Q4 2021 Focus Financial Partners Inc Earnings Call

Good morning, I'd like to welcome everyone to the focus financial partners 2021 fourth quarter and full year earnings call joining us today are Rudy Adolf founder.

Speaker 1: Good morning. I would like to welcome everyone to the Focus Financial Partners 2021 fourth quarter and full year earnings call. Joining us today are Rudy Adolf, founder and CEO , Jim Shanahan, Chief Financial Officer, Rusty McGranahan, General Counsel, and Tina Madden, Head of Investor Relations and Corporate Communications.

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. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call. Please press star zero.

Speaker 1: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

On your telephone keypad.

As a reminder, this conference is being recorded.

Mr. Mcgranahan. Please go ahead.

Good morning, everyone before we begin let me remind you that during the course of this call. We may make a number of forward looking statements. We call your attention to the fact that focuses the results may of course differ from these statements. These statements are based on assumptions made by and information currently available to it.

Speaker 2: Good morning, everyone. Before we begin, let me remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that FOCUS' results may, of course, differ from these statements.

Speaker 2: These statements are based on assumptions made by and information currently available to FOCUS financial partners and involve risks and uncertainties that could cause the results of FOCUS to materially differ from these statements.

Focus financial partners and involve risks and uncertainties that could cause the results of focus to materially differ from these statements.

Speaker 2: FOCUS has made filings with the SEC, which lists some of the factors that may cause its results to differ materially from these statements, including, without limitation, uncertainty surrounding the COVID-19 pandemic.

Focus has made filings with the SEC, which lists some of the factors that may cause its results to differ materially from these statements, including without limitation uncertainties surrounding the COVID-19 pandemic and finally focus assumes no duty and does not undertake to update any such forward.

Speaker 2: And finally, FOCUS assumes no duty and does not undertake to update any such forward-looking statements.

Looking statements.

Speaker 2: With that, I will turn it over to our founder and CEO , Rudy Adolph. Rudy?

That I will turn it over to our founder and CEO Rudy Adolf Rudy.

Thanks, Rusty and good morning, everyone and welcome to our call today, we appreciate your interest in focus.

Speaker 3: Thanks, Rusty. Good morning, everyone, and welcome to our call today. We appreciate your interest in focus.

We had an outstanding year in 2021, and Virginia, Lenny and I are incredibly proud to be performance without business deliberate reinforcing our clear leadership in the independent wealth management sector.

Speaker 3: We had an outstanding year in 2021, and Rogini, Lenny and I are incredibly proud of the performance that our business delivered, reinforcing our clear leadership in the independent wealth management sector.

Speaker 3: We generated excellent financial performance for the year, exceeding our expectations on all measures, with revenues and adjusted net income excluding tax adjustments reaching new highs.

We generated excellent financial performance for the year exceeding our expectations on all measures with revenues and adjusted net income excluding picks adjustments, reaching new heights.

We continue to attract some of the highest quality firms in the industry and we ended 2021.

Speaker 3: We continue to attract some of the highest quality firms in the industry and we ended 2021 with 84 partner firms in four countries.

84 partner firms in four countries the.

Speaker 3: The quality and scale of our partnership combined with record M&A activity and new value-added services that further enhanced our value proposition were all integral to this outcome.

The quality and scale of our partnership combined with record M&A activity and new value added services that further enhanced our value proposition.

Integral to this outcome.

Enter 2022 with excellent momentum extending the strong pace of activity, we experienced last year.

Speaker 3: We enter 2022 with excellent momentum, extending the strong pace of activity we experienced last year.

Speaker 3: We are working on a substantial pipeline in the U.S., Australia, Canada, and the U.K., and plan to expand into other countries.

We are working on this substantial pipeline in the U S, Australia, Canada, and the U K and <unk>.

And to expand into other countries.

Speaker 3: Our December primary equity race demonstrated our ability to access the equity markets to further support and capitalize on the attractive M&A opportunities that we expect in 2022 and beyond.

December primary equity rates demonstrated our ability to access the equity markets to further support and capitalize on the attractive M&A opportunities that would be expected in 2022 and beyond.

We delivered excellent results for our shareholders growing full year revenues by 32, 1% year over year to nearly one 8 billion.

Speaker 3: We delivered excellent results for our shareholders, growing full-year revenues by 32.1% year-over-year to nearly $1.8 billion.

Speaker 3: Our adjusted net income excluding tax adjustments per share was $3.36, and tax adjustments per share were 56 cents up 36.6 and 19.1 percent respectively.

Our adjusted net income excluding tax adjustments per share was $3.36 and picks adjustments per share were <unk> 56 cents up $36, six and 19, 1% respectively.

Speaker 3: These results reinforce the high growth nature of our business, which is a function of the value being created by the firms in our partner.

These results reinforce the high growth nature of our business, which is a function of the value being created by the firms and our partnership.

The results also reflect the value of our recurring revenue stream, which drives the stability and predictability of our financial performance regardless of market conditions.

Speaker 3: The results also reflect the value of our recurring revenue stream, which drives the stability and predictability of our financial performance, regardless of market conditions.

Speaker 3: In 2021, in excess of 95% of our revenues were.

In 2021 in excess of 95% of our revenues are recurring.

However, what makes 2021 standout year, what's the acceleration of our M&A momentum as we capitalized on the industry consolidation opportunity in a disciplined way.

Speaker 3: However, what made 2021 a standard year was the acceleration of our M&A momentum as we capitalized on the industry consolidation opportunity in a disciplined way. We closed a record 38 transactions last year, including 14 partner firms and 24 mergers, inclusive of 8 mergers for connectors, which expanded its footprint in Australia, Canada, and the UK.

We closed a record 38 transactions last year.

<unk> 14 partner firms in 24 mergers inclusive of Eaton mergers, so connectors, which expanded its footprint in Australia, Canada and the UK.

Speaker 3: We continue to add outstanding new partner firms, each an industry leader with a strong business, talented advisors and seasoned management teams and deep longstanding client relationships.

We continued to add outstanding new partner firms, each an industry leader with a strong business.

<unk> advisors, and seasoned management teams and deep long standing client relationships.

Speaker 3: Each added complementary capabilities to our partnership including geographic reach and an array of wealth and investment management expertise by further diversifying our revenues and cash flow. As we discussed in

Each added complementary capabilities to our partnership including geographic reach.

And an array of wealth and investment management expertise.

Further diversifying our revenues and cash flow.

As we discussed at our December Investor Day.

Speaker 3: our core value proposition of entrepreneurship, permanent capital and value-added services is unique in the market and resonates strongly enabling us to continue attracting many of the highest performing firms in the industry.

Our core value proposition of entrepreneurship.

Permanent capital in value added services is unique in the market and resonates strongly enabling us to continue attracting many many of the highest performing firms in the industry.

Speaker 3: As you heard, many of our partner firms say having focus as a long-term strategic partner with the resources, intellectual expertise, and skill advantages to help them become stronger businesses, grow faster, and continually service their clients better was at the core of the decision to join.

Hertz many of our partner firms say, having focus is a long term strategic partner Vista resources intellectual expertise and scale advantages to help them become stronger businesses grow faster and continue to service their clients better.

At the core of the decision to join Us.

Speaker 3: Every time we add a firm of the caliber of the 14 partners that joined us in 2021, it further validates the attractiveness of our value proposition and our partnership.

Every time, we add a firm of the caliber of the 14 partners that joined US in 2021, which further validates the attractiveness of our value proposition and our partnership.

Speaker 3: at our investor day. You heard my co-founder, Rajini Kodiyalam, describe the value that is created by our programmatic approach to M&A.

At our Investor Day, you heard my cofounder Regina Codell them describe the value.

That is created by our programmatic approach to M&A.

Speaker 3: central to this process is ensuring that we are adding the right firm.

<unk> two this process is ensuring that we are adding the right firms. This is what drives the consistently high investment returns we are generating.

Speaker 3: This is what drives the consistently high investment returns we have generated.

Speaker 3: Our value-added services are also an important differentiator and essential to helping our partner firms enhance their organic growth. My co-founder Lenny Chang explained that to stay competitive, RIAs need to add services to position themselves to meet evolving client needs, which vary based on the complexity of their wealth and assets.

Our value added services. So also an important differentiator.

Our central to helping our partner firms and Haynesville get you close.

My co founder Danny Cheng explains that yeah to stay competitive alright, <unk> need to add services to position themselves to meet evolving client needs, which vary based on the complexity of their wealth of assets.

Speaker 3: RIAs concurrently need to upgrade their business practices as scale has become an increasingly important differentiator.

Alright, yes concurrently needs to upgrade their business practices and scale is becoming increasingly important differentiator.

Speaker 3: We enable our partner firms to meet those needs through both our business and client solutions. And we further expanded our value-add offerings last year in important areas such as trust, lending, insurance, and valuation solutions.

We enable our partner firms to meet those needs through both our business and client solutions and we further expanded our value added offerings last year in important areas, such as trust lending insurance and valuation solutions.

Speaker 3: Last week we announced our partnership with CASE to provide a customized alternative investment platform to all of our partner firms.

Last week, we announced a partnership with case.

Provide a customized alternative investment platform to all of our partner firms.

Speaker 3: This platform will allow our partners to seamlessly access a range of alternative investment strategies on behalf of their clients. The unique scale and

Platform will allow our partners to seamlessly access to a range of alternative investment strategies on behalf of their clients.

A unique scale and reach of our partnerships.

Speaker 3: gives us insights that we can leverage to the benefit of all of our partners. And we have the profitability to continually enhance our value-added services in the areas that will help our partners the most.

It gives us insights that we can leverage to the benefit of all of our partners and perhaps the profitability to continually enhance our value added services in the areas.

We can help our partners the most.

We structured the hour Investor day to answer the key investor questions in each of these areas.

Speaker 3: We structured our investor day to answer the key investor questions in each of these areas and the feedback we have gotten has been excellent.

And the feedback we have gotten has been excellent.

Speaker 3: In particular, the disclosures we provided on our long-term organic growth rates, excluding merchants, were very rarely received.

In particular, the disclosures we provided on our long term organic growth rates excluding breakfast.

Speaker 3: As of September 30, 2021, for firms that have been with us for at least two years, our partnership generated a since inception organic growth rate of 9.6% excluding mergers, and our portfolio of US RIAs 11.2% on a weighted average.

As of September 32021 for firms that have been with us for at least two years our partnership generated.

Since inception of organic growth rate of nine 6%, excluding mergers and our portfolio of U S. <unk> 11, 2% on a weighted average basis.

Speaker 3: Our update on the size and stability of our investment returns was also viewed very positively with 91% of such firms generating levered IRRs in excess of 20% compared with 86% at our 2019 invested.

Oh, well update on the size and stability of our investment returns whilst also viewed very positively with 91% of such firms generating levered IRR in excess of 20% compared with 86% at our 2019 Investor day.

Speaker 3: Most importantly, investors were impressed by the quality and depth of our partnership as demonstrated by many partners who joined us for the panel discussion.

Most importantly investors were impressed by the quality and depth of our partnership as demonstrated by many partners who joined us for the panel discussions.

We have made substantial progress in the evolution of our business.

Speaker 3: We have made substantial progress in the evolution of our business, with the COVID crisis reinforcing the stability and resiliency of our business model, and we increased our 2025 financial targets to reflect

With the Covid crisis, reinforcing the stability and resiliency of our business model.

And we increased our 2025 financial targets to reflect this.

Our growth trajectory continues to accelerate and we are executing on a record M&A volumes by the widening our leadership position within the independent wealth management sector.

Speaker 3: Our growth trajectory continues to accelerate and we are executing on record M&A volumes while widening our leadership position within the independent wealth management sector.

Perhaps the most important takeaway is that we are consistently delivering 20 plus percent annual growth supported by strong organic revenue growth and outstanding execution investment discipline and nimbleness.

Speaker 3: Perhaps the most important takeaway is that we are consistently delivering 20 plus percent annual growth, supported by strong organic revenue growth and outstanding execution, investment discipline, and nimbleness.

I can't emphasize this point strongly enough.

Speaker 3: I can't emphasize this point strongly enough. Although we and our partner firms expect some level of market volatility in 2022, we anticipate 20% plus annual revenue and adjusted EBITDA growth and adjusted EBITDA margin of approximately 25.5% this year.

We and our partner firms expect some level of market volatility in 2022, we anticipate 20% plus annual revenue and adjusted EBITDA growth and adjusted EBITDA margin of approximately 25, 5% this year.

Similar to 2020 event, you all financial advice and longstanding client relationships provide a solid foundation for this outlook.

Speaker 3: Similar to 2020, the value of financial advice and long-standing client relationships provide a solid foundation for this outlook.

It also bears repeating.

Speaker 3: It also bears repeating that we are uniquely positioned in a multi-trillion dollar global industry that is experiencing a transformational shift driven by succession and the need for scale.

Precision in a multi trillion dollar global industry is experiencing a transformation a share driven by a succession and the need for scale.

At our Investor day, we highlighted that despite the increase in merger activity in the last several years consolidation in this industry is just beginning representing an opportunity that will span many years.

Speaker 3: At our investor day, we highlighted that despite the increase in merger activity in the last several years, consolidation in this industry is just beginning, representing an opportunity that will span many years, if not a decade or more.

Not a decade or more.

Given our scale track record and exclusive industry focus we believe that focus is the best positioned company in the world to capitalize on these dynamics, which we believe will result in significant value creation for our shareholders.

Speaker 3: Given our scale, track record, and exclusive industry focus, we believe that Focus is the best positioned company in the world to capitalize on these dynamics, which we believe will result in significant value creation for our shareholders.

Speaker 3: It is for these reasons that we updated our 2025 financial targets, including revenues of approximately $4 billion, adjusted EBITDA of $1.1 billion, and adjusted EBITDA margin of 28%, supported by a future partnership of approximately 125 firms.

It is for these reasons that we updated our 2025 financial targets, including revenues of approximately 4 billion adjusted EBITDA of $1 1 billion and adjusted EBITDA margin of 28% supported by a future partnership off approximately 100.

Third 25 firms too.

To reach these targets in about four years time requires us to be more than double the size of our revenues and adjusted EBITDA by increasing the number of partner firms, we have by about 50%.

Speaker 3: To reach these targets in about four years' time requires that we more than double the size of our revenues and adjusted EBITDA while increasing the number of partner firms we have by about 50%.

We believe that these targets are aggressive, but achievable our diverse and growing global partnership creates enduring scale advantages reinforcing the sustainability of our strong growth for many years to come.

Speaker 3: We believe that these targets are aggressive but achievable. Our diverse and growing global partnership creates enduring scale advantages, reinforcing the sustainability of our strong growth for many years to come.

I'm very excited about the outlook, both near and long term with that let me turn the call over to Jim Jim.

Speaker 3: I'm very excited about our outlook, both near and long-term. With that, let me turn the call over to Jim. Jim.

Speaker 4: Good morning, everyone. In Q4 and for the 2021 full year, our business performed exceptionally well. Our growth and financial performance were very strong as our partner firms delivered excellent results. We closed.

Good morning, everyone in Q4 and for the <unk> 2021 full year, our business performed exceptionally well our growth and financial performance were very strong as our partner firms delivered excellent results. We closed 38 transactions a new record for our M&A activity and continued our internet.

Speaker 4: a new record for our MNA activity and continued our international expansion.

<unk> expansion, we enhanced our value add services, adding new capabilities in many important areas.

Speaker 4: We enhanced our value-add services, adding new capabilities in many important areas.

Speaker 4: The revenue and adjusted EBITDA growth we achieved drove strong year-over-year growth in our cash flow generation, substantially increasing our flexibility to invest in value and creative opportunities around the world.

The revenue and adjusted EBITDA growth, we achieved drove strong year over year growth in our cash flow generation substantially increasing our flexibility to invest in value accretive opportunities around the world.

Our tax shield continue to increase which was also an important enabler of the growth in our cash flows the new partner firms. We acquired in the merger we completed on behalf of our partners last year further position our partnership for continued strong growth and performance in the future.

Speaker 4: tax shield continued to increase, which was also an important enabler of the growth in our cash.

Speaker 4: The new partner firms we acquired and the mergers we completed on behalf of our partners last year further position our partnership for continued strong growth and performance in the future.

Speaker 4: The quality of results our business is achieving and the consistently high performance our partner firms are delivering are the catalysts for the updated 2025 financial targets we shared with you at our December investment summit.

The quality of results our businesses achieving consistently high performance. Our partner firms are delivering are the catalysts for the updated 2025 financial targets. We shared with you at our December Investor Day.

Speaker 4: As Rudy noted, we also laid out the annual growth targets that support our longer-term view, which provides important near-term context.

As already noted we also laid out the annual growth targets that support our longer term view, which provides important near term context.

Speaker 4: Based on current market levels and the trajectory of our business, we believe that we will deliver full year 2022 revenue and adjusted EBITDA growth in excess of 20% and adjusted EBITDA margin of approximately 25.5%.

Based on current market levels and the trajectory of our business. We believe that we will deliver full year 2022 revenue and adjusted EBITDA growth in excess of 20% and adjusted EBITDA margin of approximately 25, 5%. So.

Speaker 4: To further emphasize a point that Rudy made, it is important to remember that our business is relationship-based.

So further emphasize the point that Rudi made it is important to remember that our business is relationship based with over 95% of our 2020 one revenues coming from recurring sources. This is a central element sort of high growth we are consistently delivering.

Speaker 4: with over 95% of our 2021 revenues coming from recurrence.

Speaker 4: This is a central element to the high growth we are consistently delivering. Now let me turn to the highlights.

Now, let me turn to the highlights of our P&L.

Our Q4 revenues were $523 9 million, reflecting a year over year increase of 38%.

Speaker 4: Our Q4 revenues were $523.9 million, reflecting a year-over-year increase of 38%, and 8% above the top end of our estimated range of $475 to $485 million.

And 8% above the top end of our estimated range of $475 million to $485 million, our Q4 year over year organic revenue growth rate was 26, 6% well above the top end of our guidance of 17% to 20%.

Speaker 4: Q4 year-over-year organic revenue growth rate was 26.6%.

Speaker 4: well above the top end of our guidance of 17 to 20.

Speaker 4: This outperformance primarily reflects approximately $20 million in performance fees associated with alternative investment funds managed by some of our partner firms, which

This outperformance primarily reflects approximately $20 million in performance fees associated with alternative investment funds managed by some of our partner firms, which will not repeat in Q1.

Our Q4, adjusted EBITDA was $129 million up 42, 2% compared to the prior year period, and our adjusted EBITDA margin was 24, 6% in line with our approximate 25% outlook.

Speaker 4: Our Q4 adjusted EBITDA was 129 million, up 42.2% compared to the prior year period. And our adjusted EBITDA margin was 24.6% in line with our approximate.

Performance fees I, just mentioned contributed approximately $7 million and adjusted EBITDA.

Speaker 4: Performance fees I just mentioned contributed approximately $7 million in adjusted EBITDA. Reflecting the strong growth

Reflecting the strong growth and profitability of our business. Our Q4 adjusted net income excluding tax adjustments per share was <unk> 94.

Speaker 4: Q4 adjustment net income excluding tax adjustments per share was $0.94.

Speaker 4: increase in 30.6 percent from the prior period.

Increasing 36% from the prior year period, our tax adjustments per share were <unk> 33, 3% higher year over year.

Speaker 4: Our tax adjustments per share were $0.16, 33.3% higher year over year.

On a full year basis, our revenues were approximately $1 8 billion 32, 1% higher than the prior year driven by our organic revenue growth rate of 24%.

Speaker 4: On a full year basis, our revenues were approximately $1.8 billion, 32.1% higher than the prior year, driven by our organic revenue growth rate of 24%.

Our full year adjusted EBITDA was $451 3 million, 43% higher than the prior year and our adjusted EBITDA margin was 25, 1% one five percentage points higher reflecting the addition of new partner firms and operating leverage.

Speaker 4: Our full year adjusted EBITDA was 451.3 million, 40.3% higher than the prior year and our adjusted EBITDA margin was 25.1%.

Speaker 4: 1.5 percentage points higher, reflecting the addition of new partner firms and operating.

Speaker 4: Full year adjusted net income, excluding tax adjustments per share was $3.36, reflecting year-over-year growth of 36.6%, and our tax adjustments per share were 56 cents, up 19.1% for the same period.

Full year adjusted net income excluding tax adjusted per share was $3.36, reflecting year over year growth of 36, 6% and our tax adjustments per share were <unk> 56 up 19, 1% for the same period.

As of December 31, our gross unamortized tax shield was over $2 5 billion to details of which are in our earnings supplement.

Speaker 4: As of December 31, our gross unamortized tax shield was over $2.5 billion, the details of which are in our earnings supplement.

Speaker 4: Almost every acquisition we make increases the value of this tax shield, which grew by approximately $800 million in the last year alone. We had a record year in 2017.

Almost every acquisition, we make increases the value of this tax shield, which grew by approximately $800 million in the last year alone.

We had a record year in 2021 for M&A activity underscoring the attractiveness of our value proposition and the scale benefits, we offer our partner firms globally.

Speaker 4: underscoring the attractiveness of our value proposition and the scale benefits we offer our partner firms globally.

As Rudy noted we closed on 14, new partner firms since 24 mergers, including eight mergers for connect us for a total of 38 transactions in Q4, we closed on 22 transactions included nine partner firms.

Speaker 4: As Rudy noted, we closed on 14 new partner firms and 24 mergers, including eight mergers for Connectus, for a total of 38 transactions. In Q4, we closed on 22 transactions.

Speaker 4: The nine new partner firms contributed approximately $16.8 million of revenue and $5.6 million of adjusted EBITDA, with adjusted EBITDA margin of 33.4 percent.

My new partner firms contributed approximately $16 8 million of revenue and $5 6 million of adjusted EBITDA adjusted EBITDA margin of 33, 4% in Q4 2021.

On a full quarter basis. These firms are estimated to contribute $37 million and $12 4 million in revenue and adjusted EBITDA, respectively.

Speaker 4: On a full quarter basis, these firms are estimated to contribute $37 million and $12.4 million in revenue and adjusted EBITDA respectively.

In December in connection with two partner firm acquisitions, we issued approximately 440000 shares as part of the consideration paid.

Speaker 4: In December , in connection with two partner firm acquisitions, we issued approximately 440,000 shares as part of the consideration page.

Speaker 4: Approximately 59,000 of these were Class A shares, and the remaining 381,000 were LLC units with an equivalent amount of Class B shares.

Approximately 59000 disease or class a shares and to remain at 381000, where LLC units with an equivalent amount of class B shares as we have highlighted on prior calls for attractive transactions, we have the unique ability to use our public shares our LLC equity capital.

Speaker 4: As we have highlighted on prior calls for our tractor transactions, we have the unique ability to use our public shares or LLC equity capital as part of our acquisition.

As part of our acquisition consideration.

Speaker 4: These share issuances, as well as our December equity offering, will increase our Q1 weighted average adjusted shares outstanding by approximately 3 million shares.

These share issuances as well as our December equity offering will increase our Q1 weighted average adjusted shares outstanding by approximately 3 million shares.

As already highlighted and we have discussed at our Investor day, our M&A momentum heading into 2022 is very strong industry.

Speaker 4: Rudy highlighted, and we have discussed at our investor day, our M&A momentum heading into 2022 is very strong.

Speaker 4: industry M&A activity continues to increase and the opportunity to set internationally is also.

Industry M&A activity continues to increase and the opportunity to set internationally is also growing while our M&A closings in Q1 will be lower given the substantial deals. We completed in late Q4, our pipeline for 2022 is substantial and we anticipate that it will expand further.

Speaker 4: While our M&A closings in Q1 will be lower, given the substantial new deals we completed in late Q4, our pipeline for 2022 is substantial, and we anticipate that it will expand further, particularly as the number of our partner firms that use mergers to accelerate their growth.

<unk> is the number of our partner firms that use mergers to accelerate their growth increases.

Speaker 4: Connectus also has a robust pipeline and will expand its global footprint in 2020.

<unk> also has a robust pipeline and will expand its global footprint in 2022.

Speaker 4: In anticipation of growing levels of M&A activity, we raised $161.9 million to our primary equity issuance in December , net of offering expenses and a...

In anticipation of growing levels of M&A activity, we raised 161 9 million to our primary equity issuance in December net of offering expenses and a synthetic suit synthetic secondary.

Speaker 4: This capital will provide us with additional work and capital flexibility to efficiently capture M&A opportunities globally. Now for a few comments on our

This capital will provide us with additional working capital flexibility to efficiently capture M&A opportunities globally.

Now for a few comments on our Q4 expenses and cash flow Matt.

Speaker 4: Management fees were $146 million or 27.9% of our Q4 revenue in line with our prior quarter.

Management fees were $146 million or 27, 9% of our Q4 revenue in line with our prior quarter as a reminder, mansion fees, our second largest operating expense because they are tied to the profitability of our partner firms and therefore highly variable they limit the effect of revenue volatility.

Speaker 4: As a reminder, mansion fees are second largest operating expense because they are tied to the profitability of our partner firms and therefore highly variable. They limit the effect of revenue volatility or increases in operating expenses on our adjusted units.

<unk> are increases in operating expenses on our adjusted EBITDA.

Speaker 4: Our non-cash equity compensation expense was 1.3% of our Q4 revenues in line with our expectation and we expect this expense will be approximately 1.2% of estimated Q1 revenues.

Our noncash equity compensation expense was one 3% of our Q4 revenues in line with our expectation and we expect this expense will be approximately one 2% of estimated Q1 revenues.

As of December 31, our LTM cash flow available for capital allocation was $319 9 million a year over year increase of 59, 6%, reflecting the strong sustained growth and financial performance of our partnership as well as the addition of 14 partner firms since 24 mergers during the Q4.

Speaker 4: As of December 31, our LTM cash flow available for capital allocation was $319.9 million, a year-over-year increase of $59.6 million.

Speaker 4: in the strong sustained growth and financial performance of our partnership as well as the addition of 14 partner firms and 24 mergers during the Q4 LTM period. We paid cash earn out obligations of $27.5 million which was within our Q4 estimate and in Q1 we estimate that we will pay cash earn outs of approximately $35 million.

LTM period, we paid cash earn out obligations of $27 5 million, which was within our Q4 estimate and in Q1, we estimate that we will pay cash earn outs of approximately $35 million.

Speaker 4: Now let me turn to our Q1 P&L expectations. We estimate that our Q1 revenues will be in the range of 510 to 520 million. We anticipate that our organic revenue growth rate will be in the range of 16 to 19%.

Now, let me turn to our Q1 P&L expectations, we estimate that our Q1 revenues will be in the range of $510 million to $520 million, we anticipate that our organic revenue growth rate will be in the range of 16% to 19%.

Speaker 4: We estimate that our Q1 adjusted EBITDA margin will be approximately 25.

We estimate that our Q1 adjusted EBITDA margin will be approximately 25%.

Our outlook for both revenue and our organic revenue growth rate excludes the approximate $20 million and year end performance fee revenues for Q4, which will not recur in Q1.

Speaker 4: Our outlook for both revenue and our organic revenue growth rate exclude the approximate $20 million in year-end performance revenues for Q4, which will not recur in Q1.

Speaker 4: Additionally through this seasonal impact of our non correlated revenues We estimate revenues will be lower by approximately 10 million in Q1 relative

Additionally to the seasonal impact of our non correlated revenues, we estimate revenues will be lower by approximately $10 million in Q1 relative to Q4.

With the recent backdrop of unsettled equity market conditions and the heightened volatility. It is important to note that the diversity of our revenues with approximately 23% of our Q4 revenue is not correlated to the financial markets.

Speaker 4: With the recent backdrop of unsettled equity market conditions and the heightened volatility, it is important to note that the diversity of our revenues, with approximately 23% of our Q4 revenues not correlated to the financial market.

Speaker 4: limits the effects of market volatility on our revenue.

Limits the effects of market volatility on our revenue stream. Additionally, our partner firms client portfolios are actively managed and allocated across investment classes, which helps limit their exposure to equity market turbulence. These.

Speaker 4: Additionally, our partner firms' client portfolios are actively managed and allocated across investment classes, which helps limit their exposure to equity market.

Speaker 4: These characteristics, together with the highly variable nature of our expenses and our earnings preference, limit downside.

These characteristics together with the highly variable nature of our expenses and our earnings preference limit downside risk to our revenues and profitability.

Most recent example of this dynamic was our financial performance in 2020 at the height of the Covid uncertainty.

Speaker 4: The most recent example of this dynamic was our financial performance in 2020 at the height of the COVID uncertainty.

Now for a few comments on our balance sheet.

Speaker 4: We ended Q4 with approximately $2.4 billion of debt outstanding, inclusive of the $150 million we tapped in December under the delay draw feature of our $800 million term.

We entered Q4 with approximately $2 4 billion of debt outstanding inclusive of the $150 million with tapped in December under the delayed draw feature of our $800 million term loan. We ended the year with a net leverage ratio of 385 times lower than anticipated due to incremental adjusted EBITDA lead Gen.

Speaker 4: We ended the year with a net leverage ratio of 3.85 times, lower than anticipated due to the incremental adjusted EVA we generated in Q4, and our equity.

<unk> in Q4, and our equity raise.

Speaker 4: Assuming that markets stay constant at current levels, we anticipate that our Q1 net leverage ratio will be between 3.75 times and 14.

And that market stay constant at current levels, we anticipate that our Q1 net leverage ratio will be between $3 seven five times and four times.

Speaker 4: We remain committed to our net leverage ratio range of 3.5 times to 4.5.

<unk> committed to our net leverage ratio range of three five times to four five times, which we believe is the most appropriate range given the highly acquisitive nature of our business.

Speaker 4: which we believe is the most appropriate range given the highly acquisitive nature of our business.

Our borrowing cost remained low in 2021 as we have been a beneficiary of the low interest rate environment, while we expect that our interest expense will increase this year as the fed begins raising rates $850 million of approximately 35% of our borrowings are swapped to a fixed rate of approximately.

Speaker 4: 2021 as we've been a beneficiary of the low interest rate environment. While we expect that our interest expense will increase this year.

Speaker 4: Fed begins raising rates. $850 million or approximately 35% of our borrowings are swapped to a fixed rate of approximately 2.6% inclusive of the 200 basis point spread.

Two 6% inclusive of the 200 basis point spread.

Speaker 4: Additionally, while not hedged, 796.4 million of our borrowings have incurred the carry costs of a 50 basis point LIBOR floor.

Additionally, upon that hedge $796 $4 million of our borrowings have incurred the carry cost of a 50 basis point LIBOR floor.

In 2021, we closed acquisitions with consideration in excess of 1 billion significantly higher than our annual deployment in the past years.

Speaker 4: consideration in excess of $1 billion, significantly higher than our annual deployment in the past

As of year end, we had over $900 million of firepower between cash on hand, and our $650 million undrawn revolver in anticipation of another exceptionally strong year for M&A activity globally.

Speaker 4: As of year-end, we had over 900 million of firepower between Kaishan hands and our 650 million undrawn revolver in anticipation of another exceptionally strong year for M&A activity globally. As always.

As always we are stringent about.

Speaker 4: only pursuing acquisitions that meet our return criteria and are a good fit for our partners.

Only pursuant acquisitions that meet our return criteria and are a good fit for our partnership.

Speaker 4: As you have heard through the partner panel discussions in our December Invest Today, we acquire entrepreneurial value-creating firms with substantial growth.

As you've heard through the partner panel discussions in our December Investor day, we acquire entrepreneurial value creative firms with substantial growth potential.

Speaker 4: These are the firms that are best positioned to benefit from our scale advantages, value-add resources, and permanent growth capital.

These are the firms that are best positioned to benefit from our scale advantages value add resources and permanent growth capital.

In closing we delivered another strong quarter in Q4, and an excellent year in 2021. These results reflect not only our ability to capitalize on the large and growing market opportunity, but also our consistent financial discipline as our business has grown.

Speaker 4: In closing, we delivered another strong quarter in Q4 and an excellent year in 2020.

Speaker 4: These results reflect not only our ability to capitalize on the large and growing market opportunity, but also our consistent financial discipline as our business has grown.

Speaker 4: Our partner firms delivered another year of exceptional financial performance.

Partner firms delivered another year of exceptional financial performance last year, our value proposition resonated strongly supported by a well designed portfolio of business and client solutions. We continue to be careful stewards of our capital invest in firms that are leaders with attractive growth profiles.

Speaker 4: Our value proposition resonated strongly, supported by a well-designed portfolio of business and clients.

Speaker 4: continue to be careful stewards of our capital, investing in firms that are leaders with attractive growth profiles. These are hallmarks of the way in which.

Are hallmarks of the way in which we manage and grow our business, which we believe will generate substantial value for our shareholders in the years to come.

Speaker 4: which we believe will generate substantial value for our shareholders in the years to come.

Speaker 4: We believe that our growth trajectory is one of the most compelling in the financial service.

We believe that our growth trajectory is one of the most compelling in the financial service sector.

Speaker 4: Reinforced by our new 2025 growth targets, approximately $4 billion in revenue, $1.1 billion in adjusted EBITDA, and a 28% adjusted EBITDA margin.

Reinforced by our new 2025 growth targets approximately $4 billion in revenue $1 1 billion and adjusted EBITDA and a 28% adjusted EBITDA margin.

We are optimistic about our strategy for growth and our financial outlook and we believe that we are uniquely positioned to capitalize on the secular dynamics shaping our industry.

Speaker 4: We are optimistic about our strategy for growth and our financial outlook, and we believe that we are uniquely positioned to capitalize on the secular dynamics shaping our industry.

With that let me turn the call over to the operator for Q&A operator.

Speaker 4: With that, let me turn the call over to the operator for Q&A.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker 1: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone.

Speaker 1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Keith.

Our first question comes from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.

Speaker 1: Our first question comes from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.

Hey, good morning, Rudy Jim Hope, you're both doing well.

Hi, Greg.

Yes.

Speaker 5: So we were interested in the CIS partnership announcement last week, and I also remember from Tony Abbiati's presentation from the investor today that his partner firm, SCS, also provides alts to some of your affiliates. So is SCS going to work with CIS going forward, or is CIS going to be sort of the dominant provider of alts more from the center of focus? Like, how's that going to work?

We were interested in the Cif partnership announcement last week and I also remember from Tony Abbiati pre.

Presentation from the Investor day that.

His partner firm FCS also provides at some of your affiliates is SCS going to work with Cif going forward or is Cif could it be sort of the dominant provider of offs more from the center of our focus like how is that going to work.

Yes, Hi, Greg.

Speaker 3: Yeah, hi, Craig. And by the way, excellent question because my co-founder, Virginia, on the phone and she'll add to what I'm saying. But Craig, obviously alternatives are an increasingly important element of wealth management for high net worth and ultra high net worth clients. And we have quite a number of partner firms that quite frankly are excellent in managing complex alternative strategies.

By the way excellent question, because my co founder, Virginia on the phone and she will add to what I'm, saying.

Craig obviously alternative saw an increasingly important element of.

Wealth management for high net worth and ultra high net worth clients and we.

We have quite a number of the firms that quite frankly are excellent in managing complex alternative strategies.

So what we did with case was basically create a proprietary platform.

Speaker 3: So what we did with KACE was basically create a proprietary platform.

Speaker 3: Yeah, we're basically all of our managers, including SCS. Yeah, they are very sophisticated, probably one of the largest alternative programs in this industry.

We're basically all of our managers, including SCS.

Sophisticated probably one of the largest alternative programs in this industry, but also other parts of the firm so suncor, but its cohorts.

Speaker 3: but also other partner firms, whether it's Ancora, whether it's Kovitz.

Speaker 3: or other partners may have the ability to add their highly sophisticated strategies.

Or other partners have the ability to add a highly sophisticated strategies to this platform and then solely at the choice of partner firms.

Speaker 3: to this platform, and then solely at the choice of our partner firms, other partner firms, they can basically tap into these capabilities.

The other partner firms they can basically Kelly tap into these capabilities.

Speaker 3: um if and when um yeah they see a good fit and quite frankly when there's capacity in this uh strategist uh regina want

If and when.

Yes, it's a good fit and quite frankly, you Mendes capacity.

Strategies.

Virginia, I want to add something.

Thanks, Judy to Craig for a case.

Speaker 6: Thanks, Rudy. So Craig, for us, CASE is a FinTech platform that's doing three things.

You think tech platform, that's doing three things.

Speaker 6: First of all, it's curated. It's not just the off-the-shelf platform, completely curated for the focus partnership.

Paul It's curated it's not just the off the shelf Blackstone completely curated for the focus partnership.

Speaker 6: And firms such as SES and others, like Rudy mentioned, are on the platform both as providers as well as all of our other firms can access the platform to avail of, it could be SES, it could be another focus partner firm, it could be a third party firm.

And Ah firms suggest SCS and others like Rudy mentioned are on the platform both ask providers as well as all of our other.

Ken acts as the platform to avail of it could be it could be another focus partner firm it could be a third party.

Speaker 6: Within the case platform that is curated for focus, the beauty of it is it is customized for each focus partner firm. So when Colony logs in, their experience, the funds they see are completely different.

Keith platform that is curated for focus the beauty of it is customized for each focus back to the club.

When colony loss.

They have experienced the funds DC are completely different.

Speaker 6: then what happens when a Bordeaux logs in or an SCS logs in? So that's the beauty of focus. It's truly open architecture. Each firm decides how they want to access it, who they want to add onto it. But the most important aspect of this is it's also comprehensive. I'm sure you've heard it. Alls are an increasing addition into the asset management mix.

And what happens then.

No.

So that's the beauty of focus its truly open architecture. Each firm decides how they want to actually state who they want to add onto it but the most important aspect of business. It's also a comprehensive I am sure you put it all in increasing addition into the asset management mix, but one of the issue.

Speaker 6: But one of the issues with leveraging all of the REA space is it's not very efficient for the advisors. It's a cumbersome process. And that is something that we've tried to streamline here. We're starting with access, education, third-party due diligence, connectivity to reporting providers, connectivity to custodians, and a collaborative community around the focus partnership, which truly, you know, the three Cs, the curated.

Leveraging <unk> space is.

It's not very efficient for the advisors the cumbersome process and that is something that we've tried to streamline here.

This accident.

<unk> third party due diligence.

The key to reporting providers connectivity to custodian.

And and equilateral weighted community around the focus partnership which truly <unk> curated.

Customized within each with each partner and the comprehensive nature. This is an extension of our value added services and it's a beautiful straddle on one hand focus client solutions because it helps our partners expand their client value proposition, but also on.

Speaker 6: customized within each for each partner and the comprehensive nature. This is an extension of our value-added services and it's a beautiful straddle. On one hand, focus client solutions because it helps our partners expand their client value proposition with us. On the other hand, it is all about focus business solutions because it provides tremendous advisor efficiency. So it's a straddle.

On the other hand, it is all about focus business solution because it provides tremendous advisor efficiency. So with this channel.

Got it.

Speaker 5: Got it. And just for my follow up, Jim, I heard your prepared comments on the expanded new deal pipeline. And to me, this sort of translates into expected more deals, more capital deployed.

And just for my follow up Jim I heard your prepared comments on the expanded new deal pipeline and to me that sort of translates into expected more deals more capital deployed.

Speaker 5: in 2022 than we've seen kind of in recent years, even though you've had some really good recent years. Is my interpretation of that correct? Maybe you could just refine that comment a little bit.

Accretion in 2022, and we've seen kind of in recent years, even though you have had some really good recent years is my interpretation of that correct. Maybe you could just refine that comment a little bit.

Speaker 4: Yeah, Craig, thanks for your question. So our projections for this year, 2022, we said we'd grow top-line over 20% in terms of revenue and our adjusted EBITDA as well. We don't have guidance on capital deployment because, as you know, M&A is kind of hard to predict.

Yeah, Craig Thanks for your question. So we our projections for this year 22, we said we'd grow topline over 'twenty.

20% in terms of revenue and our adjusted EBITDA as well we don't have.

Guidance on capital deployment, because as you know M&A is kind of hard to predict.

Speaker 4: We had a very strong Q4. At the very end of the year, we closed about 22 transactions in Q4. Q1 will be a little lighter. But there's quite a number of LOIs and transactions that we're in the middle of due diligence right now. And the future is bright here for activity in Q2.

We had a very strong Q4 at the very end of the year. We closed about 22 transactions in Q4, Q1 will be a little lighter, but there is a quite a number of LOI isn't transactions that were in middle of due diligence right now and then.

Future is bright here for activity in 'twenty two.

Thank you Jim.

Thanks.

Thank you. Our next question comes from the line of Alex Blaustein with Goldman Sachs. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

Speaker 7: Good morning, Rudy, Jim, and Regina. It's Ryan on for Alex. So maybe just firstly, a philosophical question for Rudy. We're targeting 20% revenue on EBITDA growth.

Oh, good morning, Rudy Jim in Virginia, It's Ryan on for Alex.

So maybe just firstly a philosophical question for Rudy, we're targeting 20% revenue and EBITDA growth C. O. The stock is trading in the low teens, both on N TMP, an EV to EBITDA and it's down about 20% over just the last few months at the same time, you are thinking about issuing stock for deals and sort of in the regular course of business and I was just wondering how you think.

Speaker 7: stock is trading in the low teens, both on NTNP and EBITDA, and it's down about 20% over just the last few months. At the same time, you're thinking about issuing stocks for deals and sort of in the regular course of business. And I was just wondering how you're thinking about the trade-offs between investing in this really strong growth pipeline that you see ahead of you and potentially neutralizing the effects of dilution, maybe through repurchase.

About the trade offs between investing in this really strong growth pipeline that you see ahead of you and potentially neutralizing the effective dilution navy through repurchase.

Yes.

Speaker 3: Yeah, thanks, Ryan. Well, first and foremost, obviously, we are managing the business, not the share price.

Thanks Ryan.

Well first and foremost obviously.

Turning to the business not the share price.

Speaker 3: And what is probably most important is when we deploy capital, as we have demonstrated.

And what is probably most important is.

<unk> deployed capital if it's we have demonstrated in our.

Speaker 3: in our investor day, the returns are very, very attractive. Yeah, weighted average leveled IRR in excess of 25%. This again, very conservative math.

The Investor day, the returns are very very attractive weighted average levered IRR in excess of 25%.

Again very conservative Matt.

Speaker 3: And, you know, we are very opportunistic if we use capital in a transaction or not use capital in, I mean, equity in a transaction, quite frankly, has a lot to do with also the needs and interests of partners.

And.

We are very opportunistic if we use capital being the transaction will not use capital in equity in that transaction.

Quite frankly, it's a lot to do with also the needs and interest of partners.

Speaker 3: But ultimately, when you generate this level of returns, and quite frankly, we have a close to flawless track record of doing that, we continue to believe that by far the best deployment of capital is to just keep on going the business.

But ultimately when you generate this level of returns and quite frankly, we hit close.

Close to flawless strike rate code of doing that.

We continue to believe that by far the best deployment of capital is to just keep on growing the business and ultimately get us to.

Speaker 3: and ultimately get us to our 2025 targets.

Our 2025 targets.

Speaker 3: 4 billion in revenues, 1.1 billion in adjusted EBITDA in the 28% margin. That's the trajectory we are on. That's the right way to deploy our capital. And as Jim said before, there's just tremendous opportunities ahead of us.

You also have a $4 billion in revenues $1 1 billion and adjusted EBITDA in the 28% margin trajectory beyond that.

Right way to deploy capital and as Jim said before is there's just tremendous opportunities ahead of us.

Got it okay that makes sense.

Speaker 7: Got it. Okay, that makes sense. And maybe if you could give us an update on Barrel List. I think we're approaching about a year since the initiative started. So, I was just wondering, what's the opportunity set like in the family office space? And potentially, how are you thinking about tapping into both Europe and Asia through that platform?

And maybe if you could give us an update on barrel list I think we're approaching about a year since the initiatives started so I was just wondering what's the opportunity set bike in the family office space.

And potentially how are you thinking about tapping into both Europe and Asia through that through that platform.

Speaker 3: Yeah, so, of course, Parallels is just the start of a very small joint venture. It's a little bit different than the rest of what we are doing. They have assembled a strong team there. They are kind of in their ultra, ultra high net worth.

So of course barrel, it's just.

At the start of it.

A small joint venture its a little bit different than the rest of what we are doing.

<unk> assembled.

Yes.

<unk> team there.

Do you have kind of in the ultra ultra high net worth.

Speaker 3: a segment and it follows different, somewhat different dynamics. It's kind of more about deals and deal linkages.

Segment and it follows different somewhat different dynamics.

It's more about deals.

And deal linkages. So no bearing this would not be the foundation of our if you want the entry into.

Speaker 3: So no, Barreless would not be the foundation of our.

Speaker 3: if you want entry into Asian markets.

Into Asian markets.

Speaker 3: We use our core model and that's where the opportunity is.

Use our core model.

That's where the opportunity is.

Speaker 3: and quite frankly in any of the markets that we are operating, at one point you will see holding company transactions.

And quite frankly in any of the markets via.

You're operating at one point, you will see holding company transactions.

Speaker 3: you will see traditional merger transactions. And then of course, you will see connectors transactions. That's the essence of our business model. And that's really where the emphasis is here in the greater scheme of things here, parallel is obviously very, very small still at this point.

We'll see traditional merger transactions.

And of course, you will see connects those transactions.

Yes, and so far our business model and that's really what your emphasis is the greatest chemo things get apparel is obviously, a very very small still at this point.

Okay. Thank you.

Thank you. Our next question comes from the line of Alan Lau with Oppenheimer <unk> Company. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Owen Lau with Oppenheimer & Company.

Speaker 8: Good morning and thank you for taking my questions. Could you please give us an update on international expansion? How should we think about contribution and acquisitions outside of the United States in 2022?

Good morning, and thank you for taking my questions.

Could you please give us an update on international expansion, how should we think about contribution and acquisitions outside of the United States in 2022. Thank you.

Speaker 3: Yeah, hi Owen and thanks for the question. So I stated it at the investor day, today only 5.8% here, that's the number of Q4 of our revenues are in international.

Yes, hi, and.

Thanks for the question.

So I stated at the Investor day today.

Only five 8% that's the number as of Q4 of our revenues are.

In international.

Still your run rate its not over $100 million.

Speaker 3: still your run rate is now over 100 million. And we kind of want to get it to 20, 25% over time, where we will then get the real benefits of the diversification. I'm actually doing this call from Europe right now. And it's just the number of very attractive markets.

And we kind of want to get it to 20, 25% over time will be will then get the real benefits of the diversification.

I am actually doing this call from Europe right now.

And it's.

It's just that there are a number of very attractive markets, but of course step number one is just doing more in our existing markets, Canada and Australia the U K.

Speaker 3: But of course, step number one is just doing more in our existing markets, Canada and Australia and the UK. And then gradually expand into a number of additional markets.

And then gradually expand into a number of additional markets.

Speaker 3: What makes it so attractive is our model and our value proposition, entrepreneurship, value-added services and permanent capital is very unique in the U.S. I don't think anybody can credibly claim a similar value proposition, but in these international markets, it's simply unheard of. And there is consolidation, there's regulatory change, there are a whole number of dynamic.

What makes it so so attracted to our model.

Our value proposition entrepreneur shape, our value added services and permanent capital is it's very unique in the U S. I don't think anybody can credibly claim.

A similar value proposition, but the oil in these international markets it simply unheard of.

<unk>.

The ice consolidation dose regulatory change there at all.

A number of dynamics.

Speaker 3: where markets are moving more towards a fiduciary model, the way we would call it in the US.

Markets are moving more towards a fiduciary model is the way we would call the U S and there's always creates tremendous opportunities because ultimately we know more about fiduciary wealth management.

Speaker 3: And this always creates tremendous opportunities because ultimately we know more about fiduciary wealth management on our scale than just about anybody else in the world. That's a major competitive advantage.

On our scale than just about anybody else in the world That's a major competitive advantage.

Speaker 8: Got it, that's helpful. And then on another update, could you please also provide a little bit more color on your value-added services, maybe in particular on cash and credit program and trust solutions? Thank you.

Got it that's helpful and then on.

And not all day could you. Please also provide a little bit more color on your value added surfaces, maybe in particular on cash and credit program and Trust Trust solutions. Thank you.

Yeah, absolutely and Jim will give you some of the more and more reasons numbers, but.

Speaker 3: Yeah, absolutely. And Jim will give you some of the more recent numbers, but I guess sometimes you have to be lucky, but reality is the feedback, the engagement that we are currently seeing from our partner firms.

It's.

Yes.

I guess, sometimes you have to be lucky or.

But the reality is.

The feedback engagement that we are currently seeing from our.

Partner firms.

Speaker 3: It's absolutely tremendous starting on cash and credit.

Is absolutely tremendous starting on cash and credit.

Speaker 3: And quite frankly, it is, which is a surprise to me, is really becoming, if you want, a customer-client acquisition instrument.

And quite.

Quite frankly.

It is which is a surprise to be.

It's really becoming.

If you want.

Customer client acquisition instrument.

Speaker 3: Very often I hear about partner firms ultimately using a change in the balance sheet of a client and really an optimization using these capabilities is actually really, really powerful. So we are very pleased there.

We often hear about partner firms.

Ultimately using it.

It changed the balance sheet of the client and brilliant optimization youre using our.

This capabilities.

Is actually really really powerful.

And so we are very pleased there.

Speaker 3: On the trust side, basically, it's still earlier days, we just launched it.

On the trust side.

Basically it's still earlier days here, we just launched it.

Speaker 3: But just yesterday, I talked with multi hundreds of millions of dollar clients that ultimately were our trust capability was a real game changer for our part, for the part, particularly a partner firm that is going to work with him. That is ultimately a true tool of just adding to the sophistication of our partners, but also it's leveraging our unique skill.

Just yesterday I talked with multi hundreds of millions of dollar client.

That ultimately.

Our trust capability was a real game changer for our part for the part.

Particularly important from that is going to work with them.

Did you say ultimately.

True tool of just adding to the sophistication of our partners, but also leveraging our unique scale.

We simply have more.

Speaker 3: We simply have more purchasing power access capabilities in this area than just about anybody else in this industry. And this is ultimately a strength that we are using that ultimately can help with the growth of our partner firms.

Purchasing power access capabilities.

In this area than just about anybody else in this industry and this is ultimately a strengths that we are using that.

Ultimate Beacon.

Help boost the growth of the power of our partner firms.

Got it thank you very much.

Thank you. Our next question comes from the line of Kyle Voigt with <unk>. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Kyle Voigt with KBW. Please proceed with your...

Hi, This is Matt Boone actually on for Kyle.

Speaker 9: Hi, this is Matt Moon actually on for Kyle. I just had one on the adjusted EBIT margin here. I know you didn't change out your targets and the trajectory remains positive overall both here on

I just had one on the adjusted EBITDA margin here.

No you didn't change the out your targets and the trajectory remains positive overall both year on year.

Speaker 9: you know, unchanged for the longer-term story. But I'm just curious on the assumptions underlying the expense base for this year and maybe how the impacts of inflation, overall P&E, and mix of acquisition types between ConnectUs and the core model and any other factors might be playing a role for this year and anything else you want to highlight there.

Unchanged for the longer term story, but I was just curious on the assumptions underlying the expense base for this year.

And maybe how the impacts of inflation overall <unk> mix of acquisition types between connectors and the core model and any other factors.

Be playing a role in for this year.

And anything else you want to highlight there.

Yeah.

Yeah. Thanks, Matt So obviously, we've put out detail Q1 guidance.

Speaker 4: Yeah, thanks, Matt. So obviously, we've put out a detailed Q1 guidance.

Speaker 4: If you think about what's happened over the last two quarters, a lot of people have started to travel. The costs have started to come back. In the P&L, there was a slight uptick in the SG&A costs from Q3 to Q4, that's a run rate of the business. We do our budgets with all of our partner firms in terms of compensation and so forth. That's embedded in our Q1 and our guidance as well.

If you think about what's happened over the last two quarters a lot of people have started to travel the cost have started to come back in the.

In the P&L there was a slight uptick in the SG&A cost from Q3 to Q4 sort of.

Our run rate of the business.

But we do our budgets, where all of our partner firms in terms of compensation and so forth that's embedded in our Q1 and our guidance as well.

Speaker 4: As you know, we generally buy between 40 to 60 percent of the economics and cash flows of respective partner firms. So we've made assumptions in those ranges for 2022. And that's the output with the operating leverage of the business about targeting 25.5 percent.

As you know, we generally by between 40% to 60% of the economics and cash flows irrespective partner firms. So we've made a.

Assumptions in those ranges for 2022, and that's the output with the operating leverage of the business about targeting 25, 5%.

Speaker 4: This year, which is up versus about 25% for calendar year 21 and, you know, head in towards our ultimate focus 2025 goal of adjusted even a margin of 28%.

This year, which is up versus about 25% floor.

Calendar year, 'twenty, one and heading towards our ultimate focus 2025 goal of adjusted EBITDA margin of 28%. So we like we like what we see and where we are and things like the case question earlier, all those types of initiatives and value adds that we provide our partner firms will help the margin.

Speaker 4: So we like what we see and where we are, and things like the case question earlier, all those types of initiatives and value-adds that we provide our partner firms will help the margin over time and get us towards our long-term goal.

Overtime and get us towards our long term goal.

Speaker 3: Matt, maybe the second part of your question was related to inflation.

Maybe the second part of your question was related to inflation.

Speaker 9: And quite frankly, inflation is a very important discussion topic with our clients, and obviously a very important consideration in the dynamic portfolio construction that our partners are using. But if there's one thing, Matt, we have seen again and again in our industry, ultimately kinds of uncertainty increase the need for advice. And many of our partners have seen extraordinary growth in time span.

And quite.

Quite frankly inflation is a very important discussion topic with our clients and.

Obviously, a very important consideration in the dynamic portfolio construction did that did the apartments are using but if theres. One thing Amit we have seen again then began in our industry.

Lead times of uncertainty.

Increase the need for advice.

And many part of our partners have seen extraordinary growth.

In times like these.

Speaker 3: and as you have seen with the excellent performance that we had in 2021.

And if you have seem to see excellent performance that we had in 2021.

Speaker 3: And by the way, and I'm very proud of this, those people who looked at the Q2 2020 earnings, where we basically predicted the very pattern that you're experiencing.

And by the way and I'm very proud of this.

People, who who looked at the Q2 2020 earnings.

We basically predicted at the very pet that you're experiencing which is basically just tremendous growth in this industry and of course also for us coming out of.

Speaker 3: which is basically just tremendous growth in this industry. And of course, also for us coming out of the crisis.

Out of the crisis.

Speaker 3: Yeah, I recently called a number of our largest partner firms and just asked them, how do you think about inflation? What's going to be the impact?

Recently pulled a number of our largest partner firms.

Just to ask them, how do you think about inflation, but what's going to be the impact.

And quite frankly as much of course, it's very important from a client.

Speaker 9: And quite frankly, as much, of course, it's very important for my client and asset allocation, as a management perspective.

Our location as a management perspective, but from a business perspective, there isn't a single firm that has any material concerns about the <unk>.

Speaker 3: But from a business perspective, there isn't a single firm that has any material concerns about the impact of inflation on our economy.

<unk> of inflation on our economics.

Got it great and then just as a follow up maybe more of a cleanup question.

Speaker 7: Got it. Great. And then just as a follow-up, maybe more of a clean-up question.

Speaker 7: Uh, you cited 20 million in performance fees right in the quarter to uh some of the alternative

You started $20 million in performance fees in the quarter too.

Some of the alternative platforms of some of your partner firms are on.

Speaker 7: platforms that some of your partner firms are on. So, it sounds as though the Revenue Growth Guidance does not include these performance trees for 1Q in the full year, but I'm just wondering if this is something we should expect as some sort of true-up in the fourth quarters or is this on an ongoing basis should...

So it sounds as though the revenue growth guidance does not include these performance fees from <unk> and the full year, but just wondering if this is something we should expect with some sort of true up in the fourth quarters or is this on an ongoing basis should I guess, assuming and hopefully for you guys.

Speaker 7: I guess, assuming and hopefully for you guys, if the alternatives perform well, but we're just curious on the mechanics here in the accounting.

Alternatives performed well, but was just curious on the on the mechanics here in the accounting.

Yes, so Matt we do not include performance fees and projections because generally they're based on year end performance and it's impossible to estimate those type of things.

Speaker 4: Yeah, so Matt, we we do not include performance fees and projections because generally they're based on year-end performance and it's impossible to to estimate those type of things. Even when we were sitting here in November providing the Q4 guidance, you know, there was still uncertainty. So that's why the 20 million kind of came above the the top end of our guidance.

Even when we were sitting here in November provide into Q4, our guidance there is still uncertainty.

So that's why the 20 million kind of came above the top end of our guidance but.

Speaker 4: impossible for us to estimate these for 22 and we do not include them in guidance until they're realized.

Possible for us to estimate these for 'twenty, two and we do not include them in guidance until they are realized.

Yes, but thanks for the question before on cases.

Speaker 3: Yeah, but thanks to the question before on cases, quite frankly, many of our partners are just excellent in managing these type of strategies. And of course, there's a value that they and us are getting for it. But what we really see is particularly in these complex times, there are just a number of strategies that just do extraordinarily well, despite what's happening out in the markets right now.

Quite frankly, many of our partners are just excellent and managing this.

What type of strategies.

And.

Of course, they are there.

Bet you that day.

The industrial getting put but what we really see it particularly in this complex times.

They are just a number of strategies that are just extraordinarily well despite what's happening out in the markets right now.

Okay.

Alright, thank you.

Thank you. Our next question comes from the line of Michael Young with Truth Securities. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Michael Young with Truist Securities.

Speaker 4: Hey, good morning. Thanks for taking the question. I wanted to start with, you guys had a really strong year in terms of partner firm acquisitions in 2021 with 14, the strongest you guys have had. So, as we look forward to 2022, should we expect more acquisitions kind of more into the downstream bucket? Just given investor day, it seemed like, you know, every partner firm that was presenting wanted to do more downstream M&A, so should we expect that mix to shift this year?

Hey, good morning, Thanks for taking the question wanted to start with you guys had a really strong year in terms of partner firm acquisitions in 2021 with 14 strongest you guys have had so as we look forward to 2022 should we expect more acquisitions kind of more into the downstream bucket just given <unk>.

Mr Day, it seemed like every partner firm that.

Was presenting wanted to do more downstream M&A. So can we expect that mix to shift this year.

Speaker 3: uh you know yes you're right uh one of the

Yes, you are right one of the big reasons why partner firms join us.

Speaker 3: big reasons why partner firms join us is our track record of supporting them in mergers.

Sure.

Track record of supporting them in.

Marie Jos.

Speaker 9: and therefore you're directly benefiting and being beneficiaries and drivers of industry consolidation. So about three quarters of our partner firms have done deals and will be doing deals at one point. So that is an important part of our value proposition. We are richly agnostic from an economics perspective. If we deploy capital upstairs or downstairs.

And therefore, you are directly benefiting and being beneficiaries and drivers of our industry consolidations. So about three quarters of our partner firms.

<unk> had some deals.

We'll be doing this at one point so that is an important part of our value proposition.

Richie agnostic from an economics perspective, we deploy capital upscale Saddam stairs.

Speaker 9: Quite frankly, we have a preference whenever it makes sense to do mergers.

Quite frankly.

We hit the preference when they never use it.

It makes sense to do mergers.

Speaker 3: because it's simply, as I said, the reason partners joined us and it's a huge part of our value-added program. But of course, for many transactions, it just doesn't make sense and we don't need to do this.

Because it's simply as I said.

The recent partners joined dose and it's a huge part of our value added program.

Of course, there are many transactions that just doesn't make sense.

We don't need to do this.

Speaker 9: But the reality is that last year was simply an extraordinary year from an M&A performance.

But the reality is lost.

Last year, it was simply an extraordinary year.

From an M&A performance.

Speaker 9: You know, we deployed more capital than ever before.

We deployed more capital than ever before but of in Virginia linear and I are looking at our current pipeline.

Speaker 3: But when Virginia, Lenny, and I are looking at our current pipeline, it's just really, really.

It's just really really strong and so it's hard to predict.

Speaker 3: And so it's hard to predict, but I believe our M&A, this is going to be another strong, very strong M&A year that we have ahead of us.

I believe our M&A. This is going to be another strong very strong M&A year.

All of us.

Okay. That's helpful.

Speaker 4: That's helpful. And maybe just as a follow-up, with Connectus generating more M&A volume.

Maybe just as a follow up with connect us generating more kind of M&A volume in the potential at least for there to be more mergers by partner firms.

Speaker 4: the potential, at least, for there to be more mergers by partner firms? I would assume you're getting slightly better economics or much better economics in those types of deals. So, should we expect the returns on these acquisitions to be increasing and maybe moving us closer towards a point of self-capitalized growth with M&A? Any comments on that would be helpful.

I'd assume you're getting slightly better economics or to much better economics and kind of those types of deals. So should we expect kind of the returns on these acquisitions to be increasing and maybe moving us closer towards a point of self capitalized growth with M&A.

Any comments on that would be helpful.

Well you know.

Speaker 9: Well, you know, as we have shown in the best of days, the performance of our M&A business is just extraordinarily strong. And it's strong because we are very selective and have simply a good eye, I guess, for partner firms to join us. Then, of course, we got our value-added programs.

It's we are shortening investor days our.

The performance of our M&A business is just extraordinarily strong.

<unk>.

It's strong because we are very selective.

Uh huh.

It's simply a good I guess for partner firms who joined us.

Then of course because of our value added programs.

Speaker 3: and we are financing the growth at very attractive terms through us, the 320 million.

And we are financing the growth at very attractive terms through us.

$320 million.

Speaker 3: TTM cash flow that via the free cash flow that we are generating. Plus of course, access to the debt markets and selectively to, you know, sort of use of equity. So I don't, I think it would be too optimistic to think that, you know, you can get even higher returns than what we have created here.

<unk> cash flow debt free.

Free cash flow that we're generating lots of course access to the debt markets and selectively too.

So the use of equity.

I think it would be.

Too optimistic to think that.

Can get even higher returns than what we have created here.

Speaker 3: I think sustaining at these levels is absolutely terrific.

I think sustaining at these levels is absolutely terrific.

Speaker 3: That's what our objective here is.

What I will take this year is and as I said before is our pipeline is robust it's exciting.

Speaker 3: And as I said before, our pipeline is vast. It's exciting. We are as busy as we can be. And stay tuned. There are a bunch of announcements in the works in the not too far future.

We are as busy as we can be.

And stay tune stay a bunch of announcements in the works.

In the not too far future.

Okay. Thanks, Randy.

Thank you. Our next question comes from the line of Matthew Roswell with RBC capital markets. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Matthew Roswell with RBC Capital Markets. Please proceed with your question.

Speaker 2: Yes, good morning everyone. Congratulations. I have a bit of a theoretical question, might be a little difficult to tease out, but the organic growth has been running, you know, sort of nicely higher over the last couple of quarters. And I was wondering if there's sort of a permanent shift higher in organic growth, or is it being driven by M&A activity at the partner firms, or are we still seeing some of the recovery from the pandemic? Hopefully that question makes sense.

Yes, good morning, everyone congratulation.

A bit of a theoretical question might be a little difficult to tease out, but the organic growth and running.

Nicely higher over the last couple of quarters and I was wondering if there's sort of a permanent shift higher organic growth or is it being driven by M&A activity partner firms, where are we still seeing some of the recovery.

Right.

Hopefully that question makes sense.

Speaker 3: Yeah, no, I understand the question and it makes total sense. We are less kind of focused on what happens in individual quarters, although of course it is a regular disclosure that we provide. I think the 15.9 percent, that's the average, is kind of the better number to focus on. There's always going to be some ups or downs and yes, some of them are based on the merger side.

Yes, yes.

And the question it makes total sense.

Yeah.

Kind of focused on what happens in individual quarters.

Although of course, they do say a regular disclosure that we provided I think the 15, 9% Thats. The average is kind of the better number to focus on there is always going to be some some ups and downs and get some will stay more or based on the mercury side.

Speaker 9: I think that the true piece to focus on is this new disclosure that we provided during Investor Day.

I think the true.

Yes.

Two piece to focus on is this new disclosure that we provided during investor day.

Speaker 9: Yeah, where we basically showed that our U.S. RIA is our U.S. Wealth Management Business, which of course is the vast majority of our revenue base, generates an organic growth excluding mergers of 11.2 percent.

Well it would be basically shows that.

U S. R. <unk> R U S wealth management business.

Which of course is the vast majority of our revenue base.

Generates in organic growth, excluding mergers of 11, 2%.

And this is over the cycle.

Speaker 9: And this is over the cycle. And these are most impressive numbers. So there's no M&A in this. If you then add M&A, you have the same store growth of our partner firms is 15%.

Most most impressive numbers so there's no M&A in this area.

M&A.

The same store growth of our partner firms.

15%.

So this.

Speaker 9: So this, we have a very, very strong portfolio of growth-oriented partners. Yes, they grow on their own along the lines of what I just described. And then our mergers here just can add another, almost 50% higher growth here from 11.2 to 15 growth to our partner firms, which is of course, very, very attractive.

We have been very very strong portfolio of growth oriented partners, yes, they grow on their own.

Along the lines of what I just described.

And then our merger as you just can add another.

Almost 50% higher growth from 11% to 15.

Growth through our partner firms, which is of course very very attractive.

Speaker 10: Yeah, I think just just to add to that, so obviously we're coming out of a, you know, as a base year of 2020. So obviously, you know, there's a lot of a lot of growth, but, you know, it's really sort of mentioned, you know, last 16 quarters has been 15.9% on average, and that sort of syncs with the guidance for Q1 of 16 to 19%.

Yes, it's interesting just to add to that so obviously, we're coming out of it.

As a base here of <unk>. So obviously theres a lot of a lot of growth, but it's really sort of mentioned in the last 16 quarters has been 15, 9% on average and that sort of syncs with the guidance for Q1 of 16 two.

To 19%.

Speaker 10: Obviously, our firms, now we have 84 of them, they're more interested in doing accretive tuck-in acquisitions, so that will continue to contribute towards that, but we're more normalizing now towards the 16 quarter average with the guidance in QI.

Obviously, our firms we have 84 of them, they're more interested in doing accretive tuck in acquisitions. So that will continue to contribute towards that but we're more normalizing now towards the.

16 quarter average with the guidance in Q1.

Okay, and then I guess as a quick follow up.

Speaker 10: Okay, and then I guess just a quick follow-up to an earlier question.

Ill.

To an earlier question.

Speaker 6: When do you decide to use equity as part of a merger? Is it sort of your choice, the partner firm's choice?

When do you decide to use equity as part of a merger is it sort of your choice.

Our partner firms choice.

Speaker 3: Yeah, so that speaks to one of the unique features that we have in our business model. And so for holding company deals, if we start there, it's basically very much driven by what are the needs of a prospect of ours, what are they interested in, and where are we in our balance sheet cycle. And then, yeah, whenever it makes sense.

Yes.

<unk>.

It.

It speaks to one of the unique features that they'd be hits in our business model.

And so for holding company deals if we start there.

Basically very much driven by what are the needs of.

Prospect of ours.

Are you interested in and where.

Where are we in our balance sheet cycle, and then whenever it makes sense.

Yeah.

Speaker 3: Yeah, we are delighted to add some equity. Of course, we'd like our partners to own some of our equity. That's a good thing. And we can do this upstairs through the C-Corp stock and downstairs with the LLC, which is really, really attractive. And we will continue to do on an ad hoc basis. And it's not a formula, it's a negotiation. Yeah.

Delighted to add some equity of course, we like our partners to own some of our equity that's a good thing.

And.

We can do just upstairs to the C Corp stock and dumps just with the LLC.

Which is really really attractive.

Continue to do on an AD hoc basis, then it's another formulates a negotiation.

Dave quote Marie Jos we actually have a third class of equity.

Speaker 9: The four mergers, which we have a third class of equity.

And that is when a partner from Mercury.

Speaker 9: when a partner firm merges with another firm.

Another firm.

Speaker 9: They can use, of course, our cash.

They can use of course, our cash.

Speaker 9: occasionally our stock, but that's very, very rare. But they can also use their stock in ManCo, in the management company, which creates a very tight alignment between these new firms that join our partners in our merger. Of course, first and foremost, this is the decision of our partners, how they want to use their equity.

Occasionally our stock, but that's very very rare.

But they.

They can also use this stock in MANCO in the management company, which creates a very tight alignment between these new firms that joined our partners in a merger of course first and foremost is the decision of our partners how they want to use the equity book.

Speaker 3: But all of this is just a highly collaborative, not very formulaic.

All of this.

Is it just a highly collaborative not.

Not very formulaic joined.

Speaker 3: joint initiative, you know, whenever the holding company and the partner firm basically works on the merger. And this nimbleness and flexibility that we have up and down this kind of classes of consideration is a real advantage in this, I think unique, absolutely unique to our business model.

Initiative.

And equity holding company and the partner from Brooks.

Brooks on the merger.

This nimbleness and flexibility that we have up and down this kind of classes of consideration.

Is it really bucked the trend is simply look absolutely the mix of our business model.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Patrick O'shaughnessy with Raymond James. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Patrick O'Shaughnessy with Raymond James. Please proceed with your question.

Hey, good morning, and apologies to beat a dead horse a little bit here, but another question on potential use of equity. If you guys were to deploy as much or more capital towards acquisitions. In 2022. As you did in 2021 would you expect that to require additional equity financing or do you think you can manage that all through debt financing and cash flow.

Speaker 11: Hey, good morning, and apologies to beat a dead horse a little bit here, but another question on potential use of equity. If you guys were to deploy as much or more capital towards acquisitions in 2022 as you did in 2021, would you expect that to require additional equity financing, or do you think you could manage that all through debt financing and cash flow?

Speaker 9: Well, we are generating a lot of cash, obviously. That's the $320 million that I mentioned before. And your gym went through a current firepower of almost a billion dollars, so we got a lot of flexibility.

Well, we are generating a lot of cash obviously, that's the $320 million debt that I mentioned before and Jim went through our current firepower.

Almost a one.

$1 billion, so we got a lot of flexibility and.

Speaker 3: And we will use equity, as I just said in the prior question, when we think it makes sense, and not just for financial reasons, but for strategic reasons, or if it is of important interest from our partners, or rather prospects, when they join us.

We.

We will use equity as I just said on the prior question.

When we think it makes sense and not just for financial reasons, but for strategic reasons or if you're just sort of an important interest from our partners L or rather prospects when they join us.

Speaker 3: So syncope is more of a strategic tool.

So think of it more of a strategic tool.

Speaker 3: and negotiation tool, and that's really the primary driver. Yes, we demonstrated in Q4, it was one overnight trade, and we could raise.

And negotiation tool.

That's really the primary driver as we demonstrated in Q4.

It was one overnight trade it could race.

Speaker 3: Almost, you know, quite $200 million in the market received it very well. So it's good to have this flexibility. But if Jim and I have one job, it is being good stewards of the capital of focus.

Almost not quite $200 million the market received it very well.

So it's good to have this flexibility, but if Jim and I have one job it as being good stewards of the capital focus.

Speaker 3: you know, invest our cash flows to the highest return opportunities.

Invest our cash flows to the highest return opportunities.

Speaker 9: and be very careful and prudent in the way how we use the mix of consideration ultimately to optimize shareholder value.

Be very careful and prudent in the way how we use the mix of consideration.

Ultimately to optimize shareholder value.

Yeah, obviously, Patrick this past year, we grew top line, 32% and EBITDA, 40%, but the objective for 2022 guidance is 20% revenue plus revenue growth and adjusted EBITDA. So whenever you have.

Speaker 10: Yeah, obviously, Patrick, this this past year, we grew top line 32% and EBITDA 40%. But the the objective for 2022 guidance is 20% plus revenue growth and adjusted EBITDA. So whenever you have

Speaker 10: creative transactions that were going to disproportionately grow well beyond that, then you have to evaluate all.

Accretive transactions that we're going to disproportionately grow well beyond that and you have to evaluate oil.

Speaker 10: You know, capital alternatives, but as Rudy mentioned, we have access to a $650 million revolver, over $300 million of cash at year-end, and the one thing I really appreciate is the growing cash flow, which was $320 million.

Capital alternatives, but as Rudy mentioned, we have access to a $650 million revolver over $300 million of cash at year end and one thing I really appreciate is the growing cash flow, which was 320 million our LTM cash available for capital allocation and that continues to grow, especially as we continue to.

Speaker 10: our LTM cash available for capital allocation that continues to grow.

Speaker 10: especially as we continue to structure our transactions in a tax-efficient way.

Structure, our transactions in a tax efficient way, where our tax shield now has over $2 billion to $5 billion on amortized basis.

Speaker 10: way where our tax shield now is over 2 billion, 2.5 billion on an amortized base.

Speaker 9: Actually Patrick, I think this is kind of underappreciated by the markets, I think.

Thanks, you Catherine.

I think this is.

Kind of underappreciated by the markets I think so Tim just said it would be a generating $320 million in free cash flow available for capital allocation and we are converting now 71% of our EBITDA into this free cash flow and this number is.

Speaker 9: So, Kim just said it, we are generating $320 million in free cash flow available for capital allocation.

Speaker 9: and we are converting now 71% of our EBITDA into this free cash flow and this number is up 59.6% versus prior year. This cash generative capability is just a tremendous advantage and obviously we'll use it in the most prudent way we can.

Up 59, 6% versus prior year.

Cash generative capability is just a tremendous advantage.

So obviously, we'll use it in the most important way we can.

Great I appreciate that detail.

Speaker 11: appreciate that detail. And then your continued consideration balance grew from $170 million at the end of 2020 to $350 million at the end of 2021. I appreciate the first quarter guidance that you guys already provided, but for the entirety of the year, would you expect that the cash flow related to continued consideration is going to be substantially higher in 2022 than 2021 just as that balance has built?

And then your contingent consideration balance grew from $170 million at the end of 2000 $20 million to $350 million at the end of 'twenty 'twenty. One I appreciate the first quarter guidance that you guys already provided but for the entirety of the year would you expect that the cash flow related to contingent consideration is going to be substantially higher in 2022% in 2021 just.

Is that balance is built.

Speaker 10: Well, first of all, the firms performed better, and therefore, the balance increases. Obviously, we did 38 transactions this year, our highest in our history, and that comes with incremental earn-out consideration, which is generally over a six-year period. So that's not just earmarked for calendar year 2022.

Well first of all the the firms performed better.

And therefore the balance increases.

Obviously, we did 38 transactions this year, our highest in our history and that comes with incremental.

Earn out consideration, which is generally over a six year period. So that's not just earmarked for calendar year.

2022.

Okay.

We'd love to be earn outs.

Speaker 9: We love to pay earn-outs. Earn-outs ultimately mean we did a terrific transaction. We use relatively high thresholds for partners to ultimately make this earn-out. So it's really a reflection of the health and quite frankly, the organic growth and the strength of the organic growth of our partner firms. You'll see this increase in this number.

Ultimately mean, we did a terrific transaction you'll be you.

Uh huh.

The relatively high.

Thresholds for our partners to ultimately make this earn ups. So it's really a reflection of the health and quite frankly, the organic growth and the strength of the organic growth of our partner firms.

Youll see this increase in this number.

Great. Thank you very much.

Speaker 1: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Adolf for final...

Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. <unk> for final comments.

Yeah. Thank you. Thank you all.

Speaker 9: Yeah, thank you. Thank you all. I would like to express my deep appreciation for our partner firms for their outstanding financial performance, industry leadership, and client focus in 2021. I'd also like to thank our holding company employees for a tremendous year in expanding our partnership and enhancing the value-added services, intellectual expertise, and other resources we are able to provide to our partners.

I would like to express my deep appreciation for our partner firms for their outstanding financial performance industry leadership and client focus in 2021 I would also like to thank our holding company employees for a tremendous year and expanding our partnership into enhancing.

The value added services intellectual expertise and other resources, we are able to provide to our partners.

Speaker 9: We very much appreciate your hard work, persistence, creativity, and enthusiasm.

We very much appreciate your hard work persistence creativity and enthusiasm.

Speaker 3: In closing, we demonstrated the substantial growth in earnings potential of our business last year. I want to reiterate the importance of our unique value proposition, our scale, and the diversity of our partnership.

In closing, we demonstrated the substantial growth and earnings potential of our business last year.

To reiterate the importance of our unique value proposition and our scale and the diversity of our partnership.

Our enduring competitive advantages that support our new 2025 targets.

Speaker 3: These are enduring competitive advantages that support our new 2025 targets of approximately 4 billion in revenue, 1.1 billion in adjusted EBITDA, and adjusted EBITDA margin of 28%.

Approximately 4 billion in revenue $1 1 million.

One 1 billion in adjusted EBITA.

Adjusted EBITDA margin of 28%.

Speaker 3: We have entered 2022 with terrific momentum, which when combined with the strong fundamentals of our business, we believe will enable us to continue driving superior growth and performance.

We have entered 2022 with terrific momentum.

Which when combined with the strong fundamentals of our business. We believe will enable us to continue driving superior growth and performance in term, creating substantial shareholder value. Thank you all for your interest.

Speaker 3: in term creating substantial shareholder value. Thank you all.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Speaker 1: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.