New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2021 Earnings Presentation
36 slides from New Mountain Finance's earnings presentation, May 6, 2021
Slide 1: Q1 2021 Earnings Presentation
Q1 2021 Earnings Presentation May 6, 2021
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 and related changes in base interest rates and s
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, Chief Operating Officer, and Director Shiraz Y. Kajee Chief Financial Officer 3
Slide 4: Chairman's Overview
Chairman’s Overview ▪ We believe our portfolio continues to be well positioned as a result of our defensive growth investment strategy, which focuses on acyclical, recurring, and predictable business models with long term viability, even in a recessionary environment – Since our February 25, 2021 ea
Slide 5: Chairman's Overview (cont.)
Chairman’s Overview (cont.) ▪ Implementing a dividend support program for our $0.30 per share quarterly dividend through December 31, 2022(1) – Investment Adviser has agreed to waive incentive fees as needed in order to achieve this quarterly dividend – Through this period, effective management fee
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Adjusted NII Per Share(1) $0.35 $0.30 $0.30 $0.30 $0.30 NAV Per Share $11.14 $11.63 $12.24 $12.62 $12.85 Dividends Per Share $0.34 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.8 96.8 9
Slide 7: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 8: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q1 2021, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has generally remained unchanged from a Risk Rating standpoint in Q1 2021 from Q4 2020 – As of Q1 2021, 85% of the portfolio is characterized as Green (slightly down from 87% in Q4 2020) – Red Risk Rated companies remained unchanged – Orange Ris
Slide 10: NMFC Portfolio – Risk Rating Migration from Q4 2020
NMFC Portfolio – Risk Rating Migration from Q4 2020 (FMV as of 3/31/21) ($ in millions / company count) Overall Company Strength (A = Best; C = Worst) Tenawa (Equity) $3 C Insurance Services $48 / 1 B Retail Healthcare $15 / 1 Retail Healthcare $10 / 1 Business Services $37 / 1 A Business Services $
Slide 11: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 3/31/21) ($ in millions) $28 / 1 $97 / 4 $154 / 3 $67 / 4 Overall Company Strength (A = Best; C = Worst) Permian $31 1 C National HME $28 UniTek $68. . Benevis $100. . Education Products $19 / 1 PPVA $21 . Marketing Services $31 /
Slide 12: NAV Recovery Progress
NAV Recovery Progress ($ in millions, except per share data) Impact of Assets Recovering to Par Remaining Recovery Cumulative NAV / Share: $13.11 $13.22 $13.26 NAV Impact: $25.4m $10.8m $3.2m $13.26 $12.85 $0.11 $0.04 Q1 2021 NAV $0.26 Recovery $0.23 2020 NAV Recovery $1.48 $11.14 3/31/20 NAV 3/31/2
Slide 13: Leverage Migration
Leverage Migration ($ in millions) 12/31/20 3/31/21 Statutory Debt: Statutory Debt: $1,514.4 ($43.2) $1,471.2 NAV: NAV: $1,221.9 $22.4 $1,244.3 Primarily driven by ÷ Sources market value recovery Uses ÷ Q1 2021 Repayments $190.7 Debt Paydown $43.2 Q1 2021 Settled Statutory Q1 2021 Settled Sales 5.
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit market conditions continue to improve throughout the course of the year ▪ Deal volume in our core direct lending market is starting to pick back up, as companies within most industries have good access to capital ▪ Secondary trading levels in corporate credit have r
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,517 million as of 3/31/2021) (1) ($1,771 million drawn as of 3/31/2021) Fixed 7% Fixed(2) Floating 57% 43% Floating 93% Impact of Changing Rates(3) Estimated % Change in Interest Income Illustrat
Slide 16: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2021 (October 2008 – March 31, 2021) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,045 / $3,030 / 102 $8,334 / 297 of which of which Internal Watch List $236 / $138 / 9 $600 / 19 (3 or 4 Rating)(2) of
Slide 17: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2019) 7.4x 5.0x 2.4x Company A
Slide 18: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $120.1 $29.0 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 816.0 845.0 Adj.
Slide 19: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – April 30, 2021 Indexed Total Return 390.0 S&P 281.3% CAGR (IPO to 4/30/2021) 370.0 NMFC 10.3% 350.0 S&P 500 14.4% S&P Fin 243.2% S&P 500 Financials 13.2% 330.0 CS High Yield Index 6.2% 310.0 BDC Index 4.8% 290.0 270.0 NMFC
Slide 20: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – April 30, 2021 194.3% 166.5% 135.5% 119.2% 80.3% 76.4% 41.1% 35.2% 18.6% 8.4% (62.6%) Peer A ARCC NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, exte
Slide 21: Q1 2021 Originations
Q1 2021 Originations Portfolio Originations(1) YTM at Purchase(4) ($ in millions) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Investment Membership 1/7/21 NMFC SLP III $10.0 N/A N/A 11.5% 11.5% Fund Interest Healthcare 1/22/21 Careism
Slide 22: Origination Activity Since Quarter End (Through 4/30/2021)
Origination Activity Since Quarter End (Through 4/30/2021) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 4/6/21 Diligent Software $9.9 $415 Preferred N/A 11.3% 11.3% 4/16/21 C
Slide 23: Portfolio Activity & Mix by Type of Investment
Portfolio Activity & Mix by Type of Investment Q1 2021 Q1 2021 Total Portfolio Originations by Type(1) Sales / Repayments by Type(1) (FMV as of 3/31/2021) Preferred Equity Common Equity 5% and Other 4% Subordinated Debt 1% Second Lien Debt Second Lien Debt Second 33% First 38% Lien Debt Lien Debt Fi
Slide 24: Q1 2021 Investment Activity Roll
Q1 2021 Investment Activity Roll YTM at Cost(1) / Purchase(2) 8.9% 8.7% 8.8% 8.6% 7.8% 12/31/2020 12/31/2020 Q1 Originations Q1 Sales / 3/31/2021 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $3,013.2 $3,013.2 $219.4 $196.2 $3,044.8 1 Assumes that investments are purchased at cost and held u
Slide 25: Portfolio Mix By Industry (Fair Value as of 3/31/2021)
Portfolio Mix By Industry (Fair Value as of 3/31/2021) Total Portfolio(1) Specialty Chemicals & Materials Federal Services 2% Types of Healthcare 2% Types of Enterprise Software Other(2) 4% Real Estate ERP eCommerce Distribution & Logistics 3% & Logistics Tech-Enabled 3% 3% Compliance Media, Marketi
Slide 26: Portfolio Concentration (By Fair Value as of 3/31/2021)
Portfolio Concentration (By Fair Value as of 3/31/2021) Portfolio Names By Fair Value SLP III 4.3% Edmentum 3.9% Benevis 3.3% insightsoftware 3.0% Top 15 portfolio SLP II 2.6% companies(1) represent EAB Global 2.6% $1,108.4 million, or Associa 2.3% 36.6%, of consolidated PhyNet 2.2% investments UniT
Slide 27: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Assets Portfolio $3,002.3 $2,837.5 $2,907.7 $2,964.5 $3,029.6 Cash & Equivalents 22.1 56.2 68.7 79.0 47.3 (1) Other Assets 79.1 49.9 56.1 54.0 51.4 Total Assets $3,103.5 $
Slide 28: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $14.44 $15.00 $14.43 $14.24 $14.08 $13.69 $14.07 $13.83 $13.87 $14.00 Q1 2021 $14.38 $13.23 $14.06 $13.83 $13.63 $13.46 $13.00 $13.60 $13.22 $13.46 $13.26 $13.08 $12.85 $12.00 $12.62 $11.00 NAV per Share (as Reported) NAV + Cumulat
Slide 29: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Investment Income Interest income $61.3 $53.4 $49.7 $48.9 $47.0 Dividend income 13.9 12.0 12.4 12.7 15.4 Other income 2.0 2.3 3.2 6.2 5.0 Total investment income $77.2
Slide 30: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Investment Income Build Cash Interest and Dividend Income $54.0 $45.5 $43.2 $41.4 $38.9 (1) SLP and Net Lease Income 9.2 8.4 8.8 8.6 10.2 Recurring Cash Investment Income $63.2 $53.9 $52.0 $50.0
Slide 31: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2021 NII will be approximately $0.30 per share. Our board of directors has declared a second quarter dividend of $0.30 per share. 104% 103% 102% 102% 100% 99% 99% 100% 102% 100% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.3
Slide 32: Diversified Leverage Profile
Diversified Leverage Profile (As of 3/31/2021, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $450 / $745 Broadly syndicated 1st lien loans(1): L + 2.00% September 2023 (Wells Fargo / Raymond James / State Street / CIT All other: L + 2.50% (0.00%
Slide 33: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 3/31/2021, $ in millions, based on total facility size) Floating vs. Fixed Debt Wells Fargo Outstanding Mix $1,086 extension closed As of 3/31/2021 on 4/20/21; Fixed 57.2% revised maturity to Floating 42.8% $201 April 2026 $780 $280 $745 $200 $294 $189 $117 $300 $55
Slide 34: 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 35: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 2021 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $117
Slide 36: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION