New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2017 Earnings Presentation
29 slides from New Mountain Finance's earnings presentation, Nov 8, 2017
Slide 1: Q3 2017 Earnings Presentation
Q3 2017 Earnings Presentation November 8, 2017
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 and Director John R. Kline President and Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer and Treasurer 3
Slide 4: Q3 2017 Highlights
Q3 2017 Highlights ▪ Q3 2017 Net Investment Income (“NII”) of $0.35 per weighted average share, at the high end of guidance of $0.33 to $0.35 – Q3 2017 regular dividend of $0.34 per share paid on September 29, 2017 ▪ September 30, 2017 net asset value (“NAV”) of $13.61 per share, a decrease of $0.02
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 (1) Adjusted NII Per Share $0.34 $0.34 $0.34 $0.34 $0.35 NAV Per Share $13.28 $13.46 $13.56 $13.63 $13.61 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 63.9 69.7
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 3, 2017 Indexed Total Return 240.0 S&P Fin 134.6% 230.0 220.0 S&P 120.9% 210.0 200.0 NMFC 96.4% 190.0 180.0 170.0 160.0 150.0 HY 51.0% 140.0 BDCs 36.4% 130.0 120.0 110.0 CAGR (IPO to 11/3/2017) 100.0 NMFC 11.0% 90.
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – November 3, 2017 100.7% 96.4% 74.4% 54.0% 40.9% 35.5% 32.5% 10.4% 10.1% 3.5% (8.3%) 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-
Slide 9: NMFC Return Attribution
NMFC Return Attribution $9.77 ($ per Share) $0.97 $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $0.37 $0.93 $0.38 $0.12 $0.12 $0.61 $1.17 $0.15 $8.66 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.02 $0.86 ($0.47) ($0.48) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 2016 YTD 2017 (IPO to 9/30/2017)(1) 12/31/
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2017 (October 2008 – September 30, 2017) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $1,844 / $1,873 / 83 $5,078 / 213 of which of which Internal Watch List (3 or 4 Rating)(2) $0.1 / $0.4 / 1 $236 / 10
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company At Purchase Current + / (-) Portfolio Company At Purchase Current + / (-) Company A 6.6x 5.0x 1.6x Company AH 4.0x 4.0x 0.1x Company B 5.6x 4.0x 1.6x Company AI 7.3x 7.3x 0.0x Company C 6.9
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - 12/31/2011(2) 2012 2013 2014 2015 2016 2017 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $75.1 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 449.3 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 75.5 Cumulative Adj. NII 26.5 72.7 134.
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit markets continue to show broad-based strength – Relatively tight spreads across all of leveraged credit – CLO market financing spreads continue to decline – High level of competition for the best financing transactions – Opportunistic repricing transactions have inc
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,702 million as of 9/30/2017)(1) ($839 million drawn as of 9/30/2017) Fixed 15% Floating – No Floor Fixed(2) 53% (1-Month Libor) Floating – Floor 47% 85% Impact of Changing Rates(3) Estimated %
Slide 15: Q3 2017 Originations
Q3 2017 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Distribution & 7/31/17 SnapAV $27.7 $265 1st Lien 70% 7.5% 13.3% Logistics 7/31/17 Xactly Software $11.5 $17
Slide 16: Origination Activity Since Quarter End
Origination Activity Since Quarter End (Through 11/3/2017) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Type of Date(2) Name Industry ($’s Invested) Tranche Size Investment Advance Rate(3) Unlevered Levered 2nd Lien/ $21.1 / 10/1/17 Company X* Education $260 / $150 Preferred 2
Slide 17: Q3 2017 Originations and Repayments
Q3 2017 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Preferred Subordinated Equity Debt 3% 3% Second First Lien Lien Debt Debt 38% Second 40% First Lien Lien Debt Debt 57% 59% Total: $202.4 million Total: $212.0 million 1 By $s invested / $s received at time of o
Slide 18: Q3 2017 Investment Activity Roll
Q3 2017 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.8% 10.8% 10.6% 10.3% 9.5% 6/30/2017 6/30/2017 Q3 Originations Q3 Sales / 9/30/2017 PF for change in Repayments LIBOR Curve Cost ($mm)(3) $1,867.3 $1,867.3 $202.4 $212.0 $1,843.7 1 Assumes that investments are purchased at cost and held
Slide 19: Portfolio Mix (By Fair Value as of 9/30/2017)
Portfolio Mix (By Fair Value as of 9/30/2017) By Industry(1) Net Lease SLP I Types of Services (2) 1% 1% Other Data & Federal Services 1% Analytics 5% 5% Financial Marketing Services Services Energy 7% 19% 5% Telecom Services Education 9% 6% Distribution & Services Engineering & Consulting Services
Slide 20: Portfolio Concentration (By Fair Value as of 9/30/2017)
Portfolio Concentration (By Fair Value as of 9/30/2017) Portfolio Names By Fair Value(1) HI Technology 5.7% SLP II 4.3% UniTek 3.5% AmWINS 3.2% Top 15 portfolio companies represent Tenawa 2.6% $758.9 million, or Alegeus 2.5% 41.3%, of consolidated Exact 2.4% investments 68 Other Portfolio CRGT 2.3%
Slide 21: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 Assets Portfolio $1,547.7 $1,588.0 $1,815.3 $1,883.4 $1,872.9 Cash & Equivalents 49.8 45.9 37.7 36.3 39.6 Other Assets(1) 19.7 22.1 27.9 30.1 38.1 Total Assets $1,617.2 $1
Slide 22: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $15.02 $15.14 $14.94 $14.87 $15.00 $14.68 $14.69 $14.81 $14.33 $14.43 $14.44 $14.50 $14.51 $14.34 $14.24 $14.22 (2) $14.06 $14.07 $14.17 $13.82 $14.53 $14.65 $13.69 $13.48 $13.84 $13.89 $14.00 $14.31 $14.32 $14.32 $14.38 $14.08 $14.10 $14
Slide 23: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 Investment Income Interest income $35.9 $35.4 $34.0 $37.6 $39.6 Dividend income 3.0 4.8 6.7 9.7 9.9 Other income 2.9 3.6 2.6 2.7 1.7 Total investment income $41.8 $43.8
Slide 24: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017 Investment Income Build Cash Interest Income $33.8 $32.2 $31.7 $32.8 $32.6 (1) SLP and Net Lease Income 2.5 4.1 5.5 5.0 4.8 Recurring Cash Investment Income $36.3 $36.3 $37.2 $37.8 $37.4 Non-cas
Slide 25: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2017 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. 0.8 114% 120% 108% 100% 105% 103% 103% 102% 102% 103% 103% 102% 0.7 101% 100% 99% 99% 100% 99% 100% 100% 99% 100%
Slide 26: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2017, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $376 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022(2) All other: L + 2.50% (No LIBOR floor) NMFC Credit Facility $19 / $123 L + 2.
Slide 27: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 28: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions, except for per weighted average share data; Year Ended unaudited figures) IPO - 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 2017 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $75.5 (1) (2.0) (3.
Slide 29: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION