New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2018 Earnings Presentation
30 slides from New Mountain Finance's earnings presentation, Aug 8, 2018
Slide 1: Q2 2018 Earnings Presentation
Q2 2018 Earnings Presentation August 8, 2018
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 Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer and Director John R. Kline President and Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer and Treasurer 3
Slide 4: Q2 2018 Highlights
Q2 2018 Highlights ▪ Q2 2018 Net Investment Income (“NII”) of $0.34 per weighted average share, in the middle of guidance of $0.33 to $0.35 – Q2 2018 regular dividend of $0.34 per share paid on June 29, 2018 ▪ June 30, 2018 net asset value (“NAV”) of $13.57 per share, a decrease of $0.03 per share f
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 NII Per Share $0.34 $0.35 $0.35 $0.34 $0.34 NAV Per Share $13.63 $13.61 $13.63 $13.60 $13.57 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 75.7 75.8 75.9 75.9 76.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – August 3, 2018 Indexed Total Return 260.0 S&P Fin 149.7% S&P 146.0% 240.0 220.0 NMFC 113.9% 200.0 180.0 160.0 HY 53.3% BDCs 46.4% 140.0 120.0 CAGR (IPO to 8/3/2018) NMFC 11.1% 100.0 S&P 500 Financials 13.5% S&P 500 13.3% 80
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – August 3, 2018 113.9% 113.1% 102.3% 64.2% 46.4% 46.4% 31.3% 30.9% 15.8% (14.5%) (32.8%) NMFC Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, externa
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $10.14 $0.36 $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $1.53 $0.37 $0.93 $0.38 $0.12 $0.12 $0.61 $0.17 $9.68 $0.38 $0.62 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.68 ($0.06) ($0.51) ($0.48) ($0.55) ($0.75) Cumulative 2012 2013 2014 2015 2016 2017 2018 (IPO to 6/30/
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 6/30/2018 (October 2008 – June 30, 2018) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $2,076 / $2,111 / 89 $5,820 / 238 of which of which Internal Watch List $30.0 / $14.1 / 3 $264 / 11 (3 or 4 Rating)(2) of
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A / (2014) 5.6x 3.0x 2.7x Company AJ / (2018) 7.0x 7.0x - Company B / (2017) 8.9x 6.9x
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - 12/31/2011(2) 2012 2013 2014 2015 2016 2017 2018 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $51.6 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 526.7 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 102.2 51.5 Cumulative
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have been relatively stable throughout the year – Generally, there is strong competition for the best financing transactions – Recently, some transactions have struggled to clear the market due to aggressive deal terms and capital structures – As a result, w
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $1,855 million as of 6/30/2018)(1) ($1,094 million drawn as of 6/30/2018) Fixed 14% Floating – Fixed(2) No Floor (1-Month 51% Libor) Floating – Floor 49% 86% Impact of Changing Rates(3) Estimated %
Slide 15: Q2 2018 Originations
Q2 2018 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Business 66.7% (SBIC) 4/3/18 CHA Consulting $11.3 $35 2nd Lien 12.3% 31.4% / 14.7% Services / 25%(5) 4/17/18
Slide 16: Q2 2018 Originations (cont'd)
Q2 2018 Originations (cont’d) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Healthcare 6/1/18 Dental Corporation $17.8 $200 2nd Lien 25% 10.9% 12.9% Services Business 6/8/18 I
Slide 17: Origination Activity Since Quarter End (Through 8/3/2018)
Origination Activity Since Quarter End (Through 8/3/2018) Portfolio Originations(1) YTM at Purchase(4) ($ in millions) Amount Type of Date(2) Name Industry ($’s Invested) Tranche Size Investment Advance Rate(3) Unlevered Levered Business 7/3/18 Dominion Web $10.3 $114 1st Lien 70% 9.7% 14.9% Service
Slide 18: Q2 2018 Originations and Repayments
Q2 2018 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Preferred Equity Debt <1% 3% First Lien Debt 17% Second Lien First Lien Debt Debt 40% 39% Second Lien Debt 80% SLP III(2) 14% Net Lease 7% Total: $295.6 million Total: $208.2 million 1 By $s invest
Slide 19: Q2 2018 Investment Activity Roll
Q2 2018 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.0% 11.1% 11.2% 11.1% 10.6% 3/31/2018 3/31/2018 Q2 Originations Q2 Sales / 6/30/2018 PF for change in Repayments LIBOR Curve Cost ($mm)(3) $1,975.7 $1,975.7 $295.6 $208.2 $2,076.2 1 Assumes that investments are purchased at cost and hel
Slide 20: Portfolio Mix (By Fair Value as of 6/30/2018)
Portfolio Mix (By Fair Value as of 6/30/2018) By Industry(1) Federal SLP I Services 1% Types of Services Other(2) Net Lease 3% 1% Data & 4% Marketing Analytics Distribution & Services 4% Business 8% Services Logistics Engineering & 20% 4% Consulting Services Energy 9% 6% Services Telecom Services Ed
Slide 21: Portfolio Concentration (By Fair Value as of 6/30/2018)
Portfolio Concentration (By Fair Value as of 6/30/2018) Portfolio Names By Fair Value HI Technology 5.5% UniTek 4.2% SLP II 3.8% Top 15 portfolio Benevis 3.8% companies represent Net Lease 3.7% $929.6 million, or 44.1%, of consolidated Integro 2.9% investments 74 Other Portfolio EAB Global 2.8% Comp
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 Assets Portfolio $1,883.4 $1,872.9 $1,850.9 $2,003.1 $2,111.0 Cash & Equivalents 36.3 39.6 34.9 29.6 33.9 (1) Other Assets 30.1 38.1 42.2 45.7 61.0 Total Assets $1,949.8 $
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 $14.43 Q2 2018 $14.08 $14.07 $14.24 $13.69 $14.18 $14.00 $14.38 $14.06 $13.57 $13.83 $13.60 $13.46 $13.63 $13.00 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1) $11.00 At 12/3
Slide 24: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 Investment Income Interest income $37.6 $39.6 $38.6 $36.7 $40.1 Dividend income 9.7 9.9 10.9 12.4 12.3 Other income 2.7 1.7 3.8 3.8 2.2 Total investment income $50.0 $5
Slide 25: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 Investment Income Build Cash Investment Income $32.8 $32.6 $32.6 $33.0 $35.6 (1) SLP and Net Lease Income 5.0 4.8 5.1 5.4 5.7 Recurring Cash Investment Income $37.8 $37.4 $37.7 $38.4 $41.3 (3) N
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q3 2018 NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a third quarter dividend of $0.34 per share. (2) 1 NMFC priced its initial public offering on 5/19/2011 26 2 Calculated as Adjusted Net Investment Income / regu
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 6/30/2018, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $390 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022 (Wells Fargo / Raymond James / State Street / All other: L + 2.25% CIT Bank / N
Slide 28: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 29: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions, except for per weighted average share data; unaudited figures) Year Ended IPO - 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 2018 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $
Slide 30: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION