MEDLEY MANAGEMENT INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - CURRENT REPORT - MEDLEY MANAGEMENT INC.	v394224_8k.htm

Exhibit 99.1

MEDLEY MANAGEMENT INC. ANNOUNCES THIRD QUARTER 2014 RESULTS AND DECLARES $0.20 PER SHARE DIVIDEND

79% increase in year over year Core Net Income per share to $0.25 for Q3 2014

For the period during Q3 2014 that the Company was public, Net Income attributable to Medley Management Inc. was $378,000

Declared $0.20 per share dividend for Q4 2014 payable on January 5, 2015

66% increase in year over year fee earning AUM to $3.0 billion

New York, NY (November 13, 2014) Medley Management Inc. (NYSE: MDLY) (the “Company” or “Medley”) today reported its financial results for the quarter ended September 30, 2014. Although Medley was a public company for only a portion of the reporting period, the financial results herein reflect the full period results of the Company and our operating subsidiaries, Medley LLC and Medley GP Holdings LLC, and their consolidated subsidiaries.

On September 29, 2014, Medley completed its IPO pursuant to which 6,000,000 shares of Class A common stock were sold at a price of $18.00 per share. Total proceeds from the offering, net of underwriting discount, were $100.4 million.

“We are pleased to report a strong quarter for Medley Management Inc. Growth in assets under management, origination, and financial performance for our shareholders exceeded our expectations” commented Brook Taube, Chief Executive Officer of Medley.

“Our broad origination platform continues to produce high quality assets at attractive yields for investors. Our diversified fundraising platform continues to demonstrate the ability to grow assets in both retail and institutional channels. Permanent capital increased to 65% of fee earning assets under management at Medley, underpinning our ability to drive steady and consistent cash earning for our investors. We are pleased to report our first dividend of $0.20 per share payable on January 5, 2015,” continued Mr. Taube.

Standalone Results of Operations

Total revenues increased by 57%, or $8.6 million, to $23.8 million for the three months ended September 30, 2014 as compared to $15.2 million for the same period in 2013. The growth in total revenues was driven by a 66% increase in year over year fee earning AUM, as well as a $3.4 million increase in performance fees.

Total expenses increased by 32%, or $2.5 million, to $10.1 million for the three months ended September 30, 2014 compared to $7.6 million for the same period in 2013. The increase is due primarily to increases in compensation expense, as well as general, administrative and other expenses as a result of the overall growth of our business. In addition, interest expense increased by $1.7 million due to an increase in our debt outstanding.

Core Net Income increased by 76%, or $5.5 million, to $12.7 million during the three months ended September 30, 2014 as compared to $7.2 million for the same period in 2013. Core Net Income Per Share increased by 79% to $0.25 per share for the three months ended September 30, 2014 as compared to $0.14 per share in the comparable period in 2013.

Key Performance Indicators

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2014			2013			2014			2013
	(Dollars in thousands, except per share data)
Consolidated Financial Data:
Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC	$	12,513		$	7,316		$	28,482		$	13,361

Standalone Data:
Core Net Income ⁽¹⁾	$	12,713		$	7,237		$	29,858		$	13,009
Core EBITDA		15,416			7,827			34,594			14,758
Core Net Income Per Share⁽²⁾	$	0.25		$	0.14		$	0.58		$	0.25
Core Net Income Margin⁽³⁾		31.8	%		27.9	%		26.6	%		18.9	%
Pro-Forma Weighted Average Shares Outstanding ⁽⁴⁾		30,484,637			30,484,722			30,484,693			30,484,722

Other Data (at period end, in millions):
Fee Earning AUM	$	3,036		$	1,829		$	3,036		$	1,829
AUM		3,635			2,265			3,635			2,265

(1)

Core Net Income reflects standalone net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC adjusted to exclude reimbursable expenses associated with the launch of funds, certain one-time severance costs and stock-based compensation associated with restricted stock units that were granted in connection with our initial public offering (“IPO”). In addition, Core Net Income includes the pro-forma adjustment to reflect guaranteed payments to Medley LLC members as compensation expense. Prior to our reorganization and IPO, these guaranteed payments were recorded as distributions from member’s capital. Please refer to the reconciliation of net income attributed to controlling and non-controlling interests in Medley LLC to Core Net Income in Exhibit B for additional details.

(2)

Core Net Income Per Share reflects an adjustment for federal, state and local corporate income taxes. Please refer to the calculation of Core Net Income Per Share in Exhibit C for additional details.

(3)

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

(4)

The calculation of Pro-Forma Weighted Average Shares Outstanding assumes that the following transactions had occurred at the beginning of each period presented: (1) the issuance of 6,000,000 Class A common shares in connection with our IPO (2) conversion by the pre-IPO holders of 23,333,333 Medley LLC units for 23,333,333 Class A shares and (3) 1,151,389 restricted stock units granted on the consummation of the IPO, adjusted for actual forfeitures during the period.

Fee Earning AUM

The table below presents the quarterly roll forward of our total fee earning AUM:

										% of AUM
				Long-dated								Long-dated
	Permanent			Private						Permanent		Private
	Capital			Funds and						Capital		Funds and
	Vehicles			SMAs			Total			Vehicles		SMAs
	(Dollars in millions)
Beginning balance, June 30, 2014	$	1,505		$	946		$	2,451			61%		39%
Commitments		465			157			622
Capital reduction		—			—			—
Distributions		(29	)		(26	)		(55	)
Change in fund value		26			(8	)		18
Ending balance, September 30, 2014	$	1,967		$	1,069		$	3,036			65%		35%

Total fee earning AUM increased by 24%, or $585 million, to $3.0 billion at September 30, 2014 compared to June 30, 2014. The permanent capital vehicles’ share of fee earning AUM increased to 65% at September 30, 2014 compared to 61% at June 30, 2014. During the three months ended September 30, 2014, fee earning AUM at MCC and SIC increased 21% and 58%, respectively.

Dividend Declaration

On November 10, 2014, the Company’s board of directors declared a quarterly dividend of $0.20 per share, for the fourth quarter 2014, payable on January 5, 2015 to shareholders of record as of the close of business on December 17, 2014.

Conference Call and Webcast Information

We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Friday, November 14, 2014 to discuss our third quarter 2014 financial results.

All interested parties may participate in the conference call and audio webcast by dialing (866) 314-5232 approximately 5-10 minutes prior to the call, international callers should dial (617) 213-8052. Participants should reference Medley Management Inc. and the participant passcode of 86141972 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, 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 Management Inc.

Medley Management Inc. is an asset management firm offering yield solutions to retail and institutional investors through Medley LLC and several registered investment advisors. Medley's national direct origination franchise, with over 75 people, is a premier provider of capital to the middle market in the U.S. As of September 30, 2014, Medley had in excess of $3.6 billion of investable capital in business development companies, Medley Capital Corporation (NYSE:MCC) and the Sierra Income Corporation, and private investment vehicles. Over the past 12 years, we have invested in excess of $5.1 billion to help over 285 companies grow across 35 industries. For additional information, please visit Medley Management Inc. at www.mdly.com

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 under the section entitled, “Risk Factors” in our prospectus dated September 23, 2014 as filed with the Securities and Exchange Commission on September 25, 2014 pursuant to Rule 424(b) of the Securities Exchange Act of 1933, as amended, as such factors may be updated from time to time in our filing with the Securities and Exchange Commission, which are accessible on its website at www.sec.gov. Except as required by law, the Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements in this press release speak only as of the date of this press release.

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.

Contact

Sam Anderson

212.759.0777

Exhibit A. Standalone Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

	Three Months Ended September 30, (unaudited)						Nine Months Ended September 30, (unaudited)
	2014			2013			2014			2013
	(in thousands)
Revenues
Management fees	$	17,616		$	13,875		$	47,516		$	34,315
Performance fees		3,395			(37	)		11,471			2,826
Other income and fees		2,787			1,328			7,183			3,347
Total revenues		23,798			15,166			66,170			40,488
Expenses
Compensation and benefits		5,677			3,498			15,010			10,062
Performance fee compensation		(921	)		928			2,237			6,199
General, administrative and other expenses		3,458			3,160			12,821			9,034
Total expenses		8,214			7,586			30,068			25,295
Other income (expense)
Dividend income		222			222			665			665
Interest expense		(2,016	)		(345	)		(3,380	)		(1,083	)
Other income (expenses), net		(87	)		77			(1,707	)		(936	)
Total other expense, net		(1,881	)		(46	)		(4,422	)		(1,354	)
Income before income taxes	$	13,703		$	7,534		$	31,680		$	13,839
Provision for income taxes		578			218			1,026			478
Net income		13,125			7,316			30,654			13,361
Net income attributable to non-controlling interests in consolidated subsidiaries		612			-			2,172			-
Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC	$	12,513		$	7,316		$	28,482		$	13,361

Exhibit B. Reconciliation of net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC to Core Net Income and Core Net Income to Core EBITDA (Standalone)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	(unaudited)						(unaudited)
	2014			2013			2014			2013
	(in thousands)
Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC	$	12,513		$	7,316		$	28,482		$	13,361

Reimbursable fund startup expenses ⁽¹⁾		1,195			1,226			4,591			2,603
Severance expense ⁽¹⁾		-			6			(5	)		725
IPO date award stock-based compensation ⁽¹⁾		74			-			74			-
Adjustment for pre-IPO guaranteed payments to members ⁽¹⁾⁽²⁾		(1,069	)		(1,311	)		(3,284	)		(3,680	)
Core Net Income	$	12,713		$	7,237		$	29,858		$	13,009
Interest expense		2,016			345			3,380			1,083
Income taxes		584			179			1,067			390
Depreciation and amortization		103			66			289			276
Core EBITDA	$	15,416		$	7,827		$	34,594		$	14,758

(1)

Amounts are presented net of income taxes.

(2)

Represents a pro-forma adjustment to reflect guaranteed payments to Medley LLC members as compensation expense. Prior to our reorganization and IPO, these payments were recorded as distributions from member’s capital.

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

	Three Months Ended September 30, (unaudited)						Nine Months Ended September 30, (unaudited)
	2014			2013			2014			2013
Numerator	(in thousands, except per share data)
Core Net Income	$	12,713		$	7,237		$	29,858		$	13,009
Add: Income taxes		584			179			1,067			390
Pre-tax Core Net Income		13,297			7,416			30,925			13,399
Denominator
Class A shares issued in IPO		6,000,000			6,000,000			6,000,000			6,000,000
Conversion of LLC Units to Class A shares		23,333,333			23,333,333			23,333,333			23,333,333
Restricted stock units		1,151,304			1,151,389			1,151,360			1,151,389
Pro-Forma Weighted Average Shares Outstanding		30,484,637			30,484,722			30,484,693			30,484,722
Pre-tax Core Net Income Per Share	$	0.44		$	0.24		$	1.01		$	0.44
Less: corporate income taxes per share ⁽¹⁾		(0.19	)		(0.10	)		(0.43	)		(0.19	)
Core Net Income Per Share	$	0.25		$	0.14		$	0.58		$	0.25

(1)

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 annualized effective corporate tax rate of approximately 43.0% for all periods presented.

Exhibit D. Consolidated Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2014			2013			2014			2013
	(dollars in thousands, except per share data)
Revenues
Management fees	$	17,013		$	9,271		$	43,466		$	24,129
Performance fees		965			830			3,337			1,081
Other income and fees		2,787			1,328			7,183			3,347
Total revenues		20,765			11,429			53,986			28,557
Expenses
Compensation and benefits		5,677			3,498			15,010			10,062
Performance fee compensation		(921	)		928			2,237			6,199
Consolidated Funds expenses		296			306			1,129			921
General, administrative and other expenses		3,458			3,160			12,821			9,034
Total expenses		8,510			7,892			31,197			26,216
Other income (expense)
Dividend income		222			222			665			665
Interest expense		(2,016	)		(345	)		(3,380	)		(1,083	)
Other income (expenses), net		(268	)		3			(1,586	)		(175	)
Interest and other income of Consolidated Funds		15,356			13,495			45,890			37,398
Net realized gain (loss) on investments of Consolidated Funds		(499	)		(5,486	)		789			(18,065	)
Net change in unrealized (depreciation) appreciation on investments of Consolidated Funds		(1,069	)		2,535			(9,437	)		(751	)
Total other income, net		11,726			10,424			32,941			17,989
Income before income taxes		23,981			13,961			55,730			20,330
Provision for income taxes		923			462			2,174			1,138
Net income		23,058			13,499			53,556			19,192

Net income attributable to non-controlling interests in Consolidated Funds		9,933			6,183			22,902			5,831
Net income attributable to non-controlling interests in consolidated subsidiaries		612			-			2,172			-
Net income attributable to non-controlling interests in Medley LLC		12,135		$	7,316			28,104		$	13,361
Net income attributable to Medley Management Inc.	$	378					$	378

Net income per share attributable to stockholders of
Class A common stock of Medley Management Inc:
Basic (Note 10)	$	0.05	⁽¹⁾				$	0.05	⁽¹⁾
Diluted (Note 10)	$	0.05	⁽¹⁾				$	0.05	⁽¹⁾

Weighted average shares - Basic and Diluted		7,151,304						7,151,304

⁽¹⁾ Based on net income attributable to Medley Management Inc. from September 29, 2014 through September 30, 2014

Exhibit E. Consolidated Balance Sheets for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

	September 30, 2014 (unaudited)			December 31, 2013
	(dollars in thousands)
Assets
Cash and cash equivalents	$	101,494		$	5,395
Investment, at fair value		10,226			10,173
Management fees receivable		13,599			8,921
Performance fees receivable		6,860			3,339
Other assets		7,770			5,308
Assets of Consolidated Funds:
Cash and cash equivalents		41,606			60,355
Investments, at fair value		553,836			412,218
Interest and dividends receivable		4,093			2,804
Other assets		3,334			436
Total assets	$	742,818		$	508,949
Liabilities and Equity
Loans payable	$	119,177		$	27,990
Accounts payable, accrued expenses and other liabilities		27,543			17,613
Performance fee compensation payable		17,022			16,225
Liabilities of Consolidated Funds:
Accounts payable, accrued expenses and other liabilities		4,310			1,160
Total liabilities		168,052			62,988

Equity
Class A Common Stock, $0.01 par value, 3,000,000,000
shares authorized; 6,000,000 shares issued and outstanding		60			-
Class B Common Stock, $0.01 par value, 1,000,000
shares authorized; 100 shares issued and outstanding		-			-
Additional paid-in-capital		(3,096	)		-
Retained earnings		378			-
Total stockholder’s deficit, Medley Management Inc.		(2,658	)		-
Non-controlling interests in Consolidated Funds		585,007			464,475
Non-controlling interests in consolidated subsidiaries		3,140			40
Non-controlling interests in Medley LLC		(10,723	)		-
Medley LLC members' capital prior to reorganization		-			(18,554	)
Total equity		574,766			445,961
Total liabilities and equity	$	742,818		$	508,949

Exhibit F. Consolidating Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

	Three Months Ended September 30, 2014 (unaudited)
	Standalone			Consolidated Funds			Eliminations			Consolidated
	(dollars in thousands)
Revenues:
Management fees	$	17,616		$	-		$	(603	)	$	17,013
Performance fees		3,395			-			(2,430	)		965
Other income and fees		2,787			-			-			2,787
Total revenues		23,798			-			(3,033	)		20,765
Expenses:
Compensation and benefits		5,677			-			-			5,677
Performance fee compensation		(921	)		-			-			(921	)
Consolidated Funds expenses		-			899			(603	)		296
General, administrative and other expenses		3,458			-			-			3,458
Total operating expenses		8,214			899			(603	)		8,510
Other income (expense):
Dividend income		222			-			-			222
Interest expense		(2,016	)		-			-			(2,016	)
Other expense, net		(87	)		-			(181	)		(268	)
Interest and other income of Consolidated Funds					15,356						15,356
Net realized loss on investments of Consolidated Funds		-			(499	)		-			(499	)
Net change in unrealized depreciation on investments of Consolidated Funds		-			(1,069	)		-			(1,069	)
Total other income (expense)		(1,881	)		13,788			(181	)		11,726
Income before income taxes		13,703			12,889			(2,611	)		23,981
Provision for income taxes		578			345			-			923
Net income		13,125			12,544			(2,611	)		23,058
Net income attributable to non-controlling interests in Consolidated Funds		-			-			9,933			9,933
Net income attributable to non-controlling interests in subsidiaries		612			-			-			612
Net income attributable to non-controlling interests in Medley LLC		12,135			-			-			12,135
Net income attributable to Medley Management Inc.	$	378		$	12,544		$	(12,544	)	$	378

	Nine Months Ended September 30, 2014 (unaudited)
	Standalone			Consolidated Funds			Eliminations			Consolidated
				(dollars in thousands)
Revenues:
Management fees	$	47,516		$	-		$	(4,050	)	$	43,466
Performance fees		11,471			-			(8,134	)		3,337
Other income and fees		7,183			-			-			7,183
Total revenues		66,170			-			(12,184	)		53,986
Expenses:
Compensation and benefits		15,010			-			-			15,010
Performance fee compensation		2,237			-			-			2,237
Consolidated Funds expenses		-			5,179			(4,050	)		1,129
General, administrative and other expenses		12,821			-			-			12,821
Total operating expenses		30,068			5,179			(4,050	)		31,197
Other income (expense):
Dividend income		665			-			-			665
Interest expense		(3,380	)		-			-			(3,380	)
Other income (expense)		(1,707	)		-			121			(1,586	)
Interest and other income of Consolidated Funds		-			45,890			-			45,890
Net realized gain on investments of Consolidated Funds		-			789			-			789
Net change in unrealized depreciation on investments of Consolidated Funds		-			(9,437	)		-			(9,437	)
Total other income (expense)		(4,422	)		37,242			121			32,941
Income before income taxes		31,680			32,063			(8,013	)		55,730
Provision for income taxes		1,026			1,148			-			2,174
Net income		30,654			30,915			(8,013	)		53,556
Net income attributable to non-controlling interests in Consolidated Funds		-			-			22,902			22,902
Net income attributable to non-controlling interests in subsidiaries		2,172			-			-			2,172
Net income attributable to non-controlling interests in Medley LLC		28,104			-			-			28,104
Net income attributable to Medley Management Inc.	$	378		$	30,915		$	(30,915	)	$	378

	Three Months Ended September 30, 2013 (unaudited)
	Standalone			Consolidated Funds			Eliminations			Consolidated
	(dollars in thousands)
Revenues:
Management fees	$	13,875		$	-		$	(4,604	)	$	9,271
Performance fees		(37	)		-			867			830
Other income and fees		1,328			-			-			1,328
Total revenues		15,166			-			(3,737	)		11,429
Expenses:
Compensation and benefits		3,498			-			-			3,498
Performance fee compensation		928			-			-			928
Consolidated Funds expenses		-			4,910			(4,604	)		306
General, administrative and other expenses		3,160			-			-			3,160
Total operating expenses		7,586			4,910			(4,604	)		7,892
Other income (expense):
Dividend income		222			-			-			222
Interest expense		(345	)		-			-			(345	)
Other income (expense)		77			-			(74	)		3
Interest and other income of Consolidated Funds		-			13,495			-			13,495
Net realized loss on investments of Consolidated Funds		-			(5,486	)		-			(5,486	)
Net change in unrealized appreciation on investments of Consolidated Funds		-			2,535			-			2,535
Total other income (expense)		(46	)		10,544			(74	)		10,424
Income before income taxes		7,534			5,634			793			13,961
Provision for income taxes		218			244			-			462
Net income		7,316			5,390			793			13,499
Net income attributable to non-controlling interests in Consolidated Funds		-				-		6,183			6,183
Net income attributable to Medley LLC	$	7,316		$	5,390		$	(5,390	)	$	7,316

	Nine Months Ended September 30, 2013 (unaudited)
	Standalone			Consolidated Funds			Eliminations			Consolidated
	(dollars in thousands)
Revenues:
Management fees	$	34,315		$	-		$	(10,186	)	$	24,129
Performance fees		2,826			-			(1,745	)		1,081
Other income and fees		3,347			-			-			3,347
Total revenues		40,488			-			(11,931	)		28,557
Expenses:
Compensation and benefits		10,062			-			-			10,062
Performance fee compensation		6,199			-			-			6,199
Consolidated Funds expenses		-			11,107			(10,186	)		921
General, administrative and other expenses		9,034			-			-			9,034
Total operating expenses		25,295			11,107			(10,186	)		26,216
Other income (expense):
Dividend income		665			-			-			665
Interest expense		(1,083	)		-			-			(1,083	)
Other income (expense)		(936	)		-			761			(175	)
Interest and other income of Consolidated Funds		-			37,398			-			37,398
Net realized loss on investments of Consolidated Funds		-			(18,065	)		-			(18,065	)
Net change in unrealized depreciation on investments of Consolidated Funds		-			(751	)		-			(751	)
Total other income (expense)		(1,354	)		18,582			761			17,989
Income before income taxes		13,839			7,475			(984	)		20,330
Provision for income taxes		478			660			-			1,138
Net income		13,361			6,815			(984	)		19,192
Net income attributable to non-controlling interests in Consolidated Funds		-			-			5,831			5,831
Net income attributable to Medley LLC	$	13,361		$	6,815		$	(6,815	)	$	13,361

MEDLEY MANAGEMENT INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 13, 2014

Attached files

MEDLEY MANAGEMENT INC. Reports