New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2016 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, Mar 1, 2017
Slide 1: Q4 2016 Earnings Presentation
Q4 2016 Earnings Presentation March 1, 2017
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 Shiraz Y. Kajee Chief Financial Officer and Treasurer 3
Slide 4: Q4 2016 Highlights
Q4 2016 Highlights ▪ Q4 2016 Net Investment Income (“NII”) and Adjusted NII of $0.34 per weighted average share, versus guidance of $0.33 to $0.35 – Q4 2016 regular dividend of $0.34 per share paid on December 29, 2016 ▪ December 31, 2016 net asset value (“NAV”) of $13.46 per share, an increase of $
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 Adjusted NII Per Share(1) $0.35 $0.34 $0.34 $0.34 $0.34 NAV Per Share $13.08 $12.87 $13.23 $13.28 $13.46 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 64.0 63.9
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 24, 2017 Indexed Total Return 220.0 210.0 S&P Fin 111.5% 200.0 S&P 99.5% NMFC 95.4% 190.0 180.0 170.0 160.0 150.0 BDCs 45.1% HY 44.8% 140.0 130.0 120.0 110.0 100.0 90.0 CAGR (IPO to 2/24/2017) 80.0 NMFC 12.3% 70.0
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – February 24, 2017 95.4% 94.4% 81.2% 69.4% 48.6% 45.2% 45.0% 42.4% 30.5% 6.4% (29.0%) NMFC Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, externally
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $8.60 $0.97 $2.17 $0.61 $0.46 $1.80 $1.74 $0.32 $0.37 $0.93 $0.38 $0.12 $0.12 $0.61 $7.64 $0.38 $1.34 $1.36 $1.36 $1.36 $1.36 $0.86 ($0.62) ($0.48) ($0.55) ($0.75) Cumulative IPO to 2012 2013 2014 2015 2016 (IPO to 12/31/2016)(1) 12/31/2011(1) Regular Dividends
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2016 (October 2008 – December 31, 2016) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $1,605 / $1,588 / 79 $4,270 / 194 of which of which Internal Watch List (3 or 4 Rating)(2) $60 / $22 / 4 $199 / 9 of
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company At Purchase Current + / (-) Portfolio Company At Purchase Current + / (-) Company A 7.2x 4.6x 2.7x Company AF 6.8x 6.8x - Company B 6.9x 4.4x 2.5x Company AG 3.3x 3.3x - Company C 3.7x 1.7x
Slide 12: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 Adj. NII 26.5 46.1 62.1 73.4 82.8 88.0 Cumulative Adj. NII 26.5 72.7 134.8 208.2 291.0 379.0 Divid
Slide 13: Credit Market Conditions
Credit Market Conditions ▪ Credit markets have continued to strengthen in Q1’17 supported by: – Generally good corporate earnings performance – Positive fund flows into leveraged credit • Investors have an optimistic view of the general economy and a continued desire for yield – New deal flow has be
Slide 14: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,420.9 million as of 12/31/2016)(1) ($710.5 million drawn as of 12/31/2016) Fixed 8% Floating – No Floor Fixed(2) 52% (1-Month Libor) Floating – Floor 48% 92% Impact of Changing Rates(3) Estimat
Slide 15: Q4 2016 Originations
Q4 2016 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Advance Date(2) Name Industry ($’s Invested) Size Investment Rate(3) Unlevered Levered Membership 10/19/16 NMFC SLP II Investment Fund $23.8 N/A N/A 13.6% 13.6% Interest 10/20/16 Kronos Software
Slide 16: Origination Activity Since Quarter End (Through 2/24/2017)
Origination Activity Since Quarter End (Through 2/24/2017) ($ 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 1/9/17 Digicert Software $10.0 $218 1st Lien 70% 7.0% 15.1% Business 1
Slide 17: Annual Originations and Repayments
Annual Originations and Repayments(1) ($ in millions) 2011 Cumulative (IPO(2) – (IPO(2) – 12/31/2011) 2012 2013 2014 2015 2016 12/31/2016) Total $379.3 $673.2 $529.7 $741.5 $607.2 $557.8 $3,488.7 Originations Repayments ($86.5) ($299.6) ($395.3) ($267.5) ($401.1) ($480.0) ($1,930.0) Net $292.8 $373.
Slide 18: Q4 2016 Originations and Repayments
Q4 2016 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Common Equity First Lien Subordinated and Other 6% 8% <5% Debt 1% First Lien Debt Preferred Equity 31% 27% 53% 54% 13% 11% Second Subordinated Second Lien Lien Debt Debt Debt SLP Total: $221.5 million Total: $1
Slide 19: Q4 2016 Investment Activity Roll
Q4 2016 Investment Activity Roll YTM at Cost(1) / Purchase(2) 12.3% 11.0% 11.3% 11.1% 10.4% 9/30/2016 9/30/2016 Q4 Originations Q4 Sales / 12/31/2016 PF for Change Repayments in LIBOR Curve Cost ($mm)(3) $1,594.8 $1,594.8 $221.5 $194.4 $1,605.2 1 Assumes that investments are purchased at cost and he
Slide 20: Portfolio Mix (By Fair Value as of 12/31/2016)
Portfolio Mix (By Fair Value as of 12/31/2016) By Industry(1) Net Business Lease Other(2) Types of Services Products 2% 4% Other Distribution 2% Services Engineering & Logistics 6% Data & Analytics & Consulting 4% 8% Services Federal Services 21% Marketing 4% Services Education 8% 6% Services 37% Te
Slide 21: Portfolio Concentration (By Fair Value as of 12/31/2016)
Portfolio Concentration (By Fair Value as of 12/31/2016) Portfolio Names By Fair Value SLP II 4.5% UniTek 3.5% Tenawa 2.9% TIBCO 2.8% Navex 2.8% Top 15 portfolio Hill Int’l 2.6% companies Assured represent $613.0 Partners 2.6% million, or 38.6%, Kronos 2.3% 64 Other of consolidated PetVet 2.3% Portf
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended (1) ($ in millions, except per share data) 12/31/2015 3/31/2016 6/30/2016 (1) 9/30/2016 (1) 12/31/2016(1) Assets Portfolio $1,541.9 $1,519.9 $1,527.7 $1,547.7 $1,588.0 Cash & Equivalents 30.1 32.7 34.5 49.8 45.9 (2) Other Assets 30.1 19.6 22.4 19.7 22.1 Total A
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $16.00 $15.02 $15.14 $14.94 $14.87 $15.00 $14.68 $14.69 $14.81 $14.33 $14.43 $14.44 $14.50 $14.51 $14.34 $14.06 $14.07 $13.82 (2) $14.53 $14.65 $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 $13
Slide 24: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 Investment Income Interest income $37.6 $37.8 $38.3 $35.9 $35.4 Dividend income 1.6 1.6 1.8 3.0 4.8 Other income 2.8 1.5 1.4 2.9 3.6 Total investment incom
Slide 25: Income Statement Highlights (Annually)
Income Statement Highlights (Annually) Year Ended – Pro Forma Adjusted (1) ($ in millions, except per share data) 12/31/2014 12/31/2015 12/31/2016 Investment Income Interest income $126.0 $140.0 $147.4 Dividend income 4.5 6.3 11.2 Other income 5.4 8.0 9.4 Total investment income $135.7 $154.3 $168.0
Slide 26: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 Investment Income Build Cash Interest Income $35.5 $35.9 $33.3 $33.8 $32.2 (1) SLP and Net Lease Income 1.2 1.2 1.2 2.5 4.1 Recurring Cash Investment Income $36.7 $37.1 $34.5 $36.3 $36.3 Non-ca
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2017 Adjusted NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a first 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 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 12/31/2016, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $334 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% December 2019 All other: L + 2.50% (No LIBOR floor) NMFC Credit Facility $10 / $123 L + 2.5
Slide 29: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Steven B. Klinsky Adam B. Weinstein December 31 Steven B. Klinsky (Chairman) Chairman of the Board of Directors EVP, Chief Administrative Officer Robert A. Hamwee and Director Adam B. Weinstein Robert A. Hamw
Slide 30: Appendix A: NMFC Income Reconciliation
Appendix A: NMFC Income Reconciliation ($ 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 GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 (1) Non-cash adjustment (2.0
Slide 31: NIM|E
NIM|E NEw MOUNTAIN FINANCE CORPORATION