New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2020 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, Aug 6, 2020
Slide 1: Q2 2020 Earnings Presentation
Q2 2020 Earnings Presentation August 6, 2020
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: Chairman’s Overview
Chairman’s Overview ▪ As the COVID-19 pandemic continues, NMFC has actively worked to mitigate the impact through a number of initiatives: – Continue to maintain close dialogue with sponsors and companies to monitor the impact of COVID-19 – Generated additional liquidity through various actions, inc
Slide 5: Chairman’s Overview (Continued)
Chairman’s Overview (Continued) ▪ Q2 2020 Adjusted Net Investment Income (“NII”) of $0.30(1) per weighted average share, at the higher end of our guidance of $0.27 to $0.31 – Q2 2020 regular dividend of $0.30 per share paid on June 30, 2020 ▪ Only one asset, dental practice management company, Benev
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 (1) Adjusted NII Per Share $0.34 $0.36 $0.36 $0.35 $0.30 NAV Per Share $13.41 $13.35 $13.26 $11.14 $11.63 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.30 Share Count - End of Period (mm) 80.6 87.6
Slide 7: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 8: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q2 2020, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has improved from a Risk Rating standpoint in Q2 2020 from Q1 2020 – As of Q2, 83% of the portfolio is characterized as Green (up from 78% in Q1) – 45% of Q1 Red Risk Rated companies improved to Orange – 63% of Q1 Orange Risk Rated companies imp
Slide 10: NMFC Portfolio – Risk Rating Migration from Q1 2020
NMFC Portfolio – Risk Rating Migration from Q1 2020 (FMV as of 6/30/20) ($ in millions) $72 Overall Company Strength (A = Best; C = Worst) $104 Benevis $69 Retail Healthcare $3 /1 (1) C Hospitality Mgmt. Edmentum $78 $11 / 1 NHME $26 UniTek $61 Engineering & Consulting $17 / 1 B Retail Healthcare $6
Slide 11: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 6/30/20) ($ in millions) $104 / 2 $21 / 1 $162 / 4 $101 / 5 Overall Company Strength (A = Best; C = Worst) Retail Healthcare $35 / 1 C Edmentum $78 PPVA $21 Benevis $69. . Permian $27. . National HME $26 UniTek $61. . Education Pr
Slide 12: NAV Recovery Progress
NAV Recovery Progress ($ in millions) NAV Impact Change in FMV of $143.9 Cum. NAV / Share: $12.06 $12.17 $12.23 $12.32 $13.12 $13.26 NAV Impact: $41.7m $10.3m $6.2m $8.8m $76.9m $13.6m $13.26 $0.14 $0.79 $0.06 $0.09 $0.11 $11.63 $0.43 Q2 NAV $0.49 Recovery Yield Impact 3/31/20 NAV $11.14 6/30/20 Gre
Slide 13: Leverage Migration
Leverage Migration ($ in millions) 3/31/20 6/30/20 Statutory Debt: Statutory Debt: $1,682.5 ($234.0) $1,448.5 Debt paydown primarily from asset sales / repayments NAV: NAV: $1,078.2 $47.4 $1,125.6 Primarily driven by ÷ Sources market value recovery Uses ÷ Q2 Sales $168.3 Debt Paydown $234.0 Q2 Rep
Slide 14: Q2 2020 Adjusted NII Bridge
Q2 2020 Adjusted NII Bridge Q2 2020 NII was within our initial projections of $0.27 to $0.31 per share $3m $1m $1m $2m $2m $34m $29m ($0.35 / ($0.30 / share) share) Total impact of $5m Q1 2020 NII Asset Sales / Lower Interest Lower Fee Income Non-Accruals Lower Fees Q2 2020 NII Deleveraging (Net) Ra
Slide 15: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have continued to materially improve since our last earnings call in May ▪ Deal volume in our core direct lending market remains low ▪ Secondary trading levels in corporate credit have nearly returned to pre-COVID levels ▪ The broad market has exhibited mate
Slide 16: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,543 million as of 6/30/2020) (1) ($1,748 million drawn as of 6/30/2020) Fixed 5% Fixed(2) Floating 55% 45% Floating 95% Impact of Changing Rates(3) Estimated % Change in Interest Income Illustrat
Slide 17: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2020 (October 2008 – June 30, 2020) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,984 / $2,838 / 108 $7,903 / 292 of which of which Internal Watch List $394 / $284 / 12 $600 / 19 (3 or 4 Rating)(2) of
Slide 18: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2017) 8.9x 4.5x 4.4x Company A
Slide 19: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $62.0 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 757.9 (3) Adj. NII 26.5 46.1
Slide 20: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – July 31, 2020 Indexed Total Return CAGR (IPO to 7/31/2020) S&P 194.8% 290.0 NMFC 5.8% S&P 500 12.5% 270.0 S&P 500 Financials 9.1% CS High Yield Index 5.7% 250.0 BDC Index (1.6%) 230.0 S&P Fin 123.8% 210.0 190.0 170.0 NMFC 6
Slide 21: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – July 31, 2020 100.5% 68.7% 55.6% 47.3% 34.0% (9.6%) (17.5%) (19.8%) (24.6%) (29.6%) (84.7%) Peer A ARCC NMFC GBDC Peer B SLRC Peer C PSEC Peer D PNNT Peer E BKCC Peer F TCRD Peer G AINVH Peer OCSL Peer I MCCJ Peer Source:
Slide 22: NMFC Return Attribution
NMFC Return Attribution $8.51 ($ per Share) $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $0.93 $1.53 $0.37 $0.38 $1.40 $0.12 $0.12 $0.61 $0.17 $0.95 $0.04 $12.36 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.64 ($0.48) ($0.55) ($0.41) ($2.45) ($0.75) ($2.01) ($1.63) ($0.99) Cumulative (IPO t
Slide 23: Q2 2020 Sale / Repayment Activity
Q2 2020 Sale / Repayment Activity ($ in millions) Weighted Average Date(1) Name Activity Proceeds(2) Type of Investment Price 4/8/20 Kronos Sale $36.6 2nd Lien 98.19 4/14/20 GEMS Sale $7.5 1st Lien 95.00 4/16/20 Solera Sale $5.0 Sub Debt 100.13 5/5/20 WellDyne Sale $8.6 1st Lien 96.50 5/13/20 Conser
Slide 24: Portfolio Mix (By Fair Value as of 6/30/2020)
Portfolio Mix (By Fair Value as of 6/30/2020) By Industry(1) Specialty Chemicals & Materials Distribution & Logistics Types of Services Types of Healthcare 2% 3% Other(2) Insurance Marketing Federal Services 4% Services Tech-Enabled 6% Services Healthcare 4% Data & 4% 17% Net Lease Analytics 4% 7% E
Slide 25: Portfolio Concentration (By Fair Value as of 6/30/2020)
Portfolio Concentration (By Fair Value as of 6/30/2020) Portfolio Names By Fair Value SLP III 3.9% SLP II 2.8% Edmentum 2.7% insightsoftware 2.7% PhyNet 2.6% Top 15 portfolio EAB Global 2.5% companies(1) represent Benevis 2.4% $978.9 million, or UniTek 2.2% 34.5%, of consolidated Associa 2.1% invest
Slide 26: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Assets Portfolio $2,655.2 $3,009.6 $3,171.3 $3,002.3 $2,837.5 Cash & Equivalents 87.2 69.8 48.6 22.1 56.2 (1) Other Assets 48.9 52.7 46.2 79.1 49.9 Total Assets $2,791.3 $
Slide 27: 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 $13.83 $13.87 $14.00 $14.38 $14.06 $13.83 $13.63 $13.00 $13.60 Q2 2020 $13.46 $13.22 $13.08 $13.26 $12.24 $12.00 $11.63 $11.00 NAV per Share (as Reported) NAV + Cumulative Special Di
Slide 28: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Investment Income Interest income $51.5 $55.0 $58.4 $61.3 $53.4 Dividend income 12.3 13.0 14.1 13.9 12.0 Other income 2.2 4.2 4.8 2.0 2.3 Total investment income $66.0
Slide 29: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Investment Income Build Cash Interest and Dividend Income $47.3 $50.2 $52.8 $54.0 $45.5 (1) SLP and Net Lease Income 8.4 8.7 9.6 9.2 8.4 Recurring Cash Investment Income $55.7 $58.9 $62.4 $63.2
Slide 30: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2020 NII will be approximately $0.30 per share. Our board of directors has declared a third quarter dividend of $0.30 per share. 104% 103% 102% 102% 100% 100% 101% 99% 98% 99% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.3
Slide 31: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/2020, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $500 / $800 Broadly syndicated 1st lien loans(1): October 2022 (Wells Fargo / Raymond James / State Street / CIT L + 1.75% Bank / NBH Bank / State Bank
Slide 32: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 6/30/2020, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,094 As of 6/30/2020 Fixed 54.6% $135 Floating 45.4% $800 $673 $201 $495 $280 $300 $189 $117 $90 $55 $192 $50 2020 2021 2022 2023 2024 2025 and thereafter % of Total –
Slide 33: 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 34: 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 2020 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $58.9 Non-con
Slide 35: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION