New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2019 Earnings Presentation
34 slides from New Mountain Finance's earnings presentation, Feb 27, 2020
Slide 1: Q4 2019 Earnings Presentation
Q4 2019 Earnings Presentation February 27, 2020
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 Robert A. Hamwee Chief Executive Officer and Director John R. Kline President, Chief Operating Officer, and Director Shiraz Y. Kajee Chief Financial Officer 3
Slide 4: Q4 2019 Highlights
Q4 2019 Highlights ▪ Q4 2019 Adjusted Net Investment Income (“NII”) of $0.36(1) per weighted average share, above our guidance of $0.33 to $0.35 – Q4 2019 regular dividend of $0.34 per share paid on December 27, 2019 ▪ December 31, 2019 net asset value (“NAV”) of $13.26 per share, a decrease of $0.0
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 (1) Adjusted NII Per Share $0.36 $0.35 $0.35 $0.36 $0.36 NAV Per Share $13.22 $13.45 $13.41 $13.35 $13.26 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 76.1 80.5
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 21, 2020 Indexed Total Return 300.0 S&P 198.3% 280.0 S&P Fin 182.4% 260.0 NMFC 150.4% 240.0 220.0 200.0 180.0 HY 70.1% 160.0 140.0 BDCs 41.2% 120.0 CAGR (IPO to 2/21/2020) NMFC 11.0% 100.0 S&P 500 13.3% S&P 500 Fin
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – February 21, 2020 155.4% 150.4% 131.9% 70.7% 62.4% 48.2% 34.2% 32.9% 29.8% 2.2% (55.5%) Peer A NMFC ARCC GBDC Peer B SLRC Peer C PSEC Peer D PNNT Peer E BKCC Peer F TCRD Peer G AINVH Peer OCSL Peer I MCCJ Peer Source: Capi
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $12.32 $0.81 $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $1.53 $0.37 $0.93 $0.38 $1.40 $0.12 $0.12 $0.61 $0.17 $0.95 $0.04 $11.72 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 ($0.82) ($0.48) ($0.41) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 20
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2019 (October 2008 – December 31, 2019) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,167 / $3,171 / 114 $7,664 / 287 of which of which Internal Watch List $48 / $30 / 4 $310 / 13 (3 or 4 Rating)(2) o
Slide 11: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2017) 8.9x 3.6x 5.3x Company A
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 (3) (3) (3) (3) Adj. NII 26.5 46.1 62.1 73.4
Slide 13: Asset Mix Migration (By Fair Value)
Asset Mix Migration (By Fair Value) ($ in millions) First Lien Assets(1) Non-First Lien Assets Statutory 0.81x 1.23x 1.35x Leverage(2): $3,171 $1,046 Decreased $60 million $2,354 through Non-First Lien Net 33.0% Sales & Repayments(3) $2,003 $905 38.4% $1,106 55.2% Increased $1,228 million $2,125 thr
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets were generally stable throughout 2019 ▪ Direct lending deal flow in our core verticals was strong in Q4 and throughout 2019, but has been somewhat softer in Q1 due to normal seasonal weakness associated with the start of the new year ▪ In January and early F
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,825 million as of 12/31/2019) (1) ($1,960 million drawn as of 12/31/2019) Fixed 6% Fixed(2) Floating – No Floor 45% 55% Floating 94% Impact of Changing Rates(3) Estimated % Change Illustrative NI
Slide 16: Q4 2019 Originations
Q4 2019 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered Advanced Computer 10/8/19 Software $34.2 $115 2nd Lien 40% 10.6% 14.6% Software Membership 10/8/19 NM NL Hol
Slide 17: Q4 2019 Originations (cont.)
Q4 2019 Originations (cont.) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 66.7% (SBIC) / $4.9 $78 1st Lien 6.5% 12.4% / 13.7% 70%(5) Consumer 11/14/19 Pathway Services 66.7%
Slide 18: Annual Originations and Repayments
Annual Originations and Repayments(1) ($ in millions) 2011 Cumulative (IPO(2) – (IPO(2) – 12/31/2011) 2012 2013 2014 2015 2016 2017 2018 2019 12/31/2019) Total $379.3 $673.2 $529.7 $741.5 $607.2 $557.8 $1,000.0 $1,286.9 $1,079.6 $6,855.2 Originations Repayments ($86.5) ($299.6) ($395.3) ($267.5) ($4
Slide 19: Origination Activity Since Quarter End (Through 2/21/20)
Origination Activity Since Quarter End (Through 2/21/20) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment Advance Rate(3) Unlevered Levered 12/11/19 Company X* Education $30.1 $775 1st Lien 64% 8.8% 17.3% 66.7% (
Slide 20: Q4 2019 Originations and Repayments
Q4 2019 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Debt 4% Second Lien Debt 27% Second Lien Debt 33% First Lien Net Lease First Lien Debt 4% Debt 63% 69% Total: $286.2 million Total: $117.4 million 1 By $s invested / $s received at time of originat
Slide 21: Q4 2019 Investment Activity Roll
Q4 2019 Investment Activity Roll YTM at Cost(1) / Purchase(2) 9.3% 9.5% 9.5% 9.2% 8.5% 9/30/2019 9/30/2019 Q4 Originations Q4 Sales / 12/31/2019 Repayments PF for change in LIBOR Curve Cost ($mm)(3) $2,996.1 $ 2,996.1 $286.2 $117.4 $3,167.0 1 Assumes that investments are purchased at cost and held u
Slide 22: Portfolio Mix (By Fair Value as of 12/31/2019)
Portfolio Mix (By Fair Value as of 12/31/2019) By Industry(1) Energy Other(2) 3% 3% Types of Services Federal Services Data & Marketing 4% Analytics Services Distribution & Logistics 6% 4% Insurance 4% Services Net Lease 6% Enterprise Business 4% Financial Services Software Services 38% 26% Educatio
Slide 23: Portfolio Concentration (By Fair Value as of 12/31/2019)
Portfolio Concentration (By Fair Value as of 12/31/2019) Portfolio Names By Fair Value SLP III 3.2% Benevis 2.7% SLP II 2.5% Edmentum 2.5% PhyNet 2.5% EAB Global 2.2% Top 15 portfolio UniTek 2.1% companies(1) represent Kronos 2.0% $1,004.8 million, or Associa 1.8% 31.7%, of consolidated NaviHealth 1
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Assets Portfolio $2,354.1 $2,534.5 $2,655.2 $3,009.6 $3,171.3 Cash & Equivalents 49.7 65.6 87.2 69.8 48.6 (1) Other Assets 44.9 50.0 48.9 52.7 46.2 Total Assets $2,448.7
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 $14.43 $14.07 $14.24 $14.08 $13.69 $13.83 $14.00 $14.38 $13.87 $14.06 $13.83 $13.63 $13.60 $13.26 $13.00 $13.46 $13.22 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1) $11.00 A
Slide 26: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Investment Income Interest income $43.7 $47.9 $51.7 $55.2 $58.6 Dividend income 15.1 13.5 12.6 13.2 14.5 Other income 4.2 2.8 2.2 4.2 4.8 Total investment
Slide 27: Income Statement Highlights (Annually)
Income Statement Highlights (Annually) Year Ended – Adjusted ($ in millions, except per share data) 12/31/2017 12/31/2018 12/31/2019 Investment Income Interest income $148.3 $160.2 $213.4 Dividend income 37.2 53.8 53.8 Other income 10.8 15.8 14.0 Total investment income $196.3 $229.8 $281.2 Expenses
Slide 28: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Investment Income Build Cash Interest and Dividend Income $44.1 $44.3 $47.3 $50.2 $52.8 (1) SLP and Net Lease Income 8.0 9.5 8.4 8.7 9.6 Recurring Cash Investment Income $52.1 $53.8 $55.7 $58.9
Slide 29: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2020 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, in line with the previous 31 quarters. 104% 103% 102% 103% 100% 100% 101% 99% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.
Slide 30: Diversified Leverage Profile
Diversified Leverage Profile (As of 12/31/2019, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $662 / $800 Broadly syndicated 1st lien loans(1): October 2022 (Wells Fargo / Raymond James / State Street / CIT L + 1.75% Bank / NBH Bank / State Bank
Slide 31: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 12/31/2019, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,044 As of 12/31/2019 Fixed 44.9% $135 Floating 55.1% $673 $800 $201 $495 $280 $300 $189 $117 $90 $192 $55 2020 2021 2022 2023 2024 2025 and thereafter % of Total – 4.
Slide 32: 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 & Director Robert A. Hamwee Independent Auditor John R. Kline
Slide 33: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) 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 12/31/2019 GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.1 $117.2 Non-
Slide 34: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION