New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2023 Earnings Presentation
36 slides from New Mountain Finance's earnings presentation, Nov 3, 2023
Slide 1: Earnings Presentation Q3 2023
Earnings Presentation Q3 2023 November 3, 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 current conflict between Russia and Ukraine, conflict in the Middle
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: Today's Presenters
Today’s Presenters Steven B. Klinsky John R. Kline Laura C. Holson Founder & Chairman President & CEO COO & Interim CFO Years at 24 15 14 4
Slide 5: Chairman's Overview
Chairman’s Overview Earnings, Book Value, Dividend Policy & Shareholder Alignment ▪ Q3 2023 adjusted net investment income (“NII”) of $0.40 per share, meaningfully exceeding our regular dividend of $0.32 per share – In accordance with NMFC’s supplemental dividend program, $0.04 per share supplementa
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Adjusted NII Per Share $0.32 $0.35 $0.38 $0.39 $0.40 NAV Per Share $13.20 $13.02 $13.14 $13.14 $13.06 Dividends Per Share(1) $0.30 $0.32 $0.35 $0.36 $0.36 Share Count - End of Period (mm) 100.9 100.9
Slide 7: New Mountain Capital Overview
New Mountain Capital Overview New Mountain Capital (“NMC”) was founded in 1999 to focus on “defensive growth” business building and deep fundamental research $45bn+ ~250 ~150 0 ~$15m Employees & Senior Investment Private Equity Bankruptcies Net Realized Gains for NMFC Assets Under Management(1) Advi
Slide 8: 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% 8% 1% • Achieving superior
Slide 9: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Attractive Return Profile $3.1bn 93% ~12% Green Annual Div. Yield(4) Portfolio Size(1) Portfolio Risk Rating 15 Year Operating History 42% Avg. Loan to Value(2) ~10% Annual Return Since IPO(5) Baa3 / $15m Stable Cumulative net realized
Slide 10: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) Q2 2023 Risk Ratings Q3 2023 Risk Ratings (FMV as of 6/30/2023) (FMV as of 9/30/2023) Red Orange Red Orange Yellow Yellow 0.3% 0.2% 1.6% 1.9% 4.5% 4.6% Positions representing $11m improved in Rating Positions representing $33m worsened in Rating 93.7% Green 93.3% G
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings (FMV as of 9/30/23) ($ in millions / company count) $82 / 4 $60 / 6 $6 / 3 Business Services $59 / 3 Healthcare $27 / 2 National HME $3 / 1 Business Characteristics(2) (A = Best; C = Worst) Distribution & Logistics $23 / 1 Education $21 / 2 Ansira $2 / 1 C Packaging $10
Slide 12: Q3 2023 NAV Update
Q3 2023 NAV Update Q3 2023 NAV declined $0.08 per share (or 0.6%) compared to the prior quarter $13.14 $0.08 ($0.28) $0.04 $13.06 $0.08 Net $0.20 NAV Per Share Decrease Company $ / Share EaglePicher + $0.03 Edmentum – $0.13 UniTek – $0.05 All Other – $0.05 6/30/2023 Credit-Specific Broad Market Earn
Slide 13: Credit Performance Track Record
Credit Performance Track Record ▪ No new non-accruals in Q3 2023; non-accruals represent just 1.5% of total portfolio FMV ▪ ~$9 billion of cumulative investments since IPO have generated net realized gains of $15 million ($ in millions) As of 9/30/2023 Cumulative Since IPO (12+ years)(1) Investments
Slide 14: Total Value Generated for Shareholders
Performance Since IPO(1) ($ in millions) Since IPO in 2011, NMFC has created and distributed over $1.1 billion of value for shareholders $1,200 $1,102 NMFC has generated $1,176 million of Adj. NII, $15 million of net realized gains and $89 million of net unrealized losses $1,000 Total Value Generate
Slide 15: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – October 30, 2023 Indexed Total Return 430.0 CAGR (IPO to 10/30/2023) 410.0 NMFC 9.8% S&P 500 11.7% 390.0 S&P 295.2% S&P 500 Financials 9.7% 370.0 BDC Index 4.7% CS High Yield Index 4.6% 350.0 330.0 NMFC 220.0% S&P Fin 218.2
Slide 16: 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 continues to
Slide 17: Interest Rate Sensitivity
Interest Rate Sensitivity Current base rates have provided a sustained uplift to core earnings power Asset Mix Liability Mix Impact of Rising Rates in Q3 2023(3) (Aggregate par value of ($1,903 million drawn as of 9/30/2023)(2) $2,614 million as of 9/30/2023)(1) 5.5% Daily Base Rates for Assets Fixe
Slide 18: Q3 2023 Originations
Q3 2023 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread DDTL Draws & Other 15.6 Total Originations $15.6 Veritext Business Services - Misc Services (26.2) Second Lien S + 6.75% Black Mountain Software - ERP (18.0) Second Lien S
Slide 19: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 9/30/2023)(1) Consistent with prior quarter, ~66% of the portfolio is senior in nature Common Equity & Other Positions(3) Common Equity & Other Positions(3) Preferred 8% Subordinated 6% Company FMV Edmentum $100.9 3% UniTek 73.1 Benevis 50.7 First Lien Debt To
Slide 20: Net Lease Overview
Net Lease Overview Realized 6 15 11% $41 million Investments Tenants Properties Annual Cash Yield(1) Realized Gain(2) Current Portfolio 13 70 $96 million (as of 9/30/23) Tenants Properties Capital Invested(3) 14 Years 11% $22 million W.A. Lease Term Annual Cash Yield(1) Unrealized Appreciation Indus
Slide 21: Q3 2023 Investment Activity Roll
Q3 2023 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.6% 11.8% 11.7% 11.8% 11.5% 6/30/2023 6/30/2023 Q3 Originations Q3 Sales / 9/30/2023 PF for 9/30/2023 Repayments Base Rate Changes(3) Cost ($m)(4) $3,248.2 $3,248.2 $15.6 $75.4 $3,198.7 1 Assumes that investments are purchased at cost a
Slide 22: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $160 $144 $147 $138 $141 $140 $132 $120 $100 $80 $60 $40 $20 $0 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.8x 6.7x 6.8x 6.7x 6.6x 7.0x 6.0x 5.0x 4.0x 3.0x
Slide 23: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 9/30/2023) Top 15 portfolio companies represent $1,303.4 million, or 41.8%, of consolidated investments SLP III Benevis Edmentum 4.5% 4.1% Net Lease 3.8% 3.8% SLP IV 3.6% UniTek 2.9% Kaseya Portfolio Names 2.6% 95 Other Portfolio By Fair Value 2.4% Alliance Ani
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Assets Portfolio $3,253.8 $3,237.8 $3,286.9 $3,196.0 $3,128.4 Cash & Equivalents 48.9 71.2 46.4 45.9 83.3 (1) Other Assets 45.3 46.0 45.7 55.1 67.9 Total Assets $3,348.0 $
Slide 25: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Investment Income Interest income $58.8 $66.4 $71.2 $74.4 $74.0 Dividend income 15.5 17.1 17.3 18.7 17.9 Other income 3.8 3.2 3.2 2.1 2.2 Total investment income $78.1
Slide 26: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 99%+ of Q3 2023 non-cash interest and dividend income is generated by positions with a Green risk rating Quarter Ended ($ in millions) 9/30/2022 12/31/2022 3/
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage Q4 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 March 2024) 122% 104% 103% 105% 102% 100% 99% 98% 100% 99% 98% 99% 99% $1.71 $0.37 $1.48 $1.4
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2023, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $570 / $730 Broadly syndicated 1st lien loans(1): S + 1.70% April 2026 (Wells Fargo / Raymond James / State Street / CIT All other: S + 2.20% (0.0% SOFR
Slide 29: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 10/31/2023, $ in millions, based on total facility size) Floating vs Fixed Debt Mix $895 Debt Type Outstanding Debt Max Facility Size $165 Fixed 54% 42% Floating 46% 58% $468 $13 $416 $18 $75 $364 $730 $104 $100 $199 $122 $260 $280 $5 $200 $117 2024 2025 2026 2027 2
Slide 30: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Ryan Lynch Mitchel Penn Finian O’Shea 340
Slide 31: Appendix
NIM] NEw MOUNTAIN FINANCE CORPORATION Appendix
Slide 32: Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter
Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter (FMV as of 9/30/23) ($ in millions / company count) Healthcare Services $13 / 1 Business Characteristics(2) (A = Best; C = Worst) C B Tech-Enabled Healthcare $20 / 1 Business Products A $11 / 1 ** Excludes Green to Green Migration
Slide 33: 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 (2018) 6.4x 3.6x 2.
Slide 34: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (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 9/30/2023 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $119.0 Non-controlling interest in NMNLC related t
Slide 35: Appendix D: Performance Since IPO Detail
Appendix D: Performance Since IPO Detail IPO - ($ 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 $108.0 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,162.9 Adj. NII(3) 477
Slide 36: INIMIF]
INIMIF] New MountTAIN FINANCE CORPORATION