Medley Management Inc. Reports Third Quarter 2019 Results

Thursday November 14 th 2019

NEW YORK, Nov. 14, 2019 /PRNewswire/ – Medley Management Inc. (NYSE: MDLY) today reported its financial results for its third quarter ended September 30, 2019.

Highlights

  • Fee earning assets under management were $2.3 billion as of September 30, 2019
  • Total assets under management were $4.3 billion as of September 30, 2019
  • Total revenues were $11.5 million for the three months ended September 30, 2019 and $38.2 million for the nine months ended September 30, 2019
  • U.S. GAAP net loss per share attributable to Medley Management Inc. was $0.09 for Q3 2019
  • Core Net Loss Per Share was $0.02 for Q3 2019
  • The board of directors did not declare a dividend for this quarter

Results of Operations for the Three Months Ended September 30, 2019

Total revenues were $11.5 million for the three months ended September 30, 2019 compared to $14.4 million for the same period in 2018. The decrease was due primarily to lower base management fees from our permanent capital vehicles as a result of a decrease in fee earning assets under management, which was mainly driven by a reduction in leverage and decline in portfolio valuations.

Total expenses from operations were $12.5 million for each of the three months ended September 30, 2019 and 2018. Compensation and benefits increased by $0.8 million to $7.1 million for the three months ended September 30, 2019 as compared to the same period in 2018.  This increase was offset by a decrease in professional fees and employee recruiting related expenses. Included in total expenses are costs associated with our pending merger of $2.1 million for each of the three months ended September 30, 2019 and 2018.

Total other income (expenses), net were $(0.9) million for the three months ended September 30, 2019 compared to $1.0 million for the same period in 2018. This unfavorable variance was due primarily to a $1.9 million unrealized gain on our investment in shares of MCC during the three months ended September 30, 2019 as compared to a $2.7 million unrealized gain recorded during the same period in 2018, as well as, an $0.8 million reduction in dividend income from our investment in shares of MCC during the three months ended September 30, 2019 as compared to the same period in 2018. Such unrealized gains were allocated to redeemable 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 $3.3 million for the three months ended September 30, 2019 compared to a net loss $1.4 million for the same period in 2018. Medley Management Inc.’s net loss per share was $0.09 for the three months ended September 30, 2019 compared to net loss per share of $0.15 for the same period in 2018.

Pre-Tax Core Net Loss was $0.9 million for the three months ended September 30, 2019 compared to Pre-Tax Core Net Income of $2.7 million for the same period in 2018. Core Net Loss Per Share was $0.02 for the three months ended September 30, 2019, compared to Core Net Income Per Share of $0.06 for the same period in 2018. Core EBITDA was $2.1 million for the three months ended September 30, 2019 compared to $5.6 million for the same period in 2018.

Results of Operations for the Nine Months Ended September 30, 2019

Total revenues were $38.2 million for the nine months ended September 30, 2019 compared to $43.9 million for the same period in 2018. This decrease was due primarily to lower base management fees from our permanent capital vehicles as a result of a decrease in fee earning assets under management, which was mainly driven by a reduction in leverage and decline in portfolio valuations, offset in part by an increase in investment income.

Total expenses from operations were $34.8 million for the nine months ended September 30, 2019 compared to $37.0 million for the same period in 2018. This decrease was due primarily to a decrease in professional fees and expenses associated with our consolidated fund, STRF. Included in total expenses are costs associated with our pending merger of $3.5 million and $3.9 million for the nine months ended September 30, 2019 and 2018, respectively.

Total other income (expenses), net were $(8.3) million for the nine months ended September 30, 2019 compared to $(15.8) million for the same period in 2018. This favorable variance was due primarily to unrealized losses of $0.5 million from our investment in shares of MCC compared to $10.9 million in the comparable period in 2018. All of the $0.5 million in unrealized losses during the nine months ended September 30, 2019 and $7.3 million of the $10.9 million in unrealized losses during the same period in 2018 were allocated to redeemable 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 $4.8 million for the nine months ended September 30, 2019 compared to a net loss of $6.6 million for the same period in 2018. Medley Management Inc.’s net loss per share was $0.13 for the nine months ended September 30, 2019 compared to net loss per share of $0.49 for the same period in 2018.

Pre-Tax Core Net Income was $0.7 million for the nine months ended September 30, 2019 compared to Pre-Tax Core Net Income of $7.2 million for the same period in 2018. Core Net Income Per Share was $0.01 for the nine months ended September 30, 2019, compared to Core Net Income Per Share of $0.16 for the same period in 2018. Core EBITDA was $9.8 million for the nine months ended September 30, 2019 compared to $15.9 million for the same period in 2018.

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:

 

(1) 

Net Income Margin equals Net income (loss) 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 (loss)   attributable to Medley Management Inc. and 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 B 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 (loss) attributable to Medley Management Inc. and non-controlling interests in Medley LLC in Exhibit B 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 assume that all of our pre-tax earnings 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%. Please refer to the calculation of Core Net Income Per Share in Exhibit C 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 26,316,642 vested and unvested LLC Units for 26,316,642 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:

Total fee earning AUM decreased by $152.0 million, or 6%, to $2.3 billion as of September 30, 2019 compared to June 30, 2019, due primarily to debt repayments representing capital reductions, distributions and changes in fund value.

The table below presents the roll forward of fee earning AUM for the nine months ended September 30, 2019:

Total fee earning AUM decreased by $465.0 million, or 17%, to $2.3 billion as of September 30, 2019 compared to December 31, 2018, due primarily to distributions, debt repayments representing capital reductions and changes in fund value.

Dividend Declaration

Medley did not declare a dividend this quarter. Medley’s board of directors will continue to monitor the dividend policy on an ongoing basis.

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 $4.3 billion of assets under management in two business development companies, Medley Capital Corporation (NYSE:MCC) (TASE:MCC) and Sierra Income Corporation, a credit interval fund, Sierra Total Return Fund (NASDAQ: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 (NYSE:MDLX) and (NYSE:MDLQ). Medley Capital Corporation is dual-listed on the New York Stock Exchange (NYSE:MCC) and the Tel Aviv Stock Exchange (TASE:MCC) and has outstanding bonds which trade on both the New York Stock Exchange under the symbols (NYSE:MCV), (NYSE: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.

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Medley Management Inc.