Medley Management Inc. (NYSE: MDLY) Investor Presentation Quarter ended June 30, 2016
Important Notice to Investors This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1 934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation due to the impact of many factors beyond the control of Medley Management Inc., including those listed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and our other filings with the Securities and Exchange Commission (“SEC”). Any such forward -looking statements are made pursuant to the safe harbor provisions available under applicable securities laws and Medley Management Inc.’s assumes no obligation to update or revise any such forward -looking statements except as required by law. Certain information discussed in this presentation (including information relating to portfolio companies) was derived from third party sources and has not been independently verified and, accordingly, the Company makes no representation or warranty in respect of this information. The following slides contain summaries of certain financial and statistical information about Medley Management Inc. The information contained in this presentation is summary information that is intended to be considered in the context of our SEC filings and other public announcements that we may make, by press release or otherwise, from time to time. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of Medley Management Inc., or information about the market, as indicative of Medley Management Inc.’s future results. This presentation does not constitute an offer to sell or the solicitation of an offer to b uy any securities of Medley Management Inc. This presentation includes certain non-GAAP financial measures, including Core Net Income, Core EBITDA, Core Net Income Per Share, Pre-Tax Core Net Income per Share, Pre-Tax Core Net Income Margin, Core Net Income Margin and Pro-Forma Weighted Average Shares Outstanding. These measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the appendix of this presentation for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with U.S. GAAP. 2
Table of Contents 1. Overview 4 2. Market Opportunity 11 3. Investment Process 16 4. Overview of funds 19 5. Financial Performance 23 6. Appendix 30 3
OVERVIEW 4
Overview of Medley Management Inc. Medley Management Inc. (“Medley” or “MDLY”) is a credit -focused asset • management firm with over $5.0 billion of assets under management (“AUM”) – Asset Manager offering yield-oriented investment products – 51% of AUM in permanent capital vehicles Key differentiators supporting growth • – Broad institutional and retail distribution – Direct origination franchise focused on middle market lending – Principals in their 14 th year of investing in middle market credit as a team – Scalable platform 5
Medley's Assets Under Management Senior team has worked together for 14 years executing a consistent strategy • Significant investment in people and infrastructure to support growth • Experienced group of over 40 investment professionals • Broad employee ownership creates alignment with public shareholders • MEDLEY (NYSE: MDLY) $5.0 Billion of AUM Permanent Capital Vehicles Institutional Capital Medley Capital Sierra Income Long-Dated Funds and Corporation Corporation Separately Managed Accounts (NYSE: MCC) (“SIC”) Medley Publicly- Public non- Opportunity SMAs traded BDC traded BDC Funds 6
Medley’s Historical Growth Profile Over $5.0 billion of AUM not subject to traditional outflows • • Increasing institutional and retail distribution • • With significant dry powder, we expect growth in FEAUM over time • • AUM Fee Earning AUM $5.0 $3.3 $4.8 $3.2 $3.1 $3.7 $2.0 $2.3 $1.5 $1.2 $1.8 $0.9 $1.3 $1.0 2010 2011 2012 2013 2014 2015 2Q 2016 2010 2011 2012 2013 2014 2015 2Q 2016 MCC SIC Institutional Capital MCC SIC Institutional Capital Note: Metrics in billions of USD. 7
Portfolio Summary Investment Type Breakout Floating vs. Fixed Rate 2% 1% 3% 17% First Lien 22% Second Lien Mezzanine Floating Holdco Notes Fixed Equity 72% 83% Industry Breakout Medley Investments by Geography Banking, Finance, Insurance & Real Estate 7% 14% Services: Business 2% 2% Automotive 2% Construction & Building 3% Healthcare & Pharmaceuticals 19% 28% 22% 3% Energy: Oil & gas Hotels, Gaming & Leisure 3% 13% High Tech Industries 3% Aerospace and Defense 16% Retail 3% 23.8 Beverage & Food 15% 4% Telecommunications 9% % Chemicals, Plastics and Rubber 5% Containers, Packaging and Glass Capital Equipment 5% Media: Advertising, Printing & Publishing 9% Consumer Goods: Non-Durable 5% 8% Other Note: Portfolio summary represents total committed amounts as of 6/30/2016 and represents assets in all investment vehicles including TRS and SLS assets. In addition, non-U.S. investments comprise approximately 1% of Medley’s overall investment portfolio. 8
Quarterly Financial Results of Operations Fee Earning AUM (1) AUM $6,000 $6,000 0% $4,500 $4,500 0% $3,000 $3,000 $5,012 $5,025 $3,169 $3,158 $1,500 $1,500 $- $- 3/31/2016 6/30/2016 3/31/2016 6/30/2016 Pre-Tax Core Net Income Margin Pre-Tax Core Net Income Per Share 80.0% $0.50 60.0% $0.38 9% 40.0% $0.25 20.0% $0.13 38.5% $0.24 34.9% $0.22 – $- 3/31/2016 6/30/2016 3/31/2016 6/30/2016 Core Net Income Margin (2) Core Net Income Per Share (2) 50.0% $0.35 37.5% $0.26 8% 25.0% $0.18 12.5% $0.09 21.9% 19.9% $0.14 $0.13 – $- 3/31/2016 6/30/2016 3/31/2016 6/30/2016 Note: Metrics in millions of USD, except per share data. 1. “Fee earning AUM” refers to AUM on which we directly earn base management fees. 2. Assumes that all our pre-tax earnings are subject to federal, state and local income taxes at a combined effective tax rate of 43.0%. 9
Results of Operations (Ex Net Performance Fees) (1) LTM Core EBITDA excluding net performance fees has generally tracked AUM over • time $60 $12,000 Annualized Growth: Core $50 $10,000 $49.0 EBITDA $47.8 $46.2 $45.2 21% $42.4 $40.0 $40.1 $40 $8,000 AUM $34.0 $31.1 37% $29.3 $30 $6,000 $5,012 $5,025 $4,779 $24.6 $4,002 $4,017 $3,924 $3,682 $3,635 $20 $4,000 $3,318 $2,602 $2,283 $10 $2,000 $- $- FY13 1Q14 LTM 2Q14 LTM 3Q14 LTM FY14 1Q15 LTM 2Q15 LTM 3Q15 LTM FY15 1Q16 LTM 2Q16 LTM Core EBITDA Ex Performance Fees (1) AUM Note: Metrics in millions of USD. 1. Excludes performance fees and related expenses. 10
MARKET OPPORTUNITY 11
Middle Market Opportunity – Large Target Market Standalone US middle market would rank as the 3rd largest global economy • Private equity dry powder continues to be elevated at all-time highs • Top GDPs 1 Revenue: $16.8 $500M - $1B $9.2 $6.7 $4.9 $3.6 $2.7 $2.5 $2.2 United States China US Middle Market Japan Germany France UK Brazil Revenue: $50M - $500M Private Equity Dry Powder 2 $1,000 $818 $745 $800 $685 $687 $674 $638 $622 $604 $593 $560 $531 $600 $400 $200 $- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q16 1. International Monetary Fund, World Economic Outlook Database, June 2014. Metrics in trillions of USD. 2. Preqin Private Debt Q2 2016 Quarterly Update. Metrics in billions of USD. 12
Powerful Secular Trends Banks continue to shift toward large borrowers • Regulatory environment is a headwind for banks in the middle-market • 11,000 80% U.S. FDIC Insured Commercial Banks¹ Bank Participation in Levered Loan Market (%)² 70% 10,000 60% 9,000 50% 8,000 40% 30% 7,000 20% 6,000 10% 5,000 0% 1. Federal Deposit Insurance Corporation, represents number of commercial banking institutions insured by the FDIC as of 12/31/2015. 2. S&P LCD’s Leveraged Lending Review – 4Q15. 13
Alternatives Represent a Growing Segment By 2020: • – $102 trillion global AUM – $13 trillion invested in alternatives (over 85% growth from 2014 levels) Retail Growing as a % of Alternative Investments: • – By 2020, retail expected to account for 31% ($4 trillion) of alternatives – $2 trillion increase from 2014 Alternative Investments within Retail Investments within Total Investments Alternative Investments $120 $13T $14 $102T $100 $12 $13T 13% $4T $74T $80 $10 $59T $7T $7T $8 $60 9% $5T $6 $5T $2T $40 $4 $1T 8% $20 $2 $- $- 2007 2014 2020 2007 2014 2020 All Other Alternative Investments All Other Retail Notes: Metrics in trillions of USD. Source: Based on BCG, Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence, July 2015. Preqin, Preqin Investor Outlook: Alternative Assets H1 2015. PWC Asset Management 2020, A Brave New World, June 2015. McKinsey & Company, The $64 Trillion Question: Convergence in Asset Management, February 2015. 14
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