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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Medley Management Inc | NYSE:MDLY | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.88 | 0 | 01:00:00 |
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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47-1130638
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Title of each class)
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(Name of each exchange on which registered)
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Class A Common Stock, $0.01 par value per share
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New York Stock Exchange
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☒
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Emerging growth company
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☒
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Page
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Part I.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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difficult market and political conditions may adversely affect our business in many ways, including by reducing the value or hampering the performance of the investments made by our funds, each of which could materially and adversely affect our business, results of operations and financial condition;
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•
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we derive a substantial portion of our revenues from funds managed pursuant to advisory agreements that may be terminated or fund partnership agreements that permit fund investors to remove us as the general partner;
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•
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we may not be able to maintain our current fee structure as a result of industry pressure from fund investors to reduce fees, which could have an adverse effect on our profit margins and results of operations;
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•
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a change of control of us could result in termination of our investment advisory agreements;
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•
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the historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in Medley Management Inc.'s Class A common stock ("Class A common stock");
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•
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if we are unable to consummate or successfully integrate development opportunities, acquisitions or joint ventures, we may not be able to implement our growth strategy successfully;
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•
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we depend on third-party distribution sources to market our investment strategies;
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•
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an investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies;
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•
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our funds’ investments in investee companies may be risky, and our funds could lose all or part of their investments;
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•
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prepayments of debt investments by our investee companies could adversely impact our results of operations;
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•
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our funds’ investee companies may incur debt that ranks equally with, or senior to, our funds’ investments in such companies;
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•
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subordinated liens on collateral securing loans that our funds make to their investee companies may be subject to control by senior creditors with first priority liens and, if there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and our funds;
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•
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there may be circumstances where our funds’ debt investments could be subordinated to claims of other creditors or our funds could be subject to lender liability claims;
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•
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our funds may not have the resources or ability to make additional investments in our investee companies;
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•
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economic recessions or downturns could impair our investee companies and harm our operating results;
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•
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a covenant breach by our investee companies may harm our operating results;
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•
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the investment management business is competitive;
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•
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our funds operate in a competitive market for lending that has recently intensified, and competition may limit our funds’ ability to originate or acquire desirable loans and investments and could also affect the yields of these assets and have a material adverse effect on our business, results of operations and financial condition;
|
•
|
dependence on leverage by certain of our funds and by our funds’ investee companies subjects us to volatility and contractions in the debt financing markets and could adversely affect our ability to achieve attractive rates of return on those investments;
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•
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some of our funds may invest in companies that are highly leveraged, which may increase the risk of loss associated with those investments;
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•
|
we generally do not control the business operations of our investee companies and, due to the illiquid nature of our investments, may not be able to dispose of such investments;
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•
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a substantial portion of our investments may be recorded at fair value as determined in good faith by or under the direction of our respective funds’ boards of directors or similar bodies and, as a result, there may be uncertainty regarding the value of our funds’ investments;
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•
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we may need to pay “clawback” obligations if and when they are triggered under the governing agreements with respect to certain of our funds and SMAs;
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•
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our funds may face risks relating to undiversified investments;
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•
|
third-party investors in our private funds may not satisfy their contractual obligation to fund capital calls when requested, which could adversely affect a fund’s operations and performance;
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•
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our funds may be forced to dispose of investments at a disadvantageous time;
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•
|
hedging strategies may adversely affect the returns on our funds’ investments;
|
•
|
our business depends in large part on our ability to raise capital from investors. If we were unable to raise such capital, we would be unable to collect management fees or deploy such capital into investments, which would materially and adversely affect our business, results of operations and financial condition;
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•
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we depend on our senior management team, senior investment professionals and other key personnel, and our ability to retain them and attract additional qualified personnel is critical to our success and our growth prospects;
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•
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our failure to appropriately address conflicts of interest could damage our reputation and adversely affect our business;
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•
|
potential conflicts of interest may arise between our Class A common stockholders and our fund investors;
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•
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rapid growth of our business may be difficult to sustain and may place significant demands on our administrative, operational and financial resources;
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•
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we may enter into new lines of business and expand into new investment strategies, geographic markets and business, each of which may result in additional risks and uncertainties in our business;
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•
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extensive regulation affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our business and results of operations;
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•
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failure to comply with “pay to play” regulations implemented by the SEC and certain states, and changes to the “pay to play” regulatory regimes, could adversely affect our business;
|
•
|
new or changed laws or regulations governing our funds’ operations and changes in the interpretation thereof could adversely affect our business;
|
•
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present and future business development companies for which we serve as investment adviser are subject to regulatory complexities that limit the way in which they do business and may subject them to a higher level of regulatory scrutiny;
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•
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we are subject to risks in using custodians, counterparties, administrators and other agents;
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•
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a portion of our revenue and cash flow is variable, which may impact our ability to achieve steady earnings growth on a quarterly basis and may cause the price of our Class A common stock to decline;
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•
|
we may be subject to litigation risks and may face liabilities and damage to our professional reputation as a result;
|
•
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employee misconduct could harm us by impairing our ability to attract and retain investors and subjecting us to significant legal liability, regulatory scrutiny and reputational harm, and fraud and other deceptive practices or other misconduct at our investee companies could similarly subject us to liability and reputational damage and also harm our business;
|
•
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our substantial indebtedness could adversely affect our financial condition, our ability to pay our debts or raise additional capital to fund our operations, our ability to operate our business and our ability to react to changes in the economy or our industry and could divert our cash flow from operations for debt payments;
|
•
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servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on many factors, some of which are not within our control;
|
•
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despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to our financial condition;
|
•
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operational risks may disrupt our business, result in losses or limit our growth;
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•
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Medley Management Inc.’s only material asset is its interest in Medley LLC, and it is accordingly dependent upon distributions from Medley LLC to pay taxes, make payments under the tax receivable agreement or pay dividends;
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•
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Medley Management Inc. is controlled by our pre-IPO owners, whose interests may differ from those of our public stockholders;
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•
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Medley Management Inc. will be required to pay exchanging holders of LLC Units for most of the benefits relating to any additional tax depreciation or amortization deductions that we may claim as a result of the tax basis step-up we receive in connection with sales or exchanges of LLC Units and related transactions;
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•
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in certain cases, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits Medley Management Inc. realizes in respect of the tax attributes subject to the tax receivable agreement;
|
•
|
anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable; and
|
•
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our ability to realize anticipated cost savings and efficiencies from consolidating our business activities to our New York office.
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•
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“Aspect” refers to Aspect-Medley Investment Platform A LP;
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•
|
“Aspect B” refers to Aspect-Medley Investment Platform B LP;
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•
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“AUM” refers to the assets of our funds, which represents the sum of the NAV 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);
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•
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“base management fees” refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fee earning AUM or, in certain cases, a percentage of originated assets in the case of certain of our SMAs;
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•
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“BDC” refers to business development company;
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•
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"Caddo" refers to Caddo Investors Holdings 1 LLC;
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•
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“Consolidated Funds” refers to, with respect to periods after December 31, 2013 and before January 1, 2015, MOF II, with respect to periods prior to January 1, 2014, MOF I LP, MOF II and MOF III, subsequent to its formation; and, with respect to periods after May 31, 2017, Sierra Total Return Fund, subsequent to its formation.
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•
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“fee earning AUM” refers to the assets under management on which we directly earn base management fees;
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•
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“hurdle rates” refers to the rates above which we earn performance fees, as defined in the long-dated private funds’ and SMAs’ applicable investment management or partnership agreements;
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•
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“investee company” refers to a company to which one of our funds lends money or in which one of our funds otherwise makes an investment;
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•
|
“long-dated private funds” refers to MOF II, MOF III, MOF III Offshore, MCOF, Aspect, Aspect B and any other private funds we may manage in the future;
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•
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“management fees” refers to base management fees, other management fees and Part I incentive fees;
|
•
|
“MCOF” refers to Medley Credit Opportunity Fund LP;
|
•
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“MDLY” refers to Medley Management Inc.;
|
•
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“Medley LLC” refers to Medley LLC and its consolidated subsidiaries;
|
•
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“MOF II” refers to Medley Opportunity Fund II LP;
|
•
|
“MOF III” refers to Medley Opportunity Fund III LP;
|
•
|
"MOF III Offshore" refers to Medley Opportunity Fund Offshore III LP;
|
•
|
“our funds” refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by us and our affiliates;
|
•
|
“our investors” refers to the investors in our permanent capital vehicles, our private funds and our SMAs;
|
•
|
“Part I incentive fees” refers to fees that we receive from our permanent capital vehicles, and since 2017, MCOF and Aspect, which are paid in cash quarterly and are driven primarily by net interest income on senior secured loans subject to hurdle rates. As it relates to Medley Capital Corporation (NYSE: MCC) (TASE:MCC) (“MCC”), these fees are subject to netting against realized and unrealized losses;
|
•
|
“Part II incentive fees” refers to fees related to realized capital gains in our permanent capital vehicles;
|
•
|
“performance fees” refers to incentive allocations in our long-dated private funds and incentive fees from our SMAs, which are typically 15% to 20% of the total return after a hurdle rate, accrued quarterly, but paid after the return of all invested capital and in an amount sufficient to achieve the hurdle rate;
|
•
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“permanent capital” refers to capital of funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds
|
•
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“SMA” refers to a separately managed account;
|
•
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"standalone" refers to our financial results without the consolidation of any fund(s); and
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•
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"Tac Ops" refers to Medley Tactical Opportunities LLC.
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As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
10,211
|
|
|
$
|
17,219
|
|
Investments, at fair value
|
33,575
|
|
|
36,425
|
|
||
Management fees receivable
|
9,226
|
|
|
10,274
|
|
||
Right-of-use assets under operating leases
|
7,418
|
|
|
—
|
|
||
Other assets
|
15,159
|
|
|
14,298
|
|
||
Total Assets
|
$
|
75,589
|
|
|
$
|
78,216
|
|
|
|
|
|
|
|||
Liabilities, Redeemable Non-controlling Interests and Equity
|
|
|
|
|
|
||
Liabilities
|
|
|
|
||||
Senior unsecured debt, net
|
$
|
117,999
|
|
|
$
|
117,618
|
|
Loans payable, net
|
10,000
|
|
|
9,892
|
|
||
Due to former minority interest holder, net
|
9,301
|
|
|
11,402
|
|
||
Operating lease liabilities
|
9,267
|
|
|
—
|
|
||
Accounts payable, accrued expenses and other liabilities
|
19,036
|
|
|
26,739
|
|
||
Total Liabilities
|
165,603
|
|
|
165,651
|
|
||
|
|
|
|
|
|||
Commitments and Contingencies (Note 12)
|
|
|
|
|
|
||
|
|
|
|
|
|||
Redeemable Non-controlling Interests
|
19,577
|
|
|
23,186
|
|
||
|
|
|
|
|
|||
Equity
|
|
|
|
|
|
||
Class A common stock, $0.01 par value, 3,000,000,000 shares authorized;5,870,821 and 5,701,008 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
|
59
|
|
|
57
|
|
||
Class B common stock, $0.01 par value, 1,000,000 shares authorized; 100 shares issued and outstanding
|
—
|
|
|
—
|
|
||
Additional paid in capital
|
10,434
|
|
|
7,529
|
|
||
Accumulated deficit
|
(19,812
|
)
|
|
(19,618
|
)
|
||
Total stockholders' deficit, Medley Management Inc.
|
(9,319
|
)
|
|
(12,032
|
)
|
||
Non-controlling interests in consolidated subsidiaries
|
(416
|
)
|
|
(747
|
)
|
||
Non-controlling interests in Medley LLC
|
(99,856
|
)
|
|
(97,842
|
)
|
||
Total deficit
|
(109,591
|
)
|
|
(110,621
|
)
|
||
Total Liabilities, Redeemable Non-controlling Interests and Equity
|
$
|
75,589
|
|
|
$
|
78,216
|
|
|
For the Three Months Ended
June 30, |
|
For the Six Months Ended
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management fees (there were no Part I incentive fees recognized for each of the three and six months ended June 30, 2019 and 2018)
|
$
|
10,208
|
|
|
$
|
11,965
|
|
|
$
|
21,121
|
|
|
$
|
24,050
|
|
Other revenues and fees
|
2,669
|
|
|
3,038
|
|
|
5,110
|
|
|
5,367
|
|
||||
Investment income:
|
|
|
|
|
|
|
|
||||||||
Carried interest
|
441
|
|
|
432
|
|
|
793
|
|
|
597
|
|
||||
Other investment loss, net
|
(436
|
)
|
|
(284
|
)
|
|
(373
|
)
|
|
(467
|
)
|
||||
Total Revenues
|
12,882
|
|
|
15,151
|
|
|
26,651
|
|
|
29,547
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation and benefits
|
6,958
|
|
|
7,307
|
|
|
14,979
|
|
|
15,638
|
|
||||
General, administrative and other expenses
|
4,106
|
|
|
4,342
|
|
|
7,360
|
|
|
8,851
|
|
||||
Total Expenses
|
11,064
|
|
|
11,649
|
|
|
22,339
|
|
|
24,489
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividend income
|
188
|
|
|
960
|
|
|
760
|
|
|
2,389
|
|
||||
Interest expense
|
(2,874
|
)
|
|
(2,715
|
)
|
|
(5,772
|
)
|
|
(5,396
|
)
|
||||
Other expenses, net
|
(5,980
|
)
|
|
(4,011
|
)
|
|
(2,409
|
)
|
|
(13,766
|
)
|
||||
Total other expenses, net
|
(8,666
|
)
|
|
(5,766
|
)
|
|
(7,421
|
)
|
|
(16,773
|
)
|
||||
Loss before income taxes
|
(6,848
|
)
|
|
(2,264
|
)
|
|
(3,109
|
)
|
|
(11,715
|
)
|
||||
(Benefit from) provision for income taxes
|
(70
|
)
|
|
195
|
|
|
(93
|
)
|
|
385
|
|
||||
Net Loss
|
(6,778
|
)
|
|
(2,459
|
)
|
|
(3,016
|
)
|
|
(12,100
|
)
|
||||
Net loss attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries
|
(5,674
|
)
|
|
(2,464
|
)
|
|
(1,479
|
)
|
|
(6,978
|
)
|
||||
Net (loss) income attributable to non-controlling interests in Medley LLC
|
(921
|
)
|
|
133
|
|
|
(1,282
|
)
|
|
(3,766
|
)
|
||||
Net Loss Attributable to Medley Management Inc.
|
$
|
(183
|
)
|
|
$
|
(128
|
)
|
|
$
|
(255
|
)
|
|
$
|
(1,356
|
)
|
Dividends declared per share of Class A common stock
|
$
|
—
|
|
|
$
|
0.20
|
|
|
$
|
0.03
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Loss Per Share of Class A Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (Note 14)
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.34
|
)
|
Diluted (Note 14)
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.34
|
)
|
Weighted average shares outstanding - Basic and Diluted
|
5,847,883
|
|
|
5,543,802
|
|
|
5,801,531
|
|
|
5,513,719
|
|
|
Class A
Common Stock
|
|
Class B
Common Stock
|
|
Additional
Paid in
Capital
|
|
Accumulated
Deficit
|
|
Non-
controlling Interests in Consolidated Subsidiaries |
|
Non-
controlling
Interests in
Medley
LLC
|
|
Total
Deficit
|
||||||||||||||||||||
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
|
|
|
|
|||||||||||||||||||||
Balance at March 31, 2019
|
5,817,298
|
|
|
$
|
58
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
8,999
|
|
|
$
|
(19,734
|
)
|
|
$
|
(502
|
)
|
|
$
|
(98,203
|
)
|
|
$
|
(109,382
|
)
|
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(183
|
)
|
|
309
|
|
|
(921
|
)
|
|
(795
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,436
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,436
|
|
|||||||
Dividend equivalent payments made to holders of restricted stock units ($0.03 per restricted stock unit)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|||||||
Reclass of cumulative dividends on forfeited restricted stock units to compensation and benefits expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|||||||
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(223
|
)
|
|
(732
|
)
|
|
(955
|
)
|
|||||||
Issuance of Class A common stock related to vesting of restricted stock units
|
53,523
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Balance at June 30, 2019
|
5,870,821
|
|
|
$
|
59
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
10,434
|
|
|
$
|
(19,812
|
)
|
|
$
|
(416
|
)
|
|
$
|
(99,856
|
)
|
|
$
|
(109,591
|
)
|
|
Class A
Common Stock
|
|
Class B
Common Stock
|
|
Additional
Paid in
Capital
|
|
Accumulated
Deficit
|
|
Non-
controlling Interests in Consolidated Subsidiaries |
|
Non-
controlling
Interests in
Medley
LLC
|
|
Total
Deficit
|
||||||||||||||||||||
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
|
|
|
|
|||||||||||||||||||||
Balance at December 31, 2018
|
5,701,008
|
|
|
$
|
57
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
7,529
|
|
|
$
|
(19,618
|
)
|
|
$
|
(747
|
)
|
|
$
|
(97,842
|
)
|
|
$
|
(110,621
|
)
|
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(255
|
)
|
|
554
|
|
|
(1,282
|
)
|
|
(983
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,222
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,222
|
|
|||||||
Dividends declared and paid on Class A common stock ($0.03 per share) and dividend equivalent payments made to holders of restricted stock units ($0.03 per restricted stock unit)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|||||||
Reclass of cumulative dividends on forfeited restricted stock units to compensation and benefits expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
—
|
|
|
299
|
|
|||||||
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(223
|
)
|
|
(732
|
)
|
|
(955
|
)
|
|||||||
Issuance of Class A common stock related to vesting of restricted stock units, net of tax withholdings
|
169,813
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(317
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(315
|
)
|
|||||||
Balance at June 30, 2019
|
5,870,821
|
|
|
$
|
59
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
10,434
|
|
|
$
|
(19,812
|
)
|
|
$
|
(416
|
)
|
|
$
|
(99,856
|
)
|
|
$
|
(109,591
|
)
|
|
Class A
Common Stock
|
|
Class B
Common Stock
|
|
Additional
Paid in
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated
Deficit
|
|
Non-
controlling Interests in Consolidated Subsidiaries |
|
Non-
controlling
Interests in
Medley
LLC
|
|
Total
Deficit
|
||||||||||||||||||||||
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance at March 31, 2018
|
5,495,343
|
|
|
$
|
55
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
3,805
|
|
|
$
|
—
|
|
|
$
|
(14,080
|
)
|
|
$
|
(1,644
|
)
|
|
$
|
(78,976
|
)
|
|
$
|
(90,840
|
)
|
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(128
|
)
|
|
—
|
|
|
133
|
|
|
5
|
|
||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,598
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,598
|
|
||||||||
Dividends on Class A common stock ($0.20 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,469
|
)
|
|
—
|
|
|
—
|
|
|
(1,469
|
)
|
||||||||
Reclass of cumulative dividends on forfeited restricted stock units to compensation and benefits expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
40
|
|
||||||||
Issuance of Class A common stock related to vesting of restricted stock units, net of tax withholdings
|
67,628
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(248
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(247
|
)
|
||||||||
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,560
|
)
|
|
(5,560
|
)
|
||||||||
Balance at June 30, 2018
|
5,562,971
|
|
|
$
|
56
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
5,155
|
|
|
$
|
—
|
|
|
$
|
(15,637
|
)
|
|
$
|
(1,644
|
)
|
|
$
|
(84,403
|
)
|
|
$
|
(96,473
|
)
|
|
Class A
Common Stock
|
|
Class B
Common Stock
|
|
Additional
Paid in
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated
Deficit
|
|
Non-
controlling Interests in Consolidated Subsidiaries |
|
Non-
controlling
Interests in
Medley
LLC
|
|
Total
Deficit
|
||||||||||||||||||||||
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance at December 31, 2017
|
5,481,068
|
|
|
$
|
55
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
2,820
|
|
|
$
|
(1,301
|
)
|
|
$
|
(9,545
|
)
|
|
$
|
(1,702
|
)
|
|
$
|
(67,401
|
)
|
|
$
|
(77,074
|
)
|
Cumulative effect of accounting change due to the adoption of the new revenue recognition standard
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(686
|
)
|
|
—
|
|
|
(2,905
|
)
|
|
(3,591
|
)
|
||||||||
Cumulative effect of accounting change due to the adoption of updated guidance on equity securities not accounted for under the equity method of accounting and the tax effects stranded in other comprehensive loss as a result of tax reform
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,301
|
|
|
(1,301
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,356
|
)
|
|
—
|
|
|
(3,766
|
)
|
|
(5,122
|
)
|
||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,644
|
|
||||||||
Dividends on Class A common stock ($0.20 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,814
|
)
|
|
—
|
|
|
—
|
|
|
(2,814
|
)
|
||||||||
Reclass of cumulative dividends on forfeited restricted stock units to compensation and benefits expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
65
|
|
||||||||
Issuance of Class A common stock related to vesting of restricted stock units, net of tax withholdings
|
81,903
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(309
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(308
|
)
|
||||||||
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,331
|
)
|
|
(10,331
|
)
|
||||||||
Contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||||
Issuance of non-controlling interest at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
56
|
|
||||||||
Balance at June 30, 2018
|
5,562,971
|
|
|
$
|
56
|
|
|
100
|
|
|
$
|
—
|
|
|
$
|
5,155
|
|
|
$
|
—
|
|
|
$
|
(15,637
|
)
|
|
$
|
(1,644
|
)
|
|
$
|
(84,403
|
)
|
|
$
|
(96,473
|
)
|
|
For the Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
|
|
||
Net loss
|
$
|
(3,016
|
)
|
|
$
|
(12,100
|
)
|
Adjustments to reconcile net loss to net cash used in and provided by
operating activities:
|
|
|
|
|
|
||
Stock-based compensation
|
3,222
|
|
|
2,644
|
|
||
Amortization of debt issuance costs
|
407
|
|
|
370
|
|
||
Accretion of debt discount
|
667
|
|
|
327
|
|
||
Provision for deferred taxes
|
346
|
|
|
1,221
|
|
||
Depreciation and amortization
|
352
|
|
|
434
|
|
||
Net change in unrealized depreciation on investments
|
2,762
|
|
|
14,014
|
|
||
Income from equity method investments
|
(521
|
)
|
|
(571
|
)
|
||
Reclassification of cumulative dividends paid on forfeited restricted stock units to compensation and benefits expense
|
299
|
|
|
65
|
|
||
Non-cash lease costs
|
1,215
|
|
|
—
|
|
||
Other non-cash amounts
|
—
|
|
|
56
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|||
Management fees receivable
|
1,048
|
|
|
4,389
|
|
||
Distributions of income received from equity method investments
|
585
|
|
|
288
|
|
||
Purchase of investments
|
(866
|
)
|
|
(244
|
)
|
||
Sale of investments
|
792
|
|
|
290
|
|
||
Other assets
|
(1,646
|
)
|
|
194
|
|
||
Operating lease liabilities
|
(1,361
|
)
|
|
—
|
|
||
Accounts payable, accrued expenses and other liabilities
|
(5,654
|
)
|
|
(3,521
|
)
|
||
Net cash (used in) provided by operating activities
|
(1,369
|
)
|
|
7,856
|
|
||
Cash flows from investing activities
|
|
|
|
|
|
||
Purchases of fixed assets
|
(28
|
)
|
|
—
|
|
||
Distributions received from investment held at cost less impairment
|
101
|
|
|
—
|
|
||
Capital contributions to equity method investments
|
(3
|
)
|
|
(1,504
|
)
|
||
Net cash provided by (used in) investing activities
|
70
|
|
|
(1,504
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
|
||
Payments to former minority interest holder
|
(2,625
|
)
|
|
—
|
|
||
Capital contributions from non-controlling interests
|
—
|
|
|
2
|
|
||
Distributions to non-controlling interests and redeemable
non-controlling interests
|
(2,531
|
)
|
|
(14,697
|
)
|
||
Dividends paid
|
(238
|
)
|
|
(2,814
|
)
|
||
Payments of tax withholdings related to net share settlement of restricted stock units
|
(315
|
)
|
|
(308
|
)
|
||
Net cash used in financing activities
|
(5,709
|
)
|
|
(17,817
|
)
|
||
Net decrease in cash and cash equivalents
|
(7,008
|
)
|
|
(11,465
|
)
|
||
Cash and cash equivalents, beginning of period
|
17,219
|
|
|
36,327
|
|
||
Cash and cash equivalents, end of period
|
$
|
10,211
|
|
|
$
|
24,862
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
Supplemental disclosure of non-cash investing and financing activities
|
|
|
|
||||
Recognition of right-of-use assets under operating leases upon adoption of new leasing standard
|
$
|
8,233
|
|
|
$
|
—
|
|
Recognition of operating lease liabilities offset against right-of-use assets under operating leases upon adoption of new leasing standard
|
10,229
|
|
|
—
|
|
||
Accretion of operating lease liabilities recorded against right-of-use assets
|
400
|
|
|
—
|
|
||
Net deferred tax impact on cumulative effect of accounting change
due to the adoption of the new revenue recognition standard |
—
|
|
|
(125
|
)
|
||
Reclassification of the income tax impact on cumulative effect of accounting change due to the adoption of accounting standards update 2016-01
|
—
|
|
|
649
|
|
||
Reclassification of the income tax impact of the Tax Cuts and Jobs Act on items within accumulated other comprehensive loss to retained earnings due to the early adoption of accounting standards update 2018-02
|
—
|
|
|
207
|
|
||
Issuance of non-controlling interest at fair value
|
—
|
|
|
56
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
Assets
|
(in thousands)
|
||||||
Cash and cash equivalents
|
$
|
310
|
|
|
$
|
274
|
|
Investments, at fair value
|
2,090
|
|
|
1,952
|
|
||
Other assets
|
295
|
|
|
248
|
|
||
Total assets
|
$
|
2,695
|
|
|
$
|
2,474
|
|
Liabilities and Equity
|
|
|
|
||||
Accrued expenses and other liabilities
|
$
|
469
|
|
|
$
|
330
|
|
Equity
|
2,226
|
|
|
2,144
|
|
||
Total liabilities and equity
|
$
|
2,695
|
|
|
$
|
2,474
|
|
•
|
whether the fund is near final liquidation
|
•
|
whether the fair value of the remaining assets in the fund is significantly in excess of the threshold at which the Company would earn an incentive fee
|
•
|
the probability of significant fluctuations in the fair value of the remaining assets
|
•
|
the SMA’s remaining investments are under contract for sale with contractual purchase prices that would result in no clawback and it is highly likely that the contracts will be consummated
|
|
|
Permanent
Capital Vehicles |
|
Long-dated
Private Funds |
|
SMAs
|
|
Other
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the three months ended June 30, 2019:
|
|
(in thousands)
|
||||||||||||||||||
Management fees
|
|
$
|
7,021
|
|
|
$
|
1,710
|
|
|
$
|
1,477
|
|
|
$
|
—
|
|
|
$
|
10,208
|
|
Other revenues and fees
|
|
1,472
|
|
|
—
|
|
|
—
|
|
|
1,197
|
|
|
2,669
|
|
|||||
Total revenues from contracts with customers
|
|
$
|
8,493
|
|
|
$
|
1,710
|
|
|
$
|
1,477
|
|
|
$
|
1,197
|
|
|
$
|
12,877
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the six months ended June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Management fees
|
|
$
|
14,550
|
|
|
$
|
3,570
|
|
|
$
|
3,001
|
|
|
$
|
—
|
|
|
$
|
21,121
|
|
Other revenues and fees
|
|
3,252
|
|
|
—
|
|
|
—
|
|
|
1,858
|
|
|
5,110
|
|
|||||
Total revenues from contracts with customers
|
|
$
|
17,802
|
|
|
$
|
3,570
|
|
|
$
|
3,001
|
|
|
$
|
1,858
|
|
|
$
|
26,231
|
|
|
|
Permanent
Capital Vehicles |
|
Long-dated
Private Funds |
|
SMAs
|
|
Other
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the three months ended June 30, 2018:
|
|
(in thousands)
|
||||||||||||||||||
Management fees
|
|
$
|
8,374
|
|
|
$
|
1,983
|
|
|
$
|
1,608
|
|
|
$
|
—
|
|
|
$
|
11,965
|
|
Other revenues and fees
|
|
1,920
|
|
|
—
|
|
|
—
|
|
|
1,118
|
|
|
3,038
|
|
|||||
Total revenues from contracts with customers
|
|
$
|
10,294
|
|
|
$
|
1,983
|
|
|
$
|
1,608
|
|
|
$
|
1,118
|
|
|
$
|
15,003
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the six months ended June 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Management fees
|
|
$
|
16,767
|
|
|
$
|
4,043
|
|
|
$
|
3,240
|
|
|
$
|
—
|
|
|
$
|
24,050
|
|
Other revenues and fees
|
|
3,765
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
|
5,367
|
|
|||||
Total revenues from contracts with customers
|
|
$
|
20,532
|
|
|
$
|
4,043
|
|
|
$
|
3,240
|
|
|
$
|
1,602
|
|
|
$
|
29,417
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Equity method investments, at fair value
|
$
|
13,018
|
|
|
$
|
13,422
|
|
Investment in shares of MCC, at fair value
|
18,151
|
|
|
20,633
|
|
||
Investment held at cost less impairment
|
316
|
|
|
418
|
|
||
Investments of consolidated fund
|
2,090
|
|
|
1,952
|
|
||
Total investments, at fair value
|
$
|
33,575
|
|
|
$
|
36,425
|
|
•
|
Level I
– Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.
|
•
|
Level II
– Valuations based on inputs other than quoted prices in active markets included in Level I, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities.
|
•
|
Level III
– Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants would use in pricing the assets and liabilities. These investments include debt and equity investments in private companies or assets valued using the Market or Income Approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples. The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level III information, assuming no additional corroborating evidence.
|
|
As of June 30, 2019
|
||||||||||||||
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Assets
|
(in thousands)
|
||||||||||||||
Investments of consolidated fund
|
$
|
368
|
|
|
$
|
—
|
|
|
$
|
1,722
|
|
|
$
|
2,090
|
|
Investment in shares of MCC
|
18,151
|
|
|
—
|
|
|
—
|
|
|
18,151
|
|
||||
Total Assets
|
$
|
18,519
|
|
|
$
|
—
|
|
|
$
|
1,722
|
|
|
$
|
20,241
|
|
|
As of December 31, 2018
|
||||||||||||||
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Assets
|
(in thousands)
|
||||||||||||||
Investments of consolidated fund
|
$
|
258
|
|
|
$
|
—
|
|
|
$
|
1,694
|
|
|
$
|
1,952
|
|
Investment in shares of MCC
|
20,633
|
|
|
—
|
|
|
—
|
|
|
20,633
|
|
||||
Total Assets
|
$
|
20,891
|
|
|
$
|
—
|
|
|
$
|
1,694
|
|
|
$
|
22,585
|
|
|
Level III Financial Assets as of June 30, 2019
|
||||||||||||||||||
|
Balance at
December 31, 2018
|
|
Purchases
|
|
Transfers In or (Out) of Level III
|
|
Unrealized Appreciation/(Depreciation)
|
|
Sale of Level III Assets
|
|
Balance at
June 30, 2019
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||||||
Investments of consolidated fund
|
$
|
1,694
|
|
|
505
|
|
|
—
|
|
|
6
|
|
|
(483
|
)
|
|
$
|
1,722
|
|
|
For the Three Months Ended June 30, 2019
|
|
For the Six Months Ended June 30, 2019
|
||||
Lease cost
|
|
|
|
||||
Operating lease costs
|
$
|
633
|
|
|
$
|
1,258
|
|
Variable lease costs
|
—
|
|
|
—
|
|
||
Sublease income
|
(115
|
)
|
|
(230
|
)
|
||
Total lease cost
|
$
|
518
|
|
|
$
|
1,028
|
|
Weighted-average remaining lease term (in years)
|
4.0
|
|
Weighted-average discount rate
|
8.2
|
%
|
Remaining 2019
|
$
|
1,362
|
|
2020
|
2,846
|
|
|
2021
|
2,483
|
|
|
2022
|
2,441
|
|
|
2023
|
1,823
|
|
|
Total future lease payments
|
10,955
|
|
|
Less imputed interest
|
(1,688
|
)
|
|
Operating lease liabilities, as reported
|
$
|
9,267
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Fixed assets, net of accumulated depreciation and amortization
of $3,798 and $3,446, respectively
|
$
|
2,817
|
|
|
$
|
3,140
|
|
Security deposits
|
1,975
|
|
|
1,975
|
|
||
Administrative fees receivable (Note 13)
|
1,521
|
|
|
1,645
|
|
||
Deferred tax assets (Note 15)
|
3,400
|
|
|
3,739
|
|
||
Due from affiliates (Note 13)
|
1,555
|
|
|
1,421
|
|
||
Prepaid expenses and taxes
|
2,706
|
|
|
1,113
|
|
||
Other assets
|
1,185
|
|
|
1,265
|
|
||
Total other assets
|
$
|
15,159
|
|
|
$
|
14,298
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
2026 Notes, net of unamortized discount and debt issuance costs of $2,765 and $2,946, respectively
|
$
|
50,830
|
|
|
$
|
50,649
|
|
2024 Notes, net of unamortized premium and debt issuance costs of $1,831 and $2,031 respectively
|
67,169
|
|
|
66,969
|
|
||
Total senior unsecured debt
|
$
|
117,999
|
|
|
$
|
117,618
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Non-recourse promissory notes, net of unamortized discount of $108 at December 31, 2018
|
$
|
10,000
|
|
|
$
|
9,892
|
|
Total loans payable
|
$
|
10,000
|
|
|
$
|
9,892
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Due to former minority interest holder, net of unamortized discount of $2,074 and $2,598, respectively
|
$
|
9,301
|
|
|
$
|
11,402
|
|
Total due to former minority interest holder
|
$
|
9,301
|
|
|
$
|
11,402
|
|
Remaining in 2019
|
$
|
1,750
|
|
2020
|
3,500
|
|
|
2021
|
3,500
|
|
|
2022
|
2,625
|
|
|
Total future payments
|
$
|
11,375
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Accrued compensation and benefits
|
$
|
3,444
|
|
|
$
|
7,438
|
|
Due to affiliates (Note 13)
|
7,199
|
|
|
7,635
|
|
||
Revenue share payable (Note 12)
|
2,627
|
|
|
2,976
|
|
||
Accrued interest
|
1,294
|
|
|
1,294
|
|
||
Professional fees
|
2,493
|
|
|
2,802
|
|
||
Deferred rent
|
—
|
|
|
2,035
|
|
||
Deferred tax liabilities (Note 15)
|
67
|
|
|
60
|
|
||
Accounts payable and other accrued expenses
|
1,912
|
|
|
2,499
|
|
||
Total accounts payable, accrued expenses and other liabilities
|
$
|
19,036
|
|
|
$
|
26,739
|
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
MCC Admin Agreement
|
$
|
734
|
|
|
$
|
917
|
|
|
$
|
1,615
|
|
|
$
|
1,818
|
|
SIC Admin Agreement
|
515
|
|
|
746
|
|
|
1,178
|
|
|
1,445
|
|
||||
Funds Admin Agreements
|
223
|
|
|
257
|
|
|
459
|
|
|
502
|
|
||||
Total administrative fees from related parties
|
$
|
1,472
|
|
|
$
|
1,920
|
|
|
$
|
3,252
|
|
|
$
|
3,765
|
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Amounts due from MCC under the MCC Admin Agreement
|
$
|
762
|
|
|
$
|
804
|
|
Amounts due from SIC under the SIC Admin Agreement
|
536
|
|
|
619
|
|
||
Amounts due from entities under the Funds Admin Agreements
|
223
|
|
|
222
|
|
||
Total administrative fees receivable
|
$
|
1,521
|
|
|
$
|
1,645
|
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to Medley Management Inc.
|
$
|
(183
|
)
|
|
$
|
(128
|
)
|
|
$
|
(255
|
)
|
|
$
|
(1,356
|
)
|
Less: Allocation of earnings to participating securities
|
16
|
|
|
(320
|
)
|
|
(6
|
)
|
|
(544
|
)
|
||||
Net loss available to Class A common stockholders
|
$
|
(167
|
)
|
|
$
|
(448
|
)
|
|
$
|
(261
|
)
|
|
$
|
(1,900
|
)
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares of Class A common stock outstanding
|
5,847,883
|
|
|
5,543,802
|
|
|
5,801,531
|
|
|
5,513,719
|
|
||||
Net loss per share of Class A common stock
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.34
|
)
|
Declaration Dates
|
|
Record Date
|
|
Payment Dates
|
|
Per Share
|
||
|
|
|
|
|
|
|
||
During the six months ended June 30, 2019:
|
|
|
|
|
||||
March 27, 2019
|
|
April 15, 2019
|
|
May 3, 2019
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
||
During the six months ended June 30, 2018:
|
|
|
|
|
||||
May 10, 2018
|
|
May 24, 2018
|
|
June 1, 2018
|
|
$
|
0.20
|
|
February 7, 2018
|
|
February 22, 2018
|
|
March 7, 2018
|
|
$
|
0.20
|
|
|
Number of RSUs
|
|
Weighted
Average Grant
Date Fair Value
|
|
Number of Restricted LLC Units
|
|
Weighted
Average Grant
Date Fair Value
|
||||||
Balance at December 31, 2018
|
1,822,814
|
|
|
$
|
7.74
|
|
|
1,305,969
|
|
|
$
|
6.86
|
|
Granted
|
1,082,898
|
|
|
3.26
|
|
|
1,610,671
|
|
|
2.53
|
|
||
Forfeited
|
(231,712
|
)
|
|
6.89
|
|
|
—
|
|
|
—
|
|
||
Vested
|
(321,099
|
)
|
|
6.72
|
|
|
—
|
|
|
—
|
|
||
Balance at June 30, 2019
|
2,352,901
|
|
|
$
|
5.90
|
|
|
2,916,640
|
|
|
$
|
4.47
|
|
|
For the Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Beginning balance
|
$
|
23,186
|
|
|
$
|
53,741
|
|
Net loss attributable to redeemable non-controlling interests in consolidated subsidiaries
|
(2,033
|
)
|
|
(6,980
|
)
|
||
Distributions
|
(1,576
|
)
|
|
(4,366
|
)
|
||
Ending balance
|
$
|
19,577
|
|
|
$
|
42,395
|
|
•
|
Permanent capital vehicles: MCC, SIC and STRF, have a total AUM of
$1.7 billion
as of
June 30, 2019
.
|
•
|
Long-dated private funds and SMAs: MOF II, MOF III, MOF III Offshore, MCOF, Aspect, Aspect B, MCC JV, SIC JV and SMAs, have a total AUM of
$2.7 billion
as of
June 30, 2019
.
|
(1)
|
The Class B common stock provides Medley Group LLC with a number of votes that is equal to 10 times the aggregate number of LLC Units held by all non-managing members of Medley LLC. From and after the time that the Substantial Ownership Requirement is no longer satisfied, the Class B common stock will provide Medley Group LLC with a number of votes that is equal to the aggregate number of LLC Units held by all non-managing members of Medley LLC that do not themselves hold shares of Class B common stock
.
|
(2)
|
If our pre-IPO owners exchanged all of their vested and unvested LLC Units for shares of Class A common stock, they would hold 81.8% of the outstanding shares of Class A common stock, entitling them to an equivalent percentage of economic interests and voting power in Medley Management Inc., Medley Group LLC would hold no voting power or economic interests in Medley Management Inc. and Medley Management Inc. would hold 100% of outstanding LLC Units and 100% of the voting power in Medley LLC.
|
(3)
|
Medley LLC holds 96.5% of the Class B economic interests in Medley (Aspect) Management LLC.
|
(4)
|
Medley LLC holds 100% of the outstanding Common Interest, and DB MED Investor I LLC holds 100% of the outstanding Preferred Interest in each of Medley Seed Funding I LLC and Medley Seed Funding II LLC.
|
(5)
|
Medley Seed Funding III LLC holds 100% of the senior preferred interest, Strategic Capital Advisory Services, LLC holds 100% of the junior preferred interest, and Medley LLC holds 100% of the common interest in STRF Advisors LLC.
|
(6)
|
Medley LLC holds 95.5% of the Class B economic interests in MCOF Management LLC.
|
(7)
|
Medley LLC holds 100% of the outstanding Common Interest, and DB MED Investor II LLC holds 100% of the outstanding Preferred Interest in Medley Seed Funding III LLC.
|
(8)
|
Medley GP Holdings LLC holds 95.5% of the Class B economic interests in MCOF GP LLC.
|
(9)
|
Certain employees, former employees and former members of Medley LLC hold approximately 40.3% of the limited liability company interests in MOF II GP LLC, the entity that serves as general partner of MOF II, entitling the holders to share the carried interest earned from MOF II.
|
(10)
|
Medley GP Holdings LLC holds 96.5% of the Class B economic interests in Medley (Aspect) GP LLC.
|
(11)
|
Certain employees of Medley LLC hold approximately 70.1% of the limited liability company interests in Medley Caddo Investors LLC, entitling the holders to share the carried earned from Caddo Investors Holdings I LLC.
|
(12)
|
Certain employees of Medley LLC hold approximately 69.9% of the limited liability company interests in Medley Real D Investors LLC, entitling the holders to share the carried earned from Medley Real D (Annuity) LLC.
|
(13)
|
Certain employees of Medley LLC hold approximately 70.2% of the limited liability company interests in Medley Avantor Investors LLC, entitling the holders to share the carried earned from Medley Tactical Opportunities LLC.
|
(14)
|
Certain employees of Medley LLC hold approximately 70.1% of the limited liability company interests in Medley Cloverleaf Investors LLC, entitling the holders to share the carried earned from Medley Chiller Holdings LLC.
|
•
|
The extent to which investors favor directly originated private credit investments.
Our ability to attract additional capital is dependent on investors’ views of directly originated private credit investments relative to traditional assets. We believe fundraising efforts will continue to be impacted by certain fundamental asset management trends that include: (i) the increasing importance of directly originated private credit investment strategies for institutional investors; (ii) increasing demand for directly originated private credit investments from retail investors; (iii) recognition by the consultant channel, which serves endowment and pension fund investors, that directly originated private credit is an important component of asset allocation; (iv) increasing demand from insurance companies seeking alternatives to investing in the liquid credit markets; and (v) de-leveraging of the global banking system, bank consolidation and increased bank regulatory requirements.
|
•
|
Our ability to generate strong, stable returns and retain investor capital throughout market cycles.
The capital we are able to attract and retain drives the growth of our AUM, fee earning AUM and management fees. We believe we are well positioned to invest through market cycles given our AUM is in either permanent capital vehicles or long-dated private funds and SMAs.
|
•
|
Our ability to source investments with attractive risk-adjusted returns.
Our ability to grow our revenue is dependent on our continued ability to source attractive investments and deploy the capital that we have raised. We believe that the current economic environment provides attractive investment opportunities. Our ability to identify attractive investments and execute on those investments is dependent on a number of factors, including the general macroeconomic environment, valuation, size and the liquidity of these investment opportunities. A significant decrease in the quality or quantity of investment opportunities in the directly originated private credit market, a substantial increase in corporate default rates, an increase in competition from new entrants providing capital to the private debt market and a decrease in recovery rates of directly originated private credit could adversely affect our ability to source investments with attractive risk-adjusted returns.
|
•
|
The attractiveness of our product offering to investors.
We believe defined contribution plans, retail investors, public institutional investors, pension funds, endowments, sovereign wealth funds and insurance companies are increasing
|
•
|
The strength of our investment process, operating platform and client servicing capabilities.
Following the most recent financial crisis, investors in alternative investments, including those managed by us, have heightened their focus on matters such as manager due diligence, reporting transparency and compliance infrastructure. Since inception, we have invested heavily in our investment monitoring systems, compliance and enterprise risk management systems to proactively address investor expectations and the evolving regulatory landscape. We believe these investments in operating infrastructure will continue to support our growth in AUM.
|
•
|
Base Management Fees.
Base management fees are generally based on a defined percentage of (i) average or total gross assets, including assets acquired with leverage, (ii) total commitments, (iii) net invested capital, (iv) NAV or (v) lower of cost or market value of a fund’s portfolio investments. These fees are calculated quarterly and are paid in cash in advance or in arrears. Base management fees are recognized as revenue in the period advisory services are rendered, subject to our assessment of collectability.
|
•
|
Part I Incentive Fees.
We also include Part I incentive fees that we receive from our permanent capital vehicles and certain of our long-dated private funds in management fees. Part I incentive fees are paid quarterly, in cash, and are driven primarily by net interest income on senior secured loans. As it relates to MCC, these fees are subject to netting against realized and unrealized losses. We are primarily an asset manager of yield-oriented products and our incentive fees are primarily derived from spread income rather than trading or capital gains. In addition, we also carefully manage interest rate risk. We are generally positioned to benefit from a raising rate environment, which should benefit fees paid to us from our vehicles and funds.
|
•
|
Part II Incentive Fees
. For our permanent capital vehicles and certain of our long-dated private funds, Part II incentive fees generally represent 20.0% of each fund’s cumulative realized capital gains (net of realized capital losses and unrealized capital depreciation). We have not received these fees historically, and do not expect such fees to be material in the future given our focus on senior secured lending.
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(dollars in thousands, except AUM, and per share amounts)
|
||||||||||||||
Consolidated Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|||||
Net (loss) income attributable to Medley Management Inc. and non-controlling interests in Medley LLC
|
$
|
(1,104
|
)
|
|
$
|
5
|
|
|
$
|
(1,537
|
)
|
|
$
|
(5,122
|
)
|
Net loss per Class A common stock
|
$
|
(0.03
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.34
|
)
|
Net Income Margin
(1)
|
(8.6
|
)%
|
|
—
|
%
|
|
(5.8
|
)%
|
|
(17.3
|
)%
|
||||
Weighted average shares - Basic and Diluted
|
5,847,883
|
|
|
5,543,802
|
|
|
5,801,531
|
|
|
5,513,719
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Non-GAAP Data:
|
|
|
|
|
|
|
|
|
|
|
|||||
Core Net Income
|
$
|
660
|
|
|
$
|
2,018
|
|
|
$
|
1,365
|
|
|
$
|
3,275
|
|
Core EBITDA
|
$
|
3,827
|
|
|
$
|
5,351
|
|
|
$
|
7,707
|
|
|
$
|
10,359
|
|
Core Net Income Per Share
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
|
$
|
0.10
|
|
Core Net Income Margin
|
4.1
|
%
|
|
10.7
|
%
|
|
4.0
|
%
|
|
10.2
|
%
|
||||
Pro-Forma Weighted Average Shares Outstanding
|
33,365,615
|
|
|
31,790,112
|
|
|
32,745,161
|
|
|
31,215,945
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other Data (at period end, in millions):
|
|
|
|
|
|
|
|
|
|
|
|||||
AUM
|
$
|
4,422
|
|
|
$
|
5,036
|
|
|
$
|
4,422
|
|
|
$
|
5,036
|
|
Fee Earning AUM
|
$
|
2,472
|
|
|
$
|
2,960
|
|
|
$
|
2,472
|
|
|
$
|
2,960
|
|
(1)
|
Net Income Margin equals Net income (loss) attributable to Medley Management Inc. and non-controlling interests in Medley LLC divided by total revenue.
|
•
|
Gross asset values or NAV 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).
|
|
|
|
|
|
|
|
% of 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, March 31, 2019
|
$
|
1,907
|
|
|
$
|
2,761
|
|
|
$
|
4,668
|
|
|
41
|
%
|
|
59
|
%
|
Commitments
(1)
|
1
|
|
|
4
|
|
|
5
|
|
|
|
|
|
|
|
|||
Capital reduction
(2)
|
(135
|
)
|
|
—
|
|
|
(135
|
)
|
|
|
|
|
|||||
Distributions
(3)
|
(16
|
)
|
|
(51
|
)
|
|
(67
|
)
|
|
|
|
|
|
|
|||
Change in fund value
(4)
|
(49
|
)
|
|
—
|
|
|
(49
|
)
|
|
|
|
|
|
|
|||
Ending balance, June 30, 2019
|
$
|
1,708
|
|
|
$
|
2,714
|
|
|
$
|
4,422
|
|
|
39
|
%
|
|
61
|
%
|
(1)
|
With respect to permanent capital vehicles, represents decreases during the period for debt repayments offset, in part, by equity and debt offerings. With respect to long-dated private funds and SMAs, represents new commitments as well as any increases in available undrawn borrowings.
|
(2)
|
Represents the permanent reduction in equity or leverage during the period.
|
(3)
|
With respect to permanent capital vehicles, represents distributions of income. With respect to long-dated private funds and SMAs, represents return of capital, given our funds’ stage in their respective life cycle and the prioritization of capital distributions.
|
(4)
|
Includes interest income, realized and unrealized gains (losses), fees and/or expenses.
|
|
|
|
|
|
|
|
% of 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, 2018
|
$
|
1,917
|
|
|
$
|
2,795
|
|
|
$
|
4,712
|
|
|
41
|
%
|
|
59
|
%
|
Commitments
(1)
|
15
|
|
|
(3
|
)
|
|
12
|
|
|
|
|
|
|
|
|||
Capital reduction
(2)
|
(135
|
)
|
|
—
|
|
|
(135
|
)
|
|
|
|
|
|||||
Distributions
(3)
|
(35
|
)
|
|
(69
|
)
|
|
(104
|
)
|
|
|
|
|
|
|
|||
Change in fund value
(4)
|
(54
|
)
|
|
(9
|
)
|
|
(63
|
)
|
|
|
|
|
|
|
|||
Ending balance, June 30, 2019
|
$
|
1,708
|
|
|
$
|
2,714
|
|
|
$
|
4,422
|
|
|
39
|
%
|
|
61
|
%
|
(1)
|
With respect to permanent capital vehicles, represents decreases during the period for debt repayments offset, in part, by equity and debt offerings. With respect to long-dated private funds and SMAs, represents new commitments as well as any increases in available undrawn borrowings.
|
(2)
|
Represents the permanent reduction in equity or leverage during the period.
|
(3)
|
With respect to permanent capital vehicles, represents distributions of income. With respect to long-dated private funds and SMAs, represents return of capital, given our funds’ stage in their respective life cycle and the prioritization of capital distributions.
|
(4)
|
Includes interest income, realized and unrealized gains (losses), fees and/or expenses.
|
•
|
for our permanent capital vehicles, the average or total gross asset value, including assets acquired with the proceeds of leverage (see “
Fee earning AUM based on gross asset value
” in the “
Components of Fee Earning AUM
” table below for the amount of this component of fee earning AUM as of each period);
|
•
|
for certain long-dated private funds within their investment period, the amount of limited partner capital commitments (see “
Fee earning AUM based on capital commitments
” in the “
Components of Fee Earning AUM
” table below for the amount of this component of fee earning AUM as of each period); and
|
•
|
for the aforementioned funds beyond their investment period and certain managed accounts within their investment period, the amount of limited partner invested capital or the NAV of the fund (see “Fee earning AUM based on invested capital or NAV” in the “Components of Fee Earning AUM” table below for the amount of this component of fee earning AUM as of each period).
|
|
As of
|
||||||
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
|
|
|
||||
|
(in millions)
|
||||||
Fee earning AUM based on gross asset value
|
$
|
1,527
|
|
|
$
|
1,743
|
|
Fee earning AUM based on invested capital, NAV or capital commitments
|
945
|
|
|
1,042
|
|
||
Total fee earning AUM
|
$
|
2,472
|
|
|
$
|
2,785
|
|
|
|
|
|
|
|
|
% 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, March 31, 2019
|
$
|
1,713
|
|
|
$
|
998
|
|
|
$
|
2,711
|
|
|
63
|
%
|
|
37
|
%
|
Commitments
(1)
|
13
|
|
|
29
|
|
|
42
|
|
|
|
|
|
|||||
Capital reduction
(2)
|
(135
|
)
|
|
—
|
|
|
(135
|
)
|
|
|
|
|
|||||
Distributions
(3)
|
(16
|
)
|
|
(67
|
)
|
|
(83
|
)
|
|
|
|
|
|||||
Change in fund value
(4)
|
(48
|
)
|
|
(15
|
)
|
|
(63
|
)
|
|
|
|
|
|||||
Ending balance, June 30, 2019
|
$
|
1,527
|
|
|
$
|
945
|
|
|
$
|
2,472
|
|
|
62
|
%
|
|
38
|
%
|
(1)
|
With respect to permanent capital vehicles, represents increases or temporary reductions during the period through equity and debt offerings, as well as any increases in capital commitments. With respect to long-dated private funds and SMAs, represents new commitments or gross inflows, respectively.
|
(2)
|
Represents the permanent reduction in equity or leverage during the period.
|
(3)
|
Represents distributions of income, return of capital and return of portfolio investment capital to the fund.
|
(4)
|
Includes interest income, realized and unrealized gains (losses), fees and/or expenses.
|
|
|
|
|
|
|
|
% 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, 2018
|
$
|
1,743
|
|
|
$
|
1,042
|
|
|
$
|
2,785
|
|
|
63
|
%
|
|
37
|
%
|
Commitments
(1)
|
8
|
|
|
82
|
|
|
90
|
|
|
|
|
|
|||||
Capital reduction
(2)
|
(135
|
)
|
|
—
|
|
|
(135
|
)
|
|
|
|
|
|||||
Distributions
(3)
|
(35
|
)
|
|
(131
|
)
|
|
(166
|
)
|
|
|
|
|
|||||
Change in fund value
(4)
|
(54
|
)
|
|
(48
|
)
|
|
(102
|
)
|
|
|
|
|
|||||
Ending balance, June 30, 2019
|
$
|
1,527
|
|
|
$
|
945
|
|
|
$
|
2,472
|
|
|
62
|
%
|
|
38
|
%
|
(1)
|
With respect to permanent capital vehicles, represents increases or temporary reductions during the period through equity and debt offerings, as well as any increases in capital commitments. With respect to long-dated private funds and SMAs, represents new commitments or gross inflows, respectively.
|
(2)
|
Represents the permanent reduction in equity or leverage during the period.
|
(3)
|
Represents distributions of income, return of capital and return of portfolio investment capital to the fund.
|
(4)
|
Includes interest income, realized and unrealized gains (losses), fees and/or expenses.
|
Annualized Net Total Return
(1)
:
|
3.6
|
%
|
Annualized Realized Losses on Invested Capital:
|
1.5
|
%
|
Average Recovery
(3)
:
|
61.8
|
%
|
Annualized Net Total Return
(2)
:
|
(0.9
|
)%
|
Annualized Realized Losses on Invested Capital:
|
2.9
|
%
|
Average Recovery
(3)
:
|
36.8
|
%
|
Gross Portfolio Internal Rate of Return
(4)
:
|
7.1
|
%
|
Net Investor Internal Rate of Return
(5)
:
|
3.1
|
%
|
Annualized Realized Losses on Invested Capital:
|
2.9
|
%
|
Average Recovery
(3)
:
|
39.9
|
%
|
Gross Portfolio Internal Rate of Return
(4)
:
|
10.1
|
%
|
Net Investor Internal Rate of Return
(5)
:
|
6.0
|
%
|
Annualized Realized Losses on Invested Capital:
|
—
|
%
|
Average Recovery:
|
N/A
|
|
Gross Portfolio Internal Rate of Return
(4)
:
|
7.9
|
%
|
Net Investor Internal Rate of Return
(6)
:
|
6.1
|
%
|
Annualized Realized Losses on Invested Capital:
|
0.9
|
%
|
Average Recovery
(3)
:
|
34.5
|
%
|
(1)
|
Annualized Net Total Return for SIC represents the annualized return assuming an investment at SIC’s inception, reinvestments of all distributions at prices obtained under SIC’s dividend reinvestment plan and no sales charge.
|
(2)
|
Annual Net Total Return for MCC, including Medley SBIC, represents the annualized return assuming an investment at the initial public offering price, reinvestments of all dividends and distributions at prices obtained under MCC's dividend reinvestment plan and selling at NAV as of the measurement date.
|
(3)
|
Average Recovery includes only those realized investments in which we experience a loss of principal on a cumulative cash flow basis and is calculated by dividing the total actual cash inflows for each respective investment, including all interest, principal and fee note repayments, dividends and transactions fees, if applicable, by the total actual cash outflows for each respective investment.
|
(4)
|
For MOF II, MOF III, and SMAs, the Gross Internal Rate of Return represents the cumulative investment performance from inception of each respective fund through
June 30, 2019
. The Gross Internal Rate of Return includes both realized and unrealized investments and excludes the impact of base management fees, incentive fees and other fund related expenses. For realized investments, the investment returns were calculated based on the actual cash outflows and inflows for each respective investment and include all interest, principal and fee note repayments, dividends and transactions fees, if applicable. For unrealized investments, the investment returns were calculated based on the actual cash outflows and inflows for each respective investment and include all interest, principal and fee note repayments, dividends and transactions fees, if applicable. The investment return assumes that the remaining unrealized portion of the investment is realized at the investment’s most recent fair value, as calculated in accordance with GAAP. There can be no assurance that the investments will be realized at these fair values and actual results may differ significantly.
|
(5)
|
Net Internal Rate of Return for MOF II and MOF III was calculated net of all management fees and carried interest allocation since inception and was computed based on the actual dates of capital contributions and the ending aggregate partners’ capital at the end of the period.
|
(6)
|
Net Internal Rate of Return for our SMAs was calculated using the Gross Internal Rate of Return, as described in note 4, and includes the actual management fees, incentive fees and general fund related expenses.
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands, except AUM data)
|
||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management fees (there were no Part I incentive fees recognized for each of the three and six months ended June 30, 2019 and 2018)
|
$
|
10,208
|
|
|
$
|
11,965
|
|
|
$
|
21,121
|
|
|
$
|
24,050
|
|
Other revenues and fees
|
2,669
|
|
|
3,038
|
|
|
5,110
|
|
|
5,367
|
|
||||
Investment income:
|
|
|
|
|
|
|
|
||||||||
Carried interest
|
441
|
|
|
432
|
|
|
793
|
|
|
597
|
|
||||
Other investment loss, net
|
(436
|
)
|
|
(284
|
)
|
|
(373
|
)
|
|
(467
|
)
|
||||
Total Revenues
|
12,882
|
|
|
15,151
|
|
|
26,651
|
|
|
29,547
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation and benefits
|
6,958
|
|
|
7,307
|
|
|
14,979
|
|
|
15,638
|
|
||||
General, administrative and other expenses
|
4,106
|
|
|
4,342
|
|
|
7,360
|
|
|
8,851
|
|
||||
Total Expenses
|
11,064
|
|
|
11,649
|
|
|
22,339
|
|
|
24,489
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|||||
Dividend income
|
188
|
|
|
960
|
|
|
760
|
|
|
2,389
|
|
||||
Interest expense
|
(2,874
|
)
|
|
(2,715
|
)
|
|
(5,772
|
)
|
|
(5,396
|
)
|
||||
Other expenses, net
|
(5,980
|
)
|
|
(4,011
|
)
|
|
(2,409
|
)
|
|
(13,766
|
)
|
||||
Total Other Expenses, Net
|
(8,666
|
)
|
|
(5,766
|
)
|
|
(7,421
|
)
|
|
(16,773
|
)
|
||||
Loss before income taxes
|
(6,848
|
)
|
|
(2,264
|
)
|
|
(3,109
|
)
|
|
(11,715
|
)
|
||||
(Benefit from) provision for income taxes
|
(70
|
)
|
|
195
|
|
|
(93
|
)
|
|
385
|
|
||||
Net Loss
|
(6,778
|
)
|
|
(2,459
|
)
|
|
(3,016
|
)
|
|
(12,100
|
)
|
||||
Net loss attributable to redeemable non-controlling interests and non-controlling interests in consolidated subsidiaries
|
(5,674
|
)
|
|
(2,464
|
)
|
|
(1,479
|
)
|
|
(6,978
|
)
|
||||
Net (loss) income attributable to non-controlling interests in Medley LLC
|
(921
|
)
|
|
133
|
|
|
(1,282
|
)
|
|
(3,766
|
)
|
||||
Net Loss Attributable to Medley Management Inc.
|
$
|
(183
|
)
|
|
$
|
(128
|
)
|
|
$
|
(255
|
)
|
|
$
|
(1,356
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other data (at period end, in millions):
|
|
|
|
|
|
|
|
||||||||
AUM
|
$
|
4,422
|
|
|
$
|
5,036
|
|
|
$
|
4,422
|
|
|
$
|
5,036
|
|
Fee earning AUM
|
$
|
2,472
|
|
|
$
|
2,960
|
|
|
$
|
2,472
|
|
|
$
|
2,960
|
|
•
|
Our management fees from permanent capital vehicles decreased by $1.4 million, or 16%, during the
three months ended June 30,
2019
compared to the same period in
2018
. The decrease was due primarily to lower base management fees from both SIC and MCC as a result of a decrease in fee earning assets under management driven by a reduction in leverage and changes in fund values.
|
•
|
Our management fees from long-dated private funds and SMAs decreased by $0.4 million, or 11%, during the
three months ended June 30,
2019
, compared to the same period in
2018
. The decrease was primarily due to lower base management fees from MOF II as a result of a decrease in fee earning assets under management driven by investment realizations and changes in fund value.
|
•
|
Our management fees from permanent capital vehicles decreased by
$2.2 million
, or 13%, during the
six months ended June 30,
2019
compared to the same period in
2018
. The decrease was primarily due to lower base management fees from both SIC and MCC as a result of a decrease in fee earning assets under management driven by a reduction in leverage and changes in fund values.
|
•
|
Our management fees from long-dated private funds and SMAs decreased by
$0.7 million
, or
10%
, during the
six months ended June 30,
2019
, compared to the same period in
2018
.
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Net loss attributable to Medley Management Inc.
|
$
|
(183
|
)
|
|
$
|
(128
|
)
|
|
$
|
(255
|
)
|
|
$
|
(1,356
|
)
|
Net (loss) income attributable to non-controlling interests in Medley LLC
|
(921
|
)
|
|
133
|
|
|
(1,282
|
)
|
|
(3,766
|
)
|
||||
Net (loss) income attributable to Medley Management Inc. and non-controlling interests in Medley LLC
|
$
|
(1,104
|
)
|
|
$
|
5
|
|
|
$
|
(1,537
|
)
|
|
$
|
(5,122
|
)
|
Reimbursable fund startup expenses
|
94
|
|
|
442
|
|
|
261
|
|
|
1,065
|
|
||||
IPO date award stock-based compensation
|
231
|
|
|
433
|
|
|
273
|
|
|
574
|
|
||||
Expenses associated with strategic initiatives
|
1,105
|
|
|
939
|
|
|
1,416
|
|
|
1,791
|
|
||||
Other non-core items:
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized losses on shares of MCC
|
—
|
|
|
—
|
|
|
—
|
|
|
3,543
|
|
||||
Severance expense
|
522
|
|
|
338
|
|
|
1,262
|
|
|
2,224
|
|
||||
Other
(1)
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
||||
Income tax expense on adjustments
|
(188
|
)
|
|
(208
|
)
|
|
(310
|
)
|
|
(869
|
)
|
||||
Core Net Income
|
$
|
660
|
|
|
$
|
2,018
|
|
|
$
|
1,365
|
|
|
$
|
3,275
|
|
Interest expense
|
2,875
|
|
|
2,715
|
|
|
5,773
|
|
|
5,396
|
|
||||
Income taxes
|
118
|
|
|
403
|
|
|
217
|
|
|
1,254
|
|
||||
Depreciation and amortization
|
174
|
|
|
215
|
|
|
352
|
|
|
434
|
|
||||
Core EBITDA
|
$
|
3,827
|
|
|
$
|
5,351
|
|
|
$
|
7,707
|
|
|
$
|
10,359
|
|
|
|
|
|
|
|
|
|
||||||||
Core Net Income Per Share
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
||||||||
Pro-Forma Weighted Average Shares Outstanding
(2)
|
33,365,615
|
|
|
31,790,112
|
|
|
32,745,161
|
|
|
31,215,945
|
|
|
For the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
||||
Core Net Income
|
$
|
660
|
|
|
$
|
2,018
|
|
|
$
|
1,365
|
|
|
$
|
3,275
|
|
Add: Income taxes
|
118
|
|
|
403
|
|
|
217
|
|
|
1,254
|
|
||||
Pre-Tax Core Net Income
|
$
|
778
|
|
|
$
|
2,421
|
|
|
$
|
1,582
|
|
|
$
|
4,529
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A common stock
|
5,847,883
|
|
|
5,543,802
|
|
|
5,801,531
|
|
|
5,513,719
|
|
||||
Conversion of LLC Units and restricted LLC Units to Class A common stock
|
25,183,862
|
|
|
24,372,591
|
|
|
24,918,611
|
|
|
24,023,329
|
|
||||
Restricted stock units
|
2,333,870
|
|
|
1,873,719
|
|
|
2,025,019
|
|
|
1,678,897
|
|
||||
Pro-Forma Weighted Average Shares Outstanding
|
33,365,615
|
|
|
31,790,112
|
|
|
32,745,161
|
|
|
31,215,945
|
|
||||
Pre-Tax Core Net Income Per Share
|
$
|
0.02
|
|
|
$
|
0.08
|
|
|
$
|
0.05
|
|
|
$
|
0.15
|
|
Less: corporate income taxes per share
(1)
|
—
|
|
|
(0.03
|
)
|
|
(0.02
|
)
|
|
(0.05
|
)
|
||||
Core Net Income Per Share
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
|
$
|
0.10
|
|
(1)
|
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 the Three Months Ended
June 30, |
|
For the For the Six Months Ended
June 30, |
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Net Income Margin
|
(8.6
|
)%
|
|
—
|
%
|
|
(5.8
|
)%
|
|
(17.3
|
)%
|
Reimbursable fund startup expenses
(1)
|
0.7
|
%
|
|
2.9
|
%
|
|
1.0
|
%
|
|
3.6
|
%
|
IPO date award stock-based compensation
(1)
|
1.8
|
%
|
|
2.9
|
%
|
|
1.0
|
%
|
|
1.9
|
%
|
Expenses associated with strategic initiatives
(1)
|
8.6
|
%
|
|
6.2
|
%
|
|
5.3
|
%
|
|
6.1
|
%
|
Other non-core items:
(1)
|
|
|
|
|
|
|
|
||||
Unrealized losses on shares of MCC
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
12.0
|
%
|
Severance expense
|
4.1
|
%
|
|
2.2
|
%
|
|
4.7
|
%
|
|
7.5
|
%
|
Other
|
—
|
%
|
|
0.5
|
%
|
|
—
|
%
|
|
0.2
|
%
|
Provision for income taxes
(1)
|
(0.5
|
)%
|
|
1.3
|
%
|
|
(0.3
|
)%
|
|
1.3
|
%
|
Corporate income taxes
(2)
|
(2.0
|
)%
|
|
(5.3
|
)%
|
|
(2.0
|
)%
|
|
(5.1
|
)%
|
Core Net Income Margin
|
4.1
|
%
|
|
10.7
|
%
|
|
4.0
|
%
|
|
10.2
|
%
|
(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 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 the Six Months Ended
June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Statements of cash flows data
|
|
|
|
|
|
||
Net cash (used in) provided by operating activities
|
$
|
(1,369
|
)
|
|
$
|
7,856
|
|
Net cash provided by (used in) investing activities
|
70
|
|
|
(1,504
|
)
|
||
Net cash used in financing activities
|
(5,709
|
)
|
|
(17,817
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(7,008
|
)
|
|
$
|
(11,465
|
)
|
|
Less than
1 year
|
|
1 - 3
years
|
|
4 - 5
years
|
|
More than
5 years
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Medley Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating lease obligations
(1)
|
$
|
2,751
|
|
|
$
|
5,162
|
|
|
$
|
3,042
|
|
|
$
|
—
|
|
|
$
|
10,955
|
|
Loans payable
(2)
|
10,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|||||
Senior unsecured debt
(3)
|
—
|
|
|
—
|
|
|
69,000
|
|
|
53,595
|
|
|
122,595
|
|
|||||
Payable to former minority interest holder of SIC Advisors LLC (Note 10)
|
3,500
|
|
|
7,000
|
|
|
875
|
|
|
—
|
|
|
11,375
|
|
|||||
Revenue share payable
|
1,146
|
|
|
1,481
|
|
|
—
|
|
|
—
|
|
|
2,627
|
|
|||||
Capital commitments to funds
(4)
|
256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256
|
|
|||||
Total
|
$
|
17,653
|
|
|
$
|
13,643
|
|
|
$
|
72,917
|
|
|
$
|
53,595
|
|
|
$
|
157,808
|
|
(1)
|
We lease office space in New York and San Francisco under non-cancelable lease agreements. The amounts in this table represent the minimum lease payments required over the term of the lease, and include operating leases for office equipment.
|
(2)
|
We have included all loans described in Note 9, “
Loans Payable
,” to our unaudited condensed consolidated financial statements included in this Form 10-Q.
|
(3)
|
We have included all our obligations described in Note 8, “
Senior Unsecured Debt
,” to our unaudited condensed consolidated financial statements included in this Form 10-Q. In addition to the principal amounts above, the Company is required to make quarterly interest payments of $1.2 million related to our 2024 Notes and $0.9 million related to our 2026 Notes.
|
(4)
|
Represents equity commitments by us to certain long-dated private funds managed by us. These amounts are generally due on demand and are therefore presented in the less than one year category.
|
•
|
whether the fund is near final liquidation
|
•
|
whether the fair value of the remaining assets in the fund is significantly in excess of the threshold at which the Company would earn an incentive fee
|
•
|
the probability of significant fluctuations in the fair value of the remaining assets
|
•
|
the SMA’s remaining investments are under contract for sale with contractual purchase prices that would result in no clawback and it is highly likely that the contracts will be consummated
|
•
|
our business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the MDLY Merger, without realizing any of the anticipated benefits of completing the MDLY Merger;
|
•
|
the market price of our Class A common stock may decline to the extent that the market price prior to termination reflects a market assumption that the MDLY Merger will be completed;
|
•
|
in the case of the Company, it may not be able to find a party willing to pay an equivalent or more attractive price than the price we have agreed to pay in the MDLY Merger; and
|
•
|
the payment of any termination fee, if required under the circumstances, could adversely affect our financial condition and liquidity.
|
Exhibit No.
|
|
Exhibit Description
|
|
|
|
2.1
|
|
|
|
|
|
2.2
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
4.1
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4.2
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4.3
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4.4
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4.5
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10.1
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10.2
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10.3
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31.1*
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31.2*
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31.3*
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32.1**
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32.2**
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32.3**
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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MEDLEY MANAGEMENT INC.
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(Registrant)
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Date: August 14, 2019
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By:
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/s/ Richard T. Allorto, Jr.
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Richard T. Allorto, Jr.
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Chief Financial Officer
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(Principal Financial Officer and Authorized Signatory)
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1 Year Medley Management Chart |
1 Month Medley Management Chart |
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