CIFC LLC : Announces Second Quarter of 2016 Results

NEW YORK, August 15, 2016 - CIFC LLC (NASDAQ: CIFC) ('CIFC' or the 'Company') today announced its results for the second quarter ended June 30, 2016.

Highlights

• GAAP net income (loss) for the six months was $22.1 million as compared to $6.5 million for the same period in the prior year. GAAP net income (loss) for the quarter was $17.6 million as compared to $1.1 million for the same period in the prior year.

• Economic Net Income 'ENI', a non-GAAP measure, for the six months was $27.6 million as compared to $22.6 million for the same period in the prior year. ENI for the quarter was $20.6 million as compared to $11.5 million for the same period in the prior year.

• Fee Earning AUM was $13.6 billion as of June 30, 2016, as compared to $14.1 billion as of December 31, 2015 and $14.0 billion as of June 30, 2015.

Executive Overview

The second quarter saw a strong recovery in risk assets. Both the U.S. high yield and leveraged loan markets performed strongly, driven by higher commodity prices and increased investor risk appetites. Our Credit Funds recorded strong inflows, pushing Credit Fund AUM to $1.4 billion across 15 co-mingled funds and separately managed accounts. Net investment income during the second quarter grew to $15.3 million. Incentive fees also recorded strong growth year-over-year, totaling $7.9 million in the second quarter. For the first six months of the year, net investment income and incentive fees stood at $20.2 million and $12.1 million, respectively.

The new issue CLO market continued to be challenging throughout the second quarter. As loan prices rallied, CLO liabilities lagged. As a result, prospective new issue CLO equity returns were largely uncompetitive compared to secondary market opportunities. Total issuance during the first six months of the year was limited to just 62 CLOs compared to 114 CLOs in the first half of 2015. During the month of July, we have seen a strong rally in CLO liabilities leading to a surge in issuance. We expect to see higher CLO new issue volumes in the second half of the year. Given the challenging market environment for new issue CLOs, CIFC chose not to sponsor a CLO during the first half of the year. We are currently managing two CLO warehouses which are expected to drive new issuance late in the third quarter and early in the fourth quarter. We continue to be well positioned to meet our obligations for risk retention, due to be implemented in December 2016, with more than $200 million in cash and investments on our balance sheet.

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CIFC LLC Announces Second Quarter of 2016 Results

Selected Financial Metrics

(In thousands, except per share data)

SELECTED GAAP RESULTS	2Q'16			2Q'15			% Change vs. 2Q'15	YTD'16			YTD'15			% Change vs. YTD'15
Total net revenues (1)	$	47,248		$	25,860		83%	$	86,986		$	52,837		65%
Total expenses (1)	$	30,726		$	17,470		76%	$	59,803		$	37,133		61%
Income tax expense (benefit) - Current	$	1,343		$	2,253		(40)%	$	1,306		$	5,490		(76)%
Income tax expense (benefit) - Deferred	$	1,525		$	7,575		(80)%	$	2,840		$	7,425		(62)%
Net income (loss) attributable to CIFC LLC	$	17,585		$	1,103		1,494%	$	22,089		$	6,531		238%
Earnings (loss) per share - basic	$	0.73		$	0.04		1,725%	$	0.89		$	0.26		242%
Earnings (loss) per share - diluted	$	0.68		$	0.04		1,600%	$	0.85		$	0.25		240%
Distributions declared per share	$	0.25		$	0.10		150%	$	0.59		$	0.20		195%
Weighted average shares outstanding - basic	24,096			25,302			(5)%	24,725			25,291			(2)%
Weighted average shares outstanding - diluted	25,761			26,432			(3)%	25,963			26,504			(2)%

NON-GAAP FINANCIAL MEASURES (2)	2Q'16			2Q'15			% Change vs. 2Q'15	YTD'16			YTD'15			% Change vs. YTD'15
Management Fees from CLOs	13,737			13,979			(2)%	27,679			28,939			(4)%
Management Fees from Non-CLO products	1,485			977			52%	2,671			1,838			45%
Total Management Fees	15,222			14,956			2%	30,350			30,777			(1)%
Incentive Fees	7,861			4,066			93%	12,144			8,066			51%
Net Investment Income	15,290			5,742			166%	20,182			11,850			70%
Total ENI Revenues	38,373			24,764			55%	62,676			50,693			24%
Employee compensation and benefits	9,463			7,187			32%	17,493			15,471			13%
Share-based compensation (3)	1,737			952			82%	4,144			2,628			58%
Other operating expenses	4,545			4,332			5%	9,438			8,699			8%
Corporate interest expense	1,999			800			150%	3,956			1,294			206%
Total ENI Expenses	17,744			13,271			34%	35,031			28,092			25%
ENI (2)	$	20,629		$	11,493		79%	$	27,645		$	22,601		22%
ENI per share - basic (4)	$	0.86		$	0.45		91%	$	1.12		$	0.89		26%
ENI per share - diluted (4)	$	0.80		$	0.43		86%	$	1.06		$	0.85		25%

NON-GAAP FINANCIAL MEASURES (2)	2Q'16			2Q'15			% Change vs. 2Q'15	YTD'16			YTD'15			% Change vs. YTD'15
ENI EBITDA (5)	$	22,998		$	12,642		82%	$	32,335		$	24,577		32%
ENI EBITDA Margin (6)	60		%	51		%	9%	52		%	48		%	4%
ENI Margin (6)	54		%	46		%	8%	44		%	45		%	(1)%

NON-GAAP FINANCIAL MEASURE - AUM	6/30/2016	12/31/2015	% Change vs. 12/31/15	6/30/2015	% Change vs. 6/30/15
Fee Earning AUM from loan-based products (7)	$13,617,299	$14,055,487	(3)%	$14,007,339	(3)%

Explanatory Notes:

• Prior year amounts have been re-presented to conform to current period presentation, including the Company's adoption of Accounting Standard Update 'ASU' 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis ('ASU 2015-02'). The guidance was adopted on a modified retroactive basis. As such, prior year amounts have been re-presented to reflect the deconsolidation of 30 CLOs and 1 credit fund as of January 1, 2015.
• See Appendix for a detailed description of these non-GAAP measures and reconciliations from GAAP net income (loss) attributable to the Company to non-GAAP measures.
• Share-based compensation includes equity award amortization expense for both employees and directors of the Company.
• GAAP weighted average shares outstanding is used to calculate ENI per share - basic and diluted.
• ENI EBITDA is ENI before corporate interest expense and depreciation of fixed assets. See Appendix.
• ENI EBITDA Margin is ENI EBITDA divided by Total ENI Revenue. ENI Margin is ENI divided by Total ENI Revenue.
• Amount excludes Fee Earning AUM attributable to non-core products of $525.0 million, $592.8 million and $643.3 million as of June 30, 2016, December 31, 2015 and June 30, 2015, respectively. Fee Earning AUM attributable to non-core products is expected to continue to decline as these funds run-off per their contractual terms.

Second Quarter Overview

CIFC reported GAAP net income attributable to the Company of $17.6 million for the second quarter of 2016, as compared to net income of $1.1 million in the same period of the prior year. GAAP operating results increased quarter over quarter by $16.5 million, primarily due to higher revenues from (i) unrealized gains as the Company held more investments period over period and the increase in market value of loans and CLO securities were higher period over period and (ii) incentive fees from the call of a CLO and a credit fund. In addition, income tax expenses decreased by $7.0 million as a result of the Company being taxed as a partnership in 2016. Offsetting these increases were higher (i) accrued employee compensation expenses as a result of better performance year over year, (ii) stock-based compensation from the amortization of equity awards granted since the third quarter of 2015 and (iii) corporate interest expense predominately related to the issuance of $40.0 million unsecured senior notes in November 2015 and a change in the stated rate of the March Junior Subordinated Notes.

CIFC reported ENI of $20.6 million for the second quarter of 2016, as compared to $11.5 million for the same period in the prior year. ENI increased quarter over quarter by $9.1 million, or 79%, primarily due to pre-tax increases noted above. See the Non-GAAP Financial Measures section of the Appendix for a reconciliation between GAAP and Non-GAAP ENI.

Fee Earning AUM

The following table summarizes Fee Earning AUM for the Company's loan-based products:

		June 30, 2016							December 31, 2015							June 30, 2015
(in thousands, except # of Accounts) (1)(2)		# of Accounts			Fee Earning AUM				# of Accounts			Fee Earning AUM				# of Accounts			Fee Earning AUM
Post 2011 CLOs		18			$	9,809,980			18			$	9,860,519			15			$	8,457,581
Legacy CLOs (3)		9			1,897,208				10			2,559,066				15			4,016,596
Total CLOs		27			11,707,188				28			12,419,585				30			12,474,177
Credit Funds (4)		15			1,367,871				12			1,062,712				9			884,713
Other Loan-Based Products (4)		2			542,240				2			573,190				2			648,449
Total Non-CLOs (4)		17			$	1,910,111			14			$	1,635,902			11			$	1,533,162
AUM from loan-based products		44			$	13,617,299			42			$	14,055,487			41			$	14,007,339

Explanatory Notes:

• Table excludes Fee Earning AUM attributable to non-core products of $525.0 million, $592.8 million and $643.3 million as of June 30, 2016, December 31, 2015 and June 30, 2015, respectively. Fee Earning AUM attributable to non-core products is expected to continue to decline as these funds run-off per their contractual terms.
• Fee Earning AUM is based on the latest available monthly report issued by the trustee or fund administrator prior to the end of the period, and may not tie back to the Consolidated GAAP financial statements.
• Legacy CLOs represent all managed CLOs issued prior to 2011, including CLOs acquired since 2011 but issued prior to 2011.
• Management fees for Non-CLO products vary by fund and may not be similar to a CLO.

Since 2012, CIFC has raised $11.6 billion of new AUM through organic growth (i.e. excluding mergers and acquisition related transactions) which has more than offset the run-off from Legacy CLOs (including acquired CLOs). Our Legacy CLO AUM of $1.9 billion is less than a fifth of our total CLO AUM of $11.7 billion, and we anticipate it will run off over the next three years.

Total loan-based Fee Earning AUM activity for the periods below are as follows ($ in thousands):

		2Q'16				YTD'15				LTM 2Q'15
Opening AUM Balance		$	13,955,639			$	14,055,487			$	14,007,339
CLO New Issuances		-				-				1,499,709
CLO Paydowns		(519,708		)		(709,969		)		(2,265,737		)
Net Subscriptions to Credit Funds		192,194				267,309				451,210
Net Redemptions from Other Loan-Based Products		(21,466		)		(30,949		)		(106,208		)
Other (1)		10,640				35,421				30,986
Ending AUM Balance		$	13,617,299			$	13,617,299			$	13,617,299

Explanatory Note:

• Includes changes in collateral balances of CLOs between periods and market value or portfolio value changes in certain Non-CLO products.