New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2014 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, May 8, 2014
Slide 1: Q1 2014 Earnings Presentation
Q1 2014 Earnings Presentation May 8, 2014
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 Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer, President and Director David M. Cordova Chief Financial Officer and Treasurer 3
Slide 4: Q1 2014 Highlights
Q1 2014 Highlights ▪ Q1 Pro-Forma Adjusted Net Investment Income (“NII”) of $0.37 per weighted average share, versus original guidance of $0.33 to $0.35, updated guidance of $0.35 to $0.37 and Q4 2013 of $0.34 – Q1 regular dividend of $0.34 per share paid on March 31, 2014 ▪ March 31, 2014 book valu
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 Pro Forma Adjusted NII Per Share(1) $0.34 $0.38 $0.35 $0.34 $0.37 NAV Per Share $14.31 $14.32 $14.32 $14.38 $14.53 Dividends Per Share(2) $0.34 $0.34 $0.46 $0.34 $0.34 Share Count - End of Period (mm
Slide 6: Review of NMFC
Review of NMFC Overview Public Float Market Cap History ($ in millions) ▪ Founded in October 2008 to apply New Mountain $742 Capital, L.L.C.’s (“NMC” or “New Mountain”) private $680 equity strengths to attractive risk-reward opportunities in the U.S. debt markets – Externally managed Business Develo
Slide 7: NMFC Strategy
NMFC Strategy ▪ Externally managed by an affiliate of New Mountain, a leading private equity firm with more than $12 billion of assets under management(1), approximately 100 staff members, and a consistent focus on “defensive growth” business building and deep fundamental research ▪ NMFC’s mandate i
Slide 8: NMFC Relative Trading Performance – Indexed Total Return
NMFC Relative Trading Performance – Indexed Total Return May 19, 2011 (IPO) – May 5, 2014 Indexed Total Return 150.0 S&P 49.5% 145.0 S&P Fin 45.4% NMFC 42.0% 140.0 135.0 130.0 HY 27.7% 125.0 120.0 BDCs 19.3% 115.0 110.0 105.0 100.0 95.0 90.0 85.0 80.0 75.0 70.0 7/1/11 10/1/11 1/1/12 4/1/12 7/1/12 10
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $5.19 $0.35 $0.45 $2.17 $0.49 $0.46 $1.80 $0.32 $0.37 $0.12 $0.38 $3.90 $1.34 $1.36 $0.49 $0.86 $0.15 $0.34 ($0.48) Cumulative IPO to 12/31/11(1) 2012 2013 YTD 2014 (IPO to 3/31/14)(1) Regular Dividends Special Dividend ∆ in Book Value Trading Multiple Expansion
Slide 10: Credit Market Conditions
Credit Market Conditions ▪ Credit spreads have stabilized in recent weeks – Market resiliency and reduced volatility – Offset by modest fund outflows – Long-term rates remain stable ▪ With limited exceptions, smaller deals continue to be largely insulated from spread compression ▪ NMFC works to be w
Slide 11: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,164.5 million as of March 31, 2014)(1) ($486.8 million drawn as of March 31, 2014) Fixed 14% Floating – No Floor (1-Month Libor) 100% Floating – Floor(2) 86% Impact of Changing Rates(3) Estimat
Slide 12: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2014 (October 2008 – March 31, 2014) Cost / FMV Cost / # Portfolio Co’s Investments $1,153.8 / $1,180.2 $2,518.6 / 132 of which of which Internal Watch List (3 or 4 Rating)(2) $15.0 / $8.9 $20.5 / 2 of which of which Non-Acc
Slide 13: Credit Performance – Non-70% Advance Rate Assets
Credit Performance – Non-70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company A 5.0x 5.0x - Company B 4.9x 5.1x (0.1x) Company C 6.7x 5.4x 1.3x Company D 5.0x 4.8x 0.2x Company E 6.1x 6.1x - Company F 3.7x 3.8x (0.1x) Compan
Slide 14: Credit Performance – 70% Advance Rate Assets
Credit Performance – 70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company AE 4.0x 6.0x (1.9x) Company AF 3.7x 3.7x 0.1x Company AG 3.8x 3.9x (0.0x) Company AH 3.2x 7.5x (4.2x) Company AI 4.3x 3.4x 0.9x Company AJ 1.2x 1.2x -
Slide 15: SBIC Process
SBIC Process ▪ On January 27, 2014, we announced that we received a “green light” letter from the U.S. Small Business Administration (“SBA”) inviting NMFC to continue its application process to obtain a Small Business Investment Company (“SBIC”) license – License application submitted and accepted b
Slide 16: Performance Since IPO
Performance Since IPO ($ in millions) IPO - 2014 (1) 12/31/2011 2012 2013 3/31/2014 Regular Dividend $26.6 $46.6 $59.8 $16.3 Cumulative Regular Dividend 26.6 73.2 133.0 149.2 (2) (2) Adj. NII 26.5 46.1 62.1 17.6 Cumulative Adj. NII 26.5 72.7 134.8 152.4 Dividend Coverage (Cumulative Adj. NII / Divid
Slide 17: Q1 Originations
Q1 Originations ($ in millions) Amount Portfolio Originations(1) ($’s Type of Advance YTM at Purchase(3) Date(2) Name Industry Invested) Tranche Size Investment Rate Unlevered Levered 1/10/14 Software $10.0 $389 2nd Lien 45% 11.9% 18.3% 1/27/14 Education $14.9 $408 1st Lien 70% 7.3% 15.9% 2/12/14 Me
Slide 18: Origination Activity Since Quarter End
Origination Activity Since Quarter End (Through 5/5/14) ($ in millions) Portfolio Originations(1) YTM at Purchase(3) Amount Type of Advance Date(2) Name Industry ($’s Invested) Tranche Size Investment Rate Unlevered Levered Business 4/3/14 $14.9 $200 2nd Lien 25% 11.6% 13.8% Services Business 4/15/1
Slide 19: Q1 Originations and Repayments
Q1 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) 17% Subordinated 70% Advance Rate 12% (2) First Lien Debt 28% Second Second Lien Debt 10% Lien Debt 36% Non-70% Advance Rate 15% First Lien Debt 63% 70% Advance Rate (2) 36% First Lien Debt Non-70% Advance Rate Firs
Slide 20: Q1 Investment Activity Roll
Q1 Investment Activity Roll YTM at Purchase(1) / Cost(2) 11.0% 10.9% 10.9% 10.3% 9.3% 12/31/2013 12/31/2013 Q1 Originations Q1 Sales / 3/31/2014 PF for Change Repayments in LIBOR Curve Cost ($mm)(3) $1,094.1 $1,094.1 $158.3 $101.8 $1,153.8 1 Assumes that investments are purchased at purchase price o
Slide 21: Portfolio Mix (By Fair Value as of 3/31/14)
Portfolio Mix (By Fair Value as of 3/31/14) By Industry Other(1) Media 2% Energy 6% 6% Federal Services 7% Software 21% Distribution & Logistics - 10% Education HC IT - 1% Healthcare 20% HC Products - 4% 12% Services HC Services 16% 7% Industrial Svcs Business Svcs 1% Consumer Svcs 14% 1% By Type of
Slide 22: Portfolio Concentration (By Fair Value as of 3/31/14)
Portfolio Concentration (By Fair Value as of 3/31/14) Portfolio Names By Fair Value Global Knowledge 3.9% McGraw-Hill Global 3.6% Deltek 3.5% Novell 3.4% Kronos 3.3% Top 15 portfolio companies UniTek 3.3% represent $541.4 45 Other YP 3.1% million, or 45.9%, Paradigm (aka of consolidated Portfolio Co
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per unit data) 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 Assets Portfolio $1,030.9 $1,059.0 $1,041.4 $1,115.7 $1,180.2 Cash & Equivalents 15.9 15.9 17.6 15.0 13.3 (1) Other Assets 16.6 19.5 18.3 17.1 25.9 Total Assets $1,063.4 $1
Slide 24: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $14.80 $14.53 $14.31 $14.32 $14.32 $14.38 $14.40 $14.08 $14.10 $14.06 (1) (2) $14.00 $13.98 $13.82 $13.83 $13.60 $13.60 $13.32 $13.20 $12.80 At IPO Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 D
Slide 25: Income Statement Highlights
Income Statement Highlights (1) Quarter Ended - Pro Forma Adjusted ($ in millions, except per unit data) 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 Investment Income Interest income $24.5 $27.1 $27.1 $27.4 $28.1 Dividend income – – 0.2 0.0 1.9 Other income 0.3 1.4 0.2 0.9 0.7 Total investmen
Slide 26: Investment Income Detail
Investment Income Detail (1) Quarter Ended - Pro Forma Adjusted ($ in millions) 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 Investment Income Build Cash interest $22.3 $23.4 $24.4 $24.3 $26.3 Non-cash interest 0.6 0.9 0.8 1.0 0.8 Amortization of purchase discounts (premiums) and fees 0.6 0.6
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2014 Adjusted 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. $0.80 114% 120% 108% 103% 103% $0.70 101% 100% 100% 100% 98% 99% 99% 95% 100% $0.60 $0.57 80% $0.50 $0.48
Slide 28: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administration Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 29: New Mountain Finance Corporation
NIM|F NEw MOUNTAIN FINANCE CORPORATION
Slide 30: Appendix A: Pro-Forma Adjusted NII Reconciliation
Appendix A: Pro-Forma Adjusted NII Reconciliation ($ in millions except per unit data) Three months ended March 31, 2014 Per Weighted Amount Average Unit GAAP net investment income ("NII") $16.3 $0.34 Non-cash capital gains incentive fee(1) 1.5 0.03 Adjusted NII(2) $17.8 $0.37 Non-recurring net YP,
Slide 31: Appendix B: Anticipated Structure Post-Collapse
Appendix B: Anticipated Structure Post-Collapse Public Concurrent Shareholders Private Placement New Mountain Finance Corporation Investments (“NMFC” or “New OpCo”) 100% New Mountain Finance Holdings, L.L.C. (“NMFH”) 100% Investments Wells Fargo Finance Holdings Credit Facility New Mountain Finance