New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2018 Earnings Presentation
32 slides from New Mountain Finance's earnings presentation, Nov 8, 2018
Slide 1: Q3 2018 Earnings Presentation
Q3 2018 Earnings Presentation November 8, 2018
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 and Treasurer 3
Slide 4: Q3 2018 Highlights
Q3 2018 Highlights ▪ Q3 2018 Net Investment Income (“NII”) of $0.36 per weighted average share, above our guidance of $0.33 to $0.35 – Q3 2018 regular dividend of $0.34 per share paid on September 28, 2018 ▪ September 30, 2018 net asset value (“NAV”) of $13.58 per share, an increase of $0.01 per sha
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 NII Per Share $0.35 $0.35 $0.34 $0.34 $0.36 NAV Per Share $13.61 $13.63 $13.60 $13.57 $13.58 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 75.8 75.9 75.9 76.1 76.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – November 2, 2018 Indexed Total Return 260.0 240.0 S&P 137.0% S&P Fin 135.5% 220.0 NMFC 108.6% 200.0 180.0 160.0 HY 52.7% 140.0 BDCs 42.1% 120.0 CAGR (IPO to 11/2/2018) NMFC 10.4% 100.0 S&P 500 12.3% S&P 500 Financials 12.2%
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – November 2, 2018 108.6% 108.4% 105.2% 61.7% 45.5% 38.6% 34.9% 29.7% 5.5% (20.9%) (27.2%) NMFC Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, extern
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $10.38 $0.25 $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 $10.02 $0.97 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.02 $0.86 ($0.50) ($0.05) ($0.48) ($0.55) ($0.75) IPO to 2012 2013 2014 2015 2016 2017 YTD 2018 Cumulative 1
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2018 (October 2008 – September 30, 2018) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,277 / $2,308 / 92 $6,307 / 248 of which of which Internal Watch List $30.0 / $14.1 / 3 $264 / 11 (3 or 4 Rating)(2
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2017) 8.9x 5.8x 3.1x Company AK (2018) 4.7x 4.7x - Company B (2015) 6.9x 5.0x 1.9x C
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - 12/31/2011(2) 2012 2013 2014 2015 2016 2017 2018 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $77.5 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 552.6 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 102.2 78.6 Cumulative
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.17x Leverage(2): $2,308 $2,003 $1,031 Decreased $75 million through Non-First Lien Net 44.7% Sales & Repayments(3) $1,106 55.2% $1,277 Increased $380 million $897 through First Lien Net 5
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have been relatively stable throughout the year with steady new issue flow – Spread levels and leverage structures on middle market loans have been consistent – Recently, some transactions in the syndicated new issue market have struggled to clear the market
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,024 million as of 9/30/2018)(1) ($1,371 million drawn as of 9/30/2018) Fixed 13% Floating – Fixed(2) No Floor (1-Month 56% Libor) Floating – Floor 44% 87% Impact of Changing Rates(3) Estimated %
Slide 16: Q3 2018 Originations
Q3 2018 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Business 7/3/18 Dominion Web $10.3 $114 1st Lien 70% 10.0% 15.1% Services 66.7% (SBIC) 7/18/18 Bomgar Softwa
Slide 17: Q3 2018 Originations (cont’d)
Q3 2018 Originations (cont’d) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Investment Membership 8/24/18 NMFC SLP III $24.0 N/A N/A 12.0% 12.0% Fund Interest Healthcare 9/5/1
Slide 18: Origination Activity Since Quarter End (Through 11/2/18)
Origination Activity Since Quarter End (Through 11/2/18) Portfolio Originations(1) YTM at Purchase(4) ($ in millions) Amount Type of Date(2) Name Industry ($’s Invested) Tranche Size Investment Advance Rate(3) Unlevered Levered 10/1/18 Bomgar Software $15.6 $104 2nd Lien 25% 11.3% 13.3% Membership 1
Slide 19: Q3 2018 Originations and Repayments
Q3 2018 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Preferred Subordinated Preferred Equity Debt Equity 1% 1% 1% Second Lien Debt First Lien 29% Debt Second Lien 40% Debt First Lien 58% Debt 65% SLP III(2) 5% Total: $488.5 million Total: $291.3 million 1 By $s i
Slide 20: Q3 2018 Investment Activity Roll
Q3 2018 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.1% 11.2% 10.9% 11.0% 10.4% 6/30/2018 6/30/2018 Q3 Originations Q3 Sales / 9/30/2018 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,076.2 $2,076.2 $488.5 $291.3 $2,276.5 1 Assumes that investments are purchased at cost and hel
Slide 21: Portfolio Mix (By Fair Value as of 9/30/2018)
Portfolio Mix (By Fair Value as of 9/30/2018) By Industry(1) Distribution & Logistics 3% SLP I Types of Services 1% Other(2) Net Lease Data & 1% 3% Insurance Analytics Services 5% Business Federal Services 8% Services 4% Marketing 24% Energy Services 6% 8% Services Engineering & Education 34% Consul
Slide 22: Portfolio Concentration (By Fair Value as of 9/30/2018)
Portfolio Concentration (By Fair Value as of 9/30/2018) Portfolio Names By Fair Value Hi Tech 5.1% UniTek 3.5% SLP II 3.4% Benevis 3.4% Top 15 portfolio Net Lease 3.4% companies represent $967.7 million, or SLP III 2.9% 41.9%, of consolidated 77 Other Integro 2.7% investments Portfolio Companies EAB
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 Assets Portfolio $1,872.9 $1,850.9 $2,003.1 $2,111.0 $2,307.8 Cash & Equivalents 39.6 34.9 29.6 33.9 146.3 (1) Other Assets 38.1 42.2 45.7 61.0 67.6 Total Assets $1,950.6
Slide 24: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 $14.43 Q3 2018 $14.24 $14.08 $13.69 $14.07 $14.19 $14.00 $14.38 $14.06 $13.58 $13.83 $13.63 $13.00 $13.60 $13.46 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1) $11.00 At 12/3
Slide 25: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 Investment Income Interest income $39.6 $38.6 $36.7 $40.1 $40.9 Dividend income 9.9 10.9 12.4 12.3 14.0 Other income 1.7 3.8 3.8 2.2 5.6 Total investment income $51.2 $
Slide 26: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 Investment Income Build Cash Interest Income $32.6 $32.6 $33.0 $35.6 $35.3 SLP and Net Lease Income(1) 4.8 5.1 5.4 5.7 7.0 Recurring Cash Investment Income $37.4 $37.7 $38.4 $41.3 $42.3 (2) Non-
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2018 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. 114% 108% 103% 105% 105% 100% 104% 101% 103% 102% 102% 103% 103% 102% 101% 100% 98% 100% 99% 99% 100% 99% 99% 100%
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2018, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $466 / $495 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 29: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 9/30/2018, $ in millions, based on total facility size) $685 $135 $495 $495 $305 $115 $225 $155 $90 $135 $190 $55 2019 2020 2021 2022 2023 2024 2025 and thereafter % of Total 10.6% – 6.2% 46.9% 20.9% – 15.4% Facilities Convertible Note NMFC Credit Facility Revolver
Slide 30: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 31: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions, except for per weighted average share data; 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 2018 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $
Slide 32: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION