New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2019 Earnings Presentation
33 slides from New Mountain Finance's earnings presentation, Nov 7, 2019
Slide 1: Q3 2019 Earnings Presentation
Q3 2019 Earnings Presentation November 7, 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: Q3 2019 Highlights
Q3 2019 Highlights ▪ Q3 2019 Net Investment Income (“NII”) of $0.36 per weighted average share, above our guidance of $0.33 to $0.35 – Q3 2019 regular dividend of $0.34 per share paid on September 27, 2019 ▪ September 30, 2019 net asset value (“NAV”) of $13.35 per share, a decrease of $0.06 per shar
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 NII Per Share $0.36 $0.36 $0.35 $0.35 $0.36 NAV Per Share $13.58 $13.22 $13.45 $13.41 $13.35 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 76.1 76.1 80.5 80.6 87.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – November 1, 2019 Indexed Total Return S&P 172.4% S&P Fin 165.6% 260.0 240.0 NMFC 134.8% 220.0 200.0 180.0 HY 64.4% 160.0 140.0 BDCs 34.3% 120.0 CAGR (IPO to 11/1/2019) 100.0 NMFC 10.6% S&P 500 12.6% S&P 500 Financials 12.2%
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – November 1, 2019 143.2% 134.8% 118.5% 74.7% 55.7% 35.5% 33.1% 19.9% 18.0% (2.4%) (53.9%) ARCC Peer A NMFC ARCC GBDC Peer B SLRC Peer C PSEC Peer D PNNT Peer E BKCC Peer F TCRD Peer G AINVH Peer OCSL Peer I MCCJ Peer Source
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $11.87 $0.61 $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 $1.15 $11.38 $0.13 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $1.02 $0.86 ($0.73) ($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 9/30/2019 (October 2008 – September 30, 2019) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,996 / $3,010 / 112 $7,386 / 282 of which of which Internal Watch List $38.9 / $24.5 / 3 $301 / 13 (3 or 4 Rating)(
Slide 11: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2017) 8.9x 4.4x 4.5x Company A
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ 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 $84.5 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 663.0 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 10
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.23x 1.20x(3) Leverage(2): $3,010 $2,354 $1,015 Decreased $91 million through Non-First Lien Net 33.7% $2,003 Sales & Repayments(4) $905 38.4% $1,106 55.2% Increased $1,098 million $1,995
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have been generally stable throughout 2019 ▪ Direct lending deal flow in our core verticals has been very strong throughout the summer and fall ▪ Loan yields have been stable – Lower base rates have been generally offset by modestly higher loan spreads ▪ Pri
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,694 million as of 9/30/2019) (1) ($1,827 million drawn as of 9/30/2019) Fixed 8% Fixed(2) Floating – No Floor 46% 54% Floating 92% Impact of Changing Rates(3) Estimated % Change Illustrative NII
Slide 16: Q3 2019 Originations
Q3 2019 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Investment Membership 7/1/19 NMFC SLP III $20.0 N/A N/A 12.0% 12.0% Fund Interest Healthcare 7/1/19 PhyNet $
Slide 17: Q3 2019 Originations (cont.)
Q3 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) / 8/7/19 insightsoftware Software $52.9 $201 1st Lien 7.6% 16.1% / 10.0% 70%(5) 8/7/19
Slide 18: Q3 2019 Originations (cont.)
Q3 2019 Originations (cont.) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 9/24/19 Bullhorn Software $17.0 $410 1st Lien 70% 7.4% 10.4% Business 9/25/19 OEConnection $11.9 $18
Slide 19: Origination Activity Since Quarter End (Through 11/1/19)
Origination Activity Since Quarter End (Through 11/1/19) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Advanced Computer 10/8/19 Software $34.2 $115 2nd Lien 40% 10.4% 14.4% S
Slide 20: Q3 2019 Originations and Repayments
Q3 2019 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Preferred Equity 1% Second Lien Debt Net Lease 20% 1% First Lien Second Lien SLP III(2) Debt Debt 5% 50% 50% First Lien Debt 73% Total: $452.1 million Total: $111.2 million 1 By $s invested / $s received at tim
Slide 21: Q3 2019 Investment Activity Roll
Q3 2019 Investment Activity Roll YTM at Cost(1) / Purchase(2) 9.4% 9.3% 9.3% 8.6% 8.2% 6/30/2019 6/30/2019 Q3 Originations Q3 Sales / 9/30/2019 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,634.0 $2,634.0 $452.1 $111.2 $2,996.1 1 Assumes that investments are purchased at cost and held unt
Slide 22: Portfolio Mix (By Fair Value as of 9/30/2019)
Portfolio Mix (By Fair Value as of 9/30/2019) By Industry(1) Federal Services Other(2) Types of Services 3% 3% Energy Marketing Financial 3% Services Services 5% 4% Distribution & Logistics Data & 4% Analytics Net Lease 6% Business Insurance 4% Services Services Services 26% 36% 9% Education 9% Cons
Slide 23: Portfolio Concentration (By Fair Value as of 9/30/2019)
Portfolio Concentration (By Fair Value as of 9/30/2019) Portfolio Names By Fair Value SLP III 3.3% Benevis 2.9% SLP II 2.7% PhyNet 2.5% UniTek 2.4% Edmentum 2.4% Top 15 portfolio EAB Global 2.2% companies(1) represent Integro 2.0% $994.8 million, or NaviHealth 1.9% 33.1%, of consolidated Associa 1.8
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Assets Portfolio $2,307.8 $2,354.1 $2,534.5 $2,655.2 $3,009.6 Cash & Equivalents 146.3 49.7 65.6 87.2 69.8 (1) Other Assets 67.6 44.9 50.0 48.9 52.7 Total Assets $2,521.7
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 $14.43 $14.07 $14.24 Q3 2019 $14.08 $13.69 $13.83 $14.00 $14.38 $13.96 $14.06 $13.83 $13.63 $13.35 $13.00 $13.60 $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) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Investment Income Interest income $40.9 $44.2 $47.9 $51.7 $55.2 Dividend income 14.0 15.1 13.5 12.6 13.2 Other income 5.6 4.2 2.8 2.2 4.2 Total investment income $60.5
Slide 27: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Investment Income Build Cash Interest and Dividend Income $35.3 $44.1 $44.3 $47.3 $50.2 (1) SLP and Net Lease Income 7.0 8.0 9.5 8.4 8.7 Recurring Cash Investment Income $42.3 $52.1 $53.8 $55.7
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2019 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, in line with the previous 30 quarters. 104% 103% 102% 103% 102% 100% 99% 99% 101% $1.71 $0.37 $1.48 $1.48 $0.12 $0
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2019, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $638 / $800 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 9/30/2019, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $994 As of 9/30/2019 Fixed 45.9% $135 Floating 54.1% $603 $800 $495 $201 $210 $225 $117 $90 $139 $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 $86.6 Non-cash adjustment (
Slide 33: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION