New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2021 Earnings Presentation
37 slides from New Mountain Finance's earnings presentation, Aug 5, 2021
Slide 1: Q2 2021 Earnings Presentation
Q2 2021 Earnings Presentation August 5, 2021
Slide 2: Important Notices and Safe Harbor Statement
Important Notices and Safe Harbor Statement This presentation contains forward looking statements, which are not guarantees of future performance, conditions or results, and involve substantial risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and s
Slide 3: Management Participants
Management Participants Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer and Director John R. Kline President, Chief Operating Officer, and Director Shiraz Y. Kajee Chief Financial Officer 3
Slide 4: Celebrating 10 Years as a Public Company
Celebrating 10 Years as a Public Company Thank you to all our shareholders, employees, research analysts, and financing providers. With your support since our IPO on May 19, 2011, NMFC has been able to achieve the following: 10.5% $8.4bn $1.3bn Consistent Quarterly Compounded Annual of Originations
Slide 5: Chairman’s Overview
Chairman’s Overview ▪ We believe our portfolio continues to be well positioned as a result of our defensive growth investment strategy, which focuses on acyclical, recurring, and predictable business models with long term viability, even in a recessionary environment – Since our May 6, 2021 earnings
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 Adjusted NII Per Share(1) $0.30 $0.30 $0.30 $0.30 $0.30 NAV Per Share $11.63 $12.24 $12.62 $12.85 $13.33 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.8 96.8 9
Slide 7: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 8: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q2 2021, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has generally remained unchanged from a Risk Rating standpoint in Q2 2021 from Q1 2021 – As of Q2 2021, 85% of the portfolio is characterized as Green (flat from 85% in Q1 2021) – Red Risk Rated companies remained unchanged – 65% of Orange Risk
Slide 10: Risk Rating Migration from Q1 2021
NMFC Portfolio – Risk Rating Migration from Q1 2021 (FMV as of 6/30/21) ($ in millions / company count) Overall Company Strength (A = Best; C = Worst) Benevis $101 C Retail Healthcare $6 / 1 Specialty Chemicals $32 / 1 B Education $21 / 1 A ** Excludes Green to Green Migration ** Tier 4 Tier 3 Tier
Slide 11: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 6/30/21) ($ in millions) $35 / 2 $187 / 3 $88 / 3 $67 / 4 Overall Company Strength (A = Best; C = Worst) Permian $33 1 C National HME $29. . Benevis $101.. Specialty Chemicals $32 / 1 Education Products $18 / 1 Retail Healthcare $
Slide 12: NAV Update
NAV Update ($ in millions, except per share data) Impact of Market Recovery Impact of Assets Illustrative Impact to & Equity Gains Recovering to Par NAV Cumulative NAV / Share: $13.65 NAV Impact: $30.8m A 10% change in the $13.65 $13.33 $0.32 FMV of Red Risk 2021 YTD Rating, Restructured & NAV Recov
Slide 13: Edmentum Update
Edmentum Update ▪ Edmentum, Inc. (“Edmentum” or the “Company”) is a leading provider of K-12 online learning programs ▪ NMFC has been a minority owner in Edmentum since the restructuring in 2015, assisting in the significant turnaround in performance ▪ In December 2020, The Vistria Group acquired a
Slide 14: Leverage Migration
Leverage Migration ($ in millions) 3/31/21 6/30/21 Statutory Debt: Statutory Debt: $1,471.2 $68.4 $1,539.6 NAV: NAV: $1,244.3 $47.8 $1,292.1 Primarily driven by equity gains ÷ in Edmentum and Net Lease Sources Uses ÷ Q2 2021 Settled Debt Drawn $68.4 87.1 Originations Q1 2021 Settled Statutory Q2 2
Slide 15: Credit Market Conditions
Credit Market Conditions ▪ Credit market conditions continue to remain very healthy ▪ Deal volume in our core direct lending market has meaningfully increased, as companies within most industries have good access to capital ▪ Secondary trading levels in corporate credit have returned to pre-COVID le
Slide 16: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,547 million as of 6/30/2021) (1) ($1,839 million drawn as of 6/30/2021) Fixed 8% Fixed(2) Floating 55% 45% Floating 92% Impact of Changing Rates(3) Estimated % Change in Interest Income Illustrat
Slide 17: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2021 (October 2008 – June 30, 2021) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,065 / $3,100 / 101 $8,413 / 302 of which of which Internal Watch List $286 / $170 / 10 $647 / 20 (3 or 4 Rating)(2) of
Slide 18: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2019) 8.9x 5.3x 3.6x Company A
Slide 19: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $120.1 $58.1 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 816.0 874.1 Adj.
Slide 20: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – August 2, 2021 Indexed Total Return 410.0 S&P 301.6% CAGR (IPO to 8/2/2021) 390.0 NMFC 10.5% 370.0 S&P 500 14.6% 350.0 S&P 500 Financials 13.0% S&P Fin 247.1% CS High Yield Index 6.2% 330.0 BDC Index 4.8% 310.0 290.0 NMFC 1
Slide 21: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – August 2, 2021 212.4% 176.7% 142.7% 126.1% 88.1% 76.1% 47.1% 30.9% 20.8% 15.6% (55.5%) Peer A ARCC NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, ext
Slide 22: Q2 2021 Originations
Q2 2021 Originations Portfolio Originations(1) YTM at Purchase(4) ($ in millions) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 4/6/21 Diligent Software $9.9 $415 Preferred N/A 11.3% 11.3% 4/16/21 Calabrio Software $12.3 $375 First Lien
Slide 23: Origination Activity Since Quarter End
Origination Activity Since Quarter End (Through 8/2/2021) Portfolio Originations(1) YTM at Purchase(4) ($ in millions) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Business 7/2/21 Associa $29.9 $810 First Lien 70.0% 8.0% 16.6% Services
Slide 24: Portfolio Activity & Mix by Type of Investment
Portfolio Activity & Mix by Type of Investment Q2 2021 Q2 2021 Total Portfolio Originations by Type(1) Sales / Repayments by Type(1) (FMV as of 6/30/2021) Preferred Equity Common Equity 6% and Other 5% Subordinated Debt Preferred First 1% Equity Lien Debt Second 21% 30% Lien Second Second 3% First L
Slide 25: Q2 2021 Investment Activity Roll
Q2 2021 Investment Activity Roll YTM at Cost(1) / Purchase(2) 9.5% 9.5% 8.8% 8.7% 8.8% 3/31/2021 3/31/2021 Q2 Originations Q2 Sales / 6/30/2021 Repayments PF for change in LIBOR Curve Cost ($m)(3) $3,044.8 $3,044.8 $102.3 $94.9 $3,065.3 1 Assumes that investments are purchased at cost and held until
Slide 26: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 6/30/2021) Total Portfolio(1) Specialty Chemicals & Materials Federal Services 2% Types of Healthcare 2% Types of Enterprise Software Other(2) Distribution & Logistics 4% Real Estate ERP eCommerce & Logistics 3% 3% 3% Tech-Enabled Media, Marketing Other(3)
Slide 27: Portfolio Concentration
Portfolio Concentration (By Fair Value as of 6/30/2021) Portfolio Names By Fair Value Edmentum 5.0% SLP III 4.5% SLP IV 3.6% Benevis 3.3% Top 15 portfolio companies(1) represent insightsoftware 2.9% $1,195.3 million, or EAB Global 2.6% 38.6%, of consolidated Associa 2.3% investments PhyNet 2.2% UniT
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 Assets Portfolio $2,837.5 $2,907.7 $2,964.5 $3,029.6 $3,100.0 Cash & Equivalents 56.2 68.7 79.0 47.3 27.8 (1) Other Assets 49.9 56.1 54.0 51.4 52.3 Total Assets $2,943.6 $
Slide 29: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $14.44 $15.00 $14.43 $14.24 $14.08 $13.69 $14.07 Q2 2021 $13.83 $13.87 $14.00 $13.94 $14.38 $13.23 $14.06 $13.83 $13.63 $13.33 $13.00 $13.60 $13.22 $13.46 $13.26 $13.08 $12.00 $12.62 $11.00 NAV per Share (as Reported) NAV + Cumulat
Slide 30: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 Investment Income Interest income $53.4 $49.7 $48.9 $47.0 $47.1 Dividend income 12.0 12.4 12.7 15.4 16.5 Other income 2.3 3.2 6.2 5.0 2.6 Total investment income $67.7
Slide 31: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 Investment Income Build Cash Interest and Dividend Income $45.5 $43.2 $41.4 $38.9 $39.7 (1) SLP and Net Lease Income 8.4 8.8 8.6 10.2 10.7 Recurring Cash Investment Income $53.9 $52.0 $50.0 $49.
Slide 32: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2021 NII will be at least $0.30 per share. Our board of directors has declared a third quarter dividend of $0.30 per share. 104% 103% 102% 100% 99% 99% 100% 102% 100% 99% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36
Slide 33: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/2021, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $505 / $730 Broadly syndicated 1st lien loans(1): L + 1.60% April 2026 (Wells Fargo / Raymond James / State Street / CIT All other: L + 2.10% (0.00% LIB
Slide 34: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 6/30/2021, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,699 As of 6/30/2021 Fixed 55.1% Floating 44.9% $730 $280 $189 $341 $200 $201 $105 $117 $300 $55 $140 $50 2021 2022 2023 2024 2025 and thereafter % of Total 0.0% 4.6% 1
Slide 35: 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 Administrative Officer & Director Robert A. Hamwee Independent Auditor John R. Kline
Slide 36: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 2021 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $117
Slide 37: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION