Medley Management Inc. Reports First Quarter 2020 Results

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

%

⁽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

$

$

3,880

For the Three Months Ended March,
(unaudited)

2020

2019

Numerator

Core Net Income (Loss)

$

(3,816)

$

705

Add: Income taxes

240

99

Pre-Tax Core Net Income (loss)

$

$

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

$

$

0.03

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)

(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