New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2022 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, Aug 9, 2022
Slide 1: Earnings Presentation Q2 2022
Earnings Presentation Q2 2022 August 9, 2022 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: 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 Director Laura C. Holson Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer 4
Slide 5: Chairman’s Overview
Chairman’s Overview Earnings / Book Value ▪ Q2 2022 net investment income (“NII”) of $0.31 per share, more than covered our dividend of $0.30 per share paid on June 30, 2022 ▪ June 30, 2022 net asset value (“NAV”) of $13.42 per share – Decrease of only 1.0%, or $0.14, from $13.56 per share on March
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 NII Per Share $0.30 $0.31 $0.31 $0.30 $0.31 NAV Per Share $13.33 $13.26 $13.49 $13.56 $13.42 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.9 96.9 97.9 99.5 100
Slide 7: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s strengths to attractive risk-reward opportunities i
Slide 8: Risk Rating Assessment
Risk Rating Assessment ▪ Throughout Q2 2022, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor the portfolio, we assign each portfolio company scores on 2 metrics to
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1)(2) ▪ Overall portfolio modestly improved from a “Risk Rating” standpoint in Q2 2022 from Q1 2022 – As of Q2 2022, 90.8% of the portfolio is characterized as “Green” (up from 89.2% based on Q1 2022 categorizations) – One company in the Q1 Orange category worsened to
Slide 10: Risk Rating Migration from Q1 2022
NMFC Portfolio – Risk Rating Migration from Q1 2022 (FMV as of 6/30/22) ($ in millions / company count) National HME $9 Permian $44 Distribution & Logistics $27 / 1 Business Characteristics (A = Best; C = Worst) C (1) Hospitality Mgmt. $14 / 1 Integro $51 Haven $50 B Specialty Chemicals $9 / 1 Busin
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings(1) (FMV as of 6/30/22) ($ in millions / company count) $14 / 1 $129 / 5 $41 / 2 $31 / 3 (2) Hospitality Mgmt. $14 / 1 Permian $44 / 1 Marketing Services $28 / 1 Education Products $18 / 1 Business Services $33 / 1 Business Characteristics (A = Best; C = Worst) Engineeri
Slide 12: 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) 4.7x 2.1x 2.6x Company A
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Despite the challenging macro environment, we believe the 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 ▪ Opportunities to finance new s
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,747 million as of 6/30/2022)(1) ($2,013 million drawn as of 6/30/2022)(2) Fixed 11% 46% Floating (3) Fixed 54% 89% Floating Impact of Changing Rates(4) Estimated % Change in Interest Income Net o
Slide 15: Q2 2022 NAV Update
Q2 2022 NAV Update Q2 2022 NAV decline of $0.14 per share primarily driven by broad market volatility, offset by net positive credit specific movement Net $0.13 NAV Increase $13.56 $0.26 $13.42 ($0.13) ($0.27) Company $ / Share Company $ / Share Haven $0.09 National HME ($0.07) UniTek 0.06 Marketing
Slide 16: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2022 (October 2008 – June 30, 2022) Cost / FMV / Portfolio Count Cost / Portfolio Count Investments $3,313 / $3,310 / 107 $9,590 / 332 of which of which Non-Accrual $138 / $45 / 7 $306 / 13 of which Realized Default Loss(2)
Slide 17: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2017 2018 2019 2020 2021 YTD 2022 Regular Dividend $475.1 $103.4 $117.4 $120.1 $116.5 $59.8 Cumulative Regular Dividend 475.1 578.5 695.9 816.0 932.5 992.3 (3) (3) (3) (3) Adj. NII $477.5 103.5 119.2 120.6 118.3 61.0 Cumulative Adj. NII 477.5
Slide 18: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – August 5, 2022 Indexed Total Return 430.0 CAGR (IPO to 8/5/2022) 410.0 NMFC 10.2% S&P 500 12.8% 390.0 S&P 500 Financials 11.0% S&P 285.1% 370.0 CS High Yield Index 5.0% BDC Index 4.6% 350.0 330.0 S&P Fin 224.0% 310.0 NMFC 1
Slide 19: Q2 2022 Originations
Q2 2022 Originations Portfolio Originations(1) ($ in millions) Amount Type of (2) Trade Date Company Industry ($ Invested) Investment Spread 5/10/22 Beauty Industry Group Consumer Products $9.9 First Lien L + 6.50% 5/11/22 IMO Healthcare I.T. 12.9 First Lien S + 6.00% 5/26/22 Foreside Business Servi
Slide 20: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 6/30/2022) Total Portfolio Common Equity & Other Positions(2) Common Equity ($ in millions, except per share data) & Other Preferred 7% Company FMV Subordinated 5% 2% Edmentum $131.1 Benevis 50.5 First UniTek 49.9 First First Lien Debt 2nd Lien 18% Lien Debt L
Slide 21: Q2 2022 Investment Activity Roll
Q2 2022 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.1% 10.3% 9.8% 9.7% 9.9% 3/31/2022 3/31/2022 Q2 Originations Q2 Sales / 6/30/2022 Repayments PF for 6/30/2022 LIBOR Curve(3) Cost ($m)(4) $3,235.2 $3,235.2 $220.7 $137.0 $3,313.0 1 Assumes that investments are purchased at cost and held
Slide 22: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 6/30/2022)(1) Total Portfolio Types of Healthcare Types of Enterprise Software (2) Real Estate Other Education Distribution & Logistics ERP 6% ERP / Tools IT Infrastructure Healthcare Services 4% Ecommerce & 4% & Security Education Logistics 6% 19% 9% Ente
Slide 23: Portfolio Concentration
Portfolio Concentration (By Fair Value as of 6/30/2022) Portfolio Names By Fair Value Edmentum 4.4% SLP III 4.2% SLP IV 3.4% Benevis 3.4% insightsoftware 2.8% UniTek 2.6% 2.3% Kaseya 2.0% PhyNet 1.9% Associa 92 Other Portfolio 1.8% Dealer Tire Companies 1.8% 63.1% Talend 1.6% 1.6% iCIMS 1.5% Frontli
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Assets Portfolio $3,100.0 $3,022.7 $3,185.4 $3,267.0 $3,310.2 Cash & Equivalents 27.8 83.4 58.0 35.4 40.7 Other Assets (1) 52.3 62.0 52.4 59.4 53.9 Total Assets $3,180.1 $
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 Q2 2022 $14.24 $14.10 $14.08 $14.07 $13.83 $13.87 $14.00 $14.38 $13.69 $14.03 $14.06 $13.23 $13.60 $13.83 $13.63 $13.42 $13.00 $13.46 $13.49 $13.22 $13.26 $13.08 $12.00 $12.62 $11.00 NAV per Share (as Reported)
Slide 26: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Investment Income Interest income $47.1 $47.8 $47.7 $47.9 $50.3 Dividend income 16.5 14.3 14.8 16.4 15.7 Other income 2.6 6.1 5.3 4.3 6.8 Total investment income $66.2
Slide 27: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Investment Income Build Cash Interest and Dividend Income $39.7 $39.1 $39.4 $38.4 $41.5 (1) SLP and Net Lease Income 10.7 9.4 10.0 11.3 10.4 Recurring Cash Investment Income $50.4 $48.5 $49.4 $4
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2022 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% 102% 100% 102% 100% 99% 98% 99% 100% 102% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 6/30/2022, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $615 / $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 30: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 6/30/2022, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,680 As of 6/30/2022 Fixed 54.0% Floating 46.0% $730 $280 $199 $341 Repaid on $275 7/15/2022 $201 $167 $104 $55 $117 $196 $140 $50 2022 2023 2024 2025 2026 and there
Slide 31: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer & Director Robert A. Hamwee Independent Auditor John R. Kline
Slide 32: Appendix A: Leverage Migration
Appendix A: Leverage Migration ($ in millions) 3/31/22 6/30/22 Statutory Debt: Statutory Debt: $1,660.5 $55.9 $1,716.4 NAV: NAV: $1,349.4 $2.3 $1,351.6 ÷ ÷ Statutory Statutory Leverage Ratio(1): Leverage Ratio(1): 1.23x 1.27x Pro Forma Statutory Leverage Ratio(2): 1.25x 1 Statutory debt / equity c
Slide 33: Appendix B: NMFC Cumulative Total Return Versus Peers
Appendix B: NMFC Cumulative Total Return Versus Peers(1) May 19, 2011 (IPO) – August 5, 2022 240% 198% 156% 119% 90% 67% 64% 40% 33% (8%) (60%) Peer A 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, externally-managed BDCs that
Slide 34: 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 YTD 2022 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $61.6 Non-controlling interest in NMNLC related to NII – – – (0.8) (1.3
Slide 35: New Mountain Finance Corporation
INIMIF] New MountTAIN FINANCE CORPORATION