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Medley Management Inc. Declares $0.20 Per Share Dividend and Reports Second Quarter 2017 Results

NEW YORK, Aug. 10, 2017 (GLOBE NEWSWIRE) -- Medley Management Inc. (NYSE:MDLY) today reported its financial results for its second quarter ended June 30, 2017.

Highlights

  • Fee earning assets under management increased to $3.3 billion as of June 30, 2017
  • Total assets under management were $5.4 billion as of June 30, 2017
  • U.S. GAAP net income attributable to Medley Management Inc. was $0.06 per share for Q2 2017
  • Core Net Income Per Share was $0.10 for Q2 2017
  • Declared $0.20 per share dividend for Q2 2017 payable on September 6, 2017

“At Medley, we continue to expand our alternative asset management platform by increasing our product offerings, hiring seasoned professionals and investing capital across our different investment disciplines. During the quarter we increased Fee Earning AUM to $3.3B and have additional dry-powder to deploy in the quarters ahead,” said Brook Taube, CEO of Medley.

Results of Operations for the Three Months Ended June 30, 2017

Total revenues were $16.4 million for the three months ended June 30, 2017 compared to $21.3 million for the same period in 2016. The decrease was due primarily to a decrease in Part I incentive fees from our permanent capital vehicles as well as a decrease in performance fees from our separately managed accounts, partly offset by an increase in other revenue and fees.

Total expenses from operations were $8.5 million for the three months ended June 30, 2017 compared to $17.5 million for the same period in 2016. The decrease was due primarily to a decrease in expenses associated with our expense support agreement with Sierra Income Corporation ("SIC"), a reduction in compensation and benefits expense as well as lower general, administrative and other expenses.  

Total other expense, net was $2.0 million for the three months ended June 30, 2017 compared to $2.7 million for the same period in 2016. The decrease was due primarily to a decrease in expense associated with our revenue share payable and an increase in dividend income, partly offset by an increase in interest expense.

Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC was $4.2 million for the three months ended June 30, 2017 compared to $0.6 million for the same period in 2016. Medley Management Inc.’s net income per share was $0.06 for the three months ended June 30, 2017 compared to a net loss per share of $0.03 for the same period in 2016.

Pre-Tax Core Net Income was $5.2 million for the three months ended June 30, 2017 compared to $7.4 million for the same period in 2016. Core Net Income Per Share was $0.10 for the three months ended June 30, 2017, compared to $0.14 for the same period in 2016. Core EBITDA was $8.2 million for the three months ended June 30, 2017 compared to $9.8 million for the same period in 2016.

Results of Operations for the Six Months Ended June 30, 2017

Total revenues were $30.4 million for the six months ended June 30, 2017 compared to $38.9 million for the same period in 2016. The decrease was due primarily to a decrease in Part I incentive fees from our permanent capital vehicles and a reversal of performance fees from our separately managed accounts, partly offset by an increase in other revenue and fees.

Total expenses from operations were $16.1 million for the six months ended June 30, 2017 compared to $31.3 million for the same period in 2016. The decrease was due primarily to a reduction in expenses associated with our expense support agreement with SIC, a reduction in compensation and benefits expense, a decrease in performance compensation and lower general and administrative expenses. 

Total other expense, net was $3.4 million for the six months ended June 30, 2017 compared to $5.4 million for the same period in 2016. The decrease was due primarily to a decrease in expense associated with our revenue share payable and an increase in dividend income, partly offset by an increase in interest expense.

Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC was $7.4 million for the six months ended June 30, 2017 compared to $1.4 million for the same period in 2016. Medley Management Inc.’s net income per share was $0.14 for the six months ended June 30, 2017 compared to a net loss per share of $0.04 for the same period in 2016.

Pre-Tax Core Net Income was $10.4 million for the six months ended June 30, 2017 compared to $14.2 million for the same period in 2016. Core Net Income Per Share was $0.19 for the six months ended June 30, 2017, compared to $0.26 for the same period in 2016. Core EBITDA was $16.1 million for the six months ended June 30, 2017 compared $18.8 million for the same period in 2016.

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

Media Contact:
Erin Clark
Teneo Strategy
646-214-8355

Key Performance Indicators:

    For the Three
Months Ended
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
    2017   2016   2017   2016
    (Amounts in thousands, except AUM, share and per share amounts)
Consolidated Financial Data:                
Pre-Tax Income   $ 5,923     $ 1,104     $ 10,986     $ 2,252  
Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC   4,191     597     7,353     1,370  
Net income (loss) per Class A common stock   $ 0.06     $ (0.03 )   $ 0.14     $ (0.04 )
Net Income Margin (1)   25.5 %   2.8 %   24.1 %   3.5 %
Weighted average shares - Basic and Diluted   5,588,978     5,777,726     5,697,483     5,814,428  
                 
Non-GAAP Data:                
Pre-Tax Core Net Income (2)   $ 5,228     $ 7,434     $ 10,415     $ 14,195  
Core Net Income  (2)   4,733     6,563     9,321     12,528  
Core EBITDA  (3)   8,226     9,753     16,146     18,820  
Core Net Income Per Share (4)   $ 0.10     $ 0.14     $ 0.19     $ 0.26  
Core Net Income Margin (5)   18.1 %   19.9 %   19.5 %   20.8 %
Pro-Forma Weighted Average Shares Outstanding (6)   31,028,903     30,771,830     30,997,006     30,587,862  
                 
Other Data (at period end, in millions):                
AUM   $ 5,438     $ 5,025     $ 5,438     $ 5,025  
Fee Earning AUM   3,279     3,158     3,279     3,158  

(1) Net Income Margin equals Net 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, 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 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 43.0% for all periods presented. 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 vesting of restricted stock units and conversion by the pre-IPO holders of 23,333,333 LLC Units for 23,333,333 shares of Class A common stock at the beginning of each period presented, respectively. Please refer to Exhibit D for additional details.

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, March 31, 2017   $ 2,214     $ 1,000     $ 3,214     69 %   31 %
Commitments   59     68     127          
Capital reduction                    
Distributions   (24 )   (53 )   (77 )        
Change in fund value   10     5     15          
Ending balance, June 30, 2017   $ 2,259     $ 1,020     $ 3,279     69 %   31 %


Total fee earning AUM increased by $65 million, or 2% as of June 30, 2017 compared to total fee earning AUM as of March 31, 2017. The permanent capital vehicles’ share of fee earning AUM remained at 69% as of June 30, 2017 compared to March 31, 2017.


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, 2016 $ 2,207     $ 983     $ 3,190     69 %   31 %
Commitments 97     157     254          
Capital reduction                  
Distributions (51 )   (111 )   (162 )        
Change in fund value 6     (9 )   (3 )        
Ending balance, June 30, 2017 $ 2,259     $ 1,020     $ 3,279     69 %   31 %
                                   

Total fee earning AUM increased by $89 million, or 3% as of June 30, 2017 compared to total fee earning AUM as of December 31, 2016. The permanent capital vehicles’ share of fee earning AUM remained at 69% as of June 30, 2017 compared to December 31, 2016.

Dividend Declaration

On August 8, 2017, the Company’s Board of Directors declared a quarterly dividend of $0.20 per share of Class A common stock for the second quarter of 2017. The dividend will be paid on September 6, 2017 to stockholders of record as of August 23, 2017.

Conference Call and Webcast Information

We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday, August 10, 2017 to discuss our second quarter financial results.

All interested parties may participate in the conference call by dialing (877) 524-5743 approximately 5-10 minutes prior to the call. International callers should dial (615) 247-0088. Participants should reference Medley Management Inc. and the conference ID of 51870178 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.

About Medley

Medley is an alternative asset management firm offering yield solutions to retail and institutional investors. Medley’s national direct origination franchise, with over 85 people, is a premier provider of capital to the middle market in the U.S. As of June 30, 2017, Medley had over $5 billion of assets under management in two business development companies, Medley Capital Corporation (NYSE:MCC) and Sierra Income Corporation, a credit interval fund, Sierra Total Return Fund (NASDAQ:SRNTX) and several private investment vehicles. Over the past 15 years, Medley has provided capital to over 380 companies across 35 industries in North America. For additional information, please visit Medley Management Inc. at www.mdly.com.

Medley LLC, the operating company of Medley Management Inc., has outstanding bonds which trade on the NYSE under the symbols (NYSE:MDLX) and (NYSE:MDLQ). Medley Capital Corporation (NYSE:MCC) has outstanding bonds which trade on the NYSE under the symbols (NYSE:MCV), and (NYSE:MCX).

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, 2016. 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.


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

  For the Three Months Ended
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
  2017   2016   2017   2016
  (Amounts in thousands, except share and per share data)
Revenues              
Management fees $ 13,201     $ 18,695     $ 27,096     $ 34,958  
Performance fees 575     851     (1,644 )   260  
Other revenues and fees 2,668     1,780     4,988     3,679  
Total revenues 16,444     21,326     30,440     38,897  
               
Expenses              
Compensation and benefits 5,705     8,564     11,499     14,432  
Performance fee compensation 50     45     (831 )   (26 )
General, administrative and other expenses 2,754     8,899     5,422     16,878  
Total expenses 8,509     17,508     16,090     31,284  
               
Other income (expense)              
Dividend income 733     221     1,468     443  
Interest expense (2,766 )   (2,072 )   (6,413 )   (4,190 )
Other income (expenses), net 21     (863 )   1,581     (1,614 )
Total other expense, net (2,012 )   (2,714 )   (3,364 )   (5,361 )
Income before income taxes 5,923     1,104     10,986     2,252  
Provision for income taxes 428     102     841     214  
Net income 5,495     1,002     10,145     2,038  
Net income attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries 1,304     405     2,792     668  
Net income attributable to non-controlling interests in Medley LLC 3,617     539     6,386     1,218  
Net income attributable to Medley Management Inc. $ 574     $ 58     $ 967     $ 152  
               
Net income (loss) per share of Class A common stock:              
Basic $ 0.06     $ (0.03 )   $ 0.14     $ (0.04 )
Diluted $ 0.06     $ (0.03 )   $ 0.14     $ (0.04 )
Weighted average shares outstanding - Basic and Diluted 5,588,978     5,777,726     5,697,483     5,814,428  


Exhibit B. Consolidated Statements of Comprehensive Income 

  For the Three
Months Ended
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
  2017   2016   2017   2016
  (Amounts in thousands)
Net income $ 5,495     $ 1,002     $ 10,145     $ 2,038  
Other comprehensive income:              
Change in fair value of available-for-sale securities (net of taxes of $0.2 million for Medley Management Inc. for each of the three and six months ended June 30, 2017 and $0.1 million for Non-controlling interests in Medley LLC for each of the three and six months ended June 30, 2017) (2,651 )       (2,166 )    
Total comprehensive income 2,844     1,002     7,979     2,038  
Comprehensive income attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries 952     405     2,763     668  
Comprehensive income attributable to Medley LLC 1,646     539     4,545     1,218  
Comprehensive income attributable to Medley Management Inc. $ 246     $ 58     $ 671     $ 152  


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
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
  2017   2016   2017   2016
  (Amounts in thousands)
Net income attributable to Medley Management Inc. $ 574     $ 58     $ 967     $ 152  
Net income attributable to non-controlling interests in Medley LLC 3,617     539     6,386     1,218  
Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC $ 4,191     $ 597     $ 7,353     $ 1,370  
Reimbursable fund startup expenses 226     5,541     226     10,744  
IPO date award stock-based compensation 318     673     (343 )   1,346  
Other non-core items (1) 65     521     2,338     521  
Income tax expense on adjustments (67 )   (769 )   (253 )   (1,453 )
Core Net Income $ 4,733     $ 6,563     $ 9,321     $ 12,528  
Interest expense 2,766     2,072     5,264     4,190  
Income taxes 495     871     1,094     1,667  
Depreciation and amortization 232     247     467     435  
Core EBITDA $ 8,226     $ 9,753     $ 16,146     $ 18,820  

(1) For the three months ended June 30, 2017, other non-core items consist of $0.1 million of severance costs to former employees. For the six months ended June 30, 2017, other non-core items consist of $1.2 million in 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 and $1.2 million in severance costs to former employees.  For the three and six months ended June 30, 2016, other non-core items consists of a $0.5 million impairment loss on our investment in CK Pearl Fund.


Exhibit D. Calculation of Core Net Income Per Share

  For the Three
Months Ended
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
  2017   2016   2017   2016
  (Amounts in thousands, except share and per share amounts)
Numerator              
Core Net Income $ 4,733     $ 6,563     $ 9,321     $ 12,528  
Add: Income taxes 495     871     1,094     1,667  
Pre-Tax Core Net Income $ 5,228     $ 7,434     $ 10,415     $ 14,195  
               
Denominator              
Class A common stock 5,588,978     5,777,726     5,697,483     5,814,428  
Conversion of LLC Units and restricted LLC Units to Class A common stock 23,653,333     23,333,333     23,561,400     23,333,333  
Restricted Stock Units 1,786,592     1,660,771     1,738,123     1,440,101  
Pro-Forma Weighted Average Shares Outstanding (1) 31,028,903     30,771,830     30,997,006     30,587,862  
Pre-Tax Core Net Income Per Share $ 0.17     $ 0.24     $ 0.34     $ 0.46  
Less: corporate income taxes per share (2) (0.07 )   (0.10 )   (0.15 )   (0.20 )
Core Net Income Per Share $ 0.10     $ 0.14     $ 0.19     $ 0.26  

(1) The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of  23,333,333 Medley LLC units for 23,333,333 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 and, in 2017, 320,000 restricted LLC units during each of the periods presented and conversion of such restricted LLC units for an equal number of shares of Class A common stock.

(2) Represents a per share adjustment for income taxes assuming that all of our pre-tax earnings were subject to federal, state and local income taxes. We assumed an effective corporate tax rate of 43.0% for all periods presented.


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

  For the Three
Months Ended
June 30,
(unaudited)
  For the Six
Months Ended
June 30,
(unaudited)
  2017   2016   2017   2016
               
Net Income Margin 25.5 %   2.8 %   24.1 %   3.5 %
Reimbursable fund startup expenses (1) 1.4 %   26.0 %   0.7 %   27.6 %
IPO date award stock-based compensation (1) 1.9 %   3.2 %   (1.1 )%   3.5 %
Other non-core items (1)(2) 0.4 %   2.4 %   7.7 %   1.3 %
Provision for income taxes (1) 2.6 %   0.5 %   2.8 %   0.6 %
Corporate income taxes (3) (13.7 )%   (15.0 )%   (14.7 )%   (15.7 )%
Core Net Income Margin 18.1 %   19.9 %   19.5 %   20.8 %

(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) For the three and six months ended June 30, 2017, other non-core items consist of $0 and $1.2 million, respectively, in 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 and $0.1 million and $1.1 million, respectively, in severance costs to former employees. For the three and six months ended June 30, 2016, other non-core items consists of a $0.5 million impairment loss on our investment in CK Pearl Fund.

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


Exhibit F. Consolidated Balance Sheets of Medley Management Inc.

  As of
June 30, 2017
(unaudited)
  As of
December 31,
2016
  (Amounts in thousands)
Assets      
Cash and cash equivalents $ 45,789     $ 49,666  
Cash and cash equivalents of consolidated fund 1,509      
Restricted cash equivalents 2,657     4,897  
Investments, at fair value 63,045     31,904  
Management fees receivable 11,289     12,630  
Performance fees receivable 3,319     4,961  
Other assets 16,851     18,311  
Total assets $ 144,459     $ 122,369  
       
Liabilities and Equity      
Senior unsecured debt $ 116,503     $ 49,793  
Loans payable 8,900     52,178  
Accounts payable, accrued expenses and other liabilities 23,595     37,255  
Total liabilities 148,998     139,226  
       
Redeemable Non-controlling Interests 53,506     30,805  
       
Equity      
Class A common stock 54     58  
Class B common stock      
Additional paid in capital (capital deficit) 2,239     3,310  
Accumulated other comprehensive income (loss) (263 )   33  
Retained earnings (accumulated deficit) (6,952 )   (5,254 )
Total stockholders' equity (deficit), Medley Management Inc. (4,922 )   (1,853 )
Non-controlling interests in consolidated subsidiaries (1,712 )   (1,717 )
Non-controlling interests in Medley LLC (51,411 )   (44,092 )
Total equity (deficit) (58,045 )   (47,662 )
Total liabilities, redeemable non-controlling interests and equity $ 144,459     $ 122,369  
               

Medley Management Inc