New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2022 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, Feb 28, 2023
Slide 1: Earnings Presentation Q4 2022
Earnings Presentation Q4 2022 February 28, 2023 14
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, the current conflict between Russia and Ukraine
Slide 3: Important Notices and Safe Harbor Statement (cont.)
Important Notices and Safe Harbor Statement (cont.) Yield to Maturity (“YTM”) at Cost assumes that the accruing investments in our portfolio as of each date are purchased at cost on that date and held until their respective maturities with no prepayments or losses and are exited at par at maturity.
Slide 4: Experienced Management Team + Scaled Platform
Experienced Management Team + Scaled Platform Headshot Steven B. Klinsky Robert A. Hamwee John R. Kline Laura C. Holson Shiraz Y. Kajee Founder & Chairman Vice Chairman President & CEO COO CFO Years at 22 14 14 13 7 DEEPLY EXPERIENCED CREDIT TEAM LEVERAGING THE FULL POWER OF THE NEW MOUNTAIN PLATFOR
Slide 5: Chairman's Overview
Chairman’s Overview Earnings, Book Value, Dividend Policy & Shareholder Alignment ▪ Q4 2022 adjusted net investment income (“NII”) of $0.35 per share, more than covered our dividend of $0.32 per share paid on December 30, 2022 ▪ December 31, 2022 net asset value (“NAV”) of $13.02 per share – Decreas
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Adjusted NII Per Share $0.31 $0.30 $0.31 $0.32 $0.35 NAV Per Share $13.49 $13.56 $13.42 $13.20 $13.02 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.32 Share Count - End of Period (mm) 97.9 99.5 100
Slide 7: NMFC at a Glance
NMFC at a Glance New Mountain Finance ACYCLICAL SECTORS(1)(2) where NMC has deep expertise Baa3 / $3.2bn (1) 14 Stable OTHER NMC POWER ALLEYS Portfolio Size Year History Moody’s Credit Rating Specialty Chemicals & SOFTWARE Materials Information 2% Financial Technology Services 2% 3% (8) Other IT Inf
Slide 8: NMFC's Differentiated Approach
NMFC’s Differentiated Approach New Mountain Finance Corporation is a business development company focused on lending to middle market companies that operate in “defensive growth” industries DIFFERENTIATED, DEFENSIVE GROWTH PROVEN TRACK RECORD APPROACH TO LENDING OF EXECUTION Consistent Outperformanc
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1)(2) ▪ Overall portfolio remains relatively flat from a “Risk Rating” standpoint in Q4 2022 from Q3 2022 – As of Q4 2022, 91.5% of the portfolio is characterized as “Green” (down from 92.3% based on Q3 2022 categorizations) – One company improved in Risk Rating and t
Slide 10: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings(1) (FMV as of 12/31/22) ($ in millions / company count) $127 / 4 $43 / 4 $24 / 2 Permian $58 / 1 Education $21 / 1 Business Services $19 / 1 Business Services $13 / 1 Business Characteristics(3) (A = Best; C = Worst) Business Services $48 / 2 National HME $5 / 1 C Distr
Slide 11: Credit Market Conditions
Credit Market Conditions General Investing Environment ▪ Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt structures, floating base rates, and attractive spreads – Federal Reserve rate hikes HARM valuation of stocks, bonds
Slide 12: Positively Exposed to Rising Base Rates
Positively Exposed to Rising Base Rates ▪ Rising base rates provide a sustained uplift to core earnings power, especially as the rate environment stabilizes ▪ Immediate positive impact lags as base rates reset more frequently on liabilities compared to assets Asset Mix Liability Mix Impact of Rising
Slide 13: Q4 2022 NAV Update
Q4 2022 NAV Update Q4 2022 NAV declined by $0.18 per share, or 1.4%, primarily driven by market spread widening, slightly offset by net positive credit specific movement Net $0.02 NAV Increase $13.20 $0.20 $13.02 ($0.18) ($0.20) Company $ / Share Company $ / Share Permian $0.10 Edmentum ($0.09) UniT
Slide 14: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2022 (October 2008 – December 31, 2022) Cost / FMV / Portfolio Count Cost / Portfolio Count Investments $3,275 / $3,230 / 107 $9,902 / 337 of which of which Non-Accrual $168 / $58 / 8 $347 / 14 % of Total(3) 5.1% / 1.8% 3.6
Slide 15: Performance Since IPO
Performance Since IPO ($ in millions) IPO - (1) 12/31/2017 2018 2019 2020 2021 2022 Regular Dividend $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 Cumulative Regular Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 (2) Adj. NII 477.5 103.2 116.8 117.2 114.9 128.1 Cumulative Adj. NII 477.5 580.7 697.5 814.
Slide 16: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 24, 2023 Indexed Total Return 430.0 CAGR (IPO to 2/24/2023) 410.0 NMFC 10.0% S&P 500 11.8% 390.0 S&P 500 Financials 11.2% 370.0 CS High Yield Index 4.7% S&P 272.5% 350.0 BDC Index 4.7% S&P Fin 249.8% 330.0 310.0 NM
Slide 17: Q4 2022 Originations
Q4 2022 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread Avalara Software - Governance, Risk & Compliance $34.9 First Lien S + 7.25% Mercer Advisors Financial Services 12.2 First Lien L + 5.50% Drake Software Software - Finance &
Slide 18: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 12/31/2022) Total Portfolio Common Equity & Other Positions(2)(3) Common Equity ($ in millions, except per share data) & Other Preferred 8% Company FMV 6% Edmentum $110.3 Subordinated 2% UniTek 62.5 Benevis 50.7 First First First Lien Debt Haven 27.5 Lien Debt
Slide 19: Q4 2022 Investment Activity Roll
Q4 2022 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.3% 11.3% 11.1% 11.3% 10.9% 9/30/2022 9/30/2022 Q4 Originations Q4 Sales / 12/31/2022 Repayments PF for 12/31/2022 LIBOR Curve(3) Cost ($m)(4) $3,274.4 $3,274.4 $93.9 $101.1 $3,275.5 1 Assumes that investments are purchased at cost and
Slide 20: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics Portfolio Weighted Average EBITDA(1) $160 $138 $140 $130 $132 $120 $120 $114 $100 $80 $60 $40 $20 $0 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.9x 6.8x 6.8x 6.7x 7.0x 6.5x 6.0x 5.0x 4.0x 3.0x 2.5x 2.5x 2.4x 2.1x 1.
Slide 21: Diverse Portfolio (By Fair Value as of 12/31/2022)
Diverse Portfolio (By Fair Value as of 12/31/2022)(1) Portfolio Names By Fair Value LLF III Fund Edmentum 4.3% 3.9% Benevis 3.5% LLF IV Fund 3.5% UniTek 3.2% insightsoftware 2.7% 2.4% Kaseya 2.1% PhyNet 92 Other 2.0% Dealer Tire Portfolio 2.0% Companies Associa 61.4% 1.9% Alliance Animal Health 1.9%
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Assets Portfolio $3,185.4 $3,267.0 $3,310.2 $3,244.5 $3,229.8 Cash & Equivalents 58.0 35.4 40.7 48.9 71.2 (1) Other Assets 52.4 59.4 53.9 54.6 54.0 Total Assets $3,295.8
Slide 23: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Investment Income (1) $46.7 $46.8 $50.3 $58.8 $66.4 Interest income Dividend income 14.8 16.4 15.7 15.5 17.1 Other income 5.2 4.3 6.8 3.8 3.2 Total investm
Slide 24: Income Statement Highlights (Annual)
Income Statement Highlights (Annual) Year Ended – Adjusted ($ in millions, except per share data) 12/31/2020 12/31/2021 12/31/2022 Investment Income Interest income $210.0 $185.9 $222.3 Dividend income 51.0 61.0 64.8 Other income 12.7 18.5 18.1 Total investment income $273.7 $265.4 $305.2 Expenses (
Slide 25: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Investment Income Build Cash Interest and Dividend Income $39.4 $38.4 $41.5 $51.2 $57.8 (1) SLP and Net Lease Income 10.0 11.3 10.4 9.6 10.8 Recurring Cash Investment Income $49.4 $49.7 $51.9 $
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage • Q1 2023 core dividend of $0.32 per share, more than covered by our estimated adjusted NII • For Q1 2023, new supplemental dividend anticipated to be $0.02 to $0.03 per share 104% 103% 102% 105% 100% 99% 99% 100% 102% 100% 102% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 12/31/2022, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $619 / $730 Broadly syndicated 1st lien loans(2): L + 1.60% April 2026 (Wells Fargo / Raymond James / State Street / CIT All other: L + 2.10% (0.00%
Slide 28: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 12/31/2022, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,426 As of 12/31/2022 Fixed 58% Floating 42% $730 Repaid $90 Series 2018A Unsecured Notes on January 27, 2023 $280 $304 $257 $199 $253 $90 (Jan) $167 $200 $75 $50 (
Slide 29: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Ryan Lynch Mitchel Penn Finian O’Shea 249
Slide 30: Appendix
NIM] NEW MOUNTAIN FINANCE CORPORATION Appendix
Slide 31: Appendix A: NMFC Portfolio – Risk Rating Migration from Q3 2022
Appendix A: NMFC Portfolio – Risk Rating Migration from Q3 2022 (FMV as of 12/31/22) ($ in millions / company count) Sierra Hamilton $4 / 1 Business Characteristics(2) (A = Best; C = Worst) C Healthcare $5 / 1 B Healthcare $20 / 1 A ** Excludes Green to Green Migration ** Tier 4 Tier 3 Tier 2 Tier 1
Slide 32: Appendix B: Credit Performance
Appendix B: 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) 9.5x 7.1x 2.
Slide 33: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 Non-controlling interest in NMNLC related to NII – – – (0.8) (1.
Slide 34: Appendix D: Historical NAV / Share and Leverage Trends
Appendix D: Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 $14.43 $13.69 $14.07 $14.24 $14.10 $14.08 $13.83 $13.87 $14.00 $13.60 $13.63 $14.38 $13.23 $14.06 $13.83 $13.00 $13.46 $13.63 $13.49 $13.08 $13.22 $13.26 $13.02 $12.00 $12.62 $11.00 NAV per Share (as Repor
Slide 35: INIMIF]
INIMIF] New MountTAIN FINANCE CORPORATION