RIA aggregator Focus Financial Partners posted first quarter revenue of $536.6 million on Thursday, a 36% year-over-year increase, exceeding analyst expectations and setting the stage for another active year in mergers and acquisitions despite geopolitical and market concerns.
“Our 2022 first quarter results were excellent, reflecting our strong fundamentals and the resiliency of our business despite the challenging macro backdrop,” said Focus founder and CEO Rudy Adolf, a native of Austria. “We continued to invest in leading wealth management firms that complement our partnership while further strengthening our presence in strategically important wealth markets.”
Year to date, Focus said it has closed on four mergers and one partner firm acquisition. The firm also has one partner firm deal and one additional merger pending. Adolf and CFO Jim Shanahan acknowledged that growth was likely to remain slightly slower in 2022, compared with 2021, but said they’re confident they’ll continue to meet growth goals and will likely be adding partners at a greater pace through the rest of the year.
"We just came out of a year where we did 38 deals," said Adolf. "So we needed to take a little bit of a breather, but you will see one announcement after another of very attractive transactions."
In December, Adolf laid out lofty growth goals for the next three years, saying he expects to grow to 125 partner firms, $4 billion in revenue, $1.1 billion in EBITDA and 28% margins by 2025.
During the May 5 quarterly earnings call, Adolf and Shanahan both expressed confidence in the strength of their M&A pipeline and touted a new expansion into the Swiss market with the signing of Octogone Group, an “elite” firm with $500 million in client assets.
Once the transaction is completed in the second or third quarter of this year, Octogone will become Focus’ 86th partner firm—and its first in Switzerland, characterized by both men as a particularly desirable market region.
Expressing personal concerns for those affected by the volatile situation in Ukraine, Adolf and Shanahan said the geopolitical and market uncertainties would not have any significant adverse effects on the company’s continued growth.
“We have successfully navigated market dislocations through our 16 years of history, and lessons from those experiences are embedded in our business model,” said Adolf.
“While the dynamics driving the current environment are different than what we experienced at the outset of the pandemic in 2020, our partner firms are equally well equipped to weather this storm and are generating excellent results,” said Shanahan. “Similar to 2020, we are positioning ourselves to take advantage of the opportunities that will arise post-crisis. I have no doubt that we will navigate the current challenges and our business will emerge even stronger and better positioned for growth.”
The two execs cited diversity, discipline and their decentralized business model as reasons for Focus’ resiliency and continued success.
“Our momentum remains strong,” said Adolf. “I am confident that 2022 will be an excellent year for our business, and that we will continue to be the beneficiaries of substantial industry growth and consolidation.”