Focus Financial ‘Beats Expectations’ But Stocks Give Ground After Accumulated ‘Needle’ Falls Short of Wall Street’s Hopes for Quarterly Results

Focus Financial ‘Beats Expectations’ But Stocks Give Ground After Accumulated ‘Needle’ Falls Short of Wall Street’s Hopes for Quarterly Results

Rudy Adolf: ‘The company performed in a way that shows acceleration of momentum.’ “The company performed in a way that shows acceleration of momentum,” Rudy Adolf, Founder, CEO and chairman said in a release.

Yet technically growth decelerated in the three-month period, says Matt Crow, president of Mercer Capital in Memphis, Tenn. See: Focus Financial IPO marks an RIA milestone one year on, but year two hinges on how Rudy Adolf handles the millstone around his neck–mounting debt “We delivered strong results in the 2021 first quarter, above the upper end of our guidance on all measures, and we are very pleased with the overall performance and growth of our business,” said Jim Shanahan, chief financial officer.

The New York City roll-up continued its practice of putting asterisk-style notes on key growth metrics including its organic revenue growth rate of 12.2% year- over-year and record adjusted EBITDA.  “We also reported our first quarter of adjusted EBITDA in excess of $100 million, which is a substantial milestone and reinforces the operating leverage that results from our scale.”

“Beating adjusted EPS estimates by a nickel doesn’t overcome that,” he said.  “Growth is decelerating,” he says by email. “Total revenue growth dropped to less than 20% and organic revenue growth (which you’ll recall includes tuck-in acquisitions by partner firms) is down to about 12%.

The press release headline boasted that Focus “exceeded expectations.” Unsettled macro backdrop

Total revenues of $394.2 million, 16.9% growth year over year
GAAP net income of $2.5 million
GAAP basic and diluted net income per share attributable to common shareholders of $0.00 on a rounded basis
Adjusted Net Income Excluding Tax Adjustments of $63.4 million and Tax Adjustments of $10.5 million
Adjusted Net Income Excluding Tax Adjustments Per Share of $0.80 and Tax Adjustments Per Share of $0.13
Net Leverage Ratio of 3.79x
Net cash provided by operating activities for the trailing 4-quarters ended March 31, 2021 of $242.1 million, 32.8% higher than the prior year period
LTM Cash Flow Available for Capital Allocation for the trailing 4-quarters ended March 31, 2021 of $219.9 million, 51.8% higher than the prior year period
Raised $500 million under First Lien Term Loan at LIBOR + 200 and repaid borrowings under First Lien Revolver
Formed a joint venture with Orion Advisor Solutions that will add cash and credit solutions and related services developed by Focus Client Solutions to Orion’s WealthTech platform. First Quarter 2021 Highlights Jim Shanahan: ‘We are very pleased with the overall performance and growth of our business.’

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