MDLY - Earnings call transcript Q4 2017

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Operator

Welcome and thank you for joining Medley Management Incorporated Fourth Quarter and Year-End 2017 Conference Call. Today’s call is being recorded. Please note that this call is the property of Medley Management Incorporated and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and PIN provided in the Company’s earnings press release. At this time, all participants are in a listen-only mode, but will be prompted for a question-and-answer session following the prepared remarks.

is CEO today CFO. Rick call the Brook and Taube, Allorto, On

the could that regarding historical constitute the reason from update would call differ The are law. a to customary to in its undertake a attention results in Company forward-looking recent Company’s may begins, SEC. may forward-looking than such Safe any with statement other risks does press to disclosure most filings by Before and disclosed the materially subject your note include like expressed forward-looking for the call projections, today’s forward-looking any Please those information. by the statements forward-looking those And call fact Company’s not required statements to Harbor and Company of Company’s conference the Any release actual which statement. statement the statements as unless uncertainties.

will Generally prepared measure including accordance income under certain call, these performance, of as conference to a liquidity. non-GAAP refer as this net core and measures These pre-tax substitute not measure measures, financial Accepted The management, Accounting per or income the as be considered Company for During from not share. should uses assets earning core Company fee measures the in operating with Principles. isolation a of in net

www.mdly.com. Taube. the the and by to XXXX In measures addition, available release comparable posted the these for reconciliations companies. XX-K Please other like similarly used Company the presentation, to The measures quarter Investor comparable refer Company’s I Management, which to section measures Mr. be to directly now in has of over turn may measures. earnings Form not definitions titled Relations GAAP most would Medley call Incorporated of investor website to these and at fourth is its

Brook Taube

On core on This net February approved of shareholders March December XXXX Core results share $X.XX. Thank Medley’s paid Company��s income XX. the and quarter for Directors per $X.XX February net share XXXX, the dividend XXst. quarter that for income X, quarter was the on ending you announced per call. and was share fiscal everyone X, to financial Board $X.XX. welcome we The year record morning, of was fourth of for operator, the year-end to per our a

ended fee Our end. total at quarter $X.X AUM at AUM billion, quarter the $X.X our billion earning was

continue building on our private from see to remain demand the five long-dated around investors. continue both solutions We our do at and focused managed across combination investing separately yield permanent for capital and the institutional business We of accounts our vehicles, to funds, disciplines. retail

our the now Sierra different stages an remains product Our have effort of In we in to brand well three funds expand Sierra channel. established at retail development. offerings,

in had billion Our fund fee to offering feedback capital continues AUM Corporation Sierra Sierra year corporate continue flagship make Sierra-branded Return and ahead. the Total the on we’re XXXX. to to into $X.X forward end. expect receive favorable SEC launch dealer Sierra we do been raise distribution interval in we funds the to to options product, channel in focused Fund, continues that interval Fund structure broker and inroads our the earning at quarters the it had reporting in and Opportunity latter We STRF on evaluating half look for by reviewed of the and generally. growth Income credit currently

Sierra fourth Estate Real During fourth quarter, we Sierra-branded filed product, Fund. the our

and through to both this real in public estate provide expect XXXX private exposure asset this vehicle investors launch vehicle will investments. diversified with We retail to and

year. next private loans fund we we this On a launch the institutional managed side, Sierra later pipeline of expect to demand and have for accounts targeting our

expansion of over continued for team asset to alternative to important expand management the are the platform. channels I’d institutional products call our update capital give further strategy. we and capabilities on like you investment our turn steps in as raise grow and in and Rick the to to be are diversify and our structured This on quick financials. continue to a and discussions retail We our both finance structure active finance

Rick Allorto

Brook. you, Thank

compared Our The XXXX. of in $X.X of administrative other XXXX quarter for compared general, in in unfavorable XXXX. in results same ended three months fees, XX, compared revenues due $X.X $X.X during million versus other $XX.X million December $X.X period follows. for and XXXX. XXXX by from of fees $XX.X million months decreased Pre-tax period $X.XX compared compensation by income. performance with were for decrease This share operations $XX.X the December $X.XX the Total for XXXX. $X.X million increase XX, Revenues the Other million consisted revenues net million EBITDA and to the the million the $X.X in dividend million three million primarily of and was increase by a quarter same and revenue to other fourth in in ended net benefits of other primarily Core was increase due million a were to increase to $X.X per Total million performance fees, months three a $X.X same $X.X in $X.X net of to in $X.X million the expenses. million offset December offset increase as expenses were ended fees. for $X.X fourth partially for $X.X million to due to XXXX. and $X.X million increase income primarily an management in the partially in management fees. net was was Core was to XX, $XX.X expense expense core the million period variance decrease XXXX. The million million of income a compared was income

in fees. follows. $XX.X administrative to net Total by $XX.X year income for to That primarily versus turn over decrease I'll XXXX. the $X.X to decrease decreased net call fees million a by a to million XXXX. in or $XX million to operation and income decreased Core million million or million XX.X% Core other XXXX my $XX.X -- XXXX. the general, $X.X by from to year-ended per and in the share a offset Total $X.X an $XX.X by million XX.X to results for to partially million This million expenses. the and review XXXX. ended other decreased XXXX million as $X.XX to revenue This for management EBITDA $X.XX now December compared was revenues Our by XXXX. expenses Pre-tax $XX.X million back compared for in $XX.X million decrease was due million declined, decrease XX.X% due financial to Brook. as compared concludes year-ended core were primarily decrease in $XX.X was the for $XX.X million full $XX XX,

Brook Taube

Rick. appreciate now and support we continued for any Thanks, can the open We operator questions. the call

Operator

Craig Suisse. [Operator line from Instructions] And Credit from our first of Siegenthaler the question comes

is line now open. Your

Craig Siegenthaler

rule looks be fully it this just enforced SEC. on is wondering role if you perspective? growth year fiduciary I’m business and thoughts is the your going any to the have now not from DOL now, So, shifted the to in a could impact this how

Brook Taube

coming also Total the to for as in that channel. well the We brand Look other funds. think Return Craig. Sierra it. Corporation is Thanks, positioned structured the take Sierra current or Fund appropriately the quarter within retail continues begin regulatory will do Income Sierra ticketing landscape

of call of to we’re broker I the dealer reset we what general DOL standards. not many sort back think seeing pre in

to For we a complaint I that the most think be fiduciary though be suggest and products they’re fact most appears so, to headwind. require that’ll of even not through think less combination the continued the part they’re they’re but pull products. for are roles all the do maintaining, our to the The of that of

Craig Siegenthaler

at chasing competition this a bigger wanted a I businesses more lot the cycle. attracting across IRR on of or segment? in private like see is the investing attractive the part on Sierra I And Return's capital any to Can And then you there just of of new, the public just growing the your comment seriously BDC. is follow-up know today if less deals front. but Total is how BDC,

Brook Taube

levels larger cap the permissiveness volume pressure the is an would lower partially if that respect world see structure We’ll perspective that in continuing that in from Yes, more with rising but liquid that’s our question we of market, on extent the here they occurs origination covenant we be offset on loan think to by was the XXXX, process. to than slightly to LIBOR. and front more the spreads, to be I a by good XXXX. of obviously end that Most continues at manufacturing There evidence double it look about exist.

think in also saw we I we year-over-year, significant direct quarter-over-quarter had deal market uptake. volume increase middle So, the

spreads finding have end reinvest the and We’ll flow, to capital is So, rolling I still deals we’re carefully, off. put think they’re deals the of work larger on and deal larger certainly to capital market we’re have as we been margin that seeing to the compression enough in structure. the on enough watch

Operator

And Compass the from Casey question our Alexander comes line Point. from of next

line now Your is open.

Casey Alexander

you also those a fees increases side quarter. the operating look solid fees some at than corresponding we to the both us quarter, of little and for the but There expenses. management on Can sort a was a expense on in in third increase When give drove things more management compared increase the for quarter-over-quarter what feel these on basis side?

Rick Allorto

this Sure, is Rick. Casey,

for we’d net if basis Corporation. fees, and to you’re full level. gave about incentive to onetime results in fee year, on and income including the the then approximately was largely the fees expenses These per of side, above the expect was expense. was of share income $XXX,XXX the side, a expenses the compensation QX G&A however on decline increase part And core incentive core looking XXXX Sierra QX, management On the driven $X.XX for the be in for net Income was at increase in balance XXXX run-rate by one the related expense in business

Casey Alexander

Okay. That’s drove on that like things what year-end the -- the was accruals the bonus very compensation side, Is increase? that like helpful.

Rick Allorto

A balance incentive good was related to Sierra. portion clearly the correct. to year-end was a at in then increase part once accrual, the And bonus the fees related

Casey Alexander

the how potentially leverage would to platform new And MCC different law? Medley Secondly, to I as Income for you adapt the would think, BDC it’s to Fund? you say, Sierra expect

Brook Taube

Thanks, new. Obviously, Casey. is this

market to respond. see to going going the is how We’re

no difference positive past is In view. shifted overtime. Our both we the likely to calls as prior between would impacts Sierra how over to MCC to is mentioned the for the be structure, we’ve this deals. our look borrowers, we’ve in at two it years larger carefully cases, expect years larger on versus three There that view to

that at the that extent higher benefit at would expect I EBITDA expansion. we the we’ve are remaining limits both more leverage legacy pathway work the time, to of portfolio MCC, larger At specifically portfolio against these applicable is leverage and we at look As position we’ll to through would borrowers, from look diversification. that

Casey Alexander

would there? budget try So, time leverage expanded expect the capability of new the in advantage at some law you point to to offer take for

Brook Taube

I that’s you, thank correct, yes. believe

Operator

time, I’m Instructions] at showing [Operator no And further this questions.

Brook Taube

Thank Thanks. the next to to everyone you participating. we have speaking you look with you on And questions. for reach here free if Feel follow-up forward call.

Operator

Ladies you and today’s have gentlemen, a this Everyone does great And disconnect. all may conclude call. day.

Medley Management (MDLM) 29 Mar 182017 Q4 Earnings call transcript