New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2015 Earnings Presentation
30 slides from New Mountain Finance's earnings presentation, Mar 1, 2016
Slide 1: Q4 2015 Earnings Presentation
Q4 2015 Earnings Presentation March 1, 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, President and Director John R. Kline Executive Vice President and Chief Operating Officer Shiraz Y. Kajee Chief Financial Officer and Treasurer 3
Slide 4: Q4 2015 Highlights
Q4 2015 Highlights ▪ Q4 2015 Adjusted Net Investment Income (“NII”) of $0.35 per weighted average share, versus guidance of $0.33 to $0.35 – Q4 2015 regular dividend of $0.34 per share paid on December 30, 2015 ▪ December 31, 2015 book value of $13.08 per share, a decrease of $0.65 per share from th
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended (1) 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Adjusted NII Per Share $0.34 $0.34 $0.35 $0.35 $0.35 NAV Per Share $13.83 $13.89 $13.90 $13.73 $13.08 (2) Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 58.0
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 26, 2016 Indexed Total Return 180.0 170.0 160.0 S&P 60.7% 150.0 NMFC 46.6% S&P Fin 46.4% 140.0 130.0 120.0 HY 16.9% 110.0 BDCs 6.9% 100.0 90.0 CAGR (IPO to 2/26/2016) NMFC 8.3% 80.0 S&P 500 10.4% S&P 500 Financials
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – February 26, 2016 52.5% 46.6% 46.5% 24.4% 14.8% 12.1% 5.6% (17.7%) (20.8%) (26.0%) (34.0%) Peer A NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, exte
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $6.16 $0.27 $2.17 $0.61 $0.46 $1.80 $0.32 $0.37 $0.93 $0.12 $0.12 $0.61 $6.28 $0.38 $1.34 $1.36 $1.36 $1.36 $0.86 ($1.00) ($0.48) ($0.55) ($0.75) IPO to 12/31/2011(1) 2012 2013 2014 2015 Cumulative (IPO to 12/31/2015)(1) Regular Dividends Special Dividend ∆ in B
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 12/31/2015 (October 2008 – December 31, 2015) Cost / FMV Cost / # Portfolio Co’s Investments $1,599 / $1,542 $3,710 / 173 of which of which Internal Watch List (3 or 4 Rating)(2) $67 / $33 $168 / 8 of which of which Non-Accrual $
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 5.9x 5.6x 0.3x Company AH 4.9x 5.5x (0.6x) Company B 3.4x 3.0x 0.4x Company AI 3.1x 2.3x 0.9x Company C 6
Slide 12: Performance Since IPO
Performance Since IPO ($ in millions) IPO - 2015 (1) 12/31/2011 2012 2013 2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Regular Dividend $26.6 $46.6 $59.8 $71.4 $19.7 $19.8 $19.8 $21.8 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 224.0 243.8 263.6 285.4 Adj. NII 26.5 46.1 62.1(2) 73.4(2) 19.5 2
Slide 13: Q4 2015 Change in Unrealized Depreciation Detail
Q4 2015 Change in Unrealized Depreciation Detail Change in unrealized depreciation of $43.2 million is primarily driven by broad market movements with limited impact from credit deterioration ▪ Broad market movement contributed ~$34 million of unrealized depreciation – Weighted average FMV marks on
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ Credit spreads have increased meaningfully since our last call – Fundamental weakness in many sectors of the economy including energy, materials, retail and industrials – Concerns about global economic growth – Negative fund flows in the high-yield and leveraged finance ma
Slide 15: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,562.3 million as of 12/31/2015)(1) ($742.1 million drawn as of 12/31/2015) Fixed Fixed(3) 16% 31% Floating – No Floor Floating – Floor(2) (1-Month Libor) 84% 69% Impact of Changing Rates(4) Est
Slide 16: Q4 2015 Originations
Q4 2015 Originations Portfolio Originations(1) ($ in millions) YTM at Purchase(4) Amount Tranche Type of Advance Date(2) Name Industry ($’s Invested) Size Investment Rate(3) Unlevered Levered 66.7% 10/1/15 Software $10.8 $131 2nd Lien 11.4% 27.3% (SBIC)(6) Business $19.6 / $270 / 1st Lien / 70% / 8.
Slide 17: Annual Originations and Repayments
Annual Originations and Repayments(1) ($ in millions) 2011 (IPO(2) – Cumulative 12/31/2011) 2012 2013 2014 2015 (IPO(2) – 12/31/2015) Total Originations $379.3 $673.2 $529.7 $741.5 $607.2 $2,930.9 Repayments ($86.5) ($299.6) ($395.3) ($267.5) ($401.1) ($1,450.0) Net Originations $292.8 $373.6 $134.4
Slide 18: Q4 2015 Originations and Repayments
Q4 2015 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Subordinated Common Equity and Other Subordinated Debt <1% Debt 1% 8% 70% Advance Rate 3% Second Lien First Lien Debt (2) Debt 21% 33% 50% Second Lien Non-70% Advance 16% Debt 60% Rate First Lien Debt 70% Advan
Slide 19: Q4 2015 Investment Activity Roll
Q4 2015 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.0% 10.4% 10.5% 10.7% 9.2% 9/30/2015 9/30/2015 Q4 Originations Q4 Sales / 12/31/2015 PF for Change Repayments in LIBOR Curve Cost ($mm)(3) $1,521.5 $1,521.5 $211.9 $139.2 $1,598.7 1 Assumes that investments are purchased at cost and hel
Slide 20: Portfolio Mix (By Fair Value as of 12/31/2015)
Portfolio Mix (By Fair Value as of 12/31/2015) By Industry Business Other(1) Media Products 5% 3% 2% Energy Business Svcs 6% 24% Federal Services Services 6% 29% HC Products Consumer Svcs 2% Healthcare 6% 4% HC Services Industrial Svcs 4% <1% Distribution Software & Logistics 24% Education 8% 11% By
Slide 21: Portfolio Concentration (By Fair Value as of 12/31/2015)
Portfolio Concentration (By Fair Value as of 12/31/2015) Portfolio Names By Fair Value Crowley 3.4% UniTek 3.1% Tenawa 2.8% Deltek 2.7% TIBCO 2.6% Assured Partners 2.5% Top 15 portfolio Kronos 2.4% companies Hill Int’l 2.4% represent $563.8 ProQuest 2.2% million, or 36.5%, 61 Other Portfolio Navex 2
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Assets Portfolio $1,454.7 $1,434.8 $1,338.9 $1,508.0 $1,541.9 Cash & Equivalents 23.4 22.2 24.2 24.6 30.1 (1) Other Assets 36.8 30.6 29.0 37.4 30.1 Total Assets $1,514.9
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $15.14 $15.20 $15.02 $14.94 $14.81 $14.87 $14.80 $14.68 $14.69 $14.43 $14.44 $14.50 $14.51 $14.33 $14.65 $14.34 $14.40 $14.53 $14.06 $14.31 $14.32 $14.32 $14.38 $14.33 $13.83 $13.89 $13.90 $14.00 $14.08 (2) $14.10 $14.06 $13.73 $13.69 $13.82 $13
Slide 24: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended (1) ($ in millions, except per share data) 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Investment Income Interest income $34.0 $33.3 $35.5 $33.6 $37.6 Dividend income 0.8 1.3 1.8 1.6 1.6 Other income 1.9 1.9 0.6 2.7 2.8 Total investment i
Slide 25: Income Statement Highlights (Annually)
Income Statement Highlights (Annually) (1) Year Ended – Pro Forma Adjusted ($ in millions, except per unit/share data) 12/31/2012 12/31/2013 12/31/2014 12/31/2015 Investment Income Interest income $80.2 $106.1 $126.0 $140.0 Dividend income 0.8 0.2 4.5 6.3 Other income 1.3 2.9 5.4 8.0 Total investmen
Slide 26: Investment Income Detail
Investment Income Detail Quarter Ended – Adjusted (1) ($ in millions) 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Investment Income Build (2) (3) Cash interest $32.1 $32.4 $32.3 $33.4 $36.7 (3) Non-cash interest 1.6 1.1 1.1 0.8 1.0 Amortization of purchase discounts (premiums) and fees 0.6 0
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2016 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% 103% 103% 105% 103% 103% 101% 102% 102% 0.7 100% 99% 99% 100% 100% 99% 98% 98% 95% 100%
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 12/31/2015, $ in millions) Amount Outstanding / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $419 / $495 Broadly syndicated 1st lien loans(1): L + 2.00% December 2019 All other: L + 2.75% (No LIBOR floor) NMFC Credit Facility $90 / $95 L + 2.50
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: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION