NEW YORK, May 15, 2020 /PRNewswire/ -- Medley Management Inc. (NYSE: MDLY) ("MDLY" or the "Company") today reported its financial results for its first quarter ended March 31, 2020.

Summary

  • Fee earning assets under management were $1.7 billion as of March 31, 2020
  • Total assets under management were $3.8 billion as of March 31, 2020
  • Total revenues were $7.9 million for the three months ended March 31, 2020
  • U.S. GAAP net loss per share attributable to Medley Management Inc. was $0.20 for Q1 2020
  • Core Net Loss Per Share was $0.07 for Q1 2020
  • As previously announced, on May 1, 2020, the Company received a notice of termination from Sierra Income Corporation of its agreement to merge with the Company

Results of Operations for the Three Months Ended March 31, 2020

Total revenues were $7.9 million for the three months ended March 31, 2020 compared to $13.8 million for the same period in 2019. Revenues consisted of $10.0 million of management fees and other revenues and an investment loss of $2.1 million. The decrease was due primarily to lower base management fees as a result of a decrease in fee earning assets under management, which was mainly driven by a decline in portfolio valuations, as well as a decline in investment income due to equity losses and reversal of previously recorded carried interest.

Total expenses from operations were $11.1 million for the three months ended March 31, 2020 compared to $11.3 million for the same period in 2019. The decrease was due primarily to a decline in compensation and benefits as a result of lower average headcount and discretionary bonuses, offset by an increase in professional fees. Included in total expenses are costs associated with our terminated merger of $1.9 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

Total other income (expenses), net were $(2.5) million for the three months ended March 31, 2020  and consisted of $2.8 million of interest expense and $0.3 million of dividend and other income. Total other income (expenses), net were $1.2 million for the three months ended March 31, 2019  and consisted of $2.9 million of interest expense, $0.6 million of dividend income and $3.5 million of unrealized gain on shares held of MCC. During the three months ended March 31, 2020, we did not hold any shares of MCC, and as a result there were no unrealized gains or losses recorded in the period. During the three months ended March 31, 2019, all of the unrealized gain on shares held of MCC were allocated to redeemable non-controlling interests in consolidated subsidiaries, which did not have any impact on the net income (loss) 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 $5.7 million for the three months ended March 31, 2020 compared to a net loss of $0.4 million for the same period in 2019. Medley Management Inc.'s net loss per share was $0.20 for the three months ended March 31, 2020 compared to a net loss per share of $0.02 for the same period in 2019.

Pre-Tax Core Net Income (Loss) was $(3.6) million for the three months ended March 31, 2020 compared to $0.8 million for the same period in 2019. Core Net Income (Loss) Per Share was $(0.07) for the three months ended March 31, 2020, compared to  $0.02 for the same period in 2019. Core EBITDA was $(0.6) million for the three months ended March 31, 2020 compared to $3.9 million for the same period in 2019.

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 March,
(unaudited)


2020


2019






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

Consolidated Financial Data:




Pre-Tax (Loss) Income

$

(5,800)



$

3,739


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

$

(5,687)



$

(433)


Net loss per Class A common stock

$

(0.20)



$

(0.02)


Net Income Margin (1)

(72.2)

%


(3.1)

%

Weighted average shares - Basic and Diluted

6,235,428



5,754,665






Non-GAAP Data:




Pre-Tax Core Net Income (Loss) (2)

$

(3,576)



$

804


Core Net Income (Loss) (2)

$

(3,816)



$

705


Core EBITDA (3)

$

(605)



$

3,880


Core Net Income (Loss) Per Share (4)

$

(0.07)



$

0.02


Core Net Income Margin (5)

(30.4)

%


5.1

%

Pro-Forma Weighted Average Shares Outstanding (6)

34,240,249



32,117,893






Other Data (at period end, in millions):




AUM

$

3,824



$

4,668


Fee Earning AUM

$

1,736



$

2,711




(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 terminated 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% for all of the periods presented above. 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 26,449,973 vested and unvested LLC Units for 26,449,973 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, December 31, 2019

$

1,361



$

777



$

2,138



64

%


36

%

Commitments

(91)



14



(77)






Distributions

(11)



(52)



(63)






Change in fund value

(198)



(64)



(262)






Ending balance, March 31, 2020

$

1,061



$

675



$

1,736



61

%


39

%

Total fee earning AUM decreased by $402.0 million, or 19%, to $1.7 billion as of March 31, 2020 compared to December 31, 2019, due primarily to changes in fund value, distributions and debt repayments representing capital reductions.

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 $3.8 billion of assets under management in two business development companies, Medley Capital Corporation (NYSE:MCC) (TASE:MCC) and Sierra Income Corporation, and several private investment vehicles. Over the past 18 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).

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, 2019. 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 exhibits attached hereto.

Non-GAAP measures used by management include Pre-Tax Core Net Income (Loss), Core Net Income (Loss), Core EBITDA, Core Net Income (Loss) 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 March 31, 2020.

 

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



For the Three Months Ended March,
(unaudited)


2020


2019






 (in thousands, except share and per share
data)

Revenues




Management fees

$

7,302



$

10,913


Other revenues and fees

2,727



2,441


Investment income (loss):




Carried interest

(214)



352


Other investment (loss) income, net

(1,943)



63


Total Revenues

7,872



13,769






Expenses




Compensation and benefits

6,202



8,021


General, administrative and other expenses

4,937



3,254


Total Expenses

11,139



11,275






Other Income (Expense)




Dividend income

137



572


Interest expense

(2,793)



(2,898)


Other income, net

123



3,571


Total other (expenses) income, net

(2,533)



1,245


(Loss) Income before income taxes

(5,800)



3,739


Provision for (benefit from) income taxes

39



(23)


Net (Loss) Income

(5,839)



3,762


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

(152)



4,195


Net loss attributable to non-controlling interests in Medley LLC

(4,557)



(361)


Net Loss Attributable to Medley Management Inc.

$

(1,130)



$

(72)






Net Loss Per Share of Class A Common Stock:




Basic

$

(0.20)



$

(0.02)


Diluted

$

(0.20)



$

(0.02)


Weighted average shares outstanding - Basic and Diluted

6,235,428



5,754,665


 

 

Exhibit B. Reconciliation of Core Net Income (Loss) and Core EBITDA to Net Income (Loss) Attributable to Medley
Management Inc. and Non-controlling Interests in Medley LLC



For the Three Months Ended March,
(unaudited)


2020


2019






(in thousands)

Net loss attributable to Medley Management Inc.

$

(1,130)



$

(72)


Net loss attributable to non-controlling interests in Medley LLC

(4,557)



(361)


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

$

(5,687)



$

(433)


Reimbursable fund startup expenses



167


IPO date award stock-based compensation



42


Expenses associated with strategic initiatives

1,927



311


Severance expense

145



740


Income tax expense on adjustments

(201)



(122)


Core Net Income (Loss)

$

(3,816)



$

705


Interest expense

2,793



2,898


Income taxes

240



99


Depreciation and amortization

178



178


Core EBITDA

$

(605)



$

3,880


 

 

Exhibit C. Calculation of Core Net Income (Loss) Per Share



For the Three Months Ended March,
(unaudited)


2020


2019






(in thousands, except share and per share
amounts)

Numerator




Core Net Income (Loss)

$

(3,816)



$

705


Add: Income taxes

240



99


Pre-Tax Core Net Income (loss)

$

(3,576)



$

804






Denominator




Class A common stock

6,235,428



5,754,665


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

26,316,641



24,650,414


Restricted Stock Units

1,688,180



1,712,814


Pro-Forma Weighted Average Shares Outstanding (1)

34,240,249



32,117,893


Pre-Tax Core Net Income (Loss) Per Share

$

(0.10)



$

0.03


Less: corporate income taxes per share (2)

0.03



(0.01)


Core Net Income (Loss) Per Share

$

(0.07)



$

0.02




(1)

The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of up to 26,449,973 vested and unvested LLC Units for 26,449,973 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)

Assumes 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%.

 

 

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



For the Three Months Ended March,
(unaudited)


2020


2019





Net Income Margin

(72.2)

%


(3.1)

%

Reimbursable fund startup expenses (1)

%


1.3

%

IPO date award stock-based compensation (1)

%


0.3

%

Expenses associated with strategic initiatives (1)

24.5

%


2.3

%

Severance expense

1.8

%


5.4

%

Provision for income taxes (1)

0.5

%


(0.2)

%

Corporate income taxes (2)

15.0

%


(0.9)

%

Core Net Income Margin

(30.4)

%


5.1

%



(1)

Adjustments to Net income (loss) 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 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 all of the periods presented above.

 

 

Exhibit E. Consolidated Balance Sheets of Medley Management Inc.



As of


March 31, 2020
(unaudited)


December 31, 2019






(in thousands)

Assets




Cash and cash equivalents

$

6,599



$

10,558


Investments, at fair value

10,605



13,287


Management fees receivable

7,608



8,104


Right-of-use assets under operating leases

 

6,122



6,564


Other assets

10,217



10,283


Total Assets

$

41,151



$

48,796






Liabilities, Redeemable Non-controlling Interests and Equity




Liabilities




Senior unsecured debt, net

$

118,573



$

118,382


Loans payable, net

10,000



10,000


Due to former minority interest holder, net

7,529



8,145


Operating lease liabilities

 

7,751



8,267


Accounts payable, accrued expenses and other liabilities

21,012



22,835


Total Liabilities

164,865



167,629






Redeemable Non-controlling Interests



(748)






Equity




Class A common stock

63



62


Class B common stock




Additional paid in capital

15,137



13,779


Accumulated deficit

(24,235)



(22,960)


Total stockholders' deficit, Medley Management Inc.

(9,035)



(9,119)


Non-controlling interests in consolidated subsidiaries

(539)



(391)


Non-controlling interests in Medley LLC

(114,140)



(108,575)


Total Deficit

(123,714)



(118,085)


Total Liabilities, Redeemable Non-controlling Interests and Equity

$

41,151



$

48,796


 

 

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SOURCE Medley Management Inc.

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