New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2020 Earnings Presentation
33 slides from New Mountain Finance's earnings presentation, Nov 5, 2020
Slide 1: Q3 2020 Earnings Presentation
Q3 2020 Earnings Presentation November 5, 2020
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 and related changes in base interest rates and s
Slide 3: 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, Chief Operating Officer, and Director Shiraz Y. Kajee Chief Financial Officer 3
Slide 4: 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 August 6, 2020 earni
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 (1) Adjusted NII Per Share $0.36 $0.36 $0.35 $0.30 $0.30 NAV Per Share $13.35 $13.26 $11.14 $11.63 $12.24 Dividends Per Share $0.34 $0.34 $0.34 $0.30 $0.30 Share Count - End of Period (mm) 87.6 96.8
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q3 2020, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 8: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has improved from a Risk Rating standpoint in Q3 2020 from Q2 2020 – As of Q3, 82% of the portfolio is characterized as Green (relatively flat to 83% in Q2) – 34% of Q2 Red Risk Rated companies improved to Green – 2% of Q2 Orange Risk Rated comp
Slide 9: Risk Rating Migration from Q2 2020
NMFC Portfolio – Risk Rating Migration from Q2 2020 (FMV as of 9/30/20) ($ in millions) Distribution (Restaurants) $19 /1 Overall Company Strength (A = Best; C = Worst) C Retail Healthcare $4 / 1 Retail Healthcare $34 / 1 Retail Healthcare $35 / 2 B $103 / 3 Business Services $46 / 1 Engineering & C
Slide 10: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 9/30/20) ($ in millions) $27 / 1 $25 / 2 $184 / 4 $66 / 4 Overall Company Strength (A = Best; C = Worst) Permian $28 1 C National HME $27 PPVA $21. . Benevis $82. . Education Products $23 / 1 Retail Healthcare $4 / 1 UniTek $53. .
Slide 11: NAV Recovery Progress
NAV Recovery Progress ($ in millions, except per share data) NAV Impact Change in FMV of $83.8 Cum. NAV / Share: $12.28 $12.39 $12.53 $12.58 $13.11 $13.26 NAV Impact: $3.2m $11.2m $13.6m $4.5m $51.3m $14.2m $13.26 $0.15 $0.53 $0.05 $12.24 $0.14 $0.03 $0.12 Q3 NAV Recovery $0.61 Q2 NAV Yield Impact R
Slide 12: Leverage Migration
Leverage Migration ($ in millions) 6/30/20 9/30/20 Statutory Debt: Statutory Debt: $1,448.5 $58.0 $1,506.5 NAV: NAV: $1,125.6 $59.2 $1,184.8 Primarily driven by ÷ Debt Drawn Sources market value recovery $58.0 Uses Q3 DDTL Draws, Net 30.0 ÷ Repayments Q3 Repayments 33.9 Q3 Settled Originations 12.
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit market conditions have continued to improve since our last call in August ▪ Deal volume in our core direct lending market is starting to pick back up, as our forward pipeline continues to grow ▪ Secondary trading levels in corporate credit have nearly returned to pr
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,541 million as of 9/30/2020) (1) ($1,806 million drawn as of 9/30/2020) Fixed 6% Fixed(2) Floating 53% 47% Floating 94% Impact of Changing Rates(3) Estimated % Change in Interest Income Illustrat
Slide 15: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2020 (October 2008 – September 30, 2020) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,994 / $2,908 / 105 $7,945 / 292 of which of which Internal Watch List $356 / $250 / 11 $600 / 19 (3 or 4 Rating)(2
Slide 16: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2019) 7.5x 5.0x 2.5x Company A
Slide 17: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $91.0 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 786.9 (3) Adj. NII 26.5 46.1
Slide 18: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – October 30, 2020 Indexed Total Return 330.0 CAGR (IPO to 10/30/2020) 310.0 NMFC 6.1% S&P 500 12.2% S&P 195.9% 290.0 S&P 500 Financials 8.9% CS High Yield Index 5.6% 270.0 BDC Index (1.9%) 250.0 230.0 S&P Fin 123.5% 210.0 19
Slide 19: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – October 30, 2020 102.2% 75.0% 71.0% 47.7% 37.2% (7.1%) (25.7%) (32.9%) (33.3%) (35.2%) (77.6%) Peer A ARCC NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-tra
Slide 20: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $9.08 $2.17 $0.61 $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 $12.66 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.94 ($0.41) ($1.84) ($0.48) ($0.55) ($0.75) ($1.02) ($2.35) ($0.08) IPO to 2012 2013
Slide 21: Q3 2020 Investment Activity
Q3 2020 Investment Activity Sales / Repayments(1) ($ in millions) Weighted Average Date(2) Name Activity Proceeds Type of Investment Price 7/27/20 JAMF Repayment $13.3 1st Lien 100.00 8/28/20 Amerijet Sale/Repayment $8.6 1st Lien 100.00 9/24/20 Northstar Financial Repayment $10.6 2nd Lien 100.00 Oth
Slide 22: Portfolio Mix (By Fair Value as of 9/30/2020)
Portfolio Mix (By Fair Value as of 9/30/2020) By Industry(1) Specialty Chemicals & Materials Distribution & Logistics Types of Services Types of Healthcare 2% 3% Other(2) Insurance Marketing Tech-Enabled Federal Services 4% Services 6% Services Healthcare 4% 4% Data & 17% Net Lease Analytics 4% 7% E
Slide 23: Portfolio Concentration (By Fair Value as of 9/30/2020)
Portfolio Concentration (By Fair Value as of 9/30/2020) Portfolio Names By Fair Value SLP III 4.1% Edmentum 3.7% insightsoftware 3.2% Benevis 2.8% SLP II 2.7% Top 15 portfolio companies(1) represent PhyNet 2.6% $1,049.6 million, or EAB Global 2.5% 36.1%, of consolidated Associa 2.2% investments Conn
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 Assets Portfolio $3,009.6 $3,171.3 $3,002.3 $2,837.5 $2,907.7 Cash & Equivalents 69.8 48.6 22.1 56.2 68.7 (1) Other Assets 52.7 46.2 79.1 49.9 56.1 Total Assets $3,132.1 $
Slide 25: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $14.44 $15.00 $14.43 $14.24 $14.08 $13.69 $14.07 $13.83 $13.87 $14.00 $14.38 Q3 2020 $14.06 $13.83 $13.63 $13.00 $13.60 $12.85 $13.46 $13.22 $13.26 $13.08 $12.24 $12.00 $11.00 NAV per Share (as Reported) NAV + Cumulative Special Di
Slide 26: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 Investment Income Interest income $55.0 $58.4 $61.3 $53.4 $49.7 Dividend income 13.0 14.1 13.9 12.0 12.4 Other income 4.2 4.8 2.0 2.3 3.2 Total investment income $72.2
Slide 27: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 Investment Income Build Cash Interest and Dividend Income $50.2 $52.8 $54.0 $45.5 $43.2 (1) SLP and Net Lease Income 8.7 9.6 9.2 8.4 8.8 Recurring Cash Investment Income $58.9 $62.4 $63.2 $53.9
Slide 28: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2020 NII will be approximately $0.30 per share. Our board of directors has declared a fourth quarter dividend of $0.30 per share. 104% 103% 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 $1.
Slide 29: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2020, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $459 / $745 Broadly syndicated 1st lien loans(1): September 2023 (Wells Fargo / Raymond James / State Street / CIT L + 2.00% Bank / Cadence / Old Second
Slide 30: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 9/30/2020, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,418 As of 9/30/2020 Fixed 52.8% $135 $201 Floating 47.2% $745 $495 $294 $280 $300 $189 $90 $117 $55 $192 $50 2020 2021 2022 2023 2024 2025 and thereafter % of Total –
Slide 31: 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 32: Appendix A: NMFC Income Reconciliation
Appendix A: 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 2020 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $87.9 Non-con
Slide 33: New Mountain Finance Corporation
NIM|F NEW MOUNTAIN FINANCE CORPORATION