New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2019 Earnings Presentation
33 slides from New Mountain Finance's earnings presentation, Aug 8, 2019
Slide 1: Q2 2019 Earnings Presentation
Q2 2019 Earnings Presentation August 8, 2019
Slide 2: Important Notices and Safe Harbor Statement
Important Notices 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 outcom
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 and Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer 3
Slide 4: Q2 2019 Highlights
Q2 2019 Highlights ▪ Q2 2019 Net Investment Income (“NII”) of $0.35 per weighted average share, at the high end of our guidance of $0.33 to $0.35 – Q2 2019 regular dividend of $0.34 per share paid on June 28, 2019 ▪ June 30, 2019 net asset value (“NAV”) of $13.41 per share, a decrease of $0.04 per s
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 NII Per Share $0.34 $0.36 $0.36 $0.35 $0.35 NAV Per Share $13.57 $13.58 $13.22 $13.45 $13.41 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 76.1 76.1 76.1 80.5 80.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – August 2, 2019 Indexed Total Return 260.0 S&P 159.1% S&P Fin 150.3% 240.0 NMFC 130.5% 220.0 200.0 180.0 160.0 HY 62.4% 140.0 BDCs 38.4% 120.0 CAGR (IPO to 8/2/2019) 100.0 NMFC 10.7% S&P 500 12.3% S&P 500 Financials 11.8% 80
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – August 2, 2019 137.1% 130.5% 120.6% 71.2% 54.0% 39.8% 37.0% 25.2% 18.8% (2.9%) (41.2%) ARCC Peer A NMFC ARCC GBDC Peer B SLRC Peer C PSEC Peer D PNNT Peer E BKCC Peer F TCRD Peer G AINVH Peer OCSL Peer I MCCJ Peer Source:
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $11.87 $0.89 $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $1.53 $0.37 $0.93 $0.38 $0.12 $0.12 $0.61 $0.17 $0.95 $11.04 $0.38 $0.87 $0.19 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.68 ($0.67) ($0.48) ($0.41) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 20
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2019 (October 2008 – June 30, 2019) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,634 / $2,655 / 101 $6,922 / 267 of which of which Internal Watch List $1.5 / $0.0 / 1 $264 / 11 (3 or 4 Rating)(2) of w
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2017) 8.9x 4.1x 4.8x Company AQ (2019) 6.5x 6.5x - Company B (2015) 3.7x 0.6x 3.1x C
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $54.7 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 633.2 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 10
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.17x 1.22x (4) Leverage(2): $2,655 $2,308 $2,003 $981 Decreased $125 million 36.9% through Non-First Lien Net $1,031 Sales & Repayments(3) $1,106 44.7% 55.2% $1,675 $1,277 Increased $778 m
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have been generally stable throughout Q2 and into Q3 ▪ Deal flow in the middle market has increased after a slow start in Q1 ▪ Loan yields have been stable – Lower base rates have been generally offset by modestly higher loan spreads ▪ Private market multipl
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,364 million as of 6/30/2019) (1) ($1,604 million drawn as of 6/30/2019) Fixed 9% Fixed(2) Floating – No Floor 51% 49% Floating 91% Impact of Changing Rates(3) Estimated % Change Illustrative NII
Slide 16: Q2 2019 Originations
Q2 2019 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 4/2/19 QuickBase Software $9.8 $140 2nd Lien 25% 10.5% 12.8% 5/9/19 Kaseya Software $27.1 $415 1st Lien 70%
Slide 17: Q2 2019 Originations (cont.)
Q2 2019 Originations (cont.) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 66.7% (SBIC) 28.3% 6/27/19 Idera Software $31.8 $205 2nd Lien 11.4% / 25%(5) / 13.9% Other $24.7 8.9
Slide 18: Origination Activity Since Quarter End (Through 8/2/19)
Origination Activity Since Quarter End (Through 8/2/19) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 66.7% (SBIC) / 6/28/19 Company A* Software $49.2 $112 1st Lien 7.9% 12.9%
Slide 19: Origination Activity Since Quarter End (cont.)
Origination Activity Since Quarter End (Through 8/2/19) (cont.) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Healthcare 8/2/19 MyEyeDr. $31.5 $360 2nd Lien 25% 10.7% 12.9% Se
Slide 20: Q2 2019 Originations and Repayments
Q2 2019 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Preferred Equity 3% Second Lien First Lien Debt Debt 23% 27% First Lien Second Lien Debt Debt 74% 73% Total: $183.3 million Total: $68.4 million 1 By $s invested / $s received at time of origination / sale / re
Slide 21: Q2 2019 Investment Activity Roll
Q2 2019 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.3% 10.0% 9.6% 9.4% 9.2% 3/31/2019 3/31/2019 Q2 Originations Q2 Sales / 6/30/2019 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,509.3 $2,509.3 $183.3 $68.4 $2,634.0 1 Assumes that investments are purchased at cost and held un
Slide 22: Portfolio Mix (By Fair Value as of 6/30/2019)
Portfolio Mix (By Fair Value as of 6/30/2019) By Industry(1) Distribution & Logistics Other(2) Types of Services 3% 3% Marketing Financial Federal Services Services Services 4% 5% 5% Net Lease Data & Analytics 4% 6% Energy Business Insurance Services 4% Services Services 37% 29% 9% Education 8% Cons
Slide 23: Portfolio Concentration (By Fair Value as of 6/30/2019)
Portfolio Concentration (By Fair Value as of 6/30/2019) Portfolio Names By Fair Value SLP III 3.0% SLP II 3.0% Benevis 3.0% UniTek 2.9% EAB Global 2.5% Top 15 portfolio Edmentum 2.4% companies(1) represent Integro 2.3% $942.0 million, or Kronos 2.2% 35.5%, of consolidated NaviHealth 2.2% investments
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 Assets Portfolio $2,111.0 $2,307.8 $2,354.1 $2,534.5 $2,655.2 Cash & Equivalents 33.9 146.3 49.7 65.6 87.2 (1) Other Assets 61.0 67.6 44.9 50.0 48.9 Total Assets $2,205.9
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.43 $14.44 $14.07 $14.24 Q2 2019 $14.08 $13.69 $13.83 $14.00 $14.38 $14.02 $14.06 $13.83 $13.63 $13.41 $13.60 $13.00 $13.46 $13.22 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1)
Slide 26: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 Investment Income Interest income $40.1 $40.9 $44.2 $47.9 $51.7 Dividend income 12.3 14.0 15.1 13.5 12.6 Other income 2.2 5.6 4.2 2.8 2.2 Total investment income $54.6
Slide 27: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 Investment Income Build Cash Interest and Dividend Income $35.6 $35.3 $44.1 $44.3 $47.3 (1) SLP and Net Lease Income 5.7 7.0 8.0 9.5 8.4 Recurring Cash Investment Income $41.3 $42.3 $52.1 $53.8
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2019 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, in line with the previous 29 quarters. 104% 103% 103% 102% 101% 101% 100% 99% 99% $1.71 $0.37 $1.48 $1.48 $0.12 $0.
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/2019, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $549 / $720 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022 (Wells Fargo / Raymond James / State Street / All other: L + 2.25% CIT Bank / N
Slide 30: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 6/30/2019, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $910 As of 6/30/2019 Fixed 51.1% $135 Floating 48.9% $543 $720 $495 $201 $150 $225 $117 $90 $135 $192 $55 2019 2020 2021 2022 2023 2024 2025 and thereafter % of Total – –
Slide 31: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer & Director Robert A. Hamwee Independent Auditor Adam B. Weinst
Slide 32: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions; unaudited figures) Year Ended IPO - 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 2019 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.1 $55.4 Non-cash adjustment (
Slide 33: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION