New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2022 Earnings Presentation
35 slides from New Mountain Finance's earnings presentation, Nov 7, 2022
Slide 1: Earnings Presentation Q3 2022
Earnings Presentation Q3 2022 November 9, 2022 14
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: Experienced Management Team + Scaled Platform
Experienced Management Team + Scaled Platform Headshot Steven B. Klinsky Robert A. Hamwee John R. Kline Laura C. Holson Shiraz Y. Kajee Founder & Chairman CEO & Director President & Director COO CFO Years at 22 14 14 13 7 DEEPLY EXPERIENCED CREDIT TEAM LEVERAGING THE FULL POWER OF THE NEW MOUNTAIN P
Slide 5: Chairman's Overview
Chairman’s Overview Earnings & Book Value Q3 2022 net investment income (“NII”) of $0.32 per share, more than covered our dividend of $0.30 per share paid on September 30, 2022 September 30, 2022 net asset value (“NAV”) of $13.20 per share – Decrease of only 1.6%, or $0.22, from $13.42 per share
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 NII Per Share $0.31 $0.31 $0.30 $0.31 $0.32 NAV Per Share $13.26 $13.49 $13.56 $13.42 $13.20 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.9 97.9 99.5 100.7 10
Slide 7: NMFC at a Glance
NMFC at a Glance New Mountain Finance ACYCLICAL SECTORS(1)(2) where NMC has deep expertise Baa3 / $3.2bn (1) 14 Stable OTHER NMC POWER SOFTWARE Information Other ERP Portfolio Size Year History ALLEYS FinancialTechnology 2% 4% 8% Moody’s Credit Rating Services Specialty Chemicals 3% IT Infrastructur
Slide 8: NMFC's Differentiated Approach
NMFC’s Differentiated Approach New Mountain Finance Corporation is a business development company focused on lending to middle market companies that operate in “defensive growth” industries DIFFERENTIATED, DEFENSIVE GROWTH PROVEN TRACK RECORD APPROACH TO LENDING OF EXECUTION Consistent Outperformanc
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1)(2) Overall portfolio modestly improved from a “Risk Rating” standpoint in Q3 2022 from Q2 2022 – As of Q3 2022, 92.3% of the portfolio is characterized as “Green” (up from 90.8% based on Q2 2022 categorizations) – Two companies improved in Risk Rating and two com
Slide 10: NMFC Portfolio – Risk Rating Migration from Q2 2022
NMFC Portfolio – Risk Rating Migration from Q2 2022 (FMV as of 9/30/22) ($ in millions / company count) Education $20 / 1 Business Characteristics(2) (A = Best; C = Worst) C Business Services $20 / 1 B Healthcare $14 / 1 Haven $73 A ** Excludes Green to Green Migration ** Tier 4 Tier 3 Tier 2 Tier 1
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings(1) (FMV as of 9/30/22) ($ in millions / company count) $126 / 5 $33 / 2 $31 / 3 Business Services $52 / 2 Education $20 / 1 Business Services $20 / 1 Business Characteristics(3) (A = Best; C = Worst) Permian $46 / 1 Business Services $13 / 1 National HME $7 / 1 C Distri
Slide 12: Credit Market Conditions
Credit Market Conditions General Investing Environment Challenging macro environment – higher interest rates, inflation, geopolitics and general economic weakness Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt struct
Slide 13: Positively Exposed to Rising Base Rates
Positively Exposed to Rising Base Rates Rising rates provide sustained uplift to core earnings power, especially as rate environment stabilizes Immediate positive impact lags as base rates on assets reset at longer intervals than base rates on liabilities Asset Mix Liability Mix Impact of Rising
Slide 14: Q3 2022 NAV Update
Q3 2022 NAV Update Q3 2022 NAV declined by $0.22 per share, or just 1.6%, primarily driven by market spread widening and modest net negative credit specific movement Net $0.08 NAV Decrease $0.30 $13.42 $13.20 ($0.38) ($0.14) Company $ / Share Company $ / Share Haven $0.27 Edmentum ($0.13) Education
Slide 15: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2022 (October 2008 – September 30, 2022) Cost / FMV / Portfolio Count Cost / Portfolio Count Investments $3,274 / $3,244 / 106 $9,713 / 333 of which of which Non-Accrual $180 / $59 / 8 $347 / 14 % of Total(3) 5.5% / 1.8% 3.6
Slide 16: Performance Since IPO
Performance Since IPO(1) ($ 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 $90.1 Cumulative Regular Dividend 475.1 578.5 695.9 816.0 932.5 1,022.6 (3) (3) (3) (3) Adj. NII $477.5 103.5 119.2 120.6 118.3 93.5 Cumulative Adj. NII 477.
Slide 17: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – November 4, 2022 Indexed Total Return 430.0 CAGR (IPO to 11/4/2022) 410.0 NMFC 9.6% S&P 500 11.6% 390.0 S&P 500 Financials 11.0% 370.0 CS High Yield Index 4.4% 350.0 BDC Index 4.1% S&P 251.8% 330.0 S&P Fin 230.5% 310.0 290.
Slide 18: Q3 2022 Originations
Q3 2022 Originations Portfolio Originations(1)(2) ($ in millions) Amount Type of Company Industry ($ Invested) Investment Spread iCIMS Software $43.9 First Lien S + 6.75% Infogain Business Services 17.0 Subordinated S + 8.25% Alliance Animal Health Consumer Services 11.2 First Lien L + 5.50% Infogai
Slide 19: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 9/30/2022) Total Portfolio Common Equity & Other Positions(2)(3) Common Equity ($ in millions, except per share data) & Other Preferred 8% Company FMV Subordinated 5% Edmentum $118.8 2% Benevis 50.6 First UniTek 52.1 First First Lien Debt Lien Debt Lien Debt 4
Slide 20: Q3 2022 Investment Activity Roll
Q3 2022 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.3% 11.1% 11.1% 11.3% 10.3% 6/30/2022 6/30/2022 Q3 Originations Q3 Sales / 9/30/2022 Repayments PF for 9/30/2022 LIBOR Curve(3) Cost ($m)(4) $3,313.0 $3,313.0 $123.0 $167.4 $3,274.4 1 Assumes that investments are purchased at cost and h
Slide 21: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 9/30/2022)(1)(2) Total Portfolio Information Technology Financial Services 2% 3% (3) Specialty Chemicals & Other OTHER NMC Materials 3% 4% ERP 8% SOFTWARE POWER Distribution & ALLEYS Logistics IT Infrastructure & Security 3% 8% Consumer Services Human Capi
Slide 22: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics Portfolio Weighted Average EBITDA(1) $140 $130 $132 $120 $120 $115 $114 $100 $80 $60 $40 $20 $0 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 7.0x 6.9x 6.8x 6.8x 7.0x 6.5x 6.0x 5.0x 4.0x 3.0x 2.5x 2.5x 2.5x 2.4x 2.1x 2.
Slide 23: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 9/30/2022) Portfolio Names By Fair Value SLP III 4.3% Edmentum 4.2% Benevis 3.5% SLP IV 3.5% UniTek 2.9% insightsoftware 2.9% 2.4% Kaseya 2.3% Haven 91 Other 2.1% PhyNet Portfolio Companies 1.9% Associa 61.7% 1.8% Dealer Tire 1.8% 1.8% Talend 1.5% Alliance Anim
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Assets Portfolio $3,022.7 $3,185.4 $3,267.0 $3,310.2 $3,244.5 Cash & Equivalents 83.4 58.0 35.4 40.7 48.9 (1) Other Assets 62.0 52.4 59.4 53.9 54.6 Total Assets $3,168.1 $
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.43 $14.44 Q3 2022 $14.07 $14.24 $14.10 $14.08 $13.83 $13.87 $14.00 $14.38 $13.69 $14.06 $13.23 $13.81 $13.60 $13.83 $13.00 $13.46 $13.63 $13.22 $13.49 $13.20 $13.08 $13.26 $12.00 $12.62 $11.00 NAV per Share (as Reported)
Slide 26: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Investment Income Interest income $47.8 $47.7 $47.9 $50.3 $58.8 Dividend income 14.3 14.8 16.4 15.7 15.5 Other income 6.1 5.3 4.3 6.8 3.8 Total investment income $68.2
Slide 27: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Investment Income Build Cash Interest and Dividend Income $39.1 $39.4 $38.4 $41.5 $51.2 (1) 9.4 10.0 11.3 10.4 9.6 SLP and Net Lease Income Recurring Cash Investment Income $48.5 $49.4 $49.7 $51
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2022 NII will be at least $0.32 per share. Our board of directors has declared a fourth quarter dividend of $0.32 per share. 104% 103% 102% 102% 100% 104% 100% 99% 98% 99% 100% 102% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.3
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 9/30/2022, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $631 / $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 30: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 9/30/2022, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,680 As of 9/30/2022 Fixed 52% Floating 48% $730 On November 2, 2022, closed $200 Convertible Notes to refinance the $280 Convertible Note due in August 2023 $199 $3
Slide 31: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Ryan Lynch Mitchel Penn Finian O’Shea 341
Slide 32: Appendix
NIM|F NEW MOUNTAIN FINANCE CORPORATION Appendix
Slide 33: Appendix A: Credit Performance
Appendix A: 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 (2021) 8.0x 5.7x 2.
Slide 34: Appendix B: NMFC Income Reconciliation
Appendix B: 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 $94.4 Non-controlling interest in NMNLC related to NII – – – (0.8) (1.3
Slide 35: New Mountain Finance Corporation
New MounraINn FINANCE CORPORATION