 |
Schedule of calculation of diluted income per share | 2020 2021 2022 Diluted income per share: Net income attributable to common shareholders $ 28,045 $ 10,412 $ 91,784 Weighted average shares of Class A common stock outstanding 48,678,584 57,317,477 65,552,592 Effect of dilutive stock options 77,302 461,306 235,187 Effect of dilutive unvested Class A common stock 23,822 — — Effect of dilutive restricted stock units 16,905 52,368 22,436 Total 48,796,613 57,831,151 65,810,215 Diluted income per share $ 0.57 $ 0.18 $ 1.39 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Schedule of purchase price associated with business acquisitions and the allocation thereof | 2020 2021 2022 Number of business acquisitions closed 21 36 18 Consideration: Cash due at closing $ 327,722 $ 983,240 $ 450,943 Estimated working capital adjustments and other (174) (577) 1,127 Cash due subsequent to closing at net present value — 86,778 9,611 Fair market value of Focus LLC common units issued — 23,118 28,992 Fair market value of Class A common stock issued — 3,515 — Fair market value of estimated contingent consideration 46,918 212,074 56,604 Total consideration $ 374,466 $ 1,308,148 $ 547,277 Allocation of purchase price: Total tangible assets $ 21,216 $ 61,854 $ 29,991 Total liabilities assumed (31,680) (83,444) (32,551) Customer relationships 215,686 616,283 287,172 Management contracts 7,774 33,350 11,414 Goodwill 160,341 677,195 249,677 Other acquired intangibles 1,129 2,910 1,574 Total allocated consideration $ 374,466 $ 1,308,148 $ 547,277 |
Schedule of weighted-average useful lives of intangible assets acquired | 2020 2021 2022 Management contracts 18 14 7 Customer relationships 9 9 9 Other acquired intangibles 5 5 5 Weighted-average useful life of all intangibles acquired 9 9 9 |
Asset acquisitions | |
Schedule of intangible assets acquired | 2020 2021 2022 Customer relationships $ 24,851 $ 2,916 $ 12,297 Other acquired intangibles 1,308 125 495 Total $ 26,159 $ 3,041 $ 12,792 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Summary of changes in the goodwill balances | 2020 2021 2022 Balance beginning of period: Goodwill $ 1,112,855 $ 1,278,183 $ 1,947,939 Cumulative impairment losses (22,624) (22,624) (22,624) 1,090,231 1,255,559 1,925,315 Goodwill acquired 160,341 677,195 249,677 Other 4,987 (7,439) (7,075) 165,328 669,756 242,602 Balance end of period: Goodwill 1,278,183 1,947,939 2,190,541 Cumulative impairment losses (22,624) (22,624) (22,624) $ 1,255,559 $ 1,925,315 $ 2,167,917 |
Summary of amortizing acquired intangible assets | The following table summarizes the amortizing acquired intangible assets at December 31, 2021: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 2,228,461 $ (787,016) $ 1,441,445 Management contracts 191,578 (57,153) 134,425 Other acquired intangibles 10,911 (5,062) 5,849 Total $ 2,430,950 $ (849,231) $ 1,581,719 The following table summarizes the amortizing acquired intangible assets at December 31, 2022: Gross Carry Accumulated Net Book Amount Amortization Value Customer relationships $ 2,530,062 $ (1,029,197) $ 1,500,865 Management contracts 202,479 (70,624) 131,855 Other acquired intangibles 13,416 (7,012) 6,404 Total $ 2,745,957 $ (1,106,833) $ 1,639,124 |
Schedule of estimated amortization expense | Years Ending December 31, Amount 2023 $ 270,828 2024 254,749 2025 241,575 2026 217,115 2027 181,401 |
FIXED ASSETS (Tables)
FIXED ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
FIXED ASSETS | |
Schedule of fixed assets | 2021 2022 Leasehold improvements $ 46,252 $ 51,926 Computers, software development and equipment 39,074 44,612 Furniture and fixtures 20,834 24,689 Subtotal 106,160 121,227 Less accumulated depreciation and amortization (58,961) (66,479) Total $ 47,199 $ 54,748 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
FAIR VALUE MEASUREMENTS | |
Schedule of implied fair value of the Company's First Lien Term Loan (as defined below) | 2021 2022 Stated Fair Stated Fair Value Value Value Value First Lien Term Loan B - Tranche A $ 1,610,928 $ 1,598,846 $ 1,755,600 $ 1,735,850 First Lien Term Loan B - Tranche B 796,374 792,392 788,370 772,603 |
Schedule of changes in the fair value of estimated contingent consideration for business acquisitions | 2021 2022 Balance at January 1, $ 169,670 $ 350,027 Additions to estimated contingent consideration 212,074 56,604 Assumed estimated contingent consideration obligation — 12,637 Payments of contingent consideration (143,107) (148,638) Non-cash changes in fair value of estimated contingent consideration 112,416 (64,747) Other (1,026) (1,575) Balance at December 31, $ 350,027 $ 204,308 |
Schedule of inputs used in the fair value measurement of estimated contingent consideration | Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2021 Techniques Inputs Ranges $ 350,027 Monte Carlo Simulation Model Forecasted growth rates 0.7% - 20.1 % Discount rates 9.0% - 15.0 % Quantitative Information About Level 3 Fair Value Measurements Fair Value at Valuation Unobservable December 31, 2022 Techniques Inputs Ranges $ 204,308 Monte Carlo Simulation Model Forecasted growth rates (7.8)% - 32.4 % Discount rates 13.0% - % |
CREDIT FACILITY (Tables)
CREDIT FACILITY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
CREDIT FACILITY. | |
Schedule of reconciliation of principal amounts outstanding under the Credit Facility to borrowings under credit facilities recorded in the consolidated balance sheets | 2021 2022 First Lien Term Loan B - Tranche A $ 1,610,928 $ 1,755,600 First Lien Term Loan B - Tranche B 796,374 788,370 First Lien Term Loan A — 20,000 First Lien Revolver — — Unamortized debt financing costs (7,523) (17,750) Unamortized discount (6,110) (35,471) Total $ 2,393,669 $ 2,510,749 |
EQUITY (Tables)
EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Schedule of changes in restricted stock units | Weighted Restricted Average Stock Grant Date Units Fair Value Outstanding—January 1, 2020 98,061 $ 27.90 Granted 73,310 44.71 Forfeited (7,707) 27.90 Vested (22,569) 27.90 Outstanding—December 31, 2020 141,095 36.63 Granted 92,420 58.46 Forfeited (6,954) 34.46 Vested (38,805) 35.53 Outstanding—December 31, 2021 187,756 47.69 Granted 138,708 37.59 Forfeited (17,245) 46.49 Vested (56,500) 44.16 Outstanding—December 31, 2022 252,719 43.02 |
Schedule of incentive units outstanding and vested by hurdle rates | Number Vested Incentive Hurdle Rates Outstanding Units $1.42 421 421 5.50 798 798 6.00 386 386 7.00 1,081 1,081 9.00 708,107 708,107 11.00 813,001 813,001 12.00 513,043 513,043 13.00 540,000 540,000 14.00 10,098 10,098 16.00 45,191 45,191 17.00 20,000 20,000 19.00 527,928 527,928 21.00 3,017,692 3,017,692 22.00 796,417 796,417 23.00 524,828 524,828 26.26 12,500 6,250 27.00 12,484 12,484 27.90 1,890,440 1,395,592 28.50 1,424,225 1,424,225 30.48 30,000 20,000 33.00 3,617,500 7,500 36.64 30,000 30,000 37.59 508,145 — 43.07 60,000 — 43.50 30,000 30,000 44.71 806,324 406,279 58.50 662,277 170,604 16,602,886 11,021,925 |
Stock options | |
Schedule of stock options granted | Stock Weighted Average Options Exercise Price Outstanding—January 1, 2020 1,832,966 $ 30.42 Granted 286,081 44.71 Exercised (251,913) 30.97 Forfeited (21,817) 29.27 Outstanding—December 31, 2020 1,845,317 32.57 Vested—December 31, 2020 785,257 31.36 Granted 357,141 58.50 Exercised (235,684) 31.65 Forfeited (34,906) 32.65 Outstanding—December 31, 2021 1,931,868 37.47 Vested—December 31, 2021 852,579 31.56 Granted 686,130 44.82 Exercised (42,076) 27.54 Forfeited (114,605) 47.27 Outstanding—December 31, 2022 2,461,317 39.24 Vested—December 31, 2022 1,172,105 33.53 |
Time-based stock option awards | |
Schedule of fair value of stock options grants determined with assumptions | 2020 2021 2022 Expected term 6.3 years 6.3 years 6.3 years Expected stock price volatility 34 % 34 % 34 % Risk-free interest rate 0.54 % 1.29 % 2.78 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 15.37 $ 20.89 $ 17.27 |
Focus LLC Restricted Common Units | |
Schedule of changes in restricted stock units | Weighted Restricted Average Common Grant Date Units Fair Value Outstanding—January 1, 2020 — $ — Granted 73,276 44.71 Outstanding—December 31, 2020 73,276 44.71 Granted 140,258 58.50 Forfeited (1,902) 44.71 Vested (18,007) 44.71 Outstanding—December 31, 2021 193,625 54.70 Granted 157,057 37.59 Vested (54,134) 53.91 Outstanding—December 31, 2022 296,548 45.78 |
Incentive Units | |
Schedule of incentive units granted | Weighted Average Incentive Units Hurdle Price Outstanding—January 1, 2020 19,754,450 $ 21.59 Granted 855,006 44.21 Forfeited (3,153,308) 12.51 Forfeited (221,651) 24.67 Outstanding—December 31, 2020 17,234,497 24.34 Vested—December 31, 2020 8,509,652 18.31 Granted 692,277 57.85 Exchanged (1,580,792) 17.65 Forfeited (199,458) 23.22 Outstanding—December 31, 2021 16,146,524 26.44 Vested—December 31, 2021 9,804,757 20.44 Granted 568,145 38.17 Exchanged (111,783) 24.93 Outstanding—December 31, 2022 16,602,886 26.86 Vested—December 31, 2022 11,021,925 22.15 |
Time based incentive units | |
Schedule of fair value of equity incentive units grants determined with assumptions | 2020 2021 2022 Expected term 5.0 years 5.0 years 5.0 years Expected unit price volatility 35 % 34 % 36 % Risk-free interest rate 0.39 % 1.19 % 3.58 % Expected dividend yield — % — % — % Weighted average grant date fair value $ 13.72 $ 18.35 $ 14.30 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
Schedule of U.S. and foreign components of income (loss) before income tax | 2020 2021 2022 Income before income tax: United States $ 65,472 $ 36,274 $ 163,923 Foreign 4,153 8,248 14,432 Total income before income tax $ 69,625 $ 44,522 $ 178,355 |
Schedule of U.S. and foreign components of income tax expense (benefit) | 2020 2021 2022 Current provision: Federal $ 10,363 $ 19,742 $ 12,373 State and local 5,355 7,855 8,221 Foreign 4,169 6,906 8,726 Subtotal 19,887 34,503 29,320 Deferred provision (benefit): Federal 1,854 (7,958) 19,913 State and local 580 (3,674) 8,065 Foreign (1,661) (2,789) (4,221) Subtotal 773 (14,421) 23,757 Total income tax expense $ 20,660 $ 20,082 $ 53,077 |
Schedule of deferred tax assets (liabilities) | 2021 2022 Deferred tax assets: Investment in Focus LLC, net $ 254,454 $ 224,004 Federal net operating loss carryforwards 11,561 5,289 Business interest carryforwards — 6,494 Deferred rent and other 2,353 2,479 Gross deferred tax assets 268,368 238,266 Valuation allowance — (6,494) Deferred tax assets: 268,368 231,772 Deferred tax liabilities: Intangible assets (32,483) (30,811) Fixed assets and other (526) (410) Gross deferred tax liabilities (33,009) (31,221) Net deferred tax assets $ 235,359 $ 200,551 |
Schedule of reconciliation of the differences between the U.S. federal statutory tax rate and the effective tax rate | 2020 2021 2022 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Income passed through to individual members (7.6) (6.1) (4.7) Foreign income taxes 3.6 9.2 2.5 Non-cash equity compensation expense 3.5 7.7 1.8 Non-cash changes in fair value of estimated contingent consideration — — (1.5) Other non-deductible expenses 0.9 2.7 0.3 State and local income taxes, net of U.S. federal tax benefit 7.0 8.1 6.6 Valuation allowance — — 3.6 Other 1.3 2.5 0.2 Effective income tax rate 29.7 % 45.1 % 29.8 % |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
LEASES | |
Future minimum lease payments under operating leases | Year ending December 31, Amount 2023 $ 60,113 2024 56,357 2025 49,917 2026 43,387 2027 37,541 2028 and thereafter 99,413 346,728 Less: present value discount (57,833) Operating lease liabilities at December 31, 2022 $ 288,895 |
Other information pertaining to leases | 2021 2022 Operating lease costs included in selling, general and administrative expenses $ 74,340 $ 61,057 Operating cash flows from operating leases 73,481 59,090 Operating lease assets obtained in exchange for operating lease obligations 61,750 72,012 |
CASH FLOW INFORMATION (Tables)
CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
CASH FLOW INFORMATION | |
Schedule of supplemental cash flow information | Year Ended December 31, 2020 2021 2022 Supplemental disclosures of cash flow information—cash paid for: Interest $ 41,352 $ 53,721 $ 93,851 Income taxes $ 18,927 $ 36,806 $ 33,212 Supplemental non-cash cash flow information: Fair market value of estimated contingent consideration in connection with acquisitions $ 46,918 $ 212,074 $ 56,604 |
GENERAL (Details)
GENERAL (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Business acquisitions | |
GENERAL | |
Acquisition of net assets of wealth management businesses (as a percent) | 100% |
Management Agreement | |
GENERAL | |
Term of agreement (in years) | 6 years |
Term of automatic renewal of agreement (in years) | 1 year |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue Recognition | |||
Total revenues | $ 2,143,321 | $ 1,797,951 | $ 1,361,319 |
Domestic | |||
Revenue Recognition | |||
Total revenues | 2,016,845 | 1,691,345 | 1,291,630 |
International | |||
Revenue Recognition | |||
Total revenues | $ 126,476 | $ 106,606 | $ 69,689 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fixed Assets and Goodwill, Intangible Assets and Other Long Lived Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Investments | ||
Purchase of minority equity interest in wealth management firm | $ 5,232 | $ 1,632 |
Investments in publicly traded mutual funds | $ 18,000 | |
Goodwill, Intangible Assets and Other Long-Lived Assets | ||
Indefinite-lived intangible assets | $ 0 | |
Computers | Minimum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 3 years | |
Computers | Maximum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 7 years | |
Equipment | Minimum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 3 years | |
Equipment | Maximum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 7 years | |
Furniture and fixtures | Minimum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 3 years | |
Furniture and fixtures | Maximum | ||
Fixed Assets | ||
Estimated useful lives (in years) | 7 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting, Consolidation Considerations and Income Taxes (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) segment | Dec. 31, 2021 USD ($) | |
Income Taxes | ||
Uncertain tax positions reserve | $ 0 | $ 0 |
Number of operating segments | segment | 1 | |
Option premium paid to a Singapore based wealth management firm | $ 2,000 | |
Option premiums | $ 0 |
NON-CONTROLLING INTERESTS AND_3
NON-CONTROLLING INTERESTS AND INCOME PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Basic income per share: | |||
Net income attributable to common shareholders | $ 91,784 | $ 10,412 | $ 28,045 |
Diluted income per share: | |||
Net income attributable to common shareholders | 91,784 | 10,412 | 28,045 |
Class A common stock | |||
Basic income per share: | |||
Net income attributable to common shareholders | $ 91,784 | $ 10,412 | $ 28,045 |
Weighted average shares of Class A common stock outstanding | 65,552,592 | 57,317,477 | 48,678,584 |
Basic income per share | $ 1.40 | $ 0.18 | $ 0.58 |
Diluted income per share: | |||
Net income attributable to common shareholders | $ 91,784 | $ 10,412 | $ 28,045 |
Weighted average shares of Class A common stock outstanding | 65,552,592 | 57,317,477 | 48,678,584 |
Effect of dilutive stock options | 235,187 | 461,306 | 77,302 |
Effect of dilutive unvested Class A common stock | 23,822 | ||
Effect of dilutive restricted stock units | 22,436 | 52,368 | 16,905 |
Total | 65,810,215 | 57,831,151 | 48,796,613 |
Diluted income per share | $ 1.39 | $ 0.18 | $ 0.57 |
Market based stock options | |||
Diluted income per share: | |||
Threshold period | 90 days | 90 days | 90 days |
Highest 90-day VWAP is $80.00 or less | Market based stock options | IPO | |||
Diluted income per share: | |||
Threshold period | 90 days | 90 days | 90 days |
Threshold volume weighted average per share price trigger | $ 80 | $ 80 | $ 80 |
Vesting percentage | 0% | 0% | 0% |
Highest 90-day VWAP is $110.00 or more | Market based stock options | IPO | |||
Diluted income per share: | |||
Threshold period | 90 days | 90 days | 90 days |
Threshold volume weighted average per share price trigger | $ 110 | $ 110 | $ 110 |
Vesting percentage | 100% | 100% | 100% |
Share price used in change of control transaction is $110 | Market based stock options | |||
Diluted income per share: | |||
Share price used in change of control transaction | $ 110 | $ 110 | $ 110 |
Vesting percentage | 100% | 100% | 100% |
Share price used in change of control transaction is equal to or less than $33.00 | Market based stock options | |||
Diluted income per share: | |||
Share price used in change of control transaction | $ 33 | $ 33 | $ 33 |
Vesting percentage | 0% | 0% | 0% |
Focus LLC | |||
NON-CONTROLLING INTEREST AND INCOME PER SHARE | |||
Focus LLC common units | 11,827,321 | 11,439,019 | |
Focus LLC restricted common units | 296,548 | 193,625 | |
Common unit equivalents of outstanding vested and unvested Focus LLC incentive units | 5,196,288 | 8,996,789 | |
Total common units, restricted common units and common unit equivalents attributable to non-controlling interest | 17,320,157 | 20,629,433 | |
Total common units, restricted common units and common unit equivalents of incentive units outstanding | 83,249,801 | 85,949,557 | |
Non-controlling interest allocation | 20.80% | 24% | |
Company's interest in Focus LLC | 79.20% | 76% | |
Convertible incentive units | 16,602,886 | 16,146,524 |
ACQUISITIONS - Business Acquisi
ACQUISITIONS - Business Acquisitions (Details) $ in Thousands | 2 Months Ended | 12 Months Ended | |||
Feb. 16, 2023 USD ($) | Dec. 31, 2022 USD ($) item | Dec. 31, 2021 USD ($) item | Dec. 31, 2020 USD ($) item | Dec. 31, 2019 USD ($) | |
Allocation of purchase price: | |||||
Goodwill | $ 2,167,917 | $ 1,925,315 | $ 1,255,559 | $ 1,090,231 | |
Business acquisitions | |||||
ACQUISITIONS | |||||
Number of business acquisitions closed | item | 18 | 36 | 21 | ||
Consideration: | |||||
Cash due at closing | $ 450,943 | $ 983,240 | $ 327,722 | ||
Working capital adjustment and other | 1,127 | (577) | (174) | ||
Cash due subsequent to closing at net present value | 9,611 | 86,778 | |||
Fair market value of estimated contingent consideration | 56,604 | 212,074 | 46,918 | ||
Total consideration | 547,277 | 1,308,148 | 374,466 | ||
Allocation of purchase price: | |||||
Total tangible assets | 29,991 | 61,854 | 21,216 | ||
Total liabilities assumed | (32,551) | (83,444) | (31,680) | ||
Goodwill | 249,677 | 677,195 | 160,341 | ||
Total allocated consideration | 547,277 | 1,308,148 | 374,466 | ||
Amount of goodwill and intangibles expected to be deductible for tax purposes | $ 461,746 | ||||
Deductibility period for goodwill and intangible assets acquired in a business acquisition (in years) | 15 years | ||||
Revenue from acquired entity in business acquisitions | $ 29,883 | ||||
Income from acquired entity in business acquisitions | 3,140 | ||||
Business acquisitions | Focus LLC | |||||
Consideration: | |||||
Fair market value of Focus LLC common units issued at closing | 28,992 | 23,118 | |||
Business acquisitions | Customer relationships | |||||
Allocation of purchase price: | |||||
Finite-lived intangible assets | 287,172 | 616,283 | 215,686 | ||
Business acquisitions | Management contracts | |||||
Allocation of purchase price: | |||||
Finite-lived intangible assets | 11,414 | 33,350 | 7,774 | ||
Business acquisitions | Other acquired intangibles | |||||
Allocation of purchase price: | |||||
Finite-lived intangible assets | $ 1,574 | 2,910 | $ 1,129 | ||
Business acquisitions | Class A common stock | |||||
Consideration: | |||||
Fair market value of Focus LLC common units issued at closing | $ 3,515 | ||||
Wealth management business | Subsequent Events | |||||
Consideration: | |||||
Cash due at closing | $ 28,771 | ||||
Allocation of purchase price: | |||||
Deferred cash consideration | $ 2,366 |
ACQUISITIONS - Asset Acquisitio
ACQUISITIONS - Asset Acquisitions (Details) - Asset acquisitions $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 USD ($) item | Dec. 31, 2021 USD ($) item | Dec. 31, 2020 USD ($) item | |
Asset Acquisitions | |||
Cash payable subsequent to asset acquisition | $ 3,000 | ||
Number of asset acquisitions | item | 6 | 2 | 4 |
Total purchase consideration | $ 9,718 | $ 3,041 | $ 26,159 |
Contingent consideration | 9,071 | 4,577 | 2,451 |
Intangible assets acquired in asset acquisitions | $ 12,792 | $ 3,041 | $ 26,159 |
Weighted-average useful life of all intangibles acquired | 9 years | 9 years | 9 years |
Customer relationships | |||
Asset Acquisitions | |||
Intangible assets acquired in asset acquisitions | $ 12,297 | $ 2,916 | $ 24,851 |
Weighted-average useful life of all intangibles acquired | 9 years | 9 years | 9 years |
Management contracts | |||
Asset Acquisitions | |||
Weighted-average useful life of all intangibles acquired | 7 years | 14 years | 18 years |
Other acquired intangibles | |||
Asset Acquisitions | |||
Intangible assets acquired in asset acquisitions | $ 495 | $ 125 | $ 1,308 |
Weighted-average useful life of all intangibles acquired | 5 years | 5 years | 5 years |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Change in goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Change in the goodwill | |||
Goodwill, gross, beginning of period | $ 1,947,939 | $ 1,278,183 | $ 1,112,855 |
Cumulative impairment losses beginning of period | (22,624) | (22,624) | (22,624) |
Goodwill, net, beginning of period | 1,925,315 | 1,255,559 | 1,090,231 |
Goodwill acquired | 249,677 | 677,195 | 160,341 |
Other | (7,075) | (7,439) | 4,987 |
Goodwill period increase | 242,602 | 669,756 | 165,328 |
Goodwill, gross, end of period | 2,190,541 | 1,947,939 | 1,278,183 |
Cumulative impairment losses, end of period | (22,624) | (22,624) | (22,624) |
Goodwill, net, end of period | 2,167,917 | 1,925,315 | 1,255,559 |
Impairment loss of goodwill | $ 0 | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 2,745,957 | $ 2,430,950 |
Accumulated Amortization | (1,106,833) | (849,231) |
Net Book Value | 1,639,124 | 1,581,719 |
Customer relationships | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | 2,530,062 | 2,228,461 |
Accumulated Amortization | (1,029,197) | (787,016) |
Net Book Value | $ 1,500,865 | 1,441,445 |
Customer relationships | Minimum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 4 years | |
Customer relationships | Maximum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 10 years | |
Management contracts | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 202,479 | 191,578 |
Accumulated Amortization | (70,624) | (57,153) |
Net Book Value | $ 131,855 | 134,425 |
Management contracts | Minimum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 2 years | |
Management contracts | Maximum | ||
Amortizing acquired intangible assets | ||
Estimated useful lives (in years) | 20 years | |
Other acquired intangibles | ||
Amortizing acquired intangible assets | ||
Gross Carry Amount | $ 13,416 | 10,911 |
Accumulated Amortization | (7,012) | (5,062) |
Net Book Value | $ 6,404 | $ 5,849 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Estimated amortization expense (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Estimated amortization expense | |
2023 | $ 270,828 |
2024 | 254,749 |
2025 | 241,575 |
2026 | 217,115 |
2027 | $ 181,401 |
FIXED ASSETS (Details)
FIXED ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Fixed Assets | ||
Subtotal | $ 121,227 | $ 106,160 |
Less accumulated depreciation and amortization | (66,479) | (58,961) |
Total | 54,748 | 47,199 |
Leasehold improvements | ||
Fixed Assets | ||
Subtotal | 51,926 | 46,252 |
Computers, software development and equipment | ||
Fixed Assets | ||
Subtotal | 44,612 | 39,074 |
Furniture and fixtures | ||
Fixed Assets | ||
Subtotal | $ 24,689 | $ 20,834 |
FAIR VALUE MEASUREMENTS - First
FAIR VALUE MEASUREMENTS - First Lien Term Loan (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Implied fair value based on level 2 inputs | ||
Stated Value | $ 2,510,749 | $ 2,393,669 |
First Lien Term Loan Tranche A | Level 2 | ||
Implied fair value based on level 2 inputs | ||
Stated Value | 1,755,600 | 1,610,928 |
Fair Value | 1,735,850 | 1,598,846 |
First Lien Term Loan Tranche B | Level 2 | ||
Implied fair value based on level 2 inputs | ||
Stated Value | 788,370 | 796,374 |
Fair Value | $ 772,603 | $ 792,392 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in the fair value (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Balance at beginning of period | $ 350,027 | $ 169,670 |
Additions to estimated contingent consideration | 56,604 | 212,074 |
Assumed estimated contingent consideration obligation | 12,637 | |
Non-cash changes in fair value of estimated contingent consideration | (64,747) | 112,416 |
Other | (1,575) | (1,026) |
Balance at end of period | 204,308 | 350,027 |
Contingent consideration paid in cash | 148,638 | 143,107 |
Interest rate swap | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Notional amount | 850,000 | 850,000 |
Asset acquisitions | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Contingent consideration paid in cash | 9,071 | 4,577 |
Business acquisitions | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Contingent consideration paid in cash | 138,940 | 131,827 |
Contingent consideration issued of restricted common units | 9,698 | 11,280 |
Contingent consideration and other liabilities | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Deferred cash consideration | 122,079 | 114,156 |
Amount due to sellers in 2023 | 19,357 | |
Amount due to sellers in 2024 | 21,947 | |
Amount due to sellers in 2025 | 8,157 | |
Amount due to sellers in 2026 | 0 | |
Amount due to sellers in 2027 | 4,748 | |
Amount due to sellers in 2028 | 0 | |
Amount due to sellers in 2029 | 67,870 | |
Contingent consideration and other liabilities | Interest rate swap | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Fair value of interest rate swap | $ 5,810 | |
Prepaid expenses and other assets. | Interest rate swap | ||
Changes in the fair value of estimated contingent consideration for business acquisitions | ||
Fair value of interest rate swap | $ 44,219 |
FAIR VALUE MEASUREMENTS - Conti
FAIR VALUE MEASUREMENTS - Contingent consideration fair value inputs (Details) - Level 3 $ in Thousands | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) |
Inputs used in the fair value measurement of estimated contingent consideration | ||
Estimated contingent consideration | $ 204,308 | $ 350,027 |
Valuation Technique, Forecasted Growth Rates | Minimum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Measurement input | (7.8) | 0.7 |
Valuation Technique, Forecasted Growth Rates | Maximum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Measurement input | 32.4 | 20.1 |
Valuation Technique, Discount Rates | Minimum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Measurement input | 13 | 9 |
Valuation Technique, Discount Rates | Maximum | ||
Inputs used in the fair value measurement of estimated contingent consideration | ||
Measurement input | 19 | 15 |
CREDIT FACILITY - Old and New C
CREDIT FACILITY - Old and New Credit Facility (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 7 Months Ended | 12 Months Ended | ||||
Dec. 31, 2022 | Nov. 30, 2022 | Oct. 31, 2022 | Dec. 31, 2022 | Jul. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Credit Facility | ||||||||
Face amount of debt | $ 2,563,970 | $ 2,563,970 | $ 2,563,970 | $ 2,407,302 | ||||
Amount outstanding under credit facility | 2,510,749 | 2,510,749 | 2,510,749 | 2,393,669 | ||||
Debt issuance costs | 19,072 | 8,282 | $ 634 | |||||
Borrowings under credit facilities | 1,998,900 | 1,318,375 | 555,000 | |||||
Loss on extinguishment of borrowings | (1,807) | $ (6,094) | ||||||
Consolidated EBITDA | 578,396 | 578,396 | $ 578,396 | |||||
Credit Facility | ||||||||
Credit Facility | ||||||||
First lien leverage ratio as defined in the Credit Facility | 6.25% | |||||||
Actual total secured leverage ratio | 4.19 | |||||||
Secured leverage ratio threshold for contingent principal payments | 3.75 | |||||||
Contingent principal payments due in current year | $ 0 | 0 | ||||||
Contingent principal payments due in next year | $ 0 | |||||||
Credit Facility | Maximum | ||||||||
Credit Facility | ||||||||
First lien leverage ratio as defined in the Credit Facility | 6.25% | |||||||
First Lien Term Loan Tranche A | ||||||||
Credit Facility | ||||||||
Debt financing costs | $ 8,282 | |||||||
First Lien Term Loan B | ||||||||
Credit Facility | ||||||||
Face amount of debt | 2,543,970 | 2,543,970 | $ 2,543,970 | |||||
First Lien Term Loan B - Tranche A | ||||||||
Credit Facility | ||||||||
Face amount of debt | 1,755,600 | $ 1,760,000 | 1,755,600 | 1,755,600 | ||||
Amount outstanding under credit facility | 1,755,600 | 1,755,600 | 1,755,600 | 1,610,928 | ||||
Quarterly installment repayments | $ 4,400 | |||||||
Prepayment penalty (as a percent) | 1% | |||||||
Amortization of discount | $ 30,800 | |||||||
Debt discount (as a percent) | 1.75% | |||||||
First Lien Term Loan B - Tranche A | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 3.25% | |||||||
Floor rate | 0.50% | |||||||
First Lien Term Loan B - Tranche A | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 2.25% | |||||||
First Lien Term Loan B - Tranche B | ||||||||
Credit Facility | ||||||||
Face amount of debt | 788,370 | 788,370 | 788,370 | |||||
Amount outstanding under credit facility | 788,370 | 788,370 | 788,370 | $ 796,374 | ||||
Quarterly installment repayments | $ 2,001 | |||||||
First Lien Term Loan B - Tranche B | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 2.50% | |||||||
Floor rate | 0.50% | |||||||
First Lien Term Loan B - Tranche B | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 1.50% | |||||||
First Lien Term Loan A | ||||||||
Credit Facility | ||||||||
Face amount of debt | 240,000 | $ 240,000 | 240,000 | 240,000 | ||||
Amount outstanding under credit facility | 20,000 | 20,000 | 20,000 | |||||
Debt discount (as a percent) | 1.50% | |||||||
Percentage of quarterly amortization of debt discount in 2023 | 0.25% | |||||||
Percentage of quarterly amortization of debt discount in 2024 | 0.50% | |||||||
Percentage of quarterly amortization of debt discount in 2025 | 0.50% | |||||||
Percentage of quarterly amortization of debt discount in 2026 | 1.25% | |||||||
Percentage of quarterly amortization of debt discount in 2027 | 1.875% | |||||||
Borrowings under credit facilities | 20,000 | |||||||
Debt discount amount | 300 | 300 | 300 | |||||
Amortization of discount | 50 | |||||||
First Lien Term Loan A | 0 - 60 days from the closing date | ||||||||
Credit Facility | ||||||||
Percentage of Delayed Draw Ticking Fee on Undrawn Commitments | 0% | |||||||
First Lien Term Loan A | 61-120 days of the closing date | ||||||||
Credit Facility | ||||||||
Percentage of Delayed Draw Ticking Fee on Undrawn Commitments | 50% | |||||||
First Lien Term Loan A | After 121 days of the closing date | ||||||||
Credit Facility | ||||||||
Percentage of Delayed Draw Ticking Fee on Undrawn Commitments | 100% | |||||||
First Lien Term Loan A | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 2.50% | |||||||
Floor rate | 0.50% | |||||||
First Lien Term Loan A | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 1.50% | |||||||
Then existing First Lien Term Loan B - Tranche A | ||||||||
Credit Facility | ||||||||
Amount outstanding under credit facility | $ 1,598,408 | |||||||
First Lien Term Loan B & First Lien Term Loan A | ||||||||
Credit Facility | ||||||||
Debt issuance costs | 17,961 | |||||||
Loss on extinguishment of borrowings | 1,807 | |||||||
First Lien Revolver | ||||||||
Credit Facility | ||||||||
Face amount of debt | $ 650,000 | $ 650,000 | 650,000 | |||||
Debt issuance costs | $ 1,111 | |||||||
Unused commitment fee (as a percent) | 0.50% | |||||||
Maximum borrowing capacity | $ 30,000 | |||||||
First Lien Revolver | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 2.25% | |||||||
First Lien Revolver | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 1.25% | |||||||
First Lien Revolver Step Down One | ||||||||
Credit Facility | ||||||||
Unused commitment fee (as a percent) | 0.375% | |||||||
First Lien Revolver Step Down One | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 2% | |||||||
First Lien Revolver Step Down One | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 1% | |||||||
First Lien Revolver Step Down Two | ||||||||
Credit Facility | ||||||||
Unused commitment fee (as a percent) | 0.25% | |||||||
First Lien Revolver Step Down Two | SOFR | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 1.75% | |||||||
First Lien Revolver Step Down Two | Base rate | ||||||||
Credit Facility | ||||||||
Margin (as a percent) | 0.75% |
CREDIT FACILITY - Reconciliatio
CREDIT FACILITY - Reconciliation of Principal Amounts Outstanding (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Credit Facility | ||
Unamortized debt financing costs | $ (17,750) | $ (7,523) |
Unamortized discount | (35,471) | (6,110) |
Amount outstanding under credit facility | 2,510,749 | 2,393,669 |
First Lien Term Loan B - Tranche A | ||
Credit Facility | ||
Amount outstanding under credit facility | 1,755,600 | 1,610,928 |
First Lien Term Loan B - Tranche B | ||
Credit Facility | ||
Amount outstanding under credit facility | 788,370 | $ 796,374 |
First Lien Term Loan A | ||
Credit Facility | ||
Amount outstanding under credit facility | $ 20,000 |
CREDIT FACILITY - First Lien Re
CREDIT FACILITY - First Lien Revolver and Letters of Credit (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Credit Facility | ||
Weighted average interest rate | 4% | 3% |
Deferred financing costs | $ 7,590 | $ 4,254 |
First Lien Revolver | ||
Credit Facility | ||
Deferred financing costs | 7,590 | 4,254 |
Unused commitment line | 639,997 | 642,085 |
Standby Letters of Credit | ||
Credit Facility | ||
Letter of credit outstanding | $ 10,003 | $ 7,915 |
Annual interest rate | 2% | 2% |
DERIVATIVES (Details)
DERIVATIVES (Details) $ in Thousands | Dec. 31, 2022 USD ($) item | Nov. 30, 2022 USD ($) item | Dec. 31, 2021 USD ($) |
Interest rate swaps | |||
Derivatives | |||
Number of swaps | item | 3 | 3 | |
Notional amount | $ 850,000 | $ 850,000 | |
Variable interest rate borrowings outstanding | 850,000 | ||
Interest rate swaps | Prepaid expenses and other assets | |||
Derivatives | |||
Offsetting adjustment to fair value in accumulated other comprehensive income (loss), net of tax | $ 9,458 | 1,194 | |
Interest rate swaps | LIBOR | |||
Derivatives | |||
Fixed interest rate per month | 0% | ||
Fair value | $ 5,810 | ||
Interest rate swaps | SOFR | |||
Derivatives | |||
Interest rate floor (as a percent) | 0.50% | ||
Fair value | $ 44,219 | ||
Interest rate swap, one | |||
Derivatives | |||
Notional amount | $ 400,000 | $ 400,000 | |
Variable interest rate per month | 0.713% | ||
Fixed interest rate per month | 0.619% | ||
Interest rate swap, two | |||
Derivatives | |||
Notional amount | $ 250,000 | $ 250,000 | |
Variable interest rate per month | 0.537% | ||
Fixed interest rate per month | 0.447% | ||
Interest rate swap, three | |||
Derivatives | |||
Notional amount | $ 200,000 | $ 200,000 | |
Variable interest rate per month | 0.5315% | ||
Fixed interest rate per month | 0.44% |
EQUITY - Common Stock (Details)
EQUITY - Common Stock (Details) | Dec. 31, 2022 Vote $ / shares shares |
EQUITY | |
Preferred stock, par value | $ / shares | $ 0.01 |
Preferred stock, authorized shares | shares | 500,000,000 |
Class A common stock | |
EQUITY | |
Voting rights per share | 1 |
Class B common stock | |
EQUITY | |
Voting rights per share | 1 |
EQUITY (Details)
EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||||||
Jul. 30, 2018 | Nov. 30, 2022 | Aug. 31, 2022 | May 31, 2022 | Apr. 30, 2022 | Mar. 31, 2022 | Feb. 28, 2022 | Jul. 31, 2018 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
EQUITY | |||||||||||
Net proceeds of deducting underwriting discounts | $ 219,636 | ||||||||||
Class A common stock | |||||||||||
EQUITY | |||||||||||
Issuance of common stock (in shares) | 28,291 | 396,731 | 80,000 | 26,956 | |||||||
Class B common stock | |||||||||||
EQUITY | |||||||||||
Common stock retired (in shares) | 1,685 | 381,573 | 80,000 | ||||||||
Common stock retired (in shares) | 25,000 | ||||||||||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 139,099 | 512,290 | 187,795 | ||||||||
Incentive Units | |||||||||||
EQUITY | |||||||||||
Vesting period | 4 years | ||||||||||
Changes in unvested common stock, Grant Date Fair Value | |||||||||||
Non-cash equity compensation expense | $ 21,726 | 25,566 | $ 16,800 | ||||||||
Focus LLC | |||||||||||
EQUITY | |||||||||||
Incentive units retired (in shares) | 71,176 | 36,357 | 4,250 | ||||||||
Common units acquired (in shares) | 28,291 | 396,731 | 80,000 | 26,956 | |||||||
Stock options | Class A common stock | |||||||||||
Changes in unvested common stock, Grant Date Fair Value | |||||||||||
Non-cash equity compensation expense | $ 8,727 | $ 6,036 | $ 5,485 | ||||||||
Time-based stock option awards | |||||||||||
EQUITY | |||||||||||
Vesting period | 4 years | ||||||||||
Changes in unvested common stock, Grant Date Fair Value | |||||||||||
Granted | $ 17.27 | $ 20.89 | $ 15.37 | ||||||||
Market condition-based awards | |||||||||||
EQUITY | |||||||||||
Vesting period | 5 years | ||||||||||
Threshold period | 90 days | ||||||||||
Threshold volume weighted average per share price trigger | $ 100 | ||||||||||
Market condition-based awards | Exercised on and following the first anniversary of the date of vesting in July 2025 | |||||||||||
EQUITY | |||||||||||
Vested stock options exercised (in percent) | 25% | ||||||||||
Cumulative vested stock options exercised (in percent) | 50% | ||||||||||
Market condition-based awards | IPO | |||||||||||
EQUITY | |||||||||||
Threshold period | 90 days | ||||||||||
Incremental Non-cash equity compensation expense recognized | $ 518 | ||||||||||
Market condition-based awards | IPO | Share price used is $110.00 | |||||||||||
EQUITY | |||||||||||
Share price (in dollar per share) | $ 110 | ||||||||||
Vesting percentage | 100% | ||||||||||
Market condition-based awards | IPO | Share price used is equal to or less than $33.00 | |||||||||||
EQUITY | |||||||||||
Share price (in dollar per share) | $ 33 | ||||||||||
Vesting percentage | 0% | ||||||||||
Market condition-based awards | IPO | Highest 90-day VWAP is $80.00 or less | |||||||||||
EQUITY | |||||||||||
Vesting percentage | 0% | ||||||||||
Threshold period | 90 days | ||||||||||
Threshold volume weighted average per share price trigger | $ 80 | ||||||||||
Market condition-based awards | IPO | Highest 90-day VWAP is $110.00 or more | |||||||||||
EQUITY | |||||||||||
Vesting percentage | 100% | ||||||||||
Threshold period | 90 days | ||||||||||
Threshold volume weighted average per share price trigger | $ 110 | ||||||||||
Market condition-based awards | IPO | Exercised on and following the date of vesting | |||||||||||
EQUITY | |||||||||||
Vested stock options exercised (in percent) | 25% | ||||||||||
Market condition-based awards | IPO | Exercised on and following the second anniversary of the date of vesting in July 2026 | |||||||||||
EQUITY | |||||||||||
Vested stock options exercised (in percent) | 50% | ||||||||||
Cumulative vested stock options exercised (in percent) | 100% | ||||||||||
Market condition-based awards | Class A common stock | |||||||||||
EQUITY | |||||||||||
Granted | 155,000 | ||||||||||
Changes in stock options | |||||||||||
Granted | 155,000 | ||||||||||
Changes in unvested common stock | |||||||||||
Granted | 155,000 | ||||||||||
Restricted Stock Units (RSUs) | |||||||||||
EQUITY | |||||||||||
Granted | 138,708 | 92,420 | 73,310 | ||||||||
Vesting period | 4 years | ||||||||||
Changes in stock options | |||||||||||
Granted | 138,708 | 92,420 | 73,310 | ||||||||
Vested | 56,500 | 38,805 | 22,569 | ||||||||
Changes in stock option, Weighted Average Exercise Price | |||||||||||
Vested | $ 44.16 | $ 35.53 | $ 27.90 | ||||||||
Changes in unvested common stock | |||||||||||
Outstanding at the beginning of the period | 187,756 | 141,095 | 98,061 | ||||||||
Granted | 138,708 | 92,420 | 73,310 | ||||||||
Forfeited | (17,245) | (6,954) | (7,707) | ||||||||
Vested | (56,500) | (38,805) | (22,569) | ||||||||
Outstanding at the end of the period | 252,719 | 187,756 | 141,095 | ||||||||
Changes in unvested common stock, Grant Date Fair Value | |||||||||||
Outstanding at the beginning of the period | $ 47.69 | $ 36.63 | $ 27.90 | ||||||||
Granted | 37.59 | 58.46 | 44.71 | ||||||||
Forfeited | 46.49 | 34.46 | 27.90 | ||||||||
Vested | 44.16 | 35.53 | 27.90 | ||||||||
Outstanding at the end of the period | $ 43.02 | $ 47.69 | $ 36.63 | ||||||||
Common Stock | Class A common stock | |||||||||||
EQUITY | |||||||||||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 58,657 | ||||||||||
Common Stock | Class B common stock | |||||||||||
EQUITY | |||||||||||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 839,184 | 614,362 | |||||||||
Common Stock | Stock options | |||||||||||
EQUITY | |||||||||||
Granted | 686,130 | 357,141 | 286,081 | ||||||||
Changes in stock options | |||||||||||
Outstanding at the beginning of the period | 1,931,868 | 1,845,317 | 1,832,966 | ||||||||
Granted | 686,130 | 357,141 | 286,081 | ||||||||
Exercised | (42,076) | (235,684) | (251,913) | ||||||||
Forfeited | (114,605) | (34,906) | (21,817) | ||||||||
Vested | 1,172,105 | 852,579 | 785,257 | ||||||||
Outstanding at the end of the period | 2,461,317 | 1,931,868 | 1,845,317 | ||||||||
Changes in stock option, Weighted Average Exercise Price | |||||||||||
Outstanding at the beginning of the period | $ 37.47 | $ 32.57 | $ 30.42 | ||||||||
Granted | 44.82 | 58.50 | 44.71 | ||||||||
Exercised | 27.54 | 31.65 | 30.97 | ||||||||
Forfeited | 47.27 | 32.65 | 29.27 | ||||||||
Outstanding at the end of the period | 39.24 | 37.47 | 32.57 | ||||||||
Vested | $ 33.53 | $ 31.56 | $ 31.36 | ||||||||
Changes in unvested common stock | |||||||||||
Granted | 686,130 | 357,141 | 286,081 | ||||||||
Vested | (1,172,105) | (852,579) | (785,257) | ||||||||
Changes in unvested common stock, Grant Date Fair Value | |||||||||||
Vested | $ 33.53 | $ 31.56 | $ 31.36 | ||||||||
2018 Omnibus Incentive Plan | Maximum | Stock options | Class A common stock | |||||||||||
EQUITY | |||||||||||
Shares authorized | 6,000,000 | ||||||||||
Additional shares authorized for issuance under an established share-based compensation plan | 3,000,000 | ||||||||||
Percentage of additional shares authorized for issuance under an established share-based compensation plan to the outstanding shares | 5% |
EQUITY - Focus LLC Common Units
EQUITY - Focus LLC Common Units (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||||||
Nov. 30, 2022 | Aug. 31, 2022 | May 31, 2022 | Apr. 30, 2022 | Mar. 31, 2022 | Feb. 28, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Common Units | |||||||||
EQUITY | |||||||||
Outstanding common units | 11,827,321 | ||||||||
Class A common stock | |||||||||
EQUITY | |||||||||
Issuance of common stock (in shares) | 28,291 | 396,731 | 80,000 | 26,956 | |||||
Class B common stock | |||||||||
EQUITY | |||||||||
Common stock retired (in shares) | 25,000 | ||||||||
Issuance of common stock in connection with an acquisition and contingent consideration (in shares) | 139,099 | 512,290 | 187,795 | ||||||
Incentive Units | |||||||||
EQUITY | |||||||||
Common stock exchanged (in shares) | 111,783 | 1,580,792 | |||||||
Compensation expense recognized | $ 21,726 | $ 25,566 | $ 16,800 |
EQUITY - Focus LLC Restricted C
EQUITY - Focus LLC Restricted Common Units and Incentive Units (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Jul. 31, 2018 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Restricted Common Units | ||||
Incentive Units | ||||
Total unrecognized expense | $ 13,113 | |||
Weighted-average period to recognize compensation expense (in years) | 3 years 3 months 18 days | |||
Stock options | ||||
Incentive Units | ||||
Total unrecognized expense | $ 17,078 | |||
Weighted-average period to recognize compensation expense (in years) | 3 years 1 month 6 days | |||
Restricted Stock Units (RSUs) | ||||
EQUITY | ||||
Vesting period | 4 years | |||
Fair value of the stock option grants determined with assumptions | ||||
Weighted average grant date fair value | $ 37.59 | $ 58.46 | $ 44.71 | |
Incentive Units | ||||
Total unrecognized expense | $ 10,252 | |||
Weighted-average period to recognize compensation expense (in years) | 3 years 2 months 12 days | |||
Incentive Units | ||||
EQUITY | ||||
Grant date fair value (in dollars per unit) | $ 38.17 | $ 57.85 | $ 44.21 | |
Vesting period | 4 years | |||
Incentive Units | ||||
Granted | 568,145 | 692,277 | 855,006 | |
Forfeited | 199,458 | 3,153,308 | ||
Vested at the end of the period | 11,021,925 | 9,804,757 | 8,509,652 | |
Non-cash equity compensation expense | $ 21,726 | $ 25,566 | $ 16,800 | |
Total unrecognized expense | $ 27,427 | |||
Weighted-average period to recognize compensation expense (in years) | 2 years 6 months | |||
Time based incentive units | ||||
Fair value of the stock option grants determined with assumptions | ||||
Expected term (in years) | 5 years | 5 years | 5 years | |
Expected stock price volatility (in percent) | 36% | 34% | 35% | |
Risk-free interest rate (in percent) | 3.58% | 1.19% | 0.39% | |
Weighted average grant date fair value | $ 14.30 | $ 18.35 | $ 13.72 | |
Time-based stock option awards | ||||
EQUITY | ||||
Vesting period | 4 years | |||
Fair value of the stock option grants determined with assumptions | ||||
Expected term (in years) | 6 years 3 months 18 days | 6 years 3 months 18 days | 6 years 3 months 18 days | |
Expected stock price volatility (in percent) | 34% | 34% | 34% | |
Risk-free interest rate (in percent) | 2.78% | 1.29% | 0.54% | |
Weighted average grant date fair value | $ 17.27 | $ 20.89 | $ 15.37 | |
Market-Based Incentive Units | ||||
EQUITY | ||||
Hurdle Rate | $ 33 | |||
Threshold period | 90 days | |||
Vesting period | 5 years | |||
Threshold volume weighted average per share price trigger | $ 100 | |||
Incentive Units | ||||
Granted | 3,845,000 | |||
Market condition-based awards | ||||
EQUITY | ||||
Threshold period | 90 days | |||
Vesting period | 5 years | |||
Threshold volume weighted average per share price trigger | $ 100 |
EQUITY - Focus LLC Restricted_2
EQUITY - Focus LLC Restricted Common Units and Focus LLC Incentive Units - Hurdle Rates (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Mar. 31, 2022 | Jul. 31, 2021 | Feb. 28, 2021 | Jul. 31, 2018 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Granted | 1,162,500 | ||||||
Vested | 896,230 | ||||||
Number of days prior to February 23, 2021 | 7 days | ||||||
Unvested percentage | 50% | ||||||
Remaining not vested units | 266,270 | ||||||
Anniversary period | 90 days | ||||||
Non-cash equity compensation expense | $ 6,439 | ||||||
Incremental Non-cash equity compensation expense recognized | $ 1,544 | ||||||
Less than $42 | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Threshold volume weighted average per share price trigger | $ 42 | ||||||
Between Than $42 And $63 | Minimum | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Threshold volume weighted average per share price trigger | 42 | ||||||
Between Than $42 And $63 | Maximum | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Threshold volume weighted average per share price trigger | $ 63 | ||||||
Focus LLC Restricted Common Units | |||||||
Restricted Common Units | |||||||
Outstanding at the beginning of the period | 193,625 | 73,276 | |||||
Granted | 157,057 | 140,258 | 73,276 | ||||
Forfeited | (1,902) | ||||||
Vested | (54,134) | (18,007) | |||||
Outstanding at the end of the period | 296,548 | 193,625 | 73,276 | ||||
Weighted Average Grant Date Fair Value | |||||||
Outstanding at the beginning of the period | $ 54.70 | $ 44.71 | |||||
Granted | 37.59 | 58.50 | $ 44.71 | ||||
Forfeited | 44.71 | ||||||
Vested | 53.91 | 44.71 | |||||
Outstanding at the end of the period | 45.78 | 54.70 | 44.71 | ||||
Fair value of the stock option grants determined with assumptions | |||||||
Weighted average grant date fair value | $ 37.59 | $ 58.50 | $ 44.71 | ||||
Vesting period | 4 years | ||||||
Restricted Stock Units (RSUs) | |||||||
Restricted Common Units | |||||||
Outstanding at the beginning of the period | 187,756 | 141,095 | 98,061 | ||||
Granted | 138,708 | 92,420 | 73,310 | ||||
Forfeited | (17,245) | (6,954) | (7,707) | ||||
Vested | (56,500) | (38,805) | (22,569) | ||||
Outstanding at the end of the period | 252,719 | 187,756 | 141,095 | ||||
Weighted Average Grant Date Fair Value | |||||||
Outstanding at the beginning of the period | $ 47.69 | $ 36.63 | $ 27.90 | ||||
Granted | 37.59 | 58.46 | 44.71 | ||||
Forfeited | 46.49 | 34.46 | 27.90 | ||||
Vested | 44.16 | 35.53 | 27.90 | ||||
Outstanding at the end of the period | 43.02 | 47.69 | 36.63 | ||||
Fair value of the stock option grants determined with assumptions | |||||||
Weighted average grant date fair value | $ 37.59 | $ 58.46 | $ 44.71 | ||||
Vesting period | 4 years | ||||||
Total unrecognized expense | $ 10,252 | ||||||
Weighted-average period to recognize compensation expense (in years) | 3 years 2 months 12 days | ||||||
Market-Based Incentive Units | |||||||
Incentive Units | |||||||
Granted | 3,845,000 | ||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting period | 5 years | ||||||
Threshold period | 90 days | ||||||
Threshold volume weighted average per share price trigger | $ 100 | ||||||
Hurdle Rate | $ 33 | ||||||
Stock options | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Total unrecognized expense | $ 17,078 | ||||||
Weighted-average period to recognize compensation expense (in years) | 3 years 1 month 6 days | ||||||
Incentive Units | |||||||
Incentive Units | |||||||
Outstanding at the beginning of the period | 16,146,524 | 17,234,497 | 19,754,450 | ||||
Granted | 568,145 | 692,277 | 855,006 | ||||
Exchanged | (111,783) | (1,580,792) | |||||
Forfeited | (199,458) | (3,153,308) | |||||
Redeemed | (221,651) | ||||||
Outstanding at the end of the period | 16,602,886 | 16,146,524 | 17,234,497 | ||||
Vested at the end of the period | 11,021,925 | 9,804,757 | 8,509,652 | ||||
Weighted Average Hurdle Price | |||||||
Outstanding at the beginning of the period | $ 26.44 | $ 24.34 | $ 21.59 | ||||
Granted | 38.17 | 57.85 | 44.21 | ||||
Exchanged | 24.93 | 17.65 | |||||
Forfeited | 23.22 | 12.51 | |||||
Redeemed | 24.67 | ||||||
Outstanding at the end of the period | 26.86 | 26.44 | 24.34 | ||||
Vested at the end of the period | $ 22.15 | $ 20.44 | 18.31 | ||||
Fair value of the stock option grants determined with assumptions | |||||||
Redeemed | $ 24.67 | ||||||
Vesting period | 4 years | ||||||
Non-cash equity compensation expense | $ 21,726 | $ 25,566 | $ 16,800 | ||||
Total unrecognized expense | $ 27,427 | ||||||
Weighted-average period to recognize compensation expense (in years) | 2 years 6 months | ||||||
Incentive Units | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Remaining not vested units | 266,270 | ||||||
Incentive Units | Hurdle Rate $1.42 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 421 | ||||||
Vested at the end of the period | 421 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 1.42 | ||||||
Incentive Units | Hurdle Rate 5.50 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 798 | ||||||
Vested at the end of the period | 798 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 5.50 | ||||||
Incentive Units | Hurdle Rate 6.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 386 | ||||||
Vested at the end of the period | 386 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 6 | ||||||
Incentive Units | Hurdle Rate 7.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,081 | ||||||
Vested at the end of the period | 1,081 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 7 | ||||||
Incentive Units | Hurdle Rate 9.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 708,107 | ||||||
Vested at the end of the period | 708,107 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 9 | ||||||
Incentive Units | Hurdle Rate 11.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 813,001 | ||||||
Vested at the end of the period | 813,001 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 11 | ||||||
Incentive Units | Hurdle Rate 12.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 513,043 | ||||||
Vested at the end of the period | 513,043 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 12 | ||||||
Incentive Units | Hurdle Rate 13.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 540,000 | ||||||
Vested at the end of the period | 540,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 13 | ||||||
Incentive Units | Hurdle Rate 14.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 10,098 | ||||||
Vested at the end of the period | 10,098 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 14 | ||||||
Incentive Units | Hurdle Rate 16.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 45,191 | ||||||
Vested at the end of the period | 45,191 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 16 | ||||||
Incentive Units | Hurdle Rate 17.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 20,000 | ||||||
Vested at the end of the period | 20,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 17 | ||||||
Incentive Units | Hurdle Rate 19.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 527,928 | ||||||
Vested at the end of the period | 527,928 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 19 | ||||||
Incentive Units | Hurdle Rate 21.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 3,017,692 | ||||||
Vested at the end of the period | 3,017,692 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 21 | ||||||
Incentive Units | Hurdle Rate 22.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 796,417 | ||||||
Vested at the end of the period | 796,417 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 22 | ||||||
Incentive Units | Hurdle Rate 23.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 524,828 | ||||||
Vested at the end of the period | 524,828 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 23 | ||||||
Incentive Units | Hurdle Rate 26.26 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 12,500 | ||||||
Vested at the end of the period | 6,250 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 26.26 | ||||||
Incentive Units | Hurdle Rate 27.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 12,484 | ||||||
Vested at the end of the period | 12,484 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 27 | ||||||
Incentive Units | Hurdle Rate 27.90 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,890,440 | ||||||
Vested at the end of the period | 1,395,592 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 27.90 | ||||||
Incentive Units | Hurdle Rate 28.50 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 1,424,225 | ||||||
Vested at the end of the period | 1,424,225 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 28.50 | ||||||
Incentive Units | Hurdle Rate 30.48 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 30,000 | ||||||
Vested at the end of the period | 20,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 30.48 | ||||||
Incentive Units | Hurdle Rate 33.00 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 3,617,500 | ||||||
Vested at the end of the period | 7,500 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 33 | ||||||
Incentive Units | Hurdle Rate 36.64 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 30,000 | ||||||
Vested at the end of the period | 30,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 36.64 | ||||||
Incentive Units | Hurdle Rate 37.59 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 508,145 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 37.59 | ||||||
Incentive Units | Hurdle Rate 43.07 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 60,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 43.07 | ||||||
Incentive Units | Hurdle Rate 43.50 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 30,000 | ||||||
Vested at the end of the period | 30,000 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 43.50 | ||||||
Incentive Units | Hurdle Rate 44.71 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 806,324 | ||||||
Vested at the end of the period | 406,279 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 44.71 | ||||||
Incentive Units | Hurdle Rate 58.50 | |||||||
Incentive Units | |||||||
Outstanding at the end of the period | 662,277 | ||||||
Vested at the end of the period | 170,604 | ||||||
Weighted Average Hurdle Price | |||||||
Hurdle Rates | $ 58.50 | ||||||
Incentive Units | Individuals Other than Certain Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Remaining not vested units | 337,500 | ||||||
Incentive Units | Less than $42 | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting percentage | 0% | ||||||
Incentive Units | Greater Than $63 | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting percentage | 100% | ||||||
Threshold volume weighted average per share price trigger | $ 63 | ||||||
Incentive Units | Between Than $42 And $63 | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting percentage | 50% | ||||||
Incentive Units | Between Than $42 And $63 | Minimum | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Threshold volume weighted average per share price trigger | $ 42 | ||||||
Incentive Units | Between Than $42 And $63 | Maximum | Officers | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Threshold volume weighted average per share price trigger | $ 63 | ||||||
Time based incentive units | |||||||
Weighted Average Grant Date Fair Value | |||||||
Granted | $ 14.30 | $ 18.35 | $ 13.72 | ||||
Fair value of the stock option grants determined with assumptions | |||||||
Expected term (in years) | 5 years | 5 years | 5 years | ||||
Expected stock price volatility (in percent) | 36% | 34% | 35% | ||||
Risk-free interest rate (in percent) | 3.58% | 1.19% | 0.39% | ||||
Weighted average grant date fair value | $ 14.30 | $ 18.35 | $ 13.72 | ||||
Time-based stock option awards | |||||||
Weighted Average Grant Date Fair Value | |||||||
Granted | $ 17.27 | $ 20.89 | $ 15.37 | ||||
Fair value of the stock option grants determined with assumptions | |||||||
Expected term (in years) | 6 years 3 months 18 days | 6 years 3 months 18 days | 6 years 3 months 18 days | ||||
Expected stock price volatility (in percent) | 34% | 34% | 34% | ||||
Risk-free interest rate (in percent) | 2.78% | 1.29% | 0.54% | ||||
Weighted average grant date fair value | $ 17.27 | $ 20.89 | $ 15.37 | ||||
Vesting period | 4 years | ||||||
IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Incremental Non-cash equity compensation expense recognized | $ 10,144 | ||||||
Threshold period | 90 days | ||||||
Highest 90-day VWAP is $80.00 or less | IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting percentage | 0% | ||||||
Threshold period | 90 days | ||||||
Threshold volume weighted average per share price trigger | $ 80 | ||||||
Highest 90-day VWAP is $110.00 or more | IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vesting percentage | 100% | ||||||
Threshold period | 90 days | ||||||
Threshold volume weighted average per share price trigger | $ 110 | ||||||
Exercised on and following the date of vesting | IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vested stock options exercised (in percent) | 25% | ||||||
Exercised on and following the first anniversary of the date of vesting in July 2025 | IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vested stock options exercised (in percent) | 25% | ||||||
Cumulative vested stock options exercised (in percent) | 50% | ||||||
Exercised on and following the second anniversary of the date of vesting in July 2026 | IPO | Market-Based Incentive Units | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vested stock options exercised (in percent) | 50% | ||||||
Cumulative vested stock options exercised (in percent) | 100% | ||||||
Third Anniversary of Company's IPO Scenario One | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vested | 186,545 | ||||||
Forfeited | 79,725 | ||||||
Remaining not vested units | 266,270 | ||||||
Third Anniversary of Company's IPO Scenario Two | |||||||
Fair value of the stock option grants determined with assumptions | |||||||
Vested | 236,449 | ||||||
Forfeited | 101,051 | ||||||
Remaining not vested units | 337,500 |
INCOME TAXES - Components of in
INCOME TAXES - Components of income (loss) before income tax (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
INCOME TAXES | |||
Income (loss) before income tax, United States | $ 163,923 | $ 36,274 | $ 65,472 |
Income (loss) before income tax, Foreign | 14,432 | 8,248 | 4,153 |
INCOME BEFORE INCOME TAX | $ 178,355 | $ 44,522 | $ 69,625 |
INCOME TAXES - Components of _2
INCOME TAXES - Components of income tax expense (benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Current provision: | |||
Federal | $ 12,373 | $ 19,742 | $ 10,363 |
State and local | 8,221 | 7,855 | 5,355 |
Foreign | 8,726 | 6,906 | 4,169 |
Total current provision | 29,320 | 34,503 | 19,887 |
Deferred provision (benefit): | |||
Federal | 19,913 | (7,958) | 1,854 |
State and local | 8,065 | (3,674) | 580 |
Foreign | (4,221) | (2,789) | (1,661) |
Total deferred provision (benefit) | 23,757 | (14,421) | 773 |
Total income tax expense (benefit) | $ 53,077 | $ 20,082 | $ 20,660 |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets (liabilities) (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Investment in Focus LLC | $ 224,004 | $ 254,454 |
Federal net operating loss carryforwards | 5,289 | 11,561 |
Business interest carryforwards | 6,494 | |
Deferred rent and other | 2,479 | 2,353 |
Gross deferred tax assets | 238,266 | 268,368 |
Valuation allowance | (6,494) | |
Deferred tax assets | 231,772 | 268,368 |
Deferred tax liabilities: | ||
Intangible assets | (30,811) | (32,483) |
Fixed assets and other | (410) | (526) |
Gross deferred tax liabilities | (31,221) | (33,009) |
Net deferred tax assets (liabilities) | $ 200,551 | $ 235,359 |
INCOME TAXES - Effective tax ra
INCOME TAXES - Effective tax rate reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
INCOME TAXES | |||
U.S. Federal statutory tax rate (as a percent) | 21% | 21% | 21% |
Income passed through to individual members (as a percent) | (4.70%) | (6.10%) | (7.60%) |
Foreign income taxes (as a percent) | 2.50% | 9.20% | 3.60% |
Non-cash equity compensation expense (as a percent) | 1.80% | 7.70% | 3.50% |
Non-cash changes in fair value of estimated contingent consideration | (1.50%) | ||
Other non-deductible expenses | 0.30% | 2.70% | 0.90% |
Valuation allowance (as a percent) | 3.60% | ||
State and local income taxes, net of U.S federal tax benefit (as a percent) | 6.60% | 8.10% | 7% |
Other (as a percent) | 0.20% | 2.50% | 1.30% |
Effective income tax rate (as a percent) | 29.80% | 45.10% | 29.70% |
Operating loss carryforwards | $ 25,185 | ||
Business interest having indefinite carryforward period | 24,053 | ||
Valuation allowance | $ 6,494 |
TAX RECEIVABLE AGREEMENTS (Deta
TAX RECEIVABLE AGREEMENTS (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Feb. 28, 2023 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Mar. 31, 2020 agreement | Jul. 31, 2018 agreement | |
TAX RECEIVABLE AGREEMENTS | |||||
Number of tax receivable agreements | agreement | 3 | 2 | |||
Payment to TRA holder on net cash savings (as a percent) | 85% | ||||
Retained benefit on net cash savings (as a percent) | 15% | ||||
Tax Receivable Agreement obligations | $ 224,611 | $ 219,542 | |||
Payments made under Tax Receivable Agreements | $ 9,598 | $ 4,423 | $ 3,856 |
LEASES (Details)
LEASES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Future minimum lease payments under operating leases | ||
2023 | $ 60,113 | |
2024 | 56,357 | |
2025 | 49,917 | |
2026 | 43,387 | |
2027 | 37,541 | |
2028 and thereafter | 99,413 | |
Total | 346,728 | |
Less: present value discount | (57,833) | |
Operating lease liabilities | $ 288,895 | $ 277,324 |
Weighted-average discount rate | 5% | 5% |
Weighted-average remaining lease term | 7 years | 7 years |
Other information pertaining to leases | ||
Operating lease costs included in selling general and administrative expenses | $ 61,057 | $ 74,340 |
Operating cash flows from operating leases | 59,090 | 73,481 |
Operating lease assets obtained in exchange for operating lease obligations | $ 72,012 | $ 61,750 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | ||
Liabilities, clearing brokers | $ 0 | $ 0 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Compensation and related expenses | |||
EMPLOYEE BENEFIT PLANS | |||
Employee benefit plan expense | $ 16,726 | $ 13,628 | $ 9,357 |
NET CAPITAL REQUIREMENTS (Detai
NET CAPITAL REQUIREMENTS (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
NET CAPITAL REQUIREMENTS | ||
Aggregate net capital of subsidiaries | $ 25,318 | $ 19,520 |
Excess net capital | 20,280 | 15,853 |
Minimum net capital requirement | $ 5,038 | $ 3,667 |
CASH FLOW INFORMATION (Details)
CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Supplemental disclosures of cash flow information-cash paid for: | |||
Interest | $ 93,851 | $ 53,721 | $ 41,352 |
Income taxes | 33,212 | 36,806 | 18,927 |
Supplemental non-cash cash flow information: | |||
Fair market value of estimated contingent consideration in connection with acquisitions | $ 56,604 | $ 212,074 | $ 46,918 |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue from affiliated entity | $ 12,459 | $ 12,384 | $ 12,298 |
Debt issuance costs | 19,072 | 8,282 | 634 |
Chief Executive Officer | |||
Expenses recognized | 3,678 | 2,326 | $ 1,280 |
Affiliates of holders of Class A common stock and Class B common stock | |||
Underwriting fees received by affiliates of stockholders | 5,644 | ||
Affiliates of holders of Class A common stock and Class B common stock | First Lien Term Loan | |||
Debt issuance costs | $ 1,000 | $ 394 |