New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2014 Earnings Presentation
33 slides from New Mountain Finance's earnings presentation, Nov 6, 2014
Slide 1: Q3 2014 Earnings Presentation
Q3 2014 Earnings Presentation November 6, 2014
Slide 2: Important Notice and Safe Harbor Statement
Important Notice 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 outcome
Slide 3: Management Participants
Management Participants Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer, President and Director David M. Cordova Chief Financial Officer and Treasurer 3
Slide 4: Q3 2014 Highlights
Q3 2014 Highlights ▪ Q3 Adjusted Net Investment Income (“NII”) of $0.35 per weighted average share, versus guidance of $0.33 to $0.35 and Q2 2014 of $0.36 – Q3 regular dividend of $0.34 per share paid on September 30, 2014 – Q3 special dividend of $0.12 per share paid on September 3, 2014 ▪ Septembe
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Pro Forma Adjusted NII Per Share(1) $0.35 $0.34 $0.37 $0.36 $0.35 NAV Per Share $14.32 $14.38 $14.53 $14.65 $14.33 Dividends Per Share(2) $0.46 $0.34 $0.34 $0.34 $0.46 Share Count - End of Period (mm
Slide 6: Review of NMFC
Review of NMFC Overview Public Float Market Cap History ($ in millions) ▪ Founded in October 2008 to apply New Mountain $853 Capital, L.L.C.’s (“NMC” or “New Mountain”) private equity strengths to attractive risk-reward opportunities in $680 the U.S. debt markets – Externally managed Business Develo
Slide 7: NMFC Strategy
NMFC Strategy ▪ Externally managed by an affiliate of New Mountain, a leading private equity firm with ~$15 billion of assets under management(1), approximately 100 staff members, and a consistent focus on “defensive growth” business building and deep fundamental research ▪ NMFC’s mandate is to prim
Slide 8: NMFC Relative Trading Performance – Indexed Total Return
NMFC Relative Trading Performance – Indexed Total Return May 19, 2011 (IPO) – November 3, 2014 Indexed Total Return 165.0 S&P 61.7% 160.0 S&P Fin 60.2% 155.0 NMFC 54.5% 150.0 145.0 140.0 135.0 130.0 HY 28.4% 125.0 BDCs 27.3% 120.0 115.0 110.0 105.0 100.0 95.0 CAGR (IPO to 11/3/2014) NMFC 13.4% 90.0
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $6.13 $0.69 $2.17 $0.25 $0.61 $0.46 $1.80 $0.32 $0.37 $0.12 $1.09 $0.12 $0.38 $4.58 $1.34 $1.36 $1.02 $0.86 ($0.05) ($0.48) Cumulative IPO to 12/31/11(1) 2012 2013 YTD 2014 (IPO to 9/30/14)(1) Regular Dividends Special Dividend ∆ in Book Value Trading Multiple E
Slide 10: Credit Market Conditions
Credit Market Conditions ▪ Credit spreads have widened somewhat since our last call – Primarily driven by intense volatility in the financial markets – Ongoing fund outflows – Market remains competitive ▪ With limited exceptions, smaller deals continue to be priced at a premium ▪ NMFC works to be we
Slide 11: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,319.7 million as of September 30, 2014)(1) ($600.8 million drawn as of September 30, 2014) Fixed Fixed 13% 19% Floating – No Floor Floating – Floor(2) (1-Month Libor) 87% 81% Impact of Changing
Slide 12: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2014 (October 2008 – September 30, 2014) Cost / FMV Cost / # Portfolio Co’s Investments $1,339.6 / $1,353.7 $2,875.9 / 145 of which of which Internal Watch List (3 or 4 Rating)(2) $54.9 / $38.6 $67.3 / 4 of which of which No
Slide 13: Credit Performance – Non-70% Advance Rate Assets
Credit Performance – Non-70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company A 5.6x 5.2x 0.3x Company B 4.9x 4.8x 0.1x Company C 2.6x 2.2x 0.4x Company D 4.6x 4.4x 0.3x Company E 3.7x 3.6x 0.1x Company F 4.9x 4.2x 0.7x Comp
Slide 14: Credit Performance – 70% Advance Rate Assets
Credit Performance – 70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company AK 3.8x 3.0x 0.8x Company AL 2.9x 2.8x 0.1x Company AM 3.4x 3.2x 0.2x Company AN 3.9x 3.6x 0.3x Company AO 3.1x 3.1x 0.0x Company AP 5.3x 5.3x (0.0x)
Slide 15: UniTek Situation Update
UniTek Situation Update ▪ UniTek Global Services, Inc. (“UniTek” or the “Company”) is a provider of outsourced services operating in three segments: Satellite, Cable, and Wireless ▪ UniTek has suffered from two fundamental problems that led to a liquidity shortfall 1. Significant losses in Wireless
Slide 16: Senior Loan Program
Senior Loan Program (“SLP”) ▪ In June 2014, NMFC along with two third parties formed SLP I, a $368 million leveraged loan fund for the purpose of investing in senior secured loans – Stand-alone entity (not consolidated by the BDC) managed by NMFC in exchange for management fees – Capitalized with mi
Slide 17: Performance Since IPO
Performance Since IPO ($ in millions) IPO - 2014 (1) 12/31/2011 2012 2013 3/31/2014 6/30/2014 9/30/2014 Regular Dividend $26.6 $46.6 $59.8 $16.3 $17.7 $17.7 Cumulative Regular Dividend 26.6 73.2 133.0 149.2 166.9 184.6 (2) (2) Adj. NII 26.5 46.1 62.1 17.6 18.5 18.1 Cumulative Adj. NII 26.5 72.7 134.
Slide 18: Q3 Originations
Q3 Originations ($ in millions) Amount Portfolio Originations(1) ($’s Type of Advance YTM at Purchase(4) Date(2) Name Industry Invested) Tranche Size Investment Rate(3) Unlevered Levered 7/3/14 Business Services $20.0 $20 Subordinated SBIC 17.0% 40.2% 7/18/14 Education $11.9 $80 2nd Lien 25% 11.8% 1
Slide 19: Origination Activity Since Quarter End (Through 11/3/14)
Origination Activity Since Quarter End (Through 11/3/14) ($ in millions) Portfolio Originations(1) YTM at Purchase(4) Amount Type of Advance Date(2) Name Industry ($’s Invested) Tranche Size Investment Rate(3) Unlevered Levered 11/3/14 Company X* Energy $30.0 $80 2nd Lien 25% 15.9% 19.9% Other $29.5
Slide 20: Q3 Originations and Repayments
Q3 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Preferred Debt 70% Advance Rate Equity 11% First Lien Debt (2) 70% Advance Rate 14% 21% First Lien Debt (2) 31% 2% SLP Non-70% 12% Advance Rate First Lien Debt 3% Non-70% Advance Rate First Lien Debt 52
Slide 21: Q3 Investment Activity Roll
Q3 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.1% 11.2% 10.7% 10.7% 10.7% 6/30/2014 6/30/2014 Q3 Originations Q3 Sales / 9/30/2014 PF for Change Repayments in LIBOR Curve Cost ($mm)(3) $1,282.5 $1,282.5 $199.2 $144.1 $1,339.6 1 Assumes that investments are purchased at adjusted cost (es
Slide 22: Portfolio Mix (By Fair Value as of 9/30/14)
Portfolio Mix (By Fair Value as of 9/30/14) By Industry Other(1) Media 4% 5% Federal Services 7% Education Energy 21% 7% Distribution & Business Svcs Logistics - 7% Services 19% Healthcare 21% HC IT - 1% 10% HC Products - 1% Software 18% Consumer Svcs HC Services - 8% 1% Industrial Svcs 1% By Type o
Slide 23: Portfolio Concentration (By Fair Value as of 9/30/14)
Portfolio Concentration (By Fair Value as of 9/30/14) Portfolio Names By Fair Value Global Knowledge 3.7% Ascend Learning 3.3% Tenawa 3.1% McGraw-Hill Global 3.1% Deltek 3.1% Top 15 portfolio Novell 3.0% companies Kronos 2.9% represent $570.6 55 Other Tolt 2.7% million, or 42.1%, Portfolio Companies
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per unit/share data) 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Assets Portfolio $1,041.4 $1,115.7 $1,180.2 $1,310.9 $1,353.7 (1) Cash & Equivalents 17.6 15.0 13.3 21.7 19.6 Other Assets(2) 18.3 17.1 25.9 25.5 24.8 Total Assets $1
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $15.14 $15.20 $15.02 $14.94 $14.81 $14.87 $14.80 $14.68 $14.69 $14.43 $14.33 $14.65 $14.40 $14.53 $14.06 $14.38 $14.31 $14.32 $14.32 $14.33 $14.00 $14.08 $14.10 $14.06 (1) (2) $13.60 $13.98 $13.82 $13.83 NAV per Share (as Reported) $13.60 $13.20
Slide 26: Income Statement Highlights
Income Statement Highlights (1) Quarter Ended - Pro Forma Adjusted ($ in millions, except per unit/share data) 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Investment Income Interest income $27.1 $27.4 $28.1 $31.6 $32.3 Dividend income 0.2 0.0 1.9 1.3 0.5 Other income 0.2 0.9 0.7 0.8 1.9 Total
Slide 27: Investment Income Detail
Investment Income Detail (1) Quarter Ended - Pro Forma Adjusted ($ in millions) 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Investment Income Build Cash interest $24.4 $24.3 $26.3 $28.4 $29.1 Non-cash interest 0.8 1.0 0.8 0.6 1.6 Amortization of purchase discounts (premiums) and fees 0.7 0.7
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2014 Adjusted NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a fourth quarter dividend of $0.34 per share. $0.80 114% 120% 108% 103% 103% 105% 101% 102% $0.70 100% 99% 99% 100% 100% 98% 95% 100% $0.60 $0.57 80% $
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/14, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Holdings Credit Facility $259 / $280 L + 2.75% October 2016* (Wells Fargo) (No LIBOR floor) SLF Credit Facility $205 / $215 1st Lien: L + 2.00% October 2016* (Wells Fargo) 2nd Lien:
Slide 30: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administration Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 31: New Mountain Finance Corporation
NIM|F NEw MOUNTAIN FINANCE CORPORATION
Slide 32: Appendix A: NMFC Pro-Forma Adjusted NII Reconciliation
Appendix A: NMFC Pro-Forma Adjusted NII Reconciliation ($ in millions except per share data) Three months ended Nine months ended (4) September 30, 2014 September 30, 2014 Per Weighted Per Weighted Average Average Amount Share Amount Share GAAP net investment income ("NII") $20.8 $0.40 $54.1 $1.08 N
Slide 33: Appendix B: Structure Chart
Appendix B: Structure Chart Public Concurrent Shareholders Private Placement New Mountain Finance Investments New Mountain Corporation NMFC Credit Facility Finance SBIC, (“NMFC”) Convertible Notes L.P. 100% Investments SBIC Debentures New Mountain Finance Holdings, L.L.C. (“NMFH”) Investments 100% H