Q2 2021 Focus Financial Partners Inc Earnings Call
Good morning, I would like to welcome everyone to focus financial partners 2021 second quarter earnings call joining us joining.
Joining today's call are Rudy I, it off founder and CEO, Jim Shanahan, Chief Financial Officer, Rusty Mcgranahan General Counsel and Tina Madden head of Investor Relations and corporate communications at this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded Mr. Granahan. Please go ahead.
Good morning, everyone before we begin let me remind you that during the course from this call. We may make a number of forward looking statements. We call your attention to the fact that focus as a result may of course differ from these statements. These statements are based on assumptions made by and information currently.
So far M&A momentum in queue to be close to 5 transactions feel free to date, we have closed another 7 transactions and her 3 transactions announced and pending closing.
This brings a year to date total to 17, including 6 new partner firms 11 mergers on behalf of our apartment firms with 4 of those 4 connectors connect US is also having an excellent year and continues to expand its international footprint. Most recently to Canada with the signing of the Gabbing twins.
Actually in Toronto.
Oh, what part of <unk> would be extremely difficult to replicate and be continued to add outstanding new firms. Each an industry leader was excellent wealth management advisors deep client relationships.
Each addition, it's complementary capabilities in terms of geographic reach expertise and clientele, while adding important sources of diversification to our revenues and cash flow.
Our pipeline is at record levels and continues to build.
In anticipation of this on July 1st we closed on 800 million of additional turned on that capital, which when combined with our unfunded revolver capacity cash on hand, and the cash flows we generate gives us over 1.8 billion and firepower.
Over the last 4 fiscal years, we generally deep deployed between $300 million and 625 million annually in business acquisition capital and completed in everage of approximately 27 transactions per year, which about 1 so with about 1 third of these being new partner firms.
And 2 thirds being mercurius on behalf of our partners.
This year, we anticipate deploying capital in excess of prior years with strong deal momentum and was attractive multiples and gross profiles.
The strong secular tailwinds driving growth and consolidation developed Mitch went industry haven't changed irrespective of the short term dislocations, such as COVID-19 or the potential change to the capital gains tax rate.
Day fiduciary model increasingly resonates is the broader shipped to fee based services and the demand for greater transparency continues.
This is especially true among ultra high net worth and high nitrous clients, who are sophisticated consumers sentimental value, having an advice so who couldn't provide highly personalised integrated advice delivered via open architecture.
According to a recent excellent partners study many firms are currently experiencing the highest level of organic growth market depreciation in the history.
The great migration of climbed as it flows into this industry would continue if we used to come creating an almost infinite rugby of opportunity for us both in the U S and internationally.
At the same time consolidation pressures continued to accelerate succession planning remaining at the top of that list.
1 of my favorite statistics from an investment net study is that there are about 45000 advisers, each 65 years and older managing 3 trillion inclined assets, which will change hands over the next 10 years.
The growing need for scale is another catalyst for consolidation, particularly is wells miniatures inclined to like demand access to top advisors will distich services and robust technology solutions.
Against this backdrop, a core value proposition of entrepreneurship permanent capital in value added services resonates strongly enabling us to attract many of the highest performing firms in the industry.
Having focus is a long term strategic partners, Mr resources intellectual expertise and skill advantages that enable our firms to become stronger businesses grow faster and continually surf declined spit up is an important but undervalued competitive distinction.
Joining in large highly diversified partnership of leading firms and other important in differentiating competitive advantage, especially for firms planning for succession.
The recent partners firms B, a clothes store announced as identified on page 14 of our earning supplement or an excellent example of this collectively they oversee about 12 billion in client visits and we expect them to add over $60 million in annual revenues and 23.6 million.
In annual a quiet based on earnings.
Day complement the apartment portfolio, while also strengthening our presence in several of the most important wealth markets in the U S.
Free focus these firms generated on Everage 2018, 2020 revenue CAGR of 9%. Despite the 2020 COVID-19 related market headwinds net.
Let me highlight 3 of them to provide you with further context.
The first day of specialty shops, and independent dwells miniature based in Seattle recent boxing lately for 3 billion inclined assets over the last 50 years virtually Phelps has become 1 of the premier Ria's in the Pacific Northwest and is well known for the color of it services.
<unk> and it's deep longstanding client relationships.
Betcha Phelps is highly differentiated by its long history, well established business and they continue redo of it's multi generational management team.
The second is air as well as the devices and integrated wealth management from based in Saint Petersburg, Florida, with approximately 700 million inclined Essex heiress wells has structured it's business as a family office for high net risk lines, which is an attractive in differentiating characteristic of its client service.
Model.
It will expand our footprint into Florida, and important and rapidly growing wealth market.
And the third is Rollins financial if fiduciary wealth miniature based in Atlanta with approximately 1 billion in client assets.
<unk> provides financial planning tax planning and investment management services to high net worth clients, primarily across the southeast expanding our presence in another important dwells market rolling spilled, an enviable track record of growth and client service position stem to capitalize on the substantial force.
With growth opportunity.
Every time a market leader like these firms join us it not only strengths and saw a partnership and expand so footprint, but it also further validates the attractiveness of our value proposition and our partnership which as of August 1st stood at 76 from from slowly.
Core element of our emanate process is ensuring that we are adding their right firms to a partnership b a sophisticated a value add investors with a long track record.
We are also extremely disciplined so that'd be consistently meet or exceed minimum endeavored IRR hurdle of 20 per cent.
There are 3 elements of our approach did a key to our success. The first is how extensive network of relationships. We have often said that they are about 1000 firms in the U S alone that have the potential to become part the firms and another 5000.
That could become mercurius for partners.
It bears repeating that we know virtually all of them and have built those relationships over a long period of time.
The second is a consistent acquisition structure and dwell homes due diligence process since our first acquisition. We have always used to structure that has the interest of D entrepreneur at its core.
That consistency creates enormous stability missing the partnership and is complemented by a well honed due diligence process.
You have completed more than 225 transactions and does earnings from those have all contributed to the process be followed today.
The third is already ability to offer such a broad array of value added services do our part the firms and through them to their clients. Our combined expertise purchasing power indexes is second to none and it would be very difficult to replicate what we offer.
The scale of our partnership gives us unique insights that we can leverage for the benefit of all of our partner firms. You also have to profit ability to continually evolve our value added services in the areas that will help our partners affirms the most.
Before turning to call over to Jim I wanted to briefly discuss the secondary offering that to be completed in June.
Take care on 1 of us to peace sponsors monetize the remainder of their holdings in a sale of approximately 7.1 million shares at $50.30 per share executing day of positioning focus well. This was the second large b E secondary offering an estimated quarters the incremental.
Float improves the liquidity of our stock and will enable additionally, institutional investors to become shareholders.
In summary, our growth trajectory continues to accelerate well beyond our expectations at the beginning of the year.
Executing on record M&A volume and widening our leadership position within the independent roles management sector around the world per.
[noise] helps the most important takeaway here is we have consistently delivering gross well in excess of what is typical for publicly traded financial services firm supported by outstanding execution discipline nimbleness.
We have made substantial progress into growth and evolution of our business and we look forward to sharing more details of that with you into our second Investor day on December 9th of this year.
A number of our partner, France will join US for the day Bend is D. R instrumental in helping us tell a story.
With that let me turn the call over to Jim Jim.
Good morning, everyone and thank you for joining US today, we generated strunk shih-tzu results deliver a significant value to our shareholders and we were very pleased with the growth and momentum of our business is already highlighted are M&A activity is at record levels, which we anticipate will continue to build through the second.
Half of this year and into 2022.
We are attracted many of the highest regard it firms in the industry, who will benefit meaningfully from our scale advantages as well as access to our permanent growth capital and value add services are portfolio of existent partner firms is performing well and delivered excellent organic growth.
Now, let me provide the highlights of our queue to piano.
Ah revenues for for her and 25.4 million up 35.8 per cent year over year and slightly ahead of the top end of our estimated ranch.
$405 million to 415 million as organic revenue growth across the partnership was 28.8 per cent exceeding the high end of our estimate of 23 to 26 per cent.
R Q to adjusted EBITDA was $107.8 million up 44.2 per cent year over year.
Or just sit EBIT margin was 25.3 per cent in line with our guidance.
We continue to expect there'll be some uptick in our variable expenses as employees returned to the office and in person business activities increase, but we believe that our marches will expand further over time to get to the sculpture of an operating leverage in our business.
Or just sit net income exclude on tax suggestions per share. It was 84 cents, 42.4% higher year over year and our tax adjustments per share was 14 sets up 16.7 per cent for the comparable period are M&A momentum increased darn cute too and that has continued to build in Q3 weeks.
Close to new partner firms Prairie capital management, and Rollins financial on April 1st and these 2 firms contributed a total of approximately 7.1 million of revenues and 3 million and adjusted EBITDA and a quarter.
Q3 today, we have close on 2 additional partner firms and we have 1 science impendent clothes, which we estimate will contribute a total of $36 million in revenue and 13.3 million an estimated adjusted EBITDA on an annual basis based on the mid quarter closings for these transactions, we estimate that they will <unk>.
Tribute $5.8 million in revenue and 2 million and estimated adjusted EBITDA in Q3.
And Q2, we completed 1 merger in Australia for connect Us Ah for its transaction for connect to sense. It answered the Australian market late last year. We also completed 2 mergers in the U S for a partner firm Ses financial Ella floor and Godfrey. This brings us to a total of former interest completed in the first half of this year.
In Q3 through August 1st we are closed 5 mergers and announced 2 additional mergers that are penned on clothes on now.
Now turn it to our queue to expenses and cash flow.
Management fees were 116.2 million or 27.3 per cent of revenues are slightly higher percentage relative to Q1 due to the economic relationships, we have with our partner firms are.
<unk> cash equity compensation expense was on line with our guidance at 1.5 per cent of revenues and we estimate this expense will be approximately 1.3 per cent of estimated Q3 revenues.
Q2 also reflected a 34.1 million dollar increase in non-cash changes in the fair value of estimated contingent consideration reflected an increase in the fair value of estimated earnouts pursuant to our Monte Carlo simulations stronger organic revenue growth, including the effects of market conditions.
<unk> drove the increase in the fair value estimate of diesel liabilities as of June 30th.
R. L. T M cash flow available for capital allocation I was June 30th was $266 million, 38.2% higher year over year reflect on the growth of our partnership as well as the addition of a new partner firms at 17 mergers during this period.
And Q2, we paid approximately 300000, a tax receivable agreement payments, we also paid cash or not obligations to 65.2 million higher than our guidance of $55 million, primarily due to the timing of earnouts structured for a cue to partner firm acquisition.
We anticipate that we will pay cash or an ounce of approximately $35 million in Q3 and $60 million in aggregate for the second half of 2021 based on the acquisitions close to date.
As a reminder, our cash flow and future period will be enhanced by on 1.8 billion dollar unamortized gross tax shield as a.
June 30th we expect the value of this tax share will continue to grow given are highly tax efficient acquisition structure. We'd also be enhanced by any increase in corporate tax rates.
Now turn into a queue 3 expectations, we estimate that our queue to revenues will be in the range of $440 million to 450 million, we estimate of cutesy organic revenue growth rate of 24 to 27 per cent.
Q3 expectations also reflect.
The effect of our new partner firm additions.
We anticipate that are Q3, adjusted EBIT on March and will be about 25 per cent.
Sumer market conditions stay constant at current levels. We continued to estimate that a full year of 2021, adjusted EBITDA margin will be about 25 per cent.
We'll update on longterm adjusted EBITDA margin target of 24 per cent at our Investor Day on December 9th.
Now for a few comments on our balance sheet.
We ended Q2 at approximately 1.6 billion of debt out standard and then net leverage ratio of 354 times at the low end of our 3.5 to 4.5 net leverage ratio parameters.
Assume in markets they constant at current levels and with the acquisition. So we expect to close in Q3, we anticipate that are cute free net leverage ratio will be on the ranch or 3.5 to 3.75 times as a rapidly increase in cash flow available for capital allocation continues to reduce the amount of debt capital need.
<unk> to fund our M&A activity remain committed to our net leverage ratio ranch or 3.5 to 4.5 times, which I believe is the most appropriate ranch given the highly acquisitive nature of our business.
It's Rudy mentioned based on our accelerated M&A, we close on a new 800 million tranche on our term loan on July 1st which consisted of 650 million tomorrow on a closing at 150 million with a 6 month delay draws future discharged as a 7 year maturity and close within our idea of.
99.25 day.
The interest rate is library, plus 250 basis points with libraries subject to a 50 basis 0.4.
This will add approximately $5.6 million, an estimated incremental interest expense in Q3, we expect to deploy this additional debt capital over the next few quarters.
In summary, we executed well on queue too and the growth trajectory of our business remains very strong or acquisition pipeline continues to grow as joy on the focus partnership remains exceptionally attractive to wealth managers looking at their next steps become part of an international network of over 75 firms.
Who are each industry leaders, who are highly on should memorial and at the forefront of client service and who are led by excellent management teams remains unique in our industry No. Other company in this space public or private offers this value proposition, which is supported by the benefits of permanent capital investment or has.
Anywhere near our scale the array of resources, we can offer our partner firms as a result helps them accelerate organic growth.
They are able to offer resources to current and prospective clients that would be difficult to source without focus is scale advantages and intellectual capital together. These attribute crib superior longterm value for our shareholders.
Before it turned on the call to Q&A I wanted to to introduce Charlie arrest here, who recently joined our I R. A corporate communications team working closely with Tina Madden Charlie join us from the specialty finance equity research team at J P. Morgan Please feel free to reach out to Charlie in addition to Tina if you have any question.
On his about focus with that let me turn on the call over to the operator for Q&A operator.
Thank you I think I would like to ask a question. Please press star 1 on your telephone keypad, a confirmation tell might indicate your line is in the question can you May press Darko, if you would like to remove your question from Ikea and for participants.
Their equipment may be necessary to pick up on your handset before pressing this darkies. Our first question is from L. N low with Oppenheimer and company. Please proceed.
Good morning, Thank you for taking my questions. So Kevin to pay self do acquisitions could you. Please give us an up day on the competitive dynamic what was the range of multiple you are paying over the past few months and how do you see the competitive reactions from other players. Thank you.
[noise], Hi, Ohio, and yeah, it's absolutely the.
Clearly we are on track to have 1 of our most successful M&A years in in focus is history and that's false in terms of character Debra City of day deals. We are doing a day quality of the deals and certainly to scale.
And Oh and when you look at many of day recent deal announcements to just speak to the day powerful value proposition.
And quite Franky I'll be obscene kind of aggressive multiples almost throughout the history of this industry, but certainly and number of more recent transactions and yellow and disciplined us on middle name, we remain very disciplined and focus is so much more.
More than just yeah, there's up from multiple it as being paid and of course, we are competitive if we wouldn't be doing more deals day, and just about anybody else into space, but ah firms join us because first and foremost you want to protect your clients you're from any selling pressure and from.
Really providing continuity of advice you know second is they want to protect their culture, they want to protect their stuff on.
Who made them successful because fundamentally of these businesses D as independent entities and very important day, just don't want to be on the block again, you know into private equity transaction, you ordered made made them a little bit more but then at the end the big on the block again and.
Youre ultimately will get sold to just somebody else yeah. So it's the power of this value proposition. Yeah did ultimately is focus is kind of role in this industry and allows us to protect our economics and really keep on attracting some of the best firms I'm not sure.
In the U S, but yeah. It is you know.
Increasingly on a global scale.
Got it that's very helpful. My phone off its day of lots of conversation and discussion about compensation compensation pressure could you. Please talk about maybe the trend of the compensation expands in this industry do you anticipate you'll compare that there is that going to pay up for a new.
Hires uhm what are you seeing this industry right now yeah, you know I think the yoga compensation pressure is is really a broad phenomenon that goes beyond our industry right now, but keep in mind what is different about our business model is it <unk>.
Most of the quote on quote compensation in focus is absolutely formulaic, yeah, meaning it's the management fees, yeah that basic Kelly is a negotiated number.
When we negotiate these transactions and.
We just close this number on an ongoing basis and quite frankly, it's purely formulaic as it pertains to broader staff expenses.
There probably will be some uptick quite frankly, 1 reason by Jim and I haven't provided a new margin guidance <unk>, you really want to understand its dynamics most.
More fully but the overall yeah the day.
Industry come on mix into our economics quite frankly are are so robust yeah, you'll see all accused 3 guidance yeah that ultimately this this model is it will be sustained for many many years to come with fundamentally identically economic structures.
Got it thank you very much worthy.
Our next question is from counseling with K B W. Please proceed.
Hi, Good morning, maybe you can just give us some updated thoughts around how much of this elevated deal activity. You think is being driven by sellers, maybe try and get ahead of potential tax changes and just trying to get a sense of no is there an acceleration or a pull forward a deal.
Activity, that's going on into 2021, and so you know should we be expecting a little bit on a slower activity levels as you look out to next year.
Yeah, Yeah. Thanks Kyle.
Dean me half Cyril concern that there will be a significant and meaningful slowdown named activity in 2022 and beyond.
And yes, maybe on some incremental impact on a pillow potential tax changes that may drive a little bit of the activity, but yeah, Kyle real cranking on all cylinders.
In a way beyond the U S.
And of course day on up there a different text dynamics in these countries.
So we see day M&A momentum continuing for years to come now there of course, the reason is because it structure <unk> first and foremost the I mean, the dynamics are driven by quite frankly day aging you know.
Of the founding generation and in next generation of leaders, you're joining us industry.
And very very much. This is this is not going to change 1 year from that'll be all will be 1 year old on no matter, what and then Kyle we are operating just when you look into in the U S. A D. R. I a industry is approaching 7 trillion dollars.
Which is about 25 per cent of you guys manage household wealth than in each of the other markets. We're operating in yeah. They are 1 to 2 trillion dollar market. So uhm real basic operations.
Writing in a in a 30.35 trillion dollar market opportunity.
With a little over 300 billion in assets inclined assets in aggregate, we have an unlimited opportunities ahead of us and it comes back to that day powerful value proposition that we believe will continue to be highly sustainable and getting them stronger as we scale. So.
No I have no wars that M&A momentum is just short term text written.
Great. Thanks, and then my my follow up is just maybe a clarification on the EBITDA margin guidance for 3 Q I think last quarter you got it 25.5 per cent for <unk> now got into 25 per cent for 3 Q. So just to clarify from the prepared remarks. It sounds like a lot of this is related to <unk>.
Or back to office expenses, just wondering if there's anything else impacting that uhm has there been any material impact is margins to note from acquisition activity or different ownership percentage is that you're requiring of businesses or is this really a simply resolved on its kind of getting back to a more normal working environment.
Yeah, I'll I'll I'll hand, it over to Jimmy in a second but yeah remember when you look at it the source of change will fall margin said the percentage quiet is always the most important factor no.
And by and large per cent acquired remains within the same range of this before but this can always speed.
A driver did overshadows see all kind of any other changes James do you want to comment on yeah. I mean, I think the first thing is you think about year over year, So first half 21 or 25.5% versus 23.5%. So that's a nice growth 2 percentage.
So on a year over year basis, and as you mentioned, it's also reflective of M&A activity at the new partners that we close in Q3. The numbers are included in the supplement they apply a 42% margin in the guidance on the transactions in Q3 for their new partners.
Mid thirties in terms of EBIT margin, so all of that sort of gets.
It gets baked into our model and our guidance and we said is this year full year about 25% on that reflects on an uptick in travel type of course in person activities and certainly all of the M&A activities that we're working on and where we sit today.
Think later this year at our Investor Day in December we're going to re forecast the longer term margin, but we're pretty happy with the results at this point on a year over year basis.
Got it thank you.
Okay.
Our next question is from Michael Young, let Shirley Securities. Please proceed.
Hey, Thank you for taking the question.
Hi, Michael Kim.
Hey, Jim wanted to follow up maybe on just the the tax portion of the equation, we do see a higher cap are higher tax rate in the U S. Do you have any sort of sensitivity analysis around how 'bout, a <unk> impact the tax shield and just trying to think through different parts in terms of global.
S as domestic et cetera.
Yeah, I think well first of all we continue to structure of transactions and a tax efficient manner, whether that's domestically or internationally. So that bill. So you can see the the gross unamortized tax shield from quarter to quarter continues to build and as of June 30th It was over.
1.8 billion and.
And we provide a slide on that and I think at the $1.8 billion is almost 500 million of future tax savings, obviously subject to taxable income interest and using a 27 per cent tax rate. So if the if the corporate tax rate does go up then the shields in many respects.
Becomes more valuable there.
Okay. Thank you and Rudy maybe just a question on the actual underlying partner firms. Obviously, the M&A activity is very strong, but just curious you know maybe what you're hearing anecdotally from the partner firms in terms of new business generation on an organic basis from.
Them, you know any impacts from sort of a reopening of economies or anything like that.
Yeah, absolutely and catch the Mike Let me just hit hour a day.
Regional partners meeting up in the northeast in Boston Third regional partners meeting and of course I'm visiting so many of our partners in the ongoing basis and I have to say, maybe not never but rarely have I seen the level of also David D day level of excitement.
Excitement level off momentum note that your apartment from currently experience and yeah of course, it's reflected in day, 28% organic growth rates, yeah that that'd be a disclosing this quarter and it is.
Quite frankly exceptionally what we said in the second quarter last year.
In the second quarter last year would be showed is that.
During a crisis the RIAA industry gets your weather this storm way better than any other segment into wealth management industry.
But then the more important yeah. After the at the end of these crises.
Indicating he wasn't to get a supplement Q2 last year you see if if fundamental acceleration.
The war, what's happening in any part of the other of the other segments of this industry, where ultimately the success of the fiduciary alright, a model brings more assets into D. R. I a space of course at the expense of the traditional wire houses and brokers and banks and you had the growth rate.
Do you have goals.
Bubbles Russo said, a normal growth rates at what we have experienced so will it be predicted based on historic analysis in queue to last year.
Is exactly what we are experiencing right now and this is a multi year effect is most pronounced in the first year. After day crisis split it continues into second.
After 2 years and then yeah. If history is any guide you see morphin normalization real basic Kenny our industry growth Yea, and average and over time at 10%.
Oh, Dear that focus on by a houses your day.
Typically grow it in 3 or 4%, so it's still highly differentiated but yeah, particularly in crisis and shortly after crisis, yeah, our industry really day laborers for our clients more than just about anybody else in your seat in the gross numbers that via via demonstrating here.
Maybe 1 quick follow up to that you know I think the historical analysis would imply sort of a more normal cycle, but this time, we've seen such an influx of of liquidity into the system. I mean, do you think this could be either stronger longer than prior cycles.
Well you know my till I wish I was that smart, but the the.
Really this you are correct. Yeah. This is not just a normal cycle will be a kind of in a hyper cycle because of all day and the liquidity, that's being pumped into the economy, which could make it even more pronounced.
But I I, just think the decor fundamental step Oh, a industry, where this crisis way better than anything else, but then accelerates. The after is going to occur again be experiencing as we speak and how long would help renounced it's going to be based on the on the oldest my mommy.
Terry steam on this it could be helpful, but I don't want to over stretch my my my Gospel here.
Fair enough thanks for <unk>.
Our next question is from Ryan belly with Goldman Sachs. Please proceed.
Good morning, very German Rusty uhm.
Maybe I'll ask you a question about the <unk> outlook on a little bit of a different way uhm. So about a year ago, we talked about how post period, the volatility acceleration deal activity, but I also feel like focus by itself has hit like a level of scale of momentum that is so salt should generating an idiosyncratic. So I was wondering if your thing uhm, how much of the dual pipeline activity Dude.
Think it's based on the macro of us how much of it is because of focus on his ears Socratic momentum and then secondly, Jim had mentioned that you expect you'll activity to continue into 2020 at Sir So what will be the driver that sustained on on so yeah.
Yeah Yeah.
It's of course, it's a combination of force US and you are correct not just we're doing well just overall industry M enabled momentum is very strong.
It just happens to be that I was even stronger and well partially it's of course as I said in my remarks.
And on and off the question. It was of course very much around just above the value proposition.
You want to be an entrepreneur you wanted access to to tangibly real value added services. It up tried to improve them and you want to have permanent capital. So you're not on the block again quite frankly focus it's the only game in town. We are the only ones who can make this the 3 claims.
Credible credibly and we can make them not just in the states, but also on in use international markets that are starting to be more more meaningful contributor to our growth.
So yeah.
Yes, let's also helpful. Right now is that we all can trouble again.
We are out.
With so many prospect I do expect that this is going to be our success, most successful or definitely well if our most successful <unk> in our history, we're going to deploy uhm hundreds of more millions of dollars of capital we have in 1 point.
8 billion dollar a war chest that we will deploy over time and of course. This is funded it very very attractive interest rates. So our cost of capital is probably the lowest real we have ahead. So we are in an extremely strong position and every time you're in new <unk>.
Partner from joins us.
It quite from can lead to introduction to the next number off of partners from our quality and the kind of the success of our existing partner group, but you've seen in the numbers that you're looking at you know of course bodes very well for our future transactions.
Got it uhm and British we could come back to that favorite statistics about the aging and by the base Uhm have you seen that dynamic increase in the conversations with new partner phones over the last several years the importance of transitioning partnership.
Or the kind of idiosyncratic teach from no I mean, yes every day this different of course.
<unk> in the ultimate bespoke business here, but what's interesting Ryan is the.
V actually belief that this industry is under consolidating depending which consulting group you're kind of belief is industry dusk close to 200 deals a year.
We believe based on decor demographics this industry should be doing too too maybe.
202, 400 deals more a year.
If you could justify an industry deal momentum yeah. All 3.400 guilty you or more simply when you look at the demographics of this industry. So what that basically means is there is a big lock of opportunity that's building up India starting.
To see this more and more which byways. Another reason why be can be so disciplined from a multiple and capital deployment perspective, so the industries on the consolidating and whenever the kind of this wave of consolidation comes through <unk>.
Simply better positioned than anybody else to take advantage of it and of course, there was a big reason by Jim and I.
Got more debt capacity. So we can build our war chest to the 1.8 billion I mentioned, so net net is yeah basic hovious 76 platforms in the U S and beyond many of them at least 2 thirds of them are interested or indeed M&A game.
B R of course, continuing to do holding company and I look kind of very optimistic into the future from an M&A perspective.
Thank you.
You have reached the end of our question and answer session.
On that tend to call back.
Mark's.
Thank you in closing I would like to thank our partners firms 4 day, a strong and consistent financial performance.
And continued excellence in serving declines.
And our travels visiting with many of them be here, nothing but excitement for what day do for their clients and the outlook for the rest of day of the year and beyond.
I would also like to thank our employees, who continue to demonstrate incredible creativity dedication and intensity to support our partners and expand our business worldwide I'm on my momentum is excellent and will drive strong sustained growth for many years to come we will remain focused on managing.
Business, well and executing this on ongoing discipline against a substantial opportunity we have globally I'm incredibly excited about.
Danny inflection point it business is it and how a day positions us to create meaningful incremental and sustainable value for our shareholders in the coming years. Thank you on.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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