New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2019 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, May 7, 2019
Slide 1: Q1 2019 Earnings Presentation
Q1 2019 Earnings Presentation May 7, 2019
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 3
Slide 4: Q1 2019 Highlights
Q1 2019 Highlights ▪ Q1 2019 Net Investment Income (“NII”) of $0.35 per weighted average share, at the high end of our guidance of $0.33 to $0.35 – Q1 2019 regular dividend of $0.34 per share paid on March 29, 2019 ▪ March 31, 2019 net asset value (“NAV”) of $13.45 per share, an increase of $0.23 pe
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 NII Per Share $0.34 $0.34 $0.36 $0.36 $0.35 NAV Per Share $13.60 $13.57 $13.58 $13.22 $13.45 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 75.9 76.1 76.1 76.1 80.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 1, 2019 Indexed Total Return 260.0 S&P 157.0% S&P Fin 150.7% 240.0 NMFC 129.3% 220.0 200.0 180.0 160.0 HY 60.7% BDCs 46.0% 140.0 120.0 CAGR (IPO to 5/1/2019) NMFC 11.0% 100.0 S&P 500 12.6% S&P 500 Financials 12.2% 80.0
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – May 1, 2019 129.3% 122.3% 116.9% 72.2% 54.0% 47.6% 44.5% 24.4% 11.2% (4.6%) (30.0%) NMFC Peer ARCC A Peer GBDC B Peer SLRC C Peer PSEC D Peer PNNT E Peer BKCC F Peer TCRD G Peer AINVH OCSL Peer I Peer MCCJ Source: Capital
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $11.13 $0.45 $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 $0.95 $10.70 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.57 $0.86 $0.23 $0.34 ($0.63) ($0.48) ($0.41) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 20
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2019 (October 2008 – March 31, 2019) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,509 / $2,534 / 97 $6,738 / 260 of which of which Internal Watch List $1.5 / $0.0 / 1 $264 / 11 (3 or 4 Rating)(2) of w
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2017) 8.9x 4.0x 4.9x Company AN (2018) 9.3x 9.3x - Company B (2015) 6.9x 4.4x 2.5x C
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $27.3 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 605.8 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 10
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.17x 1.25x Leverage(2): $2,534 $2,308 $2,003 $979 Decreased $127 million $1,031 38.6% through Non-First Lien Net Sales & Repayments(3) 44.7% $1,106 55.2% $1,555 $1,277 Increased $658 milli
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets improved over the course of Q1 – Syndicated loans have nearly rallied back to pre-December levels – Pricing and structures of middle market loans are similar to those seen at the beginning of Q4 – General investor sentiment is positive – Q1 middle market dea
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,238 million as of 3/31/2019) (1) ($1,524 million drawn as of 3/31/2019) Fixed 9% Fixed(2) Floating – No Floor 51% 49% Floating 91% Impact of Changing Rates(3) Estimated % Change Illustrative NII
Slide 16: Q1 2019 Originations
Q1 2019 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Business 1/3/19 Conservice $25.4 $375 1st Lien 70% 7.8% 11.5% Services 1/10/19 Apptio Software $24.3 $600 1s
Slide 17: Origination Activity Since Quarter End (Through 5/1/19)
Origination Activity Since Quarter End (Through 5/1/19) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 4/2/19 QuickBase Software $9.8 $140 2nd Lien 25% 11.2% 13.5% 5/1/19 Compa
Slide 18: Q1 2019 Originations and Repayments
Q1 2019 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Debt <1% Second Lien Debt Second Lien First Lien 35% Debt Debt First Lien 49% 51% Debt 64% SLP III(2) 1% Total: $158.0 million Total: $5.9 million 1 By $s invested / $s received at time of originat
Slide 19: Q1 2019 Investment Activity Roll
Q1 2019 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.4% 10.0% 9.9% 10.0% 9.5% 12/31/2018 12/31/2018 Q1 Originations Q1 Sales / 3/31/2019 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,345.2 $2,345.2 $158.0 $5.9 $2,509.3 1 Assumes that investments are purchased at cost and held
Slide 20: Portfolio Mix (By Fair Value as of 3/31/2019)
Portfolio Mix (By Fair Value as of 3/31/2019) By Industry(1) Federal Services Other(2) Types of Services 3% 3% Financial Services Data & Distribution & Logistics 6% Analytics 4% 3% Net Lease Marketing Services 4% 8% Energy Business Insurance Services 4% Services Services 36% 31% 9% Education 9% Cons
Slide 21: Portfolio Concentration (By Fair Value as of 3/31/2019)
Portfolio Concentration (By Fair Value as of 3/31/2019) Portfolio Names By Fair Value UniTek 3.3% SLP III 3.2% SLP II 3.1% Benevis 3.1% EAB Global 2.5% Top 15 portfolio Integro 2.4% companies(1) represent Edmentum 2.3% $933.8 million, or Kronos 2.3% 36.8%, of consolidated investments NaviHealth 2.3%
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 Assets Portfolio $2,003.1 $2,111.0 $2,307.8 $2,354.1 $2,534.5 Cash & Equivalents 29.6 33.9 146.3 49.7 65.6 (1) Other Assets 45.7 61.0 67.6 44.9 50.0 Total Assets $2,078.4
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.43 $14.44 $14.07 $14.24 Q1 2019 $14.08 $13.69 $13.83 $14.00 $14.38 $14.06 $14.06 $13.83 $13.63 $13.45 $13.60 $13.00 $13.46 $13.22 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1)
Slide 24: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 Investment Income Interest income $36.7 $40.1 $40.9 $44.2 $47.9 Dividend income 12.4 12.3 14.0 15.1 13.5 Other income 3.8 2.2 5.6 4.2 2.8 Total investment income $52.9
Slide 25: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 Investment Income Build Cash Interest and Dividend Income $33.0 $35.6 $35.3 $44.1 $44.3 (1) SLP and Net Lease Income 5.4 5.7 7.0 8.0 9.5 Recurring Cash Investment Income $38.4 $41.3 $42.3 $52.1
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2019 NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a second quarter dividend of $0.34 per share, in line with the previous 28 quarters. 104% 103% 103% 100% 102% 101% 100% 99% 99% $1.71 $0.37 $1.48 $1.48 $0.12 $0
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 3/31/2019, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $567 / $675 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 28: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 3/31/2019, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $865 As of 3/31/2019 Fixed 50.7% $135 Floating 49.3% $675 $495 $407 $115 $100 $225 $155 $90 $135 $192 $55 2019 2020 2021 2022 2023 2024 2025 and thereafter % of Total 8.9
Slide 29: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer & Director Robert A. Hamwee Independent Auditor Adam B. Weinst
Slide 30: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions; 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 12/31/2018 2019 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.1 $27.5 Non-cash adjustment (
Slide 31: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION