New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2016 Earnings Presentation
30 slides from New Mountain Finance's earnings presentation, Nov 9, 2016
Slide 1: Q3 2016 Earnings Presentation
Q3 2016 Earnings Presentation November 9, 2016
Slide 2: Important Notice and Safe Harbor Statement
Important Notice 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 outcome
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 Teddy Kaplan Managing Director Shiraz Y. Kajee Chief Financial Officer and Treasurer 3
Slide 4: Q3 2016 Highlights
Q3 2016 Highlights ▪ Q3 2016 Net Investment Income (“NII”) and Adjusted NII of $0.34 per weighted average share, versus guidance of $0.33 to $0.35 – Q3 2016 regular dividend of $0.34 per share paid on September 30, 2016 ▪ September 30, 2016 book value of $13.28 per share, an increase of $0.05 per sh
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended (1) 9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016 Adjusted NII Per Share $0.35 $0.35 $0.34 $0.34 $0.34 NAV Per Share $13.73 $13.08 $12.87 $13.23 $13.28 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 64.0 64.0
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – November 4, 2016 Indexed Total Return 190.0 180.0 S&P 74.5% 170.0 NMFC 68.9% S&P Fin 67.6% 160.0 150.0 140.0 HY 37.4% 130.0 120.0 BDCs 21.3% 110.0 100.0 90.0 CAGR (IPO to 11/4/2016) NMFC 10.1% 80.0 S&P 500 10.7% S&P 500 Fin
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – November 4, 2016 72.3% 68.9% 52.0% 31.3% 30.9% 21.6% 21.0% 19.5% 14.8% (6.3%) (24.2%) Peer A NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, externall
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $7.92 $0.81 $2.17 $0.61 $0.46 $1.80 $0.32 $0.37 $0.93 $0.12 $0.12 $0.61 $1.22 $0.20 $7.30 $0.38 $1.34 $1.36 $1.36 $1.36 $1.02 $0.86 ($0.80) ($0.48) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 YTD 2016 (IPO to 9/30/2016)(1) 12/31/2011(1) Regular Dividen
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2016 (October 2008 – September 30, 2016) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $1,595 / $1,548 / 75 $4,049 / 186 of which of which Internal Watch List (3 or 4 Rating)(2) $84 / $31 / 5 $199 / 9 of
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company At Purchase Current + / (-) Portfolio Company At Purchase Current + / (-) Company A 7.2x 4.7x 2.5x Company AE 3.7x 3.7x - Company B 3.7x 1.6x 2.1x Company AF 5.0x 5.0x - Company C 6.9x 4.8x
Slide 12: Performance Since IPO
Performance Since IPO ($ in millions) IPO - (1) 12/31/2011 2012 2013 2014 2015 2016 YTD Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $65.1 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 350.5 (2) (2) (2) Adj. NII 26.5 46.1 62.1 73.4 82.8 65.0 Cumulative Adj. NII 26.5 72.7 134.8 208.2 291.
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit markets continue to be strong – Generally positive fund flows into leveraged credit driven by continued investor desire for yield in current low rate environment – Healthy balance between new deal flow and investor demand for new issue – Significant private equity d
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,444.9 million as of 9/30/2016)(1) ($718.4 million drawn as of 9/30/2016) Fixed 14% Floating – No Floor Fixed(2) 51% (1-Month Libor) Floating – Floor 49% 86% Impact of Changing Rates(3) Estimate
Slide 15: Q3 2016 Originations
Q3 2016 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Advance Date(2) Name Industry ($’s Invested) Size Investment Rate(3) Unlevered Levered Membership 7/7/16 NMFC SLP II Investment Fund $19.9 N/A N/A 13.6% 13.6% Interest Distribution & 7/15/16 $14.
Slide 16: Origination Activity Since Quarter End (Through 11/4/2016)
Origination Activity Since Quarter End (Through 11/4/2016) ($ in millions) Portfolio Originations(1) YTM at Purchase(4) Amount Type of Advance Date(2) Name Industry ($’s Invested) Tranche Size Investment Rate(3) Unlevered Levered Membership 10/19/16 NMFC SLP II Investment Fund $7.9 N/A N/A 13.6% 13.
Slide 17: Q3 2016 Originations and Repayments
Q3 2016 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Common Equity Common Equity Debt and Other 8% 2% <1% and Other Subordinated 10% Debt 4% Second Lien Debt 8% Second Lien 40% Debt SLP 11% 58% 67% First Lien Debt First Lien Debt Total: $172.4 millio
Slide 18: Q3 2016 Investment Activity Roll
Q3 2016 Investment Activity Roll YTM at Cost(1) / Purchase(2) 10.7% 10.3% 10.4% 10.4% 9.6% 6/30/2016 6/30/2016 Q3 Originations Q3 Sales / 9/30/2016 PF for Change Repayments in LIBOR Curve Cost ($mm)(3) $1,577.0 $1,577.0 $172.4 $152.4 $1,594.8 1 Assumes that investments are purchased at cost and held
Slide 19: Portfolio Mix (By Fair Value as of 9/30/2016)
Portfolio Mix (By Fair Value as of 9/30/2016) By Industry Business Federal Media Products Other(1) Services 2% 2% 2% SLP 4% 5% Business Svcs HC IT 1% 26% Services HC Services 5% 33% Healthcare 6% Education 6% Consumer Svcs Energy 7% 6% Software Distribution 27% & Logistics 7% By Type of Investment B
Slide 20: Portfolio Concentration (By Fair Value as of 9/30/2016)
Portfolio Concentration (By Fair Value as of 9/30/2016) Portfolio Names By Fair Value UniTek 3.6% Crowley 3.4% SLP II 3.1% TIBCO 2.7% Hill Int’l 2.7% Deltek 2.7% Top 15 portfolio companies Tenawa 2.7% Assured represent $607.5 Partners 2.6% million, or 39.3%, 60 Other Portfolio Navex 2.5% of consolid
Slide 21: New Mountain Net Lease Corporation (“Net Lease”)
New Mountain Net Lease Corporation (“Net Lease”) ▪ In August 2016, NMFC began investing in a newly formed real estate entity (“Net Lease”) to invest in net lease real estate opportunities – Capitalized with equity from NMFC and non-recourse asset level leverage – Stand-alone, actively-managed operat
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2015 12/31/2015 3/31/2016 (1) 6/30/2016 (1) 9/30/2016(1) Assets Portfolio $1,508.0 $1,541.9 $1,519.9 $1,527.7 $1,547.7 Cash & Equivalents 24.6 30.1 32.7 34.5 49.8 (2) Other Assets 37.4 30.1 19.6 22.4 19.7 Total Assets
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $15.02 $15.14 $14.81 $14.87 $14.94 $15.00 $14.68 $14.69 $14.43 $14.44 $14.50 $14.51 $14.33 $14.34 (2) $14.06 $14.65 $13.82 $14.53 $13.69 $13.84 $13.89 $14.00 $14.31 $14.32 $14.32 $14.38 $13.48 $14.08 $14.10 $14.06 $14.33 $13.83 $13.83 $13
Slide 24: Income Statement Highlights
Income Statement Highlights Quarter Ended (1) ($ in millions, except per share data) 9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016 Investment Income Interest income $33.6 $37.6 $37.8 $38.3 $35.9 Dividend income 1.6 1.6 1.6 1.8 3.0 Other income 2.7 2.8 1.5 1.4 2.9 Total investment income $37.9 $
Slide 25: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2015 (1) 12/31/2015 3/31/2016 6/30/2016 9/30/2016 Investment Income Build Cash Interest Income $32.2 $35.5 $35.9 $33.3 $33.8 (2) SLP Income 1.2 1.2 1.2 1.2 2.5 Recurring Cash Investment Income $33.4 $36.7 $37.1 $34.5 $36.3 Non-cash Interest
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2016 Adjusted NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a fourth quarter dividend of $0.34 per share. 0.8 114% 120% 108% 105% 101% 103% 103% 102% 102% 103% 103% 0.7 98% 100% 99% 99% 100% 100% 98% 99% 99% 100
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2016, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $309 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% December 2019 All other: L + 2.50% (No LIBOR floor) NMFC Credit Facility $43 / $123 L + 2.50
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 (Dollars 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 2016 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $65.1 (1) Non-cash adjustment
Slide 30: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION