New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2020 Earnings Presentation
39 slides from New Mountain Finance's earnings presentation, May 7, 2020
Slide 1: Q1 2020 Earnings Presentation
Q1 2020 Earnings Presentation May 7, 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 ▪ As the COVID-19 pandemic continues, NMFC has actively worked to mitigate the impact through a number of initiatives: – Performed company-by-company evaluation of anticipated impact from COVID-19 through extensive sponsor and company dialogue – Generated additional liquidity thr
Slide 5: Chairman’s Overview (Continued)
Chairman’s Overview (Continued) ▪ Q1 2020 Adjusted Net Investment Income (“NII”) of $0.35(1) per weighted average share, at the high end of our guidance of $0.33 to $0.35 – Q1 2020 regular dividend of $0.34 per share paid on March 27, 2020 ▪ Every one of our borrowers paid their cash interest for Q1
Slide 6: New Mountain Capital Support
New Mountain Capital Support ▪ New Mountain Capital continues to be fully supportive of NMFC through the following actions during the crisis: – Provided a currently undrawn $50 million unsecured revolving loan to NMFC for any portfolio company funding needs – Purchased ~$11 million of NMFC’s REIT eq
Slide 7: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Adjusted NII Per Share(1) $0.35 $0.34 $0.36 $0.36 $0.35 NAV Per Share $13.45 $13.41 $13.35 $13.26 $11.14 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 80.5 80.6 8
Slide 8: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 9: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ New Mountain’s investment team performed a company-by-company analysis across the portfolio – Extensive dialogue with companies and sponsors to understand COVID-19 impact to business, company’s response to any disruption, level of sponsor support, and current and pr
Slide 10: Risk Ratings – Overall Company Strength vs. COVID Exposure (12/31/2019)
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 12/31/2019) ($ in millions) $9 / 1 $213 / 4 $31 / 1 $200 / 6 Overall Company Strength (A = Best; C = Worst) C Distribution & Logistics $9 / 1 Edmentum $89 Marketing Services $31 / 1 Retail Healthcare $129 / 3 UniTek $77 Permian $3
Slide 11: Risk Ratings – Overall Company Strength vs. COVID Exposure (3/31/2020)
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 3/31/2020) ($ in millions) $9 / 1 $175 / 4 $23 / 1 $156 / 6 Overall Company Strength (A = Best; C = Worst) C Distribution & Logistics $9 / 1 Edmentum $65 Marketing Services $23 / 1 Retail Healthcare $99 / 3 UniTek $63 Permian $31.
Slide 12: Path to NAV Recovery
Path to NAV Recovery NAV Impact from Change in FMV of $202.2m Cum. NAV / Share: $11.96 $12.17 $12.35 $12.48 $13.24 $13.26 NAV Impact: $79.0m $19.9m $17.6m $12.2m $73.5m $1.5m $13.26 $0.02 $0.76 $0.18 $0.13 $0.21 $11.14 $0.82 Yield Impact (1) (2) 3/31/20 Green Yellow Orange Red Restructured Other 12/
Slide 13: Leverage Migration
Leverage Migration ($ in millions) 12/31/19 3/31/20 Statutory Debt: Statutory Debt: $1,734.9 ($52.4) $1,682.5 debt paydown from asset sales NAV: NAV: $1,283.5 ($205.3) $1,078.2 due primarily to ÷ negative mark-to-market ÷ Statutory Statutory Leverage Ratio(1): Leverage Ratio(1): 1.35x 1.56x 1 Stat
Slide 14: Projected Liquidity Available to Fund Needs
Projected Liquidity Available to Fund Needs ($ in millions) ▪ Liquidity position remains strong as we currently have ~$130 million of cash and immediately available liquidity ▪ We currently expect projected liquidity through mid-July will cover future funding needs 33 (29) ~$150 ~$130 17 5/6/20 Cash
Slide 15: Liquidity Update
Liquidity Update ▪ Since mid-March, have taken a number of actions to address liquidity needs – Monetized $11.3 million of REIT assets – Sold $86 million of other assets at weighted average price of 97% of par – Deferred payment of Q4 2019 and Q1 2020 management and incentive fees – Entered into $50
Slide 16: Credit Facility Coverage (By Fair Value as of 3/31/2020)
Credit Facility Coverage (By Fair Value as of 3/31/2020) ($ in millions) Wells Fargo Credit Facility Deutsche Bank Credit Facility NMFC Credit Facility (1) Asset FMV Asset FMV Asset FMV $1,207 $530 $412 Debt Debt Outstanding Debt Outstanding $270 Outstanding $569 $189 Asset Mix Asset Mix Asset Mix R
Slide 17: Q2 2020 Preliminary Estimated NII Bridge
Q2 2020 Preliminary Estimated NII Bridge We believe our Q2 2020 NII will be in the $0.27 to $0.31 per share range NII Range $30m ~$4m High: ($0.31 / share) ~$3mm ~$2m ~$5m $26m $2m Low: ($0.27 / share) $34m Midpoint: ($0.35 / $28m share) ($0.29 / share) Total impact projected to be $4m to $8m Q1 202
Slide 18: Credit Market Conditions
Credit Market Conditions ▪ COVID-19 has dramatically changed the sub-investment grade leveraged lending market ▪ After years of growing volumes, deal volume in our core direct lending market has come to a halt ▪ Secondary trading levels in corporate credit have declined, driven by stressed credit an
Slide 19: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,838 million as of 3/31/2020) (1) ($1,983 million drawn as of 3/31/2020) Fixed 6% Fixed(2) Floating 48% 52% Floating 94% Impact of Changing Rates(3) Estimated % Change in Interest Income Illustrat
Slide 20: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2020 (October 2008 – March 31, 2020) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,202 / $3,002 / 114 $7,870 / 292 of which of which Internal Watch List $371 / $270 / 11 $579 / 19 (3 or 4 Rating)(2) of
Slide 21: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2017) 8.9x 3.5x 5.4x Company A
Slide 22: Performance Since IPO
Performance Since IPO(1) ($ 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 $32.9 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 728.8 (3) (3) (3) (3) (3) Adj
Slide 23: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 1, 2020 Indexed Total Return 290.0 270.0 S&P 153.9% 250.0 230.0 210.0 S&P Fin 103.8% 190.0 170.0 150.0 HY 50.5% NMFC 34.6% 130.0 110.0 CAGR (IPO to 5/1/2020) NMFC 3.4% 90.0 S&P 500 11.0% S&P 500 Financials 8.3% BDCs (23
Slide 24: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $5.72 $0.61 $2.17 $0.46 $1.80 $1.74 $0.32 $0.93 $1.53 $0.37 $0.38 $1.40 $0.12 $0.12 $0.61 $0.17 $0.95 $0.04 $12.06 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $1.36 $0.86 $0.34 ($0.48) ($0.55) ($0.41) ($0.75) ($2.94) ($2.12) ($4.01) ($1.78) Cumulative IPO to
Slide 25: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – May 1, 2020 71.3% 34.6% 30.3% 28.3% 5.4% (21.1%) (25.0%) (26.5%) (29.7%) (30.4%) (86.9%) 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: Cap
Slide 26: Pre-COVID Net Originations (1/1/20 through 3/11/20)
Pre-COVID Net Originations (1/1/20 through 3/11/20) Prior to the COVID outbreak, we had strong gross origination activity of $142 million Portfolio Originations(1) ($ in millions) Amount Tranche Date(2) Name Industry ($’s Invested) Size Type of Investment $3.1 $78 1st Lien 1/21/20 Pathway Consumer S
Slide 27: Post-COVID Net Originations (3/12/20 through 5/1/20)
Post-COVID Net Originations (3/12/20 through 5/1/20) After the COVID outbreak, we were able to pivot to selling assets at attractive prices Portfolio Sales / Repayments(1) ($ in millions) Date(2) Name Activity Proceeds Type of Investment Weighted Average Price 3/12/20 Kronos Sale $58.8 2nd Lien 97.4
Slide 28: Portfolio Mix (By Fair Value as of 3/31/2020)
Portfolio Mix (By Fair Value as of 3/31/2020) By Industry(1) Specialty Chemicals & Materials Distribution & Logistics Types of Services Types of Healthcare 2% 3% Other(2) Data & Marketing Federal Services 4% Analytics 6% Services Tech-Enabled 4% Insurance 3% Healthcare Net Lease Services 21% 6% 4% E
Slide 29: Portfolio Concentration (By Fair Value as of 3/31/2020)
Portfolio Concentration (By Fair Value as of 3/31/2020) Portfolio Names By Fair Value SLP III 3.5% SLP II 2.5% insightsoftware 2.4% PhyNet 2.4% EAB Global 2.3% Edmentum 2.2% Top 15 portfolio Benevis 2.1% companies(1) represent UniTek 2.1% $967.0 million, or Associa 1.9% 32.2%, of consolidated symplr
Slide 30: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Assets Portfolio $2,534.5 $2,655.2 $3,009.6 $3,171.3 $3,002.3 Cash & Equivalents 65.6 87.2 69.8 48.6 22.1 (1) Other Assets 50.0 48.9 52.7 46.2 79.1 Total Assets $2,650.1 $
Slide 31: 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 $14.06 $13.83 $13.63 $13.00 $13.60 $13.46 $13.08 $13.22 $13.26 Q1 2020 $12.00 $11.75 $11.00 NAV per Share (as Reported) $11.14 NAV + Cumulative Special Di
Slide 32: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Investment Income Interest income $47.9 $51.7 $55.2 $58.6 $61.6 Dividend income 13.2 12.3 13.0 14.1 13.9 Other income 2.8 2.2 4.2 4.8 2.0 Total investment income $63.9
Slide 33: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Investment Income Build Cash Interest and Dividend Income $44.3 $47.3 $50.2 $52.8 $54.0 (1) SLP and Net Lease Income 9.5 8.4 8.7 9.6 9.2 Recurring Cash Investment Income $53.8 $55.7 $58.9 $62.4
Slide 34: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2020 NII will be in the $0.27 to $0.31 per share range. Our board of directors has declared a second quarter dividend of $0.30 per share. 104% 103% 102% 102% 103% 100% 99% 99% 100% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $
Slide 35: Diversified Leverage Profile
Diversified Leverage Profile (As of 3/31/2020, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $569 / $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 36: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 3/31/2020, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,074 As of 3/31/2020 Fixed 48.2% $135 Floating 51.8% $673 $800 $201 $495 $280 $300 $189 $117 $90 $192 $55 $30 2020 2021 2022 2023 2024 2025 and thereafter % of Total –
Slide 37: 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 38: 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 2020 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.1 $1
Slide 39: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION