New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2017 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, Mar 1, 2018
Slide 1: Q4 2017 Earnings Presentation
Q4 2017 Earnings Presentation March 1, 2018
Slide 2: Important Notice and Safe Harbor Statement
Important Notice 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 outcome
Slide 3: Management Participants
Management Participants 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: Q4 2017 Highlights
Q4 2017 Highlights ▪ Q4 2017 Net Investment Income (“NII”) of $0.35 per weighted average share, at the high end of guidance of $0.33 to $0.35 – Q4 2017 regular dividend of $0.34 per share paid on December 28, 2017 ▪ December 31, 2017 net asset value (“NAV”) of $13.63 per share, an increase of $0.02
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 (1) Adjusted NII Per Share $0.34 $0.34 $0.34 $0.35 $0.35 NAV Per Share $13.46 $13.56 $13.63 $13.61 $13.63 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 69.7 69.8
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 26, 2018 Indexed Total Return 260.0 S&P Fin 160.1% 240.0 S&P 138.8% 220.0 200.0 NMFC 86.1% 180.0 160.0 HY 50.9% 140.0 BDCs 32.8% 120.0 CAGR (IPO to 2/26/2018) NMFC 9.6% 100.0 S&P 500 Financials 15.1% S&P 500 13.7%
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – February 26, 2018 96.0% 86.1% 78.3% 50.2% 34.9% 30.7% 30.5% 13.7% (0.2%) (19.9%) (28.8%) Peer A 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 9: NMFC Return Attribution
NMFC Return Attribution $9.41 ($ per Share) $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 $9.00 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 ($0.45) ($0.48) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 2016 2017 (IPO to 12/31/2017)(1) 12/31/201
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2017 (October 2008 – December 31, 2017) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $1,821 / $1,851 / 85 $5,274 / 221 of which of which Internal Watch List (3 or 4 Rating)(2) $0.1 / $0.4 / 1 $236 / 10
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2014) 5.6x 3.4x 2.3x Company AG (2017) 5.4x 5.4x - Company B (2011 - 2013) 2.9x 1.1x
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - 12/31/2011(2) 2012 2013 2014 2015 2016 2017 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 102.2 Cumulative Adj. NII 26.5 72.7 134.8
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit markets continue to show broad-based strength – Issuer-friendly yields and trends are prevalent in the market – CLO market financing spreads continue to decline – High level of competition for the best financing transactions – Opportunistic repricing transactions ha
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $1,665 million as of 12/31/2017) (1) ($885 million drawn as of 12/31/2017) Fixed 15% Floating – No Floor Fixed(2) 51% (1-Month Libor) Floating – Floor 49% 85% Impact of Changing Rates(3) Estimated %
Slide 15: Q4 2017 Originations
Q4 2017 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Membership 10/6/17 NM CLFX LP Net Lease $12.5 N/A N/A 12.0% 12.0% Interest $8.4 / $150 / 1st Lien / 70% / 10
Slide 16: Origination Activity Since Quarter End (Through 2/26/2018)
Origination Activity Since Quarter End (Through 2/26/2018) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Type of Date(2) Name Industry ($’s Invested) Tranche Size Investment Advance Rate(3) Unlevered Levered Business 1/2/18 ABC Financial $13.3 $115 2nd Lien 25% 11.8% 14.1% Serv
Slide 17: Annual Originations and Repayments
Annual Originations and Repayments(1) ($ in millions) 2011 Cumulative (IPO(2) – (IPO(2) – 12/31/2011) 2012 2013 2014 2015 2016 2017 12/31/2017) Total $379.3 $673.2 $529.7 $741.5 $607.2 $557.8 $1,000.0 $4,488.7 Originations Repayments ($86.5) ($299.6) ($395.3) ($267.5) ($401.1) ($480.0) ($696.6) ($2,
Slide 18: Q4 2017 Originations and Repayments
Q4 2017 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Preferred First Lien Debt Equity Debt <1% 19% 22% Second Net Lease Lien Debt First Lien 7% 46% Debt 54% Second Lien Debt 52% Total: $190.0 million Total: $224.7 million 1 By $s invested / $s receiv
Slide 19: Q4 2017 Investment Activity Roll
Q4 2017 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.8% 11.1% 10.9% 10.9% 10.6% 9/30/2017 9/30/2017 Q4 Originations Q4 Sales / 12/31/2017 PF for change in Repayments LIBOR Curve Cost ($mm)(3) $1,843.7 $1,843.7 $190.0 $224.7 $1,821.2 1 Assumes that investments are purchased at cost and he
Slide 20: Portfolio Mix (By Fair Value as of 12/31/2017)
Portfolio Mix (By Fair Value as of 12/31/2017) By Industry(1) Net Lease SLP I Types of Services Other(2) 2% 1% 2% Data & Federal Services Analytics 5% Marketing Services 5% Financial 7% Services Energy 20% 5% Engineering & Consulting Services Distribution & 7% Logistics 6% Services Telecom Services
Slide 21: Portfolio Concentration (By Fair Value as of 12/31/2017)
Portfolio Concentration (By Fair Value as of 12/31/2017) Portfolio Names By Fair Value HI Technology 5.7% SLP II 4.3% UniTek 3.5% AmWINS 3.1% Top 15 portfolio companies represent EAB Global 3.0% $791.5 million, or Tenawa 2.7% 42.7%, of consolidated Alegeus 2.5% investments 70 Other Portfolio Compani
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 Assets Portfolio $1,588.0 $1,815.3 $1,883.4 $1,872.9 $1,850.9 Cash & Equivalents 45.9 37.7 36.3 39.6 34.9 Other Assets(1) 22.1 27.9 30.1 38.1 42.2 Total Assets $1,656.0 $
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $15.02 $15.14 $14.94 $14.87 $15.00 $14.68 $14.69 $14.81 $14.33 $14.43 $14.44 $14.50 $14.51 $14.34 $14.24 $14.22 $14.24 $14.06 $14.07 $14.17 (2) $14.53 $14.65 $13.69 $13.89 $14.00 $13.82 $14.31 $14.32 $14.32 $14.38 $13.48 $13.84 $14.08 $14
Slide 24: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 Investment Income Interest income $35.4 $34.0 $37.6 $39.6 $38.6 Dividend income 4.8 6.7 9.7 9.9 10.9 Other income 3.6 2.6 2.7 1.7 3.8 Total investment inco
Slide 25: Income Statement Highlights (Annually)
Income Statement Highlights (Annually) Year Ended – Pro Forma Adjusted (1) ($ in millions, except per share data) 12/31/2015 12/31/2016 12/31/2017 Investment Income Interest income $140.0 $147.4 $149.8 Dividend income 6.3 11.2 37.2 Other income 8.0 9.4 10.8 Total investment income $154.3 $168.0 $197
Slide 26: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 Investment Income Build Cash Investment Income $32.2 $31.7 $32.8 $32.6 $32.6 (1) SLP and Net Lease Income 4.1 5.5 5.0 4.8 5.1 Recurring Cash Investment Income $36.3 $37.2 $37.8 $37.4 $37.7 Non-
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2018 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% 100% 103% 105% 101% 103% 102% 102% 103% 103% 102% 104% 100% 100% 99% 100% 100% 100% 98% 99% 99% 99% 99% 9
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 12/31/2017, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $312 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022 All other: L + 2.50% (No LIBOR floor) NMFC Credit Facility $123 / $123 L + 2.5
Slide 29: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 30: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions, except for per weighted average share data; Year Ended unaudited figures) IPO - 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 Non-cash a
Slide 31: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION