New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2023 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, May 9, 2023
Slide 1: Earnings Presentation Q1 2023
Earnings Presentation Q1 2023 May 9, 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: Chairman's Overview
Chairman’s Overview Earnings, Book Value, Dividend Policy & Shareholder Alignment ▪ Q1 2023 adjusted net investment income (“NII”) of $0.38 per share, meaningfully exceeding our regular dividend of $0.32 per share – NMFC commenced its supplemental dividend program this quarter, whereby 50% of quarte
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Adjusted NII Per Share $0.30 $0.31 $0.32 $0.35 $0.38 NAV Per Share $13.56 $13.42 $13.20 $13.02 $13.14 Dividends Per Share(1) $0.30 $0.30 $0.30 $0.32 $0.35 Share Count - End of Period (mm) 99.5 100.7
Slide 6: Experienced Management Team + Scaled Platform
Experienced Management Team + Scaled Platform Headshot Steven B. Klinsky Robert A. Hamwee John R. Kline Laura C. Holson Founder & Chairman Vice Chairman President & CEO COO & Interim CFO Years at 23 14 14 13 DEEPLY EXPERIENCED CREDIT TEAM LEVERAGING THE FULL POWER OF THE NEW MOUNTAIN PLATFORM ~220 N
Slide 7: Differentiated, Defensive Growth Approach to Lending
Differentiated, Defensive Growth Approach to Lending Why NMFC? ACYCLICAL SECTORS(3) Where NMC has deep expertise “Defensive Growth” Strategy • Focused on investing in strong businesses in Specialty Chemicals & Other acyclical sectors Materials ERP Information Technology 5% 1% 8% • Achieving superior
Slide 8: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Strong Return Profile $3.3bn 93% ~12% Green Annual Div. Yield(4) Portfolio Size(1) Portfolio Risk Rating(2) 14 Year Operating History 41% Avg. Loan to Value(2) ~10% Annual Return Since IPO(5) Baa3 / $14m Stable Cumulative adjusted net
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1)(2) Q4 2022 Risk Ratings Q1 2023 Risk Ratings (FMV as of 12/31/2022) (FMV as of 3/31/2023) Red Orange Red Orange Yellow Yellow 0.9% 0.6% 1.5% 1.4% 6.2% 4.8% Positions representing $59m improved in Rating Positions representing $16m worsened in Rating Green 91.5% Gre
Slide 10: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings(1) (FMV as of 3/31/23) ($ in millions / company count) $90 / 5 $41 / 4 $18 / 3 Business Services $56 / 3 Education $22 / 2 Ansira $10 / 1 Business Characteristics(3) (A = Best; C = Worst) Distribution & Logistics $21 / 1 Business Services $15 / 1 National HME $5 / 1 C P
Slide 11: Q1 2023 NAV Update
Q1 2023 NAV Update Q1 2023 NAV increased by $0.12 per share, or 0.9% Net $0.01 NAV per Share Increase $0.04 $13.14 $0.07 $13.02 $0.12 ($0.11) Company $ / Share UniTek + $0.12 Ansira – $0.09 Great Expressions – $0.02 12/31/2022 Credit-Specific Broad Market Earnings in Excess 3/31/2023 NAV per Share M
Slide 12: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2023 (October 2008 – March 31, 2023) Cost / FMV / Portfolio Count Cost / Portfolio Count Investments $3,333 / $3,287 / 112 $9,898 / 341 of which of which Non-Accrual(2) $159 / $56 / 9 $354 / 15 % of Total(3) 4.8% / 1.7% 3.6%
Slide 13: Performance Since IPO
Performance Since IPO(1) Since IPO, NMFC has created shareholder value of over $1 billion (Dollars in millions) +$759 +$152 Unrealized Realized Gains Appreciation $1,090 (2) $14 ($74) $1,030 Realized Losses Unrealized Depreciation (3) ($138) ($834) Dividends Net Realized Net Unrealized Shareholder (
Slide 14: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 5, 2023 Indexed Total Return 430.0 CAGR (IPO to 5/5/2023) 410.0 NMFC 9.1% S&P 500 12.0% 390.0 S&P 289.3% S&P 500 Financials 9.9% 370.0 CS High Yield Index 4.8% BDC Index 3.9% 350.0 330.0 310.0 S&P Fin 210.7% 290.0 NMFC
Slide 15: 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 Direct Lending Opportunities ▪ While deal flow is down overa
Slide 16: 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 Asset Mix Liability Mix Impact of Rising Rates in Q1 2023(3) (Aggregate par value of ($2,008 million drawn as of 3/31/2023)(2) $2,701 million a
Slide 17: Q1 2023 Originations
Q1 2023 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread Groundworks Consumer Services $17.1 First Lien S + 6.50% KnowBe4 Software - IT Infrastructure & Security 14.7 First Lien S + 7.75% Coupa Software - ERP 14.3 First Lien S +
Slide 18: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 3/31/2023) Total Portfolio(1) Common Equity & Other Positions(3) Common Equity ($ in millions, except per share data) & Other Preferred 8% Company FMV 6% Edmentum $111.4 Subordinated 2% UniTek 76.1 Benevis 50.7 First First First Lien Debt Haven 16.4 Lien Debt
Slide 19: Q1 2023 Investment Activity Roll
Q1 2023 Investment Activity Roll YTM at Cost(1) / Purchase(2) 13.8% 11.7% 11.3% 11.2% 10.9% 12/31/2022 12/31/2022 Q1 Originations Q1 Sales / 3/31/2023 PF for 3/31/2023 Base Repayments Rate Changes(3) Cost ($m)(4) $3,290.0 $3,290.0 $76.7 $30.7 $3,332.6 1 Assumes that investments are purchased at cost
Slide 20: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $160 $138 $141 $140 $130 $132 $120 $120 $100 $80 $60 $40 $20 $0 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.8x 6.8x 6.7x 6.8x 7.0x 6.5x 6.0x 5.0x 4.0x 3.0x
Slide 21: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 3/31/2023)(1) Portfolio Names By Fair Value LLF III Fund Edmentum 4.3% 3.9% Benevis 3.8% LLF IV Fund 3.4% UniTek 2.8% insightsoftware 2.7% 2.4% Kaseya 2.1% Alliance Animal Health 2.1% PhyNet 97 Other Portfolio 2.0% Companies Dealer Tire 61.5% 1.9% Mercer Adviso
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Assets Portfolio $3,276.3 $3,319.6 $3,253.8 $3,237.8 $3,286.9 Cash & Equivalents 35.4 40.7 48.9 71.2 46.4 (1) Other Assets 50.1 44.5 45.3 46.0 45.7 Total Assets $3,361.8 $
Slide 23: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Investment Income (1) $46.8 $50.3 $58.8 $66.4 $71.2 Interest income Dividend income 16.4 15.7 15.5 17.1 17.3 Other income 4.3 6.8 3.8 3.2 3.2 Total investment income $6
Slide 24: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 93%+ of Q1 2023 non-cash interest and dividend income is generated by positions with a Green risk rating Quarter Ended ($ in millions) 3/31/2022 6/30/2022 9/3
Slide 25: Dividend Summary and Coverage
Dividend Summary and Coverage Q2 2023 estimated adjusted NII expected to exceed our regular dividend of $0.32 per share and expected to generate supplemental dividend of $0.03 to $0.04 per share (payable in Sept. 2023) 118% 104% 103% 105% 102% 100% 99% 98% 100% 99% 98% 99% 99% $1.71 $0.37 $1.48 $1.4
Slide 26: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 3/31/2023, 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 27: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 3/31/2023, $ in millions, based on total facility size) Floating vs. Fixed Debt $1,426 Outstanding Mix As of 3/31/2023 Fixed 56% Floating 44% $730 $280 $364 $199 $253 $167 $167 $260 $75 $50 (Jun) $200 $117 $178 $117 (Aug) $104 $50 $18 2023 2024 2025 2026 2027 and
Slide 28: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Ryan Lynch Mitchel Penn Finian O’Shea 248
Slide 29: Appendix
NIM] NEW MOUNTAIN FINANCE CORPORATION Appendix
Slide 30: Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter
Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter (FMV as of 3/31/23) ($ in millions / company count) Packaging $13 / 1 Great Expressions $3 / 1 Business Characteristics(2) (A = Best; C = Worst) C B Permian $59 / 1 A ** Excludes Green to Green Migration ** Tier 4 Tier 3 Tier 2 Ti
Slide 31: Appendix B: Credit Performance
Appendix B: Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2017) 9.5x 7.0x 2.
Slide 32: Performance Since IPO Detail
Performance Since IPO Detail IPO - ($ in millions) 12/31/2017 (1) 2018 2019 2020 2021 2022 YTD 2023 Regular & Supplemental Dividend (2) $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 $35.3 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,090.2 Adj. NII(3) 477.5 103.2 116
Slide 33: Appendix C: NMFC Income Reconciliation (1/2)
Appendix C: NMFC Income Reconciliation (1/2) (in millions, except per share data) Year Ended YTD (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 3/31/2023 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $38.4 Non-controlling interest in NMNLC rela
Slide 34: Appendix C: NMFC Income Reconciliation (2/2)
Appendix C: NMFC Income Reconciliation (2/2) (in millions, except per share data) Year Ended YTD (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 3/31/2023 GAAP realized gains (losses) on investments ($30.8) ($9.7) $0.9 ($2.8) ($3.8) $53.5 $0.7 Non-controlling interest in NMNL
Slide 35: New Mountain Finance Corporation
INIMIF] New MountTAIN FINANCE CORPORATION