New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2014 Earnings Presentation
34 slides from New Mountain Finance's earnings presentation, Aug 7, 2014
Slide 1: Q2 2014 Earnings Presentation
Q2 2014 Earnings Presentation August 7, 2014
Slide 2: Important Notice and Safe Harbor Statement
Important Notice and Safe Harbor Statement This presentation contains forward looking statements that involve substantial risks and uncertainties. All forward-looking statements included in this presentation are made only as of the date hereof and are subject to change without notice. Actual outcome
Slide 3: Management Participants
Management Participants Robert A. Hamwee Chief Executive Officer, President and Director David M. Cordova Chief Financial Officer and Treasurer 3
Slide 4: Q2 2014 Highlights
Q2 2014 Highlights ▪ Q2 Adjusted Net Investment Income (“NII”) of $0.36 per weighted average share, versus guidance of $0.33 to $0.35 and Q1 2014 of $0.37 – Q2 regular dividend of $0.34 per share paid on June 30, 2014 ▪ June 30, 2014 book value of $14.65 per share, an increase of $0.12 per share fro
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2013 9/30/2013 12/31/2013 3/31/2014 6/30/2014 Pro Forma Adjusted NII Per Share (1) $0.38 $0.35 $0.34 $0.37 $0.36 NAV Per Share $14.32 $14.32 $14.38 $14.53 $14.65 Dividends Per Share(2) $0.34 $0.46 $0.34 $0.34 $0.34 Share Count - End of Period (m
Slide 6: Review of NMFC
Review of NMFC Overview Public Float Market Cap History ($ in millions) ▪ Founded in October 2008 to apply New Mountain $769 Capital, L.L.C.’s (“NMC” or “New Mountain”) private $680 equity strengths to attractive risk-reward opportunities in the U.S. debt markets – Externally managed Business Develo
Slide 7: NMFC Strategy
NMFC Strategy ▪ Externally managed by an affiliate of New Mountain, a leading private equity firm with more than $12 billion of assets under management(1), approximately 100 staff members, and a consistent focus on “defensive growth” business building and deep fundamental research ▪ NMFC’s mandate i
Slide 8: NMFC Relative Trading Performance – Indexed Total Return
NMFC Relative Trading Performance – Indexed Total Return May 19, 2011 (IPO) – August 4, 2014 Indexed Total Return 160.0 155.0 S&P 54.6% NMFC 50.5% 150.0 S&P Fin 49.2% 145.0 140.0 135.0 130.0 HY 27.6% 125.0 BDCs 23.2% 120.0 115.0 110.0 105.0 100.0 CAGR (IPO to 8/4/2014) 95.0 NMFC 13.6% 90.0 S&P 500 1
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $5.84 $0.54 $2.17 $0.57 $0.46 $0.49 $1.80 $0.32 $0.37 $0.12 $0.95 $0.38 $4.24 $0.27 $1.34 $1.36 $0.86 $0.68 ($0.48) Cumulative IPO to 12/31/11(1) 2012 2013 YTD 2014 (IPO to 6/30/14)(1) Regular Dividends Special Dividend ∆ in Book Value Trading Multiple Expansion
Slide 10: Credit Market Conditions
Credit Market Conditions ▪ Credit spreads have continued to contract modestly, although the last few weeks have brought a significant increase in volatility – Record CLO issuance – Offset by meaningful fund outflows – Long-term rates remain stable, although enhanced uncertainty about timing of ultim
Slide 11: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,279.5 million as of June 30, 2014)(1) ($568.1 million drawn as of June 30, 2014) Fixed Fixed 12% 20% Floating – No Floor Floating – Floor(2) (1-Month Libor) 88% 80% Impact of Changing Rates(3)
Slide 12: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2014 (October 2008 – June 30, 2014) Cost / FMV Cost / # Portfolio Co’s Investments $1,282.5 / $1,310.9 $2,677.0 / 139 of which of which Internal Watch List (3 or 4 Rating)(2) $16.9 / $11.7 $25.4 / 3 of which of which Non-Acc
Slide 13: Credit Performance – Non-70% Advance Rate Assets
Credit Performance – Non-70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company A 0.9x 0.6x 0.3x Company B 4.9x 4.9x - Company C 5.9x 5.8x 0.1x Company D 5.7x 5.2x 0.4x Company E 1.2x 1.2x - Company F 5.6x 4.9x 0.7x Company G
Slide 14: Credit Performance – 70% Advance Rate Assets
Credit Performance – 70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company AI 3.8x 4.4x (0.6x) Company AJ 3.8x 3.1x 0.7x Company AK 3.8x 3.4x 0.4x Company AL 5.3x 5.3x - Company AM 3.1x 2.7x 0.4x Company AN 3.6x 3.6x - Compan
Slide 15: Special Dividend – Learning Care Group (LCG)
Special Dividend – Learning Care Group (“LCG”) ▪ NMFC invested into the subordinated debt of LCG, the second largest for-profit child care provider in North America, in April 2010 and again in February 2013 – We received penny warrants in connection with these investments representing in total ~2% o
Slide 16: SBIC Process
SBIC Process ▪ On August 1, 2014, we received approval for a license from the United States Small Business Administration ("SBA") to operate as a Small Business Investment Company ("SBIC") – Allows the SBIC subsidiary to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance o
Slide 17: Senior Loan Program
Senior Loan Program (“SLP”) ▪ In June 2014, NMFC along with two third parties formed SLP I, a $368 million leveraged loan fund for the purpose of investing in senior secured loans – Stand-alone entity (not consolidated by the BDC) managed by NMFC in exchange for management fees – Capitalized with mi
Slide 18: Performance Since IPO
Performance Since IPO ($ in millions) IPO - 2014 (1) 12/31/2011 2012 2013 3/31/2014 6/30/2014 Regular Dividend $26.6 $46.6 $59.8 $16.3 $17.7 Cumulative Regular Dividend 26.6 73.2 133.0 149.2 166.9 (2) Adj. NII 26.5 46.1 62.1 (2) 17.6 18.5 Cumulative Adj. NII 26.5 72.7 134.8 152.4 170.9 Dividend Cove
Slide 19: Q2 Originations
Q2 Originations ($ in millions) Portfolio Originations(1) Amount YTM at Purchase(4) ($’s Type of Advance Date(2) Name Industry Invested) Tranche Size Investment Rate(3) Unlevered Levered 4/3/14 Business Services $14.9 $200 2nd Lien 25% 11.4% 13.6% 5/2/14 Education $9.4 $320 1st Lien 70% 7.1% 14.4% 5
Slide 20: Origination Activity Since Quarter End (Through 8/4/14)
Origination Activity Since Quarter End (Through 8/4/14) ($ in millions) Portfolio Originations(1) YTM at Purchase(4) Amount Type of Advance Date(2) Name Industry ($’s Invested) Tranche Size Investment Rate(3) Unlevered Levered Business 7/3/14 $20.0 $20 Subordinated SBIC 17.0% 40.2% Services 7/18/14
Slide 21: Q2 Originations and Repayments
Q2 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Common Common (3) Subordinated Equity and Other Equity and Other Subordinated Debt 70% Advance Rate 70% Advance Rate 2% Debt 1% 9% (2) (2) First Lien Debt First Lien Debt 22% 18% 23% Second 30% Lien Debt 7% SLP 30%
Slide 22: Q2 Investment Activity Roll
Q2 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.9% 10.9% 10.7% 10.7% 10.1% 3/31/2014 3/31/2014 Q2 Originations Q2 Sales / 6/30/2014 PF for Change Repayments(4) in LIBOR Curve Cost ($mm)(3) $1,153.8 $1,153.8 $158.3 $31.0 $1,282.5 1 Assumes that investments are purchased at adjusted cost (
Slide 23: Portfolio Mix (By Fair Value as of 6/30/14)
Portfolio Mix (By Fair Value as of 6/30/14) By Industry Other(1) Media 3% 5% Federal Services 7% Energy Education 9% 20% Distribution & Logistics - 9% Software 19% HC IT - 1% Healthcare HC Products - 3% 12% Services 16% HC Services - 8% Industrial Svcs Business Svcs 1% Consumer Svcs 14% 1% By Type o
Slide 24: Portfolio Concentration (By Fair Value as of 6/30/14)
Portfolio Concentration (By Fair Value as of 6/30/14) Portfolio Names By Fair Value Global Knowledge 3.5% McGraw-Hill Global 3.3% Tenawa 3.2% Deltek 3.2% Novell 3.1% Top 15 portfolio Ascend Learning 3.1% companies Kronos 3.0% represent $570.6 52 Other UniTek 2.9% million, or 43.5%, Portfolio Compani
Slide 25: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per unit/share data) 6/30/2013 9/30/2013 12/31/2013 3/31/2014 6/30/2014 Assets Portfolio $1,059.0 $1,041.4 $1,115.7 $1,180.2 $1,310.9 Cash & Equivalents 15.9 17.6 15.0 13.3 21.7 (1) Other Assets 19.5 18.3 17.1 25.9 25.5 Total Assets $1,09
Slide 26: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $15.14 $15.20 $15.02 $14.81 $14.87 $14.80 $14.68 $14.69 $14.43 $14.33 $14.65 $14.40 $14.53 $14.06 $14.38 $14.31 $14.32 $14.32 $14.00 $14.08 (1) $14.10 $13.98 $14.06 (2) $13.60 $13.82 $13.83 NAV per Share (as Reported) $13.60 $13.20 $13.32 NAV +
Slide 27: Income Statement Highlights
Income Statement Highlights (1) Quarter Ended - Pro Forma Adjusted ($ in millions, except per unit/share data) 6/30/2013 9/30/2013 12/31/2013 3/31/2014 6/30/2014 Investment Income Interest income $27.1 $27.1 $27.4 $28.1 $31.6 Dividend income – 0.2 0.0 1.9 1.3 Other income 1.4 0.2 0.9 0.7 0.8 Total i
Slide 28: Investment Income Detail
Investment Income Detail (1) Quarter Ended - Pro Forma Adjusted ($ in millions) 6/30/2013 9/30/2013 12/31/2013 3/31/2014 6/30/2014 Investment Income Build Cash interest $23.4 $24.4 $24.3 $26.3 $28.4 Non-cash interest 0.9 0.8 1.0 0.8 0.6 Amortization of purchase discounts (premiums) and fees 0.6 0.7
Slide 29: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2014 Adjusted NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a third quarter dividend of $0.34 per share. $0.80 114% 120% 108% 103% 103% 105% $0.70 101% 100% 100% 100% 98% 99% 99% 95% 100% $0.60 $0.57 80% $0.50 $
Slide 30: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/14, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Holdings Credit Facility $238 / $280 L + 2.75% October 2016 (No LIBOR floor) SLF Credit Facility $215 / $215 1st Lien: L + 2.00% October 2016 2nd Lien: L + 2.75% (No LIBOR floor) NMF
Slide 31: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administration Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 32: New Mountain Finance Corporation
NIM|F NEw MOUNTAIN FINANCE CORPORATION
Slide 33: Appendix A: NMFC Pro-Forma Adjusted NII Reconciliation
Appendix A: NMFC Pro-Forma Adjusted NII Reconciliation ($ in millions except per share data) Three months ended Six months ended (4) June 30, 2014 June 30, 2014 Per Weighted Per Weighted Amount Average Share Amount Average Share GAAP net investment income ("NII") $17.3 $0.34 $33.3 $0.68 Non-cash cap
Slide 34: Appendix B: Structure Chart
Appendix B: Structure Chart Public Concurrent Shareholders Private Placement New Mountain Finance Investments New Mountain Corporation NMFC Credit Facility Finance SBIC, (“NMFC”) Convertible Notes L.P. 100% Investments SBIC Debentures New Mountain Finance Holdings, L.L.C. (“NMFH”) Investments 100% H