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Medley Management Inc. Declares $0.03 Per Share Dividend, Reports Fourth Quarter And Full Year 2018 Results

NEW YORK, April 1, 2019 /PRNewswire/ -- Medley Management Inc. (MDLY) today reported its financial results for its fourth quarter and year ended December 31, 2018 and will host an earnings conference call and audio webcast Tuesday, April 2 at 10:00 a.m. (Eastern Time).

Highlights

  • Fee earning assets under management were $2.8 billion as of December 31, 2018
  • Total assets under management were $4.7 billion as of December 31, 2018
  • Total revenues were $56.5 million for the year ended December 31, 2018 
  • U.S. GAAP net loss per share attributable to Medley Management Inc. was $0.16 for Q4 2018 and $0.65 for the year ended December 31, 2018
  • Core Net (Loss) Income Per Share was $(0.03) for Q4 2018 and $0.12 for the year ended December 31, 2018
  • Declared $0.03 per share dividend for Q4 2018 payable on May 3, 2019

Results of Operations for the Three Months Ended December 31, 2018

Total revenues were $12.6 million for the three months ended December 31, 2018 compared to $18.0 million for the same period in 2017. The decrease was due primarily to lower base management fees and incentive fees from our permanent capital vehicles as a result of a decrease in fee earning assets under management, partly offset by an increase in other revenue and fees.

Total expenses from operations were $14.1 million for the three months ended December 31, 2018 compared to $13.6 million for the same period in 2017. The increase was due primarily to increased performance fee compensation expense.

Total other expense, net was $10.9 million for the three months ended December 31, 2018 compared to $1.3 million for the same period in 2017. The increase was due primarily to $9.0 million of unrealized losses relating to one of our investments.  The $9.0 million of unrealized losses were allocated to non-controlling interests in consolidated subsidiaries which did not have any impact on the income attributed to Medley Management Inc. and non-controlling interests in Medley LLC.

Net loss attributable to Medley Management Inc. and non-controlling interests in Medley LLC was $3.9 million for the three months ended December 31, 2018 compared to net income of $0.6 million for the same period in 2017. Medley Management Inc.'s net loss per share was $0.16 for the three months ended December 31, 2018 compared to net loss per share of $0.11 for the same period in 2017.

Pre-Tax Core Net Loss was $1.4 million for the three months ended December 31, 2018 compared to Pre-Tax Core Net Income of $2.5 million for the same period in 2017. Core Net Loss Per Share was $0.03 for the three months ended December 31, 2018, compared to Core Net Income Per Share of $0.05 for the same period in 2017. Core EBITDA was $1.5 million for the three months ended December 31, 2018 compared to $5.5 million for the same period in 2017.

Results of Operations for the Year Ended December 31, 2018

Total revenues were $56.5 million for the year ended December 31, 2018 compared to $65.0 million for the same period in 2017. The decrease was due primarily to lower base management fees and incentive fees from our permanent capital vehicles as a result of a decrease in fee earning assets under management, partly offset by an increase in other revenue and fees.

Total expenses from operations were $51.0 million for the year ended December 31, 2018 compared to $39.6 million for the same period in 2017. The increase was due primarily to an increase in professional fees and compensation expense. The increase in professional fees was related to strategic initiatives, including our pending merger with Sierra. The increase in compensation expense was primarily attributed to severance expense as a result of the consolidation of our business activities to our New York office and increased compensation relating to existing and planned growth initiatives.

Total other expense, net was $26.7 million for the year ended December 31, 2018 compared to $6.2 million for the same period in 2017. The increase was due primarily to $19.9 million of unrealized losses relating to one of our investments. Of the $19.9 million of unrealized losses, $16.3 million was allocated to non-controlling interests in consolidated subsidiaries which did not have any impact on the net income attributed to Medley Management Inc. and non-controlling interests in Medley LLC.

Net loss attributable to Medley Management Inc. and non-controlling interests in Medley LLC was $10.4 million for the year ended December 31, 2018 compared to net income of $10.6 million for the same period in 2017. Medley Management Inc.'s net loss per share was $0.65 for the year ended December 31, 2018 compared to net income per share of $0.07 for the same period in 2017.

Pre-Tax Core Net Income was $5.8 million for the year ended December 31, 2018 compared to $17.6 million for the same period in 2017. Core Net Income Per Share was $0.12 for the year ended December 31, 2018, compared to $0.33 for the same period in 2017. Core EBITDA was $17.4 million for the year ended December 31, 2018 compared to $29.2 million for the same period in 2017.

Conference Call and Webcast Information

We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Tuesday, April 2, 2019 to discuss our fourth quarter and year-end financial results.

All interested parties may participate in the conference call by dialing (877) 870-4263 approximately 5-10 minutes prior to the call. International callers should dial (412) 317-0790. Participants should request to be joined into the Medley Management Inc. call when prompted.  Following the call you may access a replay of the event via audio webcast. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through the Company's website, http://www.mdly.com. To listen to the live call, please go to the Company's website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the Company's website.

Investor Contact:

Sam Anderson
Head of Capital Markets & Risk Management
Medley Management Inc.
212-759-0777

Media Contact:

Jonathan Gasthalter/Nathaniel Garnick
Gasthalter & Co. LP
212-257-4170

Key Performance Indicators:



For the Three Months Ended
December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017


(Amounts in thousands, except AUM, share and per share
amounts)

Consolidated Financial Data:








Pre-Tax Income (Loss)

$

(12,421)



$

3,077



$

(21,268)



$

19,265


Net (loss) income attributable to Medley Management
Inc. and non-controlling interests in Medley LLC

$

(3,873)



$

605



$

(10,443)



$

10,591


Net (Loss) income per Class A common stock

$

(0.16)



$

(0.11)



$

(0.65)



$

0.07


Net (Loss) Income Margin (1)

(30.8)

%


3.4

%


(18.5)

%


16.3

%

Weighted average shares - Basic and Diluted

5,697,802



5,478,910



5,579,628



5,553,026










Non-GAAP Data:








Pre-Tax Core Net Income (2)

$

(1,397)



$

2,543



$

5,818



$

17,609


Core Net Income  (2)

$

(1,106)



$

1,918



$

4,058



$

15,090


Core EBITDA  (3)

$

1,478



$

5,488



$

17,420



$

29,226


Core Net Income Per Share (4)

$

(0.03)



$

0.05



$

0.12



$

0.33


Core Net Income Margin (5)

(7.4)

%


7.9

%


7.0

%


15.4

%

Pro-Forma Weighted Average Shares Outstanding (6)

32,158,366



30,640,996



31,695,208



30,851,882










Other Data (at period end, in millions):








AUM

$

4,712



$

5,198



$

4,712



$

5,198


Fee Earning AUM

$

2,785



$

3,158



$

2,785



$

3,158




(1)   

Net (Loss) Income Margin equals Net (loss) income attributable to Medley Management Inc. and non-controlling interests in Medley LLC divided by total revenue.



(2)    

Pre-Tax Core Net Income is calculated as Core Net Income before income taxes. Core Net Income reflects net income attributable to Medley Management Inc. and net income attributable to non-controlling interests in Medley LLC adjusted to exclude reimbursable expenses associated with the launch of funds, stock-based compensation associated with restricted stock units that were granted in connection with our IPO, non-recurring expenses associated with strategic initiatives, such as our pending merger with Sierra, other non-core items and the income tax expense associated with the foregoing adjustments. Please refer to the reconciliation of Core Net Income to Net income (loss) attributable to Medley Management Inc. and non-controlling interests in Medley LLC in Exhibit C for additional details.



(3)    

Core EBITDA is calculated as Core Net Income before interest expense, income taxes, depreciation and amortization. Please refer to the reconciliation of Core EBITDA to Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC in Exhibit C for additional details.



(4)  

Core Net Income Per Share is calculated as Core Net Income, adjusted for the income tax effect of assuming that all of our pre-tax earnings were subject to federal, state and local corporate income taxes, divided by Pro-Forma Weighted Average Shares Outstanding (as defined below). We assumed an effective corporate tax rate of 33.0% for 2018 and 43.0% for 2017. Please refer to the calculation of Core Net Income Per Share in Exhibit D for additional details.



(5)   

Core Net Income Margin equals Core Net Income Per Share divided by total revenue per share.



(6)    

The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of up to 24,639,302 vested and unvested LLC Units for 24,639,302 shares of Class A common stock at the beginning of each period presented, as well as the vesting of the weighted average number of restricted stock units granted to employees and directors during each of the periods presented.

Fee Earning AUM

The table below presents the quarter-to-date roll forward of our total fee earning AUM:








% of  Fee Earning AUM


Permanent
Capital
Vehicles


Long-dated
Private
Funds
and SMAs


Total


Permanent
Capital
Vehicles


Long-dated
Private
Funds
and SMAs


(Dollars in millions)





Ending Balance, September 30, 2018

$

1,814



$

1,077



$

2,891



63

%


37

%

Commitments

(20)



23



3






Distributions

(41)



(58)



(99)






Change in fund value

(10)





(10)






Ending Balance, December 31, 2018

$

1,743



$

1,042



$

2,785



63

%


37

%

Total fee earning AUM decreased by $106.0 million, or 4% as of December 31, 2018 compared to total fee earning AUM as of September 30, 2018. The permanent capital vehicles' share of fee earning AUM remained at 63% as of December 31, 2018 compared to September 30, 2018.

The table below presents the year-to-date roll forward of our total fee earning AUM:








% of  Fee Earning AUM


Permanent
Capital
Vehicles


Long-dated
Private
Funds
and SMAs


Total


Permanent
Capital
Vehicles


Long-dated
Private
Funds
and SMAs


(Dollars in millions)





Ending balance, December 31, 2017

$

2,090



$

1,068



$

3,158



66

%


34

%

Commitments

(137)



237



100






Distributions

(107)



(159)



(266)






Change in fund value

(103)



(104)



(207)






Ending Balance, December 31, 2018

$

1,743



$

1,042



$

2,785



63

%


37

%

Total fee earning AUM decreased by $373 million, or 12% as of December 31, 2018 compared to total fee earning AUM as of December 31, 2017. The permanent capital vehicles' share of fee earning AUM decreased to 63% as of December 31, 2018 compared to 66% as of December 31, 2017.

Dividend Declaration

On March 27, 2019, the Company's Board of Directors declared a dividend of $0.03 per share of Class A common stock for the fourth quarter of 2018. The dividend will be paid on May 3, 2019 to stockholders of record as of April 15, 2019.

About Medley

Medley is an alternative asset management firm offering yield solutions to retail and institutional investors. Medley's national direct origination franchise is a premier provider of capital to the middle market in the U.S. Medley has $4.7 billion of assets under management in two business development companies, Medley Capital Corporation (MCC) (MCC) and Sierra Income Corporation, a credit interval fund, Sierra Total Return Fund (SRNTX) and several private investment vehicles. Over the past 17 years, Medley has provided capital to over 400 companies across 35 industries in North America.(1)

Medley LLC, the operating company of Medley Management Inc., has outstanding bonds which trade on the NYSE under the symbols (MDLX) and (MDLQ). Medley Capital Corporation is dual-listed on the New York Stock Exchange (MCC) and the Tel Aviv Stock Exchange (MCC) and has outstanding bonds which trade on both the New York Stock Exchange under the symbols (MCV), (MCX) and the Tel Aviv Stock Exchange under the symbol (TASE:MCC.B1).

Forward-Looking Statements

Statements included herein may contain "forward-looking statements." Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission, including those described in the section "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Except as required by law, the Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements made herein speak only as of the date of this press release.

Non-GAAP Financial Measures

We make reference to certain non-GAAP financial measures in this press release. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP is contained in the tables attached hereto.

Non-GAAP measures used by management include Pre-Tax Core Net Income, Core Net Income, Core EBITDA, Core Net Income Per Share and Core Net Income Margin. Management believes that these measures provide analysts, investors and management with helpful information regarding our underlying operating performance and our business, as they remove the impact of items management believes are not reflective of underlying operating performance. These non-GAAP measures are also used by management for planning purposes, including the preparation of internal budgets; and for evaluating the effectiveness of operational strategies. Additionally, we believe these non-GAAP measures provide another tool for investors to use in comparing our results with other companies in our industry, many of whom use similar non-GAAP measures. There are limitations associated with the use of non-GAAP financial measures as compared to the use of the most directly comparable U.S. GAAP financial measure and these measures supplement and should be considered in addition to and not in lieu of the results of operations discussed below. Furthermore, such measures may be inconsistent with measures presented by other companies.

This press release does not constitute an offer for any Medley fund.

Available Information

Medley Management Inc.'s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available at www.mdly.com.

(1) Medley Management Inc. is the parent company of Medley LLC and several registered investment advisors (collectively,  "Medley"). Assets under management refers to assets of our funds, which represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund level, including amounts subject to restrictions) and uncalled committed  capital (including commitments to funds that have yet to commence their investment periods). Assets under management are as of December 31, 2018.

Exhibit A. Consolidated Statements of Operations of Medley Management Inc.



For the Three Months Ended
December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017


 (in thousands, except share and per share data)

Revenues








Management fees

$

10,699



$

16,170



$

47,085



$

58,104


Performance fees



10





(1,974)


Other revenues and fees

2,367



2,197



10,503



9,201


Investment income (loss):








Carried interest

(129)



91



142



230


Other investment loss

(372)



(427)



(1,221)



(528)


Total Revenues

12,565



18,041



56,509



65,033










Expenses








Compensation and benefits

9,168



9,551



31,159



27,432


Performance fee compensation

619



(29)



507



(874)


General, administrative and other expenses

4,271



4,113



19,366



13,045


Total Expenses

14,058



13,635



51,032



39,603










Other Income (Expense)








Dividend income

960



1,431



4,311



4,327


Interest expense

(2,693)



(2,724)



(10,806)



(11,855)


Other income (expenses), net

(9,195)



(36)



(20,250)



1,363


Total Other Expense, Net

(10,928)



(1,329)



(26,745)



(6,165)


Income (loss) before income taxes

(12,421)



3,077



(21,268)



19,265


Provision for (benefit from) income taxes

(577)



463



258



1,956


Net Income (Loss)

(11,844)



2,614



(21,526)



17,309


Net income (loss) attributable to redeemable non-
controlling interests and non-controlling interests in
consolidated subsidiaries

(7,971)



2,009



(11,083)



6,718


Net (Loss) income attributable to non-controlling
interests in Medley LLC

(3,282)



1,107



(8,011)



9,664


Net (Loss) Income Attributable to Medley
Management Inc.

$

(591)



$

(502)



$

(2,432)



$

927










Net (Loss) Income Per Share of Class A Common
Stock:








Basic

$

(0.16)



$

(0.11)



$

(0.65)



$

0.07


Diluted

$

(0.16)



$

(0.11)



$

(0.65)



$

0.07


Weighted average shares outstanding - Basic and
Diluted

5,697,802



5,478,910



5,579,628



5,553,026


 

Exhibit B. Consolidated Statements of Comprehensive Income



For the Three Months Ended
December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017


(in thousands)

Net Income (Loss)

$

(11,844)



$

2,614



$

(21,526)



$

17,309


Other Comprehensive Income (Loss):








Change in fair value of available-for-sale securities (net
of income tax benefit of $0.4 million and $0.9 million
for Medley Management Inc. for the three months and
year ended December 31, 2017, respectively, and $0.2
million and $0.3 million for Non-controlling interests in
Medley LLC for the three months and year ended
December 31, 2017, respectively)



(5,225)





(10,305)


Total Comprehensive Income (Loss)

(11,844)



(2,611)



(21,526)



7,004


Comprehensive income (Loss) attributable to
redeemable non-controlling interests and non-controlling
interests in consolidated subsidiaries

(7,971)



2,009



(11,083)



6,690


Comprehensive (loss) income attributable to non-
controlling interests in Medley LLC

(3,282)



(3,441)



(8,011)



721


Comprehensive (Loss) Income Attributable to Medley
Management Inc.

$

(591)



$

(1,179)



$

(2,432)



$

(407)


 

Exhibit C. Reconciliation of Core Net Income and Core EBITDA to Net income attributable to Medley Management
Inc. and non-controlling interests in Medley LLC



For the Three Months Ended
December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017


(in thousands)

Net (loss) income attributable to Medley Management Inc.

$

(591)



$

(502)



$

(2,432)



$

927


Net (loss) income attributable to non-controlling
interests in Medley LLC

(3,282)



1,107



(8,011)



9,664


Net (loss) income attributable to Medley Management Inc.
and non-controlling interests in Medley LLC

$

(3,873)



$

605



$

(10,443)



$

10,591


Reimbursable fund startup expenses

179



664



1,483



1,510


IPO date award stock-based compensation

428



272



1,446



461


Expenses associated with strategic initiatives

975



530



4,833



737


Other non-core items:








Unrealized losses on shares of MCC





3,543




Severance expense

467





2,730



1,184


Acceleration of debt issuance costs (1)







1,150


Other (2)

1,004



9



1,967



20


Income tax expense on adjustments

(286)



(162)



(1,501)



(563)


Core Net Income

$

(1,106)



$

1,918



$

4,058



$

15,090


Interest expense

2,693



2,723



10,806



10,705


Income taxes

(290)



625



1,760



2,519


Depreciation and amortization

181



222



796



912


Core EBITDA

$

1,478



$

5,488



$

17,420



$

29,226




(1)

Amounts relate to additional interest expense associated with the acceleration of amortization of debt issuance costs and discount relating to prepayments made on our Term Loan Facility as a result of the refinancing of our indebtedness from the issuance of Senior Unsecured Debt.

(2)  

For 2018, consists primarily of expenses related to the consolidation of our business activities to our New York office.

 

 

 

Exhibit D. Calculation of Core Net Income Per Share



For the Three Months Ended December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017


(in thousands, except share and per share amounts)

Numerator








Core Net Income

$

(1,106)



$

1,918



$

4,058



$

15,090


Add: Income taxes

(291)



625



1,760



2,519


Pre-Tax Core Net Income

$

(1,397)



$

2,543



$

5,818



$

17,609










Denominator








Class A common stock

5,697,802



5,478,910



5,579,628



5,553,026


Conversion of LLC Units and restricted LLC Units to
Class A common stock

24,215,302



23,653,333



24,060,861



23,607,744


Restricted Stock Units

2,245,262



1,508,753



2,054,719



1,691,112


Pro-Forma Weighted Average Shares Outstanding (1)

32,158,366



30,640,996



31,695,208



30,851,882


Pre-Tax Core Net Income Per Share

$

(0.04)



$

0.08



$

0.18



$

0.57


Less: corporate income taxes per share (2)

0.01



(0.03)



(0.06)



(0.25)


Core Net Income Per Share

$

(0.03)



$

0.05



$

0.12



$

0.33




(1)    

The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of up to 24,639,302 vested and unvested LLC Units for 24,639,302 shares of Class A common stock at the beginning of each period presented, as well as the vesting of the weighted average number of restricted stock units granted to employees and directors during each of the periods presented.

(2) 

Represents a per share adjustment for income taxes assuming that all of our pre-tax earnings were subject to federal, state and local corporate income taxes. We assumed an effective corporate tax rate of 33.0% for 2018 and 43.0% for 2017. The lower effective corporate tax rate was primarily the result of the enactment of the Tax Cuts and Jobs Act which reduced the federal corporate tax rate from 34.0% to 21.0% effective January 1, 2018.

 

 

Exhibit E. Reconciliation of Net Income Margin to Core Net Income Margin



For the Three Months Ended
December 31,
(unaudited)


For the Year Ended
December 31,


2018


2017


2018


2017









Net Income Margin

(30.8)

%


3.4

%


(18.5)

%


16.3

%

Reimbursable fund startup expenses (1)

1.4

%


3.7

%


2.6

%


2.2

%

IPO date award stock-based compensation (1)

3.4

%


1.5

%


2.6

%


0.7

%

Expenses associated with strategic initiatives (1)

7.8

%


2.9

%


8.6

%


1.1

%









Other non-core items:(1)








Unrealized losses on shares of MCC

%


%


6.3

%


%

Severance expense

3.7

%


%


4.8

%


1.9

%

Acceleration of debt issuance costs

%


%


%


1.8

%

Other

 

8.0

%


%


3.5

%


%

Provision for income taxes (1)

(4.6)

%


2.6

%


0.5

%


3.0

%

Corporate income taxes (2)

3.7

%


(6.1)

%


(3.4)

%


(11.6)

%

Core Net Income Margin

(7.4)

%


7.9

%


7.0

%


15.4

%



(1)

Adjustments to Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC to calculate Core Net Income are presented as a percentage of total revenue.

(2)    

Assumes that all of our pre-tax earnings, including adjustments above, are subject to federal, state and local corporate income taxes. In determining corporate income taxes, we used a combined effective corporate tax rate of 33.0% for 2018 and 43.0% for 2017 and presented the calculation as a percentage of total revenue.

 

 

Exhibit F. Consolidated Balance Sheets of Medley Management Inc.



As of December 31,


2018


2017


(in thousands)

Assets




Cash and cash equivalents

$

17,219



$

36,327


Investments, at fair value

36,425



56,632


Management fees receivable

10,274



14,714


Performance fees receivable



2,987


Other assets

14,298



17,262


Total Assets

$

78,216



$

127,922






Liabilities, Redeemable Non-controlling Interests and Equity




Liabilities




Senior unsecured debt, net

$

117,618



$

116,892


Loans payable, net

9,892



9,233


Due to former minority interest holder

11,402




Accounts payable, accrued expenses and other liabilities

26,739



25,130


Total Liabilities

165,651



151,255






Redeemable Non-controlling Interests

23,186



53,741






Equity




Class A common stock

57



55


Class B common stock




Additional paid in capital

7,529



2,820


Accumulated other comprehensive loss



(1,301)


Accumulated deficit

(19,618)



(9,545)


Total stockholders' deficit, Medley Management Inc.

(12,032)



(7,971)


Non-controlling interests in consolidated subsidiaries

(747)



(1,702)


Non-controlling interests in Medley LLC

(97,842)



(67,401)


Total Deficit

(110,621)



(77,074)


Total Liabilities, Redeemable Non-controlling Interests and Equity

$

78,216



$

127,922


 

 

 

 

Cision

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