New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2021 Earnings Presentation
38 slides from New Mountain Finance's earnings presentation, Mar 1, 2022
Slide 1: Q4 2021 Earnings Presentation
Q4 2021 Earnings Presentation March 1, 2022
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: Management Participants
Management Participants Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer and Director John R. Kline President and Director Laura C. Holson Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer 4
Slide 5: Chairman's Overview
Chairman’s Overview ▪ We believe our portfolio continues to be well positioned as a result of our defensive growth investment strategy, which focuses on acyclical, recurring, and predictable business models with long-term viability, even in a recessionary environment – Since our November 4, 2021 ear
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Adjusted NII Per Share(1) $0.30 $0.30 $0.30 $0.31 $0.31 NAV Per Share $12.62 $12.85 $13.33 $13.26 $13.49 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.8 96.8
Slide 7: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 8: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q4 2021, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 9: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has generally remained unchanged from a Risk Rating standpoint in Q4 2021 from Q3 2021 – As of Q4 2021, 87% of the portfolio is characterized as Green (stable from Q3 2021) Q3 2021 Risk Ratings Q4 2021 Risk Ratings (FMV as of 9/30/2021)(2) (FMV
Slide 10: Portfolio Risk Rating Migration from Q3 2021
NMFC Portfolio – Risk Rating Migration from Q3 2021(1) (FMV as of 12/31/21) ($ in millions / company count) Insurance Services $49 / 1 Overall Company Strength (A = Best; C = Worst) C B Engineering & Consulting $17 / 1 A Specialty Chemicals $9 / 1 Tier 4 Tier 3 Tier 2 Tier 1 COVID Exposure (4 = Best
Slide 11: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure(1) (FMV as of 12/31/21) ($ in millions) $33 / 2 $121 / 3 $120 / 4 $91 / 4 Overall Company Strength (A = Best; C = Worst) C National HME $27. . UniTek $67 1 Insurance Services $49 / 1 Permian $35 1 Retail Healthcare $6 / 1 Business Services $
Slide 12: 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 (2019) 4.7x 2.0x 2.8x Company A
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ We believe direct lending market conditions continue to remain healthy ▪ Market is supported by secured debt structures and floating interest rates ▪ Our direct lending deal pipeline continues to build after a seasonally slow period in January ▪ Secondary trading levels in
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,531 million as of 12/31/2021) (1) ($1,912 million drawn as of 12/31/2021) (2) Fixed 10% Fixed(3) Floating 53% 47% Floating 90% Impact of Changing Rates(4) Estimated % Change in Interest Income Il
Slide 15: NAV Update
NAV Update ($ in millions, except per share data) $13.49 $13.26 2021 NAV Equity Positions(1) $0.87 Recovery FMV as of 12/31/2021 2020 NAV Company FMV $1.48 Recovery Edmentum $114.9 Benevis 50.7 UniTek 31.8 Permian 11.0 Equity Co-invests 13.8 Other 6.7 Total Equity $228.9 3/31/20 NAV A 10% change in
Slide 16: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2021 (October 2008 – December 31, 2021) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,142 / $3,185 / 106 $9,214 / 326 of which of which Internal Watch List $248 / $129 / 11 $661 / 21 (3 or 4 Rating)(2
Slide 17: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $120.1 $116.5 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 816.0 932.5 (3) (3)
Slide 18: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 25, 2022 Indexed Total Return 430.0 CAGR (IPO to 2/25/2022) 410.0 NMFC 10.4% S&P 304.6% 390.0 S&P 500 13.8% S&P 500 Financials 13.1% S&P Fin 275.4% 370.0 CS High Yield Index 5.6% 350.0 BDC Index 5.5% 330.0 310.0 29
Slide 19: Q4 2021 Originations
Q4 2021 Originations Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate 10/1/21 Talend Information Technology $58.6 First Lien L + 6.00% 10/5/21 Stamps Software $36.9 First Lien L + 5.75% 10/13/21 Associa Consumer Services $20.5 First Lien L
Slide 20: Q4 2021 Originations (cont.)
Q4 2021 Originations (cont.) Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate $23.2 Second Lien L + 7.00% 12/17/21 OEConnection Business Services $7.1 Preferred Shares 11.00% $27.9 First Lien L + 6.00% 12/20/21 Office Ally Healthcare I.T.
Slide 21: Origination Activity Since Quarter End
Origination Activity Since Quarter End (Through 2/25/2022) Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate $9.8 First Lien L + 5.50% 1/13/22 Alliance Animal Health Consumer Services $4.3 Subordinated 11.50% 1/19/22 Recorded Future Softwar
Slide 22: Portfolio Activity & Mix by Type of Investment
Portfolio Activity & Mix by Type of Investment Q4 2021 Q4 2021 Total Portfolio Originations by Type(1) Sales / Repayments by Type(1) (FMV as of 12/31/2021) Preferred Equity Subordinated 2% Common Equity Preferred Equity and Other Preferred Equity 3% 3% Common Equity 4% 5% and Other Second 6% Lien De
Slide 23: Q4 2021 Investment Activity Roll
Q4 2021 Investment Activity Roll YTM at Cost(1) / Purchase(2) 9.1% 9.1% 8.8% 8.3% 8.3% 9/30/2021 9/30/2021 Q4 Originations Q4 Sales / 12/31/2021 Repayments PF for 12/31/2021 LIBOR Curve(3) Cost ($m)(4) $3,019.3 $3,019.3 $355.3 $249.8 $3,142.0 1 Assumes that investments are purchased at cost and held
Slide 24: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 12/31/2021) Total Portfolio(1) Specialty Chemicals Information Technology & Materials 2% Types of Healthcare 2% Other(2) Types of Enterprise Software 4% Real Estate ERP Distribution & Logistics 3% Education 4% ERP/Tools Other(3) Healthcare 1% Services Net
Slide 25: Portfolio Concentration
Portfolio Concentration (By Fair Value as of 12/31/2021) Portfolio Names By Fair Value SLP III 4.4% Edmentum 4.1% SLP IV 3.5% Benevis 3.4% insightsoftware 2.9% PhyNet 2.1% UniTek 2.1% Dealer Tire 1.9% Talend 1.8% 91 Other Portfolio Associa 1.8% Companies 63.9% iCIMS 1.7% Frontline Education 1.7% Tri
Slide 26: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Assets Portfolio $2,964.5 $3,029.6 $3,100.0 $3,022.7 $3,185.4 Cash & Equivalents 79.0 47.3 27.8 83.4 58.0 (1) Other Assets 54.0 51.4 52.3 62.0 52.4 Total Assets $3,097.5
Slide 27: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $14.44 $15.00 $14.43 Q4 2021 $14.24 $14.08 $13.69 $14.07 $13.83 $13.87 $14.00 $14.10 $14.38 $13.23 $14.06 $13.49 $13.83 $13.63 $13.00 $13.60 $13.46 $13.22 $13.26 $13.08 $12.00 $12.62 $11.00 NAV per Share (as Reported) NAV + Cumulat
Slide 28: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Investment Income Interest income $48.9 $47.0 $47.1 $47.8 $47.7 Dividend income 12.7 15.4 16.5 14.3 14.8 Other income 6.2 5.0 2.6 6.1 5.3 Total investment
Slide 29: Income Statement Highlights (Annual)
Income Statement Highlights (Annual) Year Ended – Adjusted ($ in millions, except per share data) 12/31/2019 12/31/2020 12/31/2021 Investment Income Interest income $212.4 $213.3 $189.6 Dividend income 52.6 51.0 61.0 Other income 14.0 13.7 19.0 Total investment income $279.0 $278.0 $269.6 Expenses M
Slide 30: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Investment Income Build Cash Interest and Dividend Income $41.4 $38.9 $39.7 $39.1 $39.4 SLP and Net Lease Income(1) 8.6 10.2 10.7 9.4 10.0 Recurring Cash Investment Income $50.0 $49.1 $50.4 $48
Slide 31: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2022 NII will be approximately $0.30 per share. Our board of directors has declared a first quarter dividend of $0.30 per share. 104% 103% 102% 102% 100% 99% 99% 100% 102% 100% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36
Slide 32: Diversified Leverage Profile
Diversified Leverage Profile(1) (As of 12/31/2021, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $545 / $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 33: Leverage Maturity Schedule
Leverage Maturity Schedule(1) (As of 12/31/2021, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,605 As of 12/31/2021 Fixed 53.0% Floating 47.0% $730 $280 $199 $341 $200 $201 $167 $104 $55 $117 $196 $140 $50 2022 2023 2024 2025 2026 and thereafter % of Total 2
Slide 34: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer & Director Robert A. Hamwee Independent Auditor John R. Kline
Slide 35: Appendix A: Leverage Migration
Appendix A: Leverage Migration ($ in millions) 9/30/21 12/31/21 Statutory Debt: Statutory Debt: $1,529.8 $97.1 $1,626.9 NAV: NAV: $1,284.9 $36.3 $1,321.2 ÷ Debt Drawn Sources $97.1 Uses Q4 2021 Settled 347.4 ÷ Originations Q3 2021 Settled Q4 2021 Repayments $147.3 24.7 Originations Statutory Q4 20
Slide 36: Appendix B: NMFC Cumulative Total Return Versus Peers
Appendix B: NMFC Cumulative Total Return Versus Peers(1) May 19, 2011 (IPO) – February 25, 2022 253.7% 191.9% 153.6% 133.5% 115.6% 87.9% 68.1% 36.8% 33.3% 17.8% (55.0%) Peer A ARCC 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,
Slide 37: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $117
Slide 38: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION