New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2018 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, Feb 28, 2019
Slide 1: Q4 2018 Earnings Presentation
Q4 2018 Earnings Presentation February 28, 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: Q4 2018 Highlights
Q4 2018 Highlights ▪ Q4 2018 Net Investment Income (“NII”) of $0.36 per weighted average share, above our guidance of $0.33 to $0.35 – Q4 2018 regular dividend of $0.34 per share paid on December 28, 2018 ▪ December 31, 2018 net asset value (“NAV”) of $13.22 per share, a decrease of $0.36 per share
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 NII Per Share $0.35 $0.34 $0.34 $0.36 $0.36 NAV Per Share $13.63 $13.60 $13.57 $13.58 $13.22 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 75.9 75.9 76.1 76.1 76
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 22, 2019 Indexed Total Return 260.0 S&P 144.7% 240.0 S&P Fin 137.5% NMFC 126.1% 220.0 200.0 180.0 160.0 HY 56.0% BDCs 50.2% 140.0 120.0 CAGR (IPO to 2/22/2019) NMFC 11.1% 100.0 S&P 500 12.2% S&P 500 Financials 11.8
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – February 22, 2019 126.1% 114.3% 113.7% 70.2% 53.7% 51.8% 48.7% 30.8% 9.3% (6.5%) (25.8%) NMFC Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, extern
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $9.80 $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 $10.36 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 ($0.31) ($0.41) ($0.86) ($0.48) ($0.55) ($0.75) IPO to 2012 2013 2014 2015 2016 2017 2018 Cumulative 12/3
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2018 (October 2008 – December 31, 2018) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,345 / $2,354 / 92 $6,576 / 254 of which of which Internal Watch List $1.5 / $0.1 / 1 $264 / 11 (3 or 4 Rating)(2)
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2017) 8.9x 4.7x 4.2x Company AL (2018) 4.4x 4.4x - Company B (2018) 6.7x 4.6x 2.1x C
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - 12/31/2011(2) 2012 2013 2014 2015 2016 2017 2018 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 102.2 106.1 Cumulative A
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.17x 1.23x Leverage(2): $2,308 $2,354 $2,003 $905 Decreased $201 million $1,031 38.4% through Non-First Lien Net 44.7% Sales & Repayments(3) $1,106 55.2% $1,449 $1,277 Increased $552 milli
Slide 14: HI Technology Investment Update
HI Technology Investment Update ▪ In December 2018, NMFC sold its investment in its largest portfolio company(1), HI Technology Corp (“HI Technology”) and received $140.0 million in total proceeds – HI Technology is a leading provider of prepaid payment products and innovative transaction services t
Slide 15: Credit Market Conditions
Credit Market Conditions ▪ Credit markets experienced volatility in the month of December – Certain syndicated loans sold off by 3-5 points – Dealers were forced to sell some primary loan issuances in the mid 90s – General negative investor sentiment created a “risk off” mentality in the market – Mi
Slide 16: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,074 million as of 12/31/2018)(1) ($1,402 million drawn as of 12/31/2018) Fixed 9% Fixed(2) Floating – No Floor 55% 45% Floating 91% Impact of Changing Rates(3) Estimated % Change Illustrative Adj
Slide 17: Q4 2018 Originations
Q4 2018 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 10/1/18 Bomgar Software $15.6 $104 2nd Lien 25% 10.9% 12.9% Membership 10/12/18 NM NL Holdings, L.P. Net Lea
Slide 18: Q4 2018 Originations (cont’d)
Q4 2018 Originations (cont’d) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 12/20/18 Kronos Software $21.2 $1,000 2nd Lien 25% 11.4% 13.3% 12/31/18 Wrike Software $9.0 $150 1s
Slide 19: Annual Originations and Repayments
Annual Originations and Repayments(1) ($ in millions) 2011 Cumulative (IPO(2) – (IPO(2) – 12/31/2011) 2012 2013 2014 2015 2016 2017 2018 12/31/2018) Total $379.3 $673.2 $529.7 $741.5 $607.2 $557.8 $1,000.0 $1,286.9 $5,775.6 Originations Repayments ($86.5) ($299.6) ($395.3) ($267.5) ($401.1) ($480.0)
Slide 20: Origination Activity Since Quarter End (Through 2/22/19)
Origination Activity Since Quarter End (Through 2/22/19) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Business 1/3/19 Conservice $25.4 $375 1st Lien 70% 8.2% 12.0% Services 1
Slide 21: Q4 2018 Originations and Repayments
Q4 2018 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Preferred Debt Equity <1% 4% First Lien Second Lien Debt Debt 19% 17% SLP III(2) 4% Preferred First Lien Equity Second Lien Net Lease Debt 54% Debt 5% 69% 27% Total: $265.0 million Total: $195.3 mi
Slide 22: Q4 2018 Investment Activity Roll
Q4 2018 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.3% 11.0% 10.7% 10.4% 9.8% 9/30/2018 9/30/2018 Q4 Originations Q4 Sales / 12/31/2018 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,276.5 $2,276.5 $265.0 $195.3 $2,345.2 1 Assumes that investments are purchased at cost and hel
Slide 23: Portfolio Mix (By Fair Value as of 12/31/2018)
Portfolio Mix (By Fair Value as of 12/31/2018) By Industry(1) Federal Services Other(2) Types of Services 3% 4% Financial Services Data & Distribution & Logistics Analytics 3% 4% 3% Insurance Net Lease Services Business 4% 9% Services Marketing 29% Energy Services 4% Services 9% 31% Education 9% Tel
Slide 24: Portfolio Concentration (By Fair Value as of 12/31/2018)
Portfolio Concentration (By Fair Value as of 12/31/2018) Portfolio Names By Fair Value Net Lease 4.0% UniTek 3.5% SLP II 3.4% SLP III 3.3% Top 15 portfolio Benevis 3.3% companies represent Integro 2.7% $942.1 million, or EAB Global 2.6% 40.0%, of consolidated Kronos 2.4% investments 77 Other Portfol
Slide 25: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Assets Portfolio $1,850.9 $2,003.1 $2,111.0 $2,307.8 $2,354.1 Cash & Equivalents 34.9 29.6 33.9 146.3 49.7 (1) Other Assets 42.2 45.7 61.0 67.6 44.9 Total Assets $1,928.0
Slide 26: 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 $14.08 $13.69 $14.00 $14.38 $14.06 $13.83 $13.83 $13.63 $13.60 $13.22 $13.00 $13.46 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1) $11.00 At 12/31/2011 1
Slide 27: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Investment Income Interest income $38.6 $36.7 $40.1 $40.9 $44.2 Dividend income 10.9 12.4 12.3 14.0 15.1 Other income 3.8 3.8 2.2 5.6 4.2 Total investment
Slide 28: Income Statement Highlights (Annually)
Income Statement Highlights (Annually) Year Ended – Adjusted ($ in millions, except per share data) 12/31/2016 12/31/2017 12/31/2018 Investment Income Interest income $147.4 $149.8 $161.9 Dividend income 11.2 37.2 53.8 Other income 9.4 10.8 15.8 Total investment income $168.0 $197.8 $231.5 Expenses
Slide 29: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Investment Income Build Cash Interest and Dividend Income $32.6 $33.0 $35.6 $35.3 $44.1 (1) SLP and Net Lease Income 5.1 5.4 5.7 7.0 8.0 Recurring Cash Investment Income $37.7 $38.4 $41.3 $42.3
Slide 30: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2019 NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a first quarter dividend of $0.34 per share. 114% 108% 105% 105% 106% 100% 103% 103% 104% 103% 102% 102% 103% 102% 101% 100% 100% 100% 100% 100% 101% 100% 98% 9
Slide 31: Diversified Leverage Profile
Diversified Leverage Profile (As of 12/31/2018, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $513 / $615 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022 (Wells Fargo / Raymond James / State Street / All other: L + 2.25% CIT Bank /
Slide 32: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 12/31/2018, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $805 As of 12/31/2018 Fixed 55.1% $135 Floating 44.9% $615 $407 $495 $115 $100 $225 $155 $90 $135 $192 $55 2019 2020 2021 2022 2023 2024 2025 and thereafter % of Total 9
Slide 33: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 34: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ 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 GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.1 (1) Non-cash adjustment (2.0) (3.5)
Slide 35: NIM|F
NIM|F NEw MOUNTAIN FINANCE CORPORATION