Delaware | 001-36638 | 47-1130638 | ||
(State or other jurisdiction of | (Commission File Number) | (IRS Employer | ||
incorporation) | Identification No.) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |
99.1 | ||
MEDLEY MANAGEMENT INC. | ||||
By: | /s/ Richard T. Allorto, Jr. | |||
Name: | Richard T. Allorto, Jr. | |||
Title: | Chief Financial Officer |
• | Fee earning assets under management were $2.8 billion as of December 31, 2018 |
• | Total assets under management were $4.7 billion as of December 31, 2018 |
• | Total revenues were $56.5 million for the year ended December 31, 2018 |
• | U.S. GAAP net loss per share attributable to Medley Management Inc. was $0.16 for Q4 2018 and $0.65 for the year ended December 31, 2018 |
• | Core Net (Loss) Income Per Share was $(0.03) for Q4 2018 and $0.12 for the year ended December 31, 2018 |
• | Declared $0.03 per share dividend for Q4 2018 payable on May 3, 2019 |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(Amounts in thousands, except AUM, share and per share amounts) | |||||||||||||||
Consolidated Financial Data: | |||||||||||||||
Pre-Tax Income (Loss) | $ | (12,421 | ) | $ | 3,077 | $ | (21,268 | ) | $ | 19,265 | |||||
Net (loss) income attributable to Medley Management Inc. and non-controlling interests in Medley LLC | $ | (3,873 | ) | $ | 605 | $ | (10,443 | ) | $ | 10,591 | |||||
Net (Loss) income per Class A common stock | $ | (0.16 | ) | $ | (0.11 | ) | $ | (0.65 | ) | $ | 0.07 | ||||
Net (Loss) Income Margin (1) | (30.8 | )% | 3.4 | % | (18.5 | )% | 16.3 | % | |||||||
Weighted average shares - Basic and Diluted | 5,697,802 | 5,478,910 | 5,579,628 | 5,553,026 | |||||||||||
Non-GAAP Data: | |||||||||||||||
Pre-Tax Core Net Income (2) | $ | (1,397 | ) | $ | 2,543 | $ | 5,818 | $ | 17,609 | ||||||
Core Net Income (2) | $ | (1,106 | ) | $ | 1,918 | $ | 4,058 | $ | 15,090 | ||||||
Core EBITDA (3) | $ | 1,478 | $ | 5,488 | $ | 17,420 | $ | 29,226 | |||||||
Core Net Income Per Share (4) | $ | (0.03 | ) | $ | 0.05 | $ | 0.12 | $ | 0.33 | ||||||
Core Net Income Margin (5) | (7.4 | )% | 7.9 | % | 7.0 | % | 15.4 | % | |||||||
Pro-Forma Weighted Average Shares Outstanding (6) | 32,158,366 | 30,640,996 | 31,695,208 | 30,851,882 | |||||||||||
Other Data (at period end, in millions): | |||||||||||||||
AUM | $ | 4,712 | $ | 5,198 | $ | 4,712 | $ | 5,198 | |||||||
Fee Earning AUM | $ | 2,785 | $ | 3,158 | $ | 2,785 | $ | 3,158 |
(1) | Net (Loss) Income Margin equals Net (loss) 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, 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 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 33.0% for 2018 and 43.0% for 2017. 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 conversion by the pre-IPO holders of up to 24,639,302 vested and unvested LLC Units for 24,639,302 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. |
% 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, September 30, 2018 | $ | 1,814 | $ | 1,077 | $ | 2,891 | 63 | % | 37 | % | |||||||
Commitments | (20 | ) | 23 | 3 | |||||||||||||
Distributions | (41 | ) | (58 | ) | (99 | ) | |||||||||||
Change in fund value | (10 | ) | — | (10 | ) | ||||||||||||
Ending Balance, December 31, 2018 | $ | 1,743 | $ | 1,042 | $ | 2,785 | 63 | % | 37 | % |
% 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, 2017 | $ | 2,090 | $ | 1,068 | $ | 3,158 | 66 | % | 34 | % | |||||||
Commitments | (137 | ) | 237 | 100 | |||||||||||||
Distributions | (107 | ) | (159 | ) | (266 | ) | |||||||||||
Change in fund value | (103 | ) | (104 | ) | (207 | ) | |||||||||||
Ending Balance, December 31, 2018 | $ | 1,743 | $ | 1,042 | $ | 2,785 | 63 | % | 37 | % |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except share and per share data) | |||||||||||||||
Revenues | |||||||||||||||
Management fees | $ | 10,699 | $ | 16,170 | $ | 47,085 | $ | 58,104 | |||||||
Performance fees | — | 10 | — | (1,974 | ) | ||||||||||
Other revenues and fees | 2,367 | 2,197 | 10,503 | 9,201 | |||||||||||
Investment income (loss): | |||||||||||||||
Carried interest | (129 | ) | 91 | 142 | 230 | ||||||||||
Other investment loss | (372 | ) | (427 | ) | (1,221 | ) | (528 | ) | |||||||
Total Revenues | 12,565 | 18,041 | 56,509 | 65,033 | |||||||||||
Expenses | |||||||||||||||
Compensation and benefits | 9,168 | 9,551 | 31,159 | 27,432 | |||||||||||
Performance fee compensation | 619 | (29 | ) | 507 | (874 | ) | |||||||||
General, administrative and other expenses | 4,271 | 4,113 | 19,366 | 13,045 | |||||||||||
Total Expenses | 14,058 | 13,635 | 51,032 | 39,603 | |||||||||||
Other Income (Expense) | |||||||||||||||
Dividend income | 960 | 1,431 | 4,311 | 4,327 | |||||||||||
Interest expense | (2,693 | ) | (2,724 | ) | (10,806 | ) | (11,855 | ) | |||||||
Other income (expenses), net | (9,195 | ) | (36 | ) | (20,250 | ) | 1,363 | ||||||||
Total Other Expense, Net | (10,928 | ) | (1,329 | ) | (26,745 | ) | (6,165 | ) | |||||||
Income (loss) before income taxes | (12,421 | ) | 3,077 | (21,268 | ) | 19,265 | |||||||||
Provision for (benefit from) income taxes | (577 | ) | 463 | 258 | 1,956 | ||||||||||
Net Income (Loss) | (11,844 | ) | 2,614 | (21,526 | ) | 17,309 | |||||||||
Net income (loss) attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries | (7,971 | ) | 2,009 | (11,083 | ) | 6,718 | |||||||||
Net (Loss) income attributable to non-controlling interests in Medley LLC | (3,282 | ) | 1,107 | (8,011 | ) | 9,664 | |||||||||
Net (Loss) Income Attributable to Medley Management Inc. | $ | (591 | ) | $ | (502 | ) | $ | (2,432 | ) | $ | 927 | ||||
Net (Loss) Income Per Share of Class A Common Stock: | |||||||||||||||
Basic | $ | (0.16 | ) | $ | (0.11 | ) | $ | (0.65 | ) | $ | 0.07 | ||||
Diluted | $ | (0.16 | ) | $ | (0.11 | ) | $ | (0.65 | ) | $ | 0.07 | ||||
Weighted average shares outstanding - Basic and Diluted | 5,697,802 | 5,478,910 | 5,579,628 | 5,553,026 |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (Loss) | $ | (11,844 | ) | $ | 2,614 | $ | (21,526 | ) | $ | 17,309 | |||||
Other Comprehensive Income (Loss): | |||||||||||||||
Change in fair value of available-for-sale securities (net of income tax benefit of $0.4 million and $0.9 million for Medley Management Inc. for the three months and year ended December 31, 2017, respectively, and $0.2 million and $0.3 million for Non-controlling interests in Medley LLC for the three months and year ended December 31, 2017, respectively) | — | (5,225 | ) | — | (10,305 | ) | |||||||||
Total Comprehensive Income (Loss) | (11,844 | ) | (2,611 | ) | (21,526 | ) | 7,004 | ||||||||
Comprehensive income (Loss) attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries | (7,971 | ) | 2,009 | (11,083 | ) | 6,690 | |||||||||
Comprehensive (loss) income attributable to non-controlling interests in Medley LLC | (3,282 | ) | (3,441 | ) | (8,011 | ) | 721 | ||||||||
Comprehensive (Loss) Income Attributable to Medley Management Inc. | $ | (591 | ) | $ | (1,179 | ) | $ | (2,432 | ) | $ | (407 | ) |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net (loss) income attributable to Medley Management Inc. | $ | (591 | ) | $ | (502 | ) | $ | (2,432 | ) | $ | 927 | ||||
Net (loss) income attributable to non-controlling interests in Medley LLC | (3,282 | ) | 1,107 | (8,011 | ) | 9,664 | |||||||||
Net (loss) income attributable to Medley Management Inc. and non-controlling interests in Medley LLC | $ | (3,873 | ) | $ | 605 | $ | (10,443 | ) | $ | 10,591 | |||||
Reimbursable fund startup expenses | 179 | 664 | 1,483 | 1,510 | |||||||||||
IPO date award stock-based compensation | 428 | 272 | 1,446 | 461 | |||||||||||
Expenses associated with strategic initiatives | 975 | 530 | 4,833 | 737 | |||||||||||
Other non-core items: | |||||||||||||||
Unrealized losses on shares of MCC | — | — | 3,543 | — | |||||||||||
Severance expense | 467 | — | 2,730 | 1,184 | |||||||||||
Acceleration of debt issuance costs (1) | — | — | — | 1,150 | |||||||||||
Other (2) | 1,004 | 9 | 1,967 | 20 | |||||||||||
Income tax expense on adjustments | (286 | ) | (162 | ) | (1,501 | ) | (563 | ) | |||||||
Core Net Income | $ | (1,106 | ) | $ | 1,918 | $ | 4,058 | $ | 15,090 | ||||||
Interest expense | 2,693 | 2,723 | 10,806 | 10,705 | |||||||||||
Income taxes | (290 | ) | 625 | 1,760 | 2,519 | ||||||||||
Depreciation and amortization | 181 | 222 | 796 | 912 | |||||||||||
Core EBITDA | $ | 1,478 | $ | 5,488 | $ | 17,420 | $ | 29,226 |
(1) | Amounts relate to 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. |
(2) | For 2018, consists primarily of expenses related to the consolidation of our business activities to our New York office. |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except share and per share amounts) | |||||||||||||||
Numerator | |||||||||||||||
Core Net Income | $ | (1,106 | ) | $ | 1,918 | $ | 4,058 | $ | 15,090 | ||||||
Add: Income taxes | (291 | ) | 625 | 1,760 | 2,519 | ||||||||||
Pre-Tax Core Net Income | $ | (1,397 | ) | $ | 2,543 | $ | 5,818 | $ | 17,609 | ||||||
Denominator | |||||||||||||||
Class A common stock | 5,697,802 | 5,478,910 | 5,579,628 | 5,553,026 | |||||||||||
Conversion of LLC Units and restricted LLC Units to Class A common stock | 24,215,302 | 23,653,333 | 24,060,861 | 23,607,744 | |||||||||||
Restricted Stock Units | 2,245,262 | 1,508,753 | 2,054,719 | 1,691,112 | |||||||||||
Pro-Forma Weighted Average Shares Outstanding (1) | 32,158,366 | 30,640,996 | 31,695,208 | 30,851,882 | |||||||||||
Pre-Tax Core Net Income Per Share | $ | (0.04 | ) | $ | 0.08 | $ | 0.18 | $ | 0.57 | ||||||
Less: corporate income taxes per share (2) | 0.01 | (0.03 | ) | (0.06 | ) | (0.25 | ) | ||||||||
Core Net Income Per Share | $ | (0.03 | ) | $ | 0.05 | $ | 0.12 | $ | 0.33 |
(1) | The calculation of Pro-Forma Weighted Average Shares Outstanding assumes the conversion by the pre-IPO holders of up to 24,639,302 vested and unvested LLC Units for 24,639,302 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) | 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 effective corporate tax rate of 33.0% for 2018 and 43.0% for 2017. The lower effective corporate tax rate was primarily the result of the enactment of the Tax Cuts and Jobs Act which reduced the federal corporate tax rate from 34.0% to 21.0% effective January 1, 2018. |
For the Three Months Ended December 31, (unaudited) | For the Year Ended December 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Net Income Margin | (30.8 | )% | 3.4 | % | (18.5 | )% | 16.3 | % | |||
Reimbursable fund startup expenses (1) | 1.4 | % | 3.7 | % | 2.6 | % | 2.2 | % | |||
IPO date award stock-based compensation (1) | 3.4 | % | 1.5 | % | 2.6 | % | 0.7 | % | |||
Expenses associated with strategic initiatives (1) | 7.8 | % | 2.9 | % | 8.6 | % | 1.1 | % | |||
Other non-core items:(1) | |||||||||||
Unrealized losses on shares of MCC | — | % | — | % | 6.3 | % | — | % | |||
Severance expense | 3.7 | % | — | % | 4.8 | % | 1.9 | % | |||
Acceleration of debt issuance costs | — | % | — | % | — | % | 1.8 | % | |||
Other | 8.0 | % | — | % | 3.5 | % | — | % | |||
Provision for income taxes (1) | (4.6 | )% | 2.6 | % | 0.5 | % | 3.0 | % | |||
Corporate income taxes (2) | 3.7 | % | (6.1 | )% | (3.4 | )% | (11.6 | )% | |||
Core Net Income Margin | (7.4 | )% | 7.9 | % | 7.0 | % | 15.4 | % |
(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) | Assumes that all of our pre-tax earnings, including adjustments above, 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 2018 and 43.0% for 2017 and presented the calculation as a percentage of total revenue. |
As of December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 17,219 | $ | 36,327 | |||
Investments, at fair value | 36,425 | 56,632 | |||||
Management fees receivable | 10,274 | 14,714 | |||||
Performance fees receivable | — | 2,987 | |||||
Other assets | 14,298 | 17,262 | |||||
Total Assets | $ | 78,216 | $ | 127,922 | |||
Liabilities, Redeemable Non-controlling Interests and Equity | |||||||
Liabilities | |||||||
Senior unsecured debt, net | $ | 117,618 | $ | 116,892 | |||
Loans payable, net | 9,892 | 9,233 | |||||
Due to former minority interest holder | 11,402 | — | |||||
Accounts payable, accrued expenses and other liabilities | 26,739 | 25,130 | |||||
Total Liabilities | 165,651 | 151,255 | |||||
Redeemable Non-controlling Interests | 23,186 | 53,741 | |||||
Equity | |||||||
Class A common stock | 57 | 55 | |||||
Class B common stock | — | — | |||||
Additional paid in capital | 7,529 | 2,820 | |||||
Accumulated other comprehensive loss | — | (1,301 | ) | ||||
Accumulated deficit | (19,618 | ) | (9,545 | ) | |||
Total stockholders' deficit, Medley Management Inc. | (12,032 | ) | (7,971 | ) | |||
Non-controlling interests in consolidated subsidiaries | (747 | ) | (1,702 | ) | |||
Non-controlling interests in Medley LLC | (97,842 | ) | (67,401 | ) | |||
Total Deficit | (110,621 | ) | (77,074 | ) | |||
Total Liabilities, Redeemable Non-controlling Interests and Equity | $ | 78,216 | $ | 127,922 |