New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2023 Earnings Presentation
34 slides from New Mountain Finance's earnings presentation, Aug 2, 2023
Slide 1: Earnings Presentation Q2 2023
Earnings Presentation Q2 2023 August 3, 2023 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 current conflict between Russia and Ukraine, and related changes in
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: Chairman's Overview
Chairman’s Overview Earnings, Book Value, Dividend Policy & Shareholder Alignment ▪ Q2 2023 adjusted net investment income (“NII”) of $0.39 per share, meaningfully exceeding our regular dividend of $0.32 per share – In accordance with NMFC’s supplemental dividend program, $0.04 per share supplementa
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Adjusted NII Per Share $0.31 $0.32 $0.35 $0.38 $0.39 NAV Per Share $13.42 $13.20 $13.02 $13.14 $13.14 Dividends Per Share(1) $0.30 $0.30 $0.32 $0.35 $0.36 Share Count - End of Period (mm) 100.7 100.9
Slide 6: Experienced Management Team + Scaled Platform
Experienced Management Team + Scaled Platform Headshot Steven B. Klinsky Robert A. Hamwee John R. Kline Laura C. Holson Founder & Chairman Vice Chairman President & CEO COO & Interim CFO Years at 24 15 15 14 DEEPLY EXPERIENCED CREDIT TEAM LEVERAGING THE FULL POWER OF THE NEW MOUNTAIN PLATFORM ~245 N
Slide 7: Differentiated, Defensive Growth Approach to Lending
Differentiated, Defensive Growth Approach to Lending Why NMFC? ACYCLICAL SECTORS(3) Where NMC has deep expertise “Defensive Growth” Strategy • Focused on investing in strong businesses in Specialty Chemicals & Other acyclical sectors Materials ERP Information Technology 5% 1% 9% • Achieving superior
Slide 8: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Attractive Return Profile $3.2bn 93% ~11% Green Annual Div. Yield(4) Portfolio Size(1) Portfolio Risk Rating(2) 14 Year Operating History 43% Avg. Loan to Value(2) ~10% Annual Return Since IPO(5) Baa3 / $10m Stable Cumulative net reali
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1)(2) Q1 2023 Risk Ratings Q2 2023 Risk Ratings (FMV as of 3/31/2023) (FMV as of 6/30/2023) Red Orange Red Orange Yellow Yellow 0.6% 0.3% 1.4% 1.8% 4.8% 5.1% Positions representing $15m improved in Rating Positions representing $46m worsened in Rating 93.2% Green 92.8
Slide 10: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings(1) (FMV as of 6/30/23) ($ in millions / company count) $79 / 4 $51 / 5 $9 / 3 Business Services $58 / 3 Education $20 / 2 National HME $5 / 1 Business Characteristics(3) (A = Best; C = Worst) Distribution & Logistics $21 / 1 Healthcare $15 / 1 Ansira $3 / 1 C Packaging
Slide 11: Q2 2023 NAV Update
Q2 2023 NAV Update $13.14 $0.06 $0.04 $13.14 ($0.16) $0.06 Net $0.10 NAV Per Share Decrease Company $ / Share MyEyeDr. + $0.02 TriTech + $0.02 Integro + $0.01 Franklin Energy + $0.01 Ansira – $0.06 Careismatic Brands – $0.04 Great Expressions – $0.02 AAC – $0.02 Transcendia – $0.01 BIG – $0.01 3/31/
Slide 12: Credit Performance Track Record
Credit Performance Track Record ▪ No new non-accruals in Q2 2023; non-accruals represent just 1.5% of total portfolio FMV ▪ ~$10 billion of cumulative investments since inception have generated net realized gains of $10 million ($ in millions) As of 6/30/2023 Cumulative Since Inception (14+ years)(1
Slide 13: Total Value Generated for Shareholders
Performance Since IPO(1) ($ in millions) Since IPO in 2011, NMFC has created and distributed over $1.0 billion of value for shareholders $1,150 $1,074 NMFC has generated $1,135 million of Adj. NII, $10 million of net realized gains and $1,000 $72 million of net unrealized losses Total Value Generate
Slide 14: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – July 31, 2023 Indexed Total Return 430.0 CAGR (IPO to 7/31/2023) S&P 333.6% 410.0 NMFC 10.0% S&P 500 12.8% 390.0 S&P 500 Financials 10.8% 370.0 BDC Index 5.3% CS High Yield Index 4.9% 350.0 S&P Fin 249.8% 330.0 NMFC 221.7%
Slide 15: Credit Market Conditions
Credit Market Conditions General Investing Environment ▪ Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt structures, floating base rates, and attractive spreads Direct Lending Opportunities ▪ While deal flow continues to
Slide 16: Positively Exposed to Rising Base Rates
Positively Exposed to Rising Base Rates Rising base rates provide a sustained uplift to core earnings power, especially as the rate environment stabilizes Asset Mix Liability Mix Impact of Rising Rates in Q2 2023(3) (Aggregate par value of ($1,923 million drawn as of 6/30/2023)(2) $2,625 million as
Slide 17: Q2 2023 Originations
Q2 2023 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread Lyons Magnus Food & Beverage $5.4 First Lien S + 6.75% Alliance Animal Health Consumer Services 5.1 First Lien S + 5.50% DDTL Draws & Other 19.0 Total Originations $29.5 Re
Slide 18: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 6/30/2023)(1) Common Equity & Other Positions(3) Common Equity & Other Positions(3) Preferred 8% Subordinated 6% Company FMV Edmentum $112.6 3% UniTek 78.1 Benevis 50.7 First Lien Debt Total Permian 26.0 93% 1st Lien Portfolio: Equity Co-invests 13.2 2nd Lien
Slide 19: Q2 2023 Investment Activity Roll
Q2 2023 Investment Activity Roll YTM at Cost(1) / Purchase(2) 15.3% 11.6% 11.2% 11.6% 10.9% 3/31/2023 3/31/2023 Q2 Originations Q2 Sales / 6/30/2023 PF for 6/30/2023 Repayments Base Rate Changes(3) Cost ($m)(4) $3,362.6 $3,362.6 $29.7 $137.8 $3,248.2 1 Assumes that investments are purchased at cost
Slide 20: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $160 $141 $144 $138 $140 $130 $132 $120 $100 $80 $60 $40 $20 $0 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.8x 6.8x 6.7x 6.8x 6.7x 7.0x 6.0x 5.0x 4.0x 3.0x
Slide 21: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 6/30/2023)(1) Top 15 portfolio companies(1) represent $1,247.1 million, or 39.0%, of consolidated investments SLP III Edmentum Benevis 4.4% 4.1% SLP IV 4.0% 3.5% UniTek 2.9% Kaseya 2.5% Alliance Animal Health 2.4% Portfolio Names 2.1% PhyNet 98 Other Portfolio
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Assets Portfolio $3,319.6 $3,253.8 $3,237.8 $3,286.9 $3,196.0 Cash & Equivalents 40.7 48.9 71.2 46.4 45.9 (1) Other Assets 44.5 45.3 46.0 45.7 55.1 Total Assets $3,404.8 $
Slide 23: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Investment Income Interest income $50.3 $58.8 $66.4 $71.2 $74.4 Dividend income 15.7 15.5 17.1 17.3 18.7 Other income 6.8 3.8 3.2 3.2 2.1 Total investment income $72.8
Slide 24: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 96%+ of Q2 2023 non-cash interest and dividend income is generated by positions with a Green risk rating Quarter Ended ($ in millions) 6/30/2022 9/30/2022 12/
Slide 25: Dividend Summary and Coverage
Dividend Summary and Coverage Q3 2023 estimated adjusted NII expected to exceed our regular dividend of $0.32 per share and expected to generate supplemental dividend of $0.03 to $0.04 per share (payable in Dec. 2023) 120% 104% 103% 105% 102% 100% 99% 98% 100% 99% 98% 99% 99% $1.71 $0.37 $1.48 $1.48
Slide 26: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/2023, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $574 / $730 Broadly syndicated 1st lien loans(1): S + 1.70% April 2026 (Wells Fargo / Raymond James / State Street / CIT All other: S + 2.20% (0.0% SOFR
Slide 27: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 6/30/2023, $ in millions, based on total facility size) Floating vs Fixed Debt Mix $1,426 Debt Type Outstanding Debt Max Facility Size Fixed 56% 47% Floating 44% 53% $730 Convertible Notes due on August 15, 2023 to be repaid through borrowing $280 from revolving cre
Slide 28: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Ryan Lynch Mitchel Penn Finian O’Shea 248
Slide 29: Appendix
NIM] NEw MOUNTAIN FINANCE CORPORATION Appendix
Slide 30: Appendix A: Risk Rating Migration from Prior Quarter
Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter (FMV as of 6/30/23) ($ in millions / company count) Healthcare ($15 / 1) Business Characteristics(2) (A = Best; C = Worst) C Packaging ($12 / 1) B Business Consumer Services Products ($15 / 1) ($19 / 1) A ** Excludes Green to Gree
Slide 31: Appendix B: Credit Performance
Appendix B: 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 (2019) 7.5x 4.9x 2.
Slide 32: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended YTD (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 6/30/2023 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $78.3 Non-controlling interest in NMNLC related to
Slide 33: Appendix D: Performance Since IPO Detail
Appendix D: Performance Since IPO Detail IPO - ($ in millions) 12/31/2017(1) 2018 2019 2020 2021 2022 YTD 2023 Regular & Supplemental Dividend (2) $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 $71.6 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,126.5 Adj. NII(3) 477.
Slide 34: INIMIF]
INIMIF] New MountTAIN FINANCE CORPORATION