New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2022 Earnings Presentation
36 slides from New Mountain Finance's earnings presentation, May 10, 2022
Slide 1: Q1 2022 Earnings Presentation
Q1 2022 Earnings Presentation May 10, 2022
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: 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 Director Laura C. Holson Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer 4
Slide 5: 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 March 1, 2022 earnin
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 (1) Adjusted NII Per Share $0.30 $0.30 $0.31 $0.31 $0.30 NAV Per Share $12.85 $13.33 $13.26 $13.49 $13.56 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.8 96.9
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: Revised Risk Rating System for Portfolio Companies
Revised Risk Rating System for Portfolio Companies COVID Risk Rating (Q1 2020 thru Q4 2021) Revised Risk Rating (Q1 2022 and Beyond) ▪ We assign each portfolio company scores on 2 ▪ Replaces existing COVID Risk Rating and the 1-4 metrics to generate an overall “Risk Rating”: Investment Rating in the
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has modestly improved from a Risk Rating standpoint in Q1 2022 from Q4 2021 – As of Q1 2022, 89% of the portfolio is characterized as Green (up from 87% in Q4 2021) Q4 2021 Risk Ratings Q1 2022 Risk Ratings (FMV as of 12/31/2021)(2) (FMV as of 3
Slide 10: NMFC Portfolio – Risk Rating Migration from Q4 2021
NMFC Portfolio – Risk Rating Migration from Q4 2021(1) (FMV as of 3/31/22) National HME $14 ($ in millions / company count) Retail Healthcare $6 /1 Haven $40 Business Characteristics (A = Best; C = Worst) Permian $36 Hospitality (2) C Management 6 Engineering & $13 / 1 $76 Consulting $13 / 1 B $79 U
Slide 11: NMFC Portfolio Risk Ratings
NMFC Portfolio Risk Ratings(1) (FMV as of 3/31/22) ($ in millions) $71 / 4 $205 / 7 $22 / 2 Business Characteristics (A = Best; C = Worst) C Business Services $33 / 1 Insurance Services $44 / 1 Education Products $18 / 1 PPVA $19 1 Haven $40 1 Sierra Hamilton $4 (2) Hospitality Management $13 / 1 Pe
Slide 12: 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) 4.7x 2.1x 2.6x Company A
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Despite general market volatility, direct lending has continued to be a resilient asset class ▪ Market is supported by secured debt structures and floating interest rates ▪ Our direct lending deal pipeline continues to build after a seasonally slow period in Q1 ▪ Increased
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,640 million as of 3/31/2022) (1) ($1,945 million drawn as of 3/31/2022)(2) Fixed 11% Fixed(3) Floating 52% 48% Floating 89% Impact of Changing Rates(4) Estimated % Change in Interest Income Net o
Slide 15: NAV Update
NAV Update ($ in millions, except per share data) $13.56 2022 NAV $0.07 Appreciation $13.26 2021 NAV Equity Positions(1) $0.87 Recovery FMV as of 3/31/2022 2020 NAV Company FMV $1.48 Recovery Edmentum $127.1 Benevis 50.5 UniTek 42.2 Permian 11.0 Equity Co-invests 13.8 Other 4.2 Total Equity $248.8 3
Slide 16: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2022 (October 2008 – March 31, 2022) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,235 / $3,267 / 107 $9,368 / 328 of which of which Non-Accrual $97 / $30 / 5 $276 / 12 of which Realized Default Loss(2
Slide 17: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2017 2018 2019 2020 2021 YTD 2022 Regular Dividend $475.1 $103.4 $117.4 $120.1 $116.5 $29.6 Cumulative Regular Dividend 475.1 578.5 695.9 816.0 932.5 962.1 (3) (3) (3) (3) Adj. NII $477.5 103.5 119.2 120.6 118.3 29.6 Cumulative Adj. NII 477.5
Slide 18: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 6, 2022 Indexed Total Return 430.0 CAGR (IPO to 5/6/2022) 410.0 NMFC 10.4% 390.0 S&P 500 13.0% S&P 500 Financials 11.6% S&P 281.5% 370.0 CS High Yield Index 5.0% 350.0 BDC Index 5.0% 330.0 S&P Fin 234.9% 310.0 NMFC 195.
Slide 19: Net Lease Update
Net Lease Update ▪ In August 2016, NMFC began investing in a newly formed real estate entity (“Net Lease”) to invest in net lease real estate opportunities ‒ Capitalized with equity from NMFC and non-recourse asset level leverage ‒ Stand-alone, actively-managed operating entity structured as a REIT
Slide 20: Q1 2022 Originations
Q1 2022 Originations Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate $9.8 First Lien L + 5.50% 1/13/22 Alliance Animal Health Consumer Services $4.3 Subordinated 11.50% 1/19/22 Recorded Future Software $26.3 First Lien L + 5.25% 2/16/22 T
Slide 21: Portfolio Activity & Mix by Type of Investment
Portfolio Activity & Mix by Type of Investment Q1 2022 Q1 2022 Total Portfolio Originations by Type(1) Sales / Repayments by Type(1) (FMV as of 3/31/2022) Second Lien Debt Subordinated 5% 3% Preferred Equity Common Equity 5% and Other 7% Subordinated Debt Second Lien 1% Debt 20% Second Lien Debt Fir
Slide 22: Q1 2022 Investment Activity Roll
Q1 2022 Investment Activity Roll YTM at Cost(1) / Purchase(2) 9.8% 9.8% 9.1% 9.0% 9.2% 12/31/2021 12/31/2021 Q1 Originations Q1 Sales / 3/31/2022 Repayments PF for 3/31/2022 LIBOR Curve(3) Cost ($m)(4) $3,142.0 $3,142.0 $153.7 $74.2 $3,235.2 1 Assumes that investments are purchased at cost and held
Slide 23: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 3/31/2022) Total Portfolio(1) Distribution & Logistics 4% Types of Healthcare Other(2) Types of Enterprise Software 5% Net Lease Real Estate ERP 4% Tech-Enabled 6% Education Other(3) ERP/Tools 3% Healthcare 6% 20% Education IT Infrastructure 8% Enterprise
Slide 24: Portfolio Concentration
Portfolio Concentration (By Fair Value as of 3/31/2022) Portfolio Names By Fair Value Edmentum 4.4% SLP III 4.3% SLP IV 3.4% Benevis 3.4% insightsoftware 2.9% UniTek 2.4% PhyNet 2.1% Dealer Tire 1.9% 92 Other Associa 1.9% Portfolio Companies Talend 1.8% 63.8% iCIMS 1.6% Frontline Education 1.6% TriT
Slide 25: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 Assets Portfolio $3,029.6 $3,100.0 $3,022.7 $3,185.4 $3,267.0 Cash & Equivalents 47.3 27.8 83.4 58.0 35.4 (1) Other Assets 51.4 52.3 62.0 52.4 59.4 Total Assets $3,128.3 $
Slide 26: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $14.44 Q1 2022 $15.00 $14.43 $14.24 $14.08 $13.69 $14.07 $13.83 $14.10 $13.87 $14.17 $14.00 $13.23 $14.38 $14.06 $13.56 $13.83 $13.63 $13.00 $13.60 $13.46 $13.22 $13.26 $13.49 $13.08 $12.00 $12.62 $11.00 NAV per Share (as Reported)
Slide 27: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2021 6/30/2021 9/30/2021 12/31/2022 3/31/2022 Investment Income Interest income $47.0 $47.1 $47.8 $47.7 $47.9 Dividend income 15.4 16.5 14.3 14.8 16.4 Other income 5.0 2.6 6.1 5.3 4.3 Total investment income $67.4
Slide 28: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 Investment Income Build Cash Interest and Dividend Income $38.9 $39.7 $39.1 $39.4 $38.4 SLP and Net Lease Income(1) 10.2 10.7 9.4 10.0 11.3 Recurring Cash Investment Income $49.1 $50.4 $48.5 $49
Slide 29: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2022 NII will be approximately $0.30 per share. Our board of directors has declared a first quarter dividend of $0.30 per share. 104% 103% 102% 102% 100% 100% 99% 98% 99% 100% 102% 100% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36
Slide 30: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 3/31/2022, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $576 / $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 31: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 3/31/2022, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,605 As of 3/31/2022 Fixed 52.1% Floating 47.9% $730 $280 $199 $341 $200 $201 $167 $104 $55 $117 $196 $140 $50 2022 2023 2024 2025 2026 and thereafter % of Total 2.4
Slide 32: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer & Director Robert A. Hamwee Independent Auditor John R. Kline
Slide 33: Appendix A: Leverage Migration
Appendix A: Leverage Migration ($ in millions) 12/31/21 3/31/22 Statutory Debt: Statutory Debt: $1,626.9 $33.6 $1,660.5 NAV: NAV: $1,321.2 $28.2 $1,349.4 ÷ Sources Uses ÷ Q1 2022 Settled Debt Drawn $33.6 $151.7 Originations Q4 2021 Settled Statutory Q1 2022 Repayments 43.9 Originations 7.9 Statuto
Slide 34: Appendix B: NMFC Cumulative Total Return Versus Peers
Appendix B: NMFC Cumulative Total Return Versus Peers(1) May 19, 2011 (IPO) – May 6, 2022 234.5% 195.8% 149.1% 130.6% 111.6% 74.4% 67.5% 37.3% 31.2% 8.6% (58.8%) 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, extern
Slide 35: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 YTD 2022 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $29.9 Non-controlling interest in NMNLC related to NII – – – (0.8) (1.3
Slide 36: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION