New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2018 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, May 8, 2018
Slide 1: Q1 2018 Earnings Presentation
Q1 2018 Earnings Presentation May 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: Q1 2018 Highlights
Q1 2018 Highlights ▪ Q1 2018 Net Investment Income (“NII”) of $0.34 per weighted average share, in the middle of guidance of $0.33 to $0.35 – Q1 2018 regular dividend of $0.34 per share paid on March 29, 2018 ▪ March 31, 2018 net asset value (“NAV”) of $13.60 per share, a decrease of $0.03 per share
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 NII Per Share $0.34 $0.34 $0.35 $0.35 $0.34 NAV Per Share $13.56 $13.63 $13.61 $13.63 $13.60 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 69.8 75.7 75.8 75.9 75.
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 3, 2018 Indexed Total Return 260.0 240.0 S&P Fin 137.9% S&P 126.6% 220.0 200.0 NMFC 99.7% 180.0 160.0 HY 50.6% 140.0 BDCs 28.0% 120.0 CAGR (IPO to 5/3/2018) NMFC 10.4% 100.0 S&P 500 Financials 13.3% S&P 500 12.5% 80.0 C
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – May 3, 2018 99.7% 97.1% 85.6% 54.0% 30.0% 26.0% 25.3% 24.0% 1.9% (18.4%) (27.4%) NMFC Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, externally-man
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $9.35 $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 $9.34 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.31 $0.34 ($0.03) ($0.48) ($0.12) ($0.48) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 2016 2017 2018 (IPO
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2018 (October 2008 – March 31, 2018) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $1,976 / $2,003 / 90 $5,510 / 229 of which of which Internal Watch List (3 or 4 Rating)(2) $1.6 / $0.5 / 2 $236 / 10 of w
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company (Vintage) At Purchase Current + / (-) Portfolio Company (Vintage) At Purchase Current + / (-) Company A (2014) 5.6x 3.0x 2.7x Company AJ (2017) 7.3x 7.3x - Company B (2015) 7.2x 4.9x 2.4x C
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ 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 $25.8 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 500.9 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 102.2 25.7 Cumulative
Slide 13: Increased Leverage Cap Proposal
Increased Leverage Cap Proposal ▪ In late March 2018, legislation was signed to permit BDCs to increase their leverage cap from 1:1 debt-to- equity to 2:1 debt-to-equity, subject to Board or shareholder approval ▪ NMFC is proposing to increase our leverage cap in line with the new legislation in ord
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit markets continue to show broad-based strength – Issuer-friendly yields and trends are prevalent in the market – CLO market financing spreads continue to decline – High level of competition for the best financing transactions – Middle market deals often being arrange
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $1,805 million as of 3/31/2018)(1) ($991 million drawn as of 3/31/2018) Fixed 15% Floating – Fixed(2) No Floor (1-Month 55% Libor) Floating – Floor 45% 85% Impact of Changing Rates(3) Estimated % Ch
Slide 16: Q1 2018 Originations
Q1 2018 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Date(2) Name Industry ($’s Invested) Size Investment Advance Rate(3) Unlevered Levered Business 1/2/18 ABC Financial $13.3 $115 2nd Lien 25% 12.0% 14.4% Services Membership 2/1/18 NM GLCR LLC Net
Slide 17: Origination Activity Since Quarter End (Through 5/3/2018)
Origination Activity Since Quarter End (Through 5/3/2018) Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Type of Date(2) Name Industry ($’s Invested) Tranche Size Investment Advance Rate(3) Unlevered Levered Business 66.7% (SBIC) 4/3/18 CHA Consulting $11.3 $35 2nd Lien 12.3% 31
Slide 18: Senior Loan Program III (“SLP III”)
Senior Loan Program III (“SLP III”) ▪ In April 2018, NMFC closed a joint venture (“JV”) with SkyKnight Income II, LLC (“SkyKnight”) to create SLP III, a $400 million leveraged loan fund for the purpose of investing in senior secured loans − Stand-alone entity (not consolidated by the BDC); utilizing
Slide 19: Q1 2018 Originations and Repayments
Q1 2018 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Other(2) Debt <1% Second Lien Debt 3% 2% Second Lien Debt 38% First Lien Debt 55% First Lien Debt 95% Net Lease 6% Total: $237.8 million Total: $87.1 million 1 By $s invested / $s received at time
Slide 20: Q1 2018 Investment Activity Roll
Q1 2018 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.2% 11.1% 10.9% 10.1% 10.5% 12/31/2017 12/31/2017 Q1 Originations Q1 Sales / 3/31/2018 PF for change in Repayments LIBOR Curve Cost ($mm)(3) $1,821.2 $1,821.2 $237.8 $87.1 $1,975.7 1 Assumes that investments are purchased at cost and he
Slide 21: Portfolio Mix (By Fair Value as of 3/31/2018)
Portfolio Mix (By Fair Value as of 3/31/2018) By Industry(1) Net Lease SLP I Types of Services Other(2) 3% 1% Data & 2% Federal Services Analytics 4% Engineering & 5% Consulting Services Business Energy Services 7% 5% 23% Marketing Services 8% Distribution & Logistics 6% Services Telecom Services 38
Slide 22: Portfolio Concentration (By Fair Value as of 3/31/2018)
Portfolio Concentration (By Fair Value as of 3/31/2018) Portfolio Names By Fair Value HI Technology 5.3% Benevis 4.0% SLP II 4.0% UniTek 3.3% Top 15 portfolio companies represent EAB Global 2.9% $844.6 million, or AmWINS 2.9% 42.2%, of consolidated Net Lease 2.8% investments 75 Other Portfolio Compa
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 Assets Portfolio $1,815.3 $1,883.4 $1,872.9 $1,850.9 $2,003.1 Cash & Equivalents 37.7 36.3 39.6 34.9 29.6 (1) Other Assets 27.9 30.1 38.1 42.2 45.7 Total Assets $1,880.9 $
Slide 24: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $14.87 $15.00 $14.44 Q1 2018 $14.43 $14.24 $14.08 $14.07 $13.69 $14.21 $14.00 $14.38 $14.06 $13.60 $13.83 $13.60 $13.63 $13.00 $13.46 $13.08 $12.00 NAV per Share (as Reported) NAV + Cumulative Special Dividends Per Share(1) $11.00 At 12/3
Slide 25: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 Investment Income Interest income $34.0 $37.6 $39.6 $38.6 $36.7 Dividend income 6.7 9.7 9.9 10.9 12.4 Other income 2.6 2.7 1.7 3.8 3.8 Total investment income $43.3 $50
Slide 26: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 Investment Income Build Cash Investment Income $31.7 $32.8 $32.6 $32.6 $33.0 (1) SLP and Net Lease Income 5.5 5.0 4.8 5.1 5.4 Recurring Cash Investment Income $37.2 $37.8 $37.4 $37.7 $38.4 (3) N
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2018 NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a second quarter dividend of $0.34 per share. 114% 108% 100% 103% 105% 104% 101% 103% 102% 102% 103% 103% 102% 101% 100% 100% 99% 100% 100% 100% 98% 99% 99% 99%
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 3/31/2018, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $356 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% October 2022 (Wells Fargo / Raymond James / State Street / All other: L + 2.50% CIT Bank / N
Slide 29: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 30: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ in millions, except for per weighted average share data; Year Ended unaudited figures) 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 31: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION