New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2024 Earnings Presentation
34 slides from New Mountain Finance's earnings presentation, May 2, 2024
Slide 1: Earnings Presentation Q1 2024
Earnings Presentation Q1 2024 May 2, 2024 14
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 current conflict between Russia and Ukraine, conflict in the Middle
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: Today's Presenters
Today’s Presenters Steven B. Klinsky John R. Kline Laura C. Holson Kris Corbett Founder & Chairman President & CEO COO CFO Joined Years at 24 15 14 November 2023 4
Slide 5: Chairman's Overview
Chairman’s Overview ▪ Q1 2024 adjusted net investment income (“NII”) of $0.36 per share exceeded our regular dividend of $0.32 per share – NMFC will pay a $0.02 per share supplemental dividend alongside the Q2 2024 regular dividend (1) • In line with the previously communicated estimate – Current an
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 3/31/2023 6/30/2023 9/30/2023 12/31/2023 3/31/2024 Adjusted NII Per Share $0.38 $0.39 $0.40 $0.40 $0.36 NAV Per Share $13.14 $13.14 $13.06 $12.87 $12.77 Dividends Per Share(1) $0.35 $0.36 $0.36 $0.46 $0.34 (2) Pro Forma Statutory Debt / Equity 1.26x
Slide 7: New Mountain Capital Overview
New Mountain Capital Overview New Mountain Capital (“NMC”) was founded in 1999 to focus on “defensive growth” business building and deep fundamental research $50bn+ ~245 ~150 0 5bps Employees & Senior Investment Private Equity Bankruptcies Average Net Realized Loss Rate Assets Under Management(1) Ad
Slide 8: Differentiated, Defensive Growth Approach to Lending
Differentiated, Defensive Growth Approach to Lending Why NMFC? ACYCLICAL SECTORS(3) Where NMC has deep expertise “Defensive Growth” Strategy • Focused on investing in strong businesses in Other acyclical sectors Packaging ERP 6% 9% • Achieving superior risk-adjusted returns despite Financial Service
Slide 9: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Attractive Return Profile $3.1bn 96.5% 11% Green Annualized Div. Portfolio Size(1) Portfolio Risk Rating Yield(4) 15 Year Operating History 43% Avg. Loan to Value(2) 10% Annual Return Since IPO(5) Baa3 / 5bps Stable Average realized lo
Slide 10: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) Q4 2023 Risk Ratings Q1 2024 Risk Ratings (FMV as of 12/31/2023) (FMV as of 3/31/2024) 0.2% 0.1% 1.4% 1.3% 3.9% 2.1% ▪ No risk rating migrations during the quarter ▪ Share of the portfolio rated green increased from 94.5% to 96.5% as a result of: ‒ Realization of n
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings (FMV as of 3/31/24) ($ in millions / company count) $24 / 2 $42 / 4 $4 / 3 Business Services $24 / 5 Education $20 / 1 National HME $3 / 1 Business Characteristics(2) (A = Best; C = Worst) Healthcare $13 / 1 Healthcare $0 / 1 C Packaging $6 / 1 Great Expressions $0 / 1
Slide 12: Q1 2024 NAV Update
Q1 2024 NAV Update Q1 2024 NAV declined $0.10 per share (or 0.8%) compared to the prior quarter $12.87 $12.77 ($0.23) $0.12 $0.04 ($0.03) Edmentum All Other, Net 12/31/2023 Credit- Broad Other 3/31/2024 NAV per Share Specific Market NAV per Share Movement Movement 142
Slide 13: Credit Performance Track Record
Credit Performance Track Record ▪ Non-accruals represent just 1.6% of total portfolio FMV ▪ >$9 billion of cumulative investments since IPO have generated net realized losses of just $37 million ($ in millions) As of 3/31/2024 Cumulative Since IPO (~13 years)(1) Investments Investments FMV / Cost /
Slide 14: Total Value Generated for Shareholders
Performance Since IPO(1) ($ in millions) Since IPO in 2011, NMFC has distributed over $1.2 billion to shareholders while creating over $1.1 billion of total value $1,200 $1,159 NMFC has generated $1,254 million of Adj. NII, $37 million of net realized losses and $58 million of net unrealized losses
Slide 15: Credit Market Conditions
Credit Market Conditions General Investing Environment ▪ Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt structures, floating base rates, and attractive spreads Direct Lending Opportunities ▪ Deal flow picking up in real
Slide 16: Positively Exposed to Elevated Base Rates
Positively Exposed to Elevated Base Rates Elevated base rates provide a sustained uplift to core earnings power Asset Mix Liability Mix (Aggregate par value of ($1,774 million drawn as of 3/31/2024)(2) $2,457 million as of 3/31/2024)(1) Fixed 12% Fixed Floating 46% 54% 88% Floating Illustrative NII
Slide 17: Q1 2024 Originations
Q1 2024 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread RealPage Software - ERP $41.7 Second Lien S + 6.50% Nelipak Packaging 26.9 First Lien S + 5.50% Groundworks Business Services - Engineering & Consulting Services 19.1 First
Slide 18: Q2 2024 QTD Originations
Q2 2024 QTD Originations(1) Portfolio Originations(2) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread OEConnection Software - Ecommerce & Logistics $46.4 First Lien S + 5.25% TriTech Software - ERP 34.6 First Lien S + 6.50% DDTL Draws & Other 15.8 Total Originations
Slide 19: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 3/31/2024)(1) ~69% of the portfolio is senior in nature, roughly in line with prior quarter Common Equity & Other Positions(3) Common Equity & Other Positions(3) Preferred 8% Subordinated 6% Company FMV UniTek $77.8 3% Edmentum 72.4 Benevis 41.5 First Lien Deb
Slide 20: Q1 2024 Investment Activity Roll
Q1 2024 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.8% 11.4% 11.1% 10.9% 10.2% 12/31/2023 12/31/2023 Q1 Originations Q1 Repayments 3/31/2024 PF for 3/31/2024 Base Rate Changes(3) Cost ($m)(4) $3,068.2 $3,068.2 $191.8 $144.9 $3,124.2 1 Assumes that investments are purchased at cost and h
Slide 21: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $200 $179 $180 $155 $160 $144 $147 $141 $140 $120 $100 $80 $60 $40 $20 $0 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.8x 6.7x 6.6x 7.0x 6.5x 6.3x 6.0x 5.0x
Slide 22: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 3/31/2024) Top 15 portfolio companies represent $1,294.6 million, or 41.9%, of consolidated investments SLP III Benevis Net Lease 4.5% 4.3% SLP IV 4.0% 3.6% UniTek 3.2% Edmentum 3.0% Kaseya Portfolio Names 2.7% 100 Other By Fair Value 2.6% Alliance Animal Healt
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2023 6/30/2023 9/30/2023 12/31/2023 3/31/2024 Assets Portfolio $3,286.9 $3,196.0 $3,128.4 $3,027.8 $3,086.5 Cash & Equivalents 46.4 45.9 83.3 70.1 107.5 (1) Other Assets 45.7 55.1 67.9 61.3 61.6 Total Assets $3,379.0
Slide 24: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 3/31/2023 6/30/2023 9/30/2023 12/31/2023 3/31/2024 Investment Income Interest income $71.2 $74.4 $74.0 $71.1 $67.6 Dividend income 17.3 18.7 17.9 18.7 20.2 Other income 3.2 2.1 2.2 3.0 2.5 Total investment i
Slide 25: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 99%+ of Q1 2024 non-cash interest and dividend income is generated by positions with a Green risk rating Quarter Ended ($ in millions) 3/31/2023 6/30/2023 9/3
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage ▪ Q2 2024 estimated adjusted NII expected to exceed our regular dividend of $0.32 per share and generate a supplemental dividend of $0.02 per share (payable in September 2024) ▪ Investment Advisor has pledged to reduce its incentive if and as needed during 2024 to fully
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 03/31/2024, Amount Outstanding $ in millions) / Facility Size Interest Rate(1) Maturity Wells Fargo Credit Facility $292 / $730 Daily SOFR + 2.50% October 2028 (Wells Fargo / State Street / First Citizens) (0.0% SOFR floor) Deutsche Bank Credit Facility $182 / $28
Slide 28: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 03/31/2024, $ in millions) Floating vs Fixed Debt Mix Debt Type Outstanding Debt Max Facility Size $875 Fixed 54% 37% $115 Floating 46% 63% $30 $468 $435 $416 $13 $300 $364 $18 $75 $730 $104 $100 $199 $5 $260 $280 $200 $135 $5 2024 2025 2026 2027 2028 2029 and there
Slide 29: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Paul Johnson Mitchel Penn Finian O’Shea 249
Slide 30: Appendix
NIM] NEw MOUNTAIN FINANCE CORPORATION Appendix
Slide 31: Appendix A: Credit Performance
Appendix A: 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 (2023) 5.9x 3.3x 2.
Slide 32: Appendix B: NMFC Income Reconciliation
Appendix B: NMFC Income Reconciliation (in millions, except per share data) Year Ended YTD (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 3/31/2024 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $159.9 $37.5 Non-controlling interest in
Slide 33: Appendix C: Performance Since IPO Detail
Appendix C: Performance Since IPO Detail IPO - (1) ($ in millions) 12/31/2017 2018 2019 2020 2021 2022 2023 YTD 2024 Regular & Supplemental Dividend (2) $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 $154.8 $40.4 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,209.6 1,2
Slide 34: New Mountain Finance Corporation
INIMIF] New MountTAIN FINANCE CORPORATION