New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2021 Earnings Presentation
39 slides from New Mountain Finance's earnings presentation, Nov 4, 2021
Slide 1: Q3 2021 Earnings Presentation
Q3 2021 Earnings Presentation November 4, 2021
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: Important Notices and Safe Harbor Statement (cont.)
Important Notices and Safe Harbor Statement (cont.) The S&P 500 Stock Index (the “S&P 500”) is an unmanaged index of 500 widely held, large‐capitalization stocks from a broad variety of industries that is recognized by investors to be generally representative of the performance of the broad domestic
Slide 4: 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 4
Slide 5: Chairman’s Overview
Chairman’s Overview ▪ Q3 2021 Net Investment Income (“NII”) of $0.31 per weighted average share, above our guidance of $0.30 ▪ Q3 2021 regular dividend of $0.30 per share paid on September 30, 2021 ▪ Q4 2021 regular dividend of $0.30 per share announced, based on estimated NII of at least $0.30 per
Slide 6: Chairman’s Overview (cont.)
Chairman’s Overview (cont.) ▪ In addition, now announcing structural changes expected to benefit NMFC shareholders: – Maximum potential management fee permanently reduced from 1.75% to 1.40% – Actual management fee will be 1.25% through December 2023 – Dividend protection by manager’s pledge to waiv
Slide 7: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Adjusted NII Per Share(1) $0.30 $0.30 $0.30 $0.30 $0.31 NAV Per Share $12.24 $12.62 $12.85 $13.33 $13.26 Dividends Per Share $0.30 $0.30 $0.30 $0.30 $0.30 Share Count - End of Period (mm) 96.8 96.8 9
Slide 8: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 9: Assessment of COVID-19 Exposure
Assessment of COVID-19 Exposure ▪ Throughout Q3 2021, New Mountain’s investment team has maintained its dialogue with companies and sponsors; we have re-rated each company based on those conversations ▪ As a reminder, in order to monitor COVID risk to the portfolio, we had assigned each portfolio co
Slide 10: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) ▪ Overall portfolio has generally remained unchanged from a Risk Rating standpoint in Q3 2021 from Q2 2021 – As of Q3 2021, 87% of the portfolio is characterized as Green (up from 85% in Q2 2021) Q2 2021 Risk Ratings Q3 2021 Risk Ratings (FMV as of 6/30/2021)(2) (F
Slide 11: Portfolio Risk Rating Migration from Q2 2021
NMFC Portfolio – Risk Rating Migration from Q2 2021 (FMV as of 9/30/21) ($ in millions / company count) Business Services $34 / 1 Specialty Chemicals $27 / 1 Overall Company Strength (A = Best; C = Worst) C Hospitality Mgmt.(1) $13 / 1 B Benevis $108 A ** Excludes Green to Green Migration ** Tier 4
Slide 12: Risk Ratings – Overall Company Strength vs. COVID Exposure
Risk Ratings – Overall Company Strength vs. COVID Exposure (FMV as of 9/30/21) ($ in millions) $36 / 2 $118 / 3 $70 / 3 $82 / 4 Overall Company Strength (A = Best; C = Worst) C National HME $30. . UniTek $63.. Marketing Services $32 / 1 Permian $33 1 Retail Healthcare $6 / 1 Business Services $34 .
Slide 13: Credit Performance
Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2019) 4.7x 2.2x 2.6x Company A
Slide 14: NAV Update
NAV Update ($ in millions, except per share data) Impact of Market Recovery Impact of Assets Illustrative Impact to & Equity Gains Recovering to Par NAV NAV Impact: $30.4m A 10% change in the $13.57 $13.26 $13.26 FMV of Red Risk 2021 YTD $0.31 NAV $0.64 Rating, Restructured & Recovery Equity positio
Slide 15: Leverage Migration
Leverage Migration ($ in millions) 6/30/21 9/30/21 Statutory Debt: Statutory Debt: $1,539.6 ($9.8) $1,529.8 NAV: NAV: $1,292.1 ($7.2) $1,284.9 ÷ Q3 2021 Repayments Sources $447.8 Debt Paydown Uses $9.8 ÷ Q3 2021 Settled Q3 2021 Settled Sales 55.4 404.5 Originations Statutory Q3 2021 Revolver Q2 20
Slide 16: Credit Market Conditions
Credit Market Conditions ▪ Credit market conditions continue to remain very healthy ▪ Deal volume in our core direct lending market continues to be very strong ▪ Secondary trading levels in corporate credit have been stable through 2021 ▪ Companies within our defensive growth verticals continue to t
Slide 17: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Investments Debt (Aggregate par value of $2,448 million as of 9/30/2021) (1) ($1,824 million drawn as of 9/30/2021)(2) Fixed 9% Fixed(3) Floating 56% 44% Floating 91% Impact of Changing Rates(4) Estimated % Change in Interest Income Illust
Slide 18: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 9/30/2021 (October 2008 – September 30, 2021) Cost / FMV / # Portfolio Co’s Cost / # Portfolio Co’s Investments $3,019 / $3,023 / 106 $8,843 / 314 of which of which Internal Watch List $293 / $165 / 10 $651 / 20 (3 or 4 Rating)(2
Slide 19: Performance Since IPO
Performance Since IPO(1) ($ in millions) IPO - (2) 12/31/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $88.8 $100.9 $103.4 $117.4 $120.1 $87.2 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 374.2 475.1 578.5 695.9 816.0 903.2 Adj.
Slide 20: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – October 29, 2021 Indexed Total Return S&P 322.9% 410.0 CAGR (IPO to 10/29/2021) 390.0 NMFC 11.0% S&P Fin 284.7% S&P 500 14.8% 370.0 S&P 500 Financials 13.8% 350.0 CS High Yield Index 6.1% 330.0 BDC Index 5.5% 310.0 NMFC 198
Slide 21: Q3 2021 Originations
Q3 2021 Originations Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate 7/2/21 Associa Business Services $29.9 First Lien L + 6.50% 7/19/21 Chemical Guys Specialty Chemicals $8.2 First Lien L + 5.25% 7/22/21 USRP Federal Services $11.3 First
Slide 22: Q3 2021 Originations (cont.)
Q3 2021 Originations (cont.) Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate 9/8/21 Kaseya Software $7.7 First Lien L + 7.00% 9/13/21 Dealer Tire Distribution & Logistics $55.8 Preferred Shares 7.00% (Fixed) 9/22/21 Insight Global Busines
Slide 23: Origination Activity Since Quarter End
Origination Activity Since Quarter End (Through 10/29/2021) Portfolio Originations(1) ($ in millions) Amount Date(2) Name Industry ($’s Invested) Type of Investment Rate 10/1/21 Talend Information Technology $58.6 First Lien L + 6.00% 10/5/21 Stamps Software $36.9 First Lien L + 5.75% 10/15/21 Forti
Slide 24: Portfolio Activity & Mix by Type of Investment
Portfolio Activity & Mix by Type of Investment Q3 2021 Q3 2021 Total Portfolio Originations by Type(1) Sales / Repayments by Type(1) (FMV as of 9/30/2021) Common Equity Preferred Equity Common Equity and Other 5% and Other 1% 6% Subordinated Debt Preferred Preferred 1% Equity Equity 17% Second Lien
Slide 25: Q3 2021 Investment Activity Roll
Q3 2021 Investment Activity Roll YTM at Cost(1) / Purchase(2) 8.8% 8.8% 8.8% 8.6% 8.4% 6/30/2021 6/30/2021 Q3 Originations Q3 Sales / 9/30/2021 Repayments PF for change in LIBOR Curve Cost ($m)(3) $3,065.3 $3,065.3 $428.9 $490.8 $3,019.3 1 Assumes that investments are purchased at cost and held unti
Slide 26: Portfolio Mix By Industry
Portfolio Mix By Industry (Fair Value as of 9/30/2021) Total Portfolio(1) Specialty Chemicals Energy & Materials 1% Types of Healthcare 2% Other(2) Types of Enterprise Software Distribution & Logistics 2% Real Estate ERP 4% 3% Tech-Enabled eCommerce & Logistics Healthcare Net Lease 3% Other (3) 16%
Slide 27: Portfolio Concentration
Portfolio Concentration (By Fair Value as of 9/30/2021) Portfolio Names By Fair Value SLP III 4.6% SLP IV 3.7% Benevis 3.6% Edmentum 3.5% Top 15 portfolio insightsoftware 3.0% companies(1) represent PhyNet 2.3% $1,091.9 million, or UniTek 2.1% 36.1%, of consolidated Dealer Tire 1.9% investments 91 O
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Assets Portfolio $2,907.7 $2,964.5 $3,029.6 $3,100.0 $3,022.7 Cash & Equivalents 68.7 79.0 47.3 27.8 83.4 (1) Other Assets 56.1 54.0 51.4 52.3 62.0 Total Assets $3,032.5 $
Slide 29: 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 Q3 2021 $13.83 $13.87 $14.00 $13.87 $14.38 $13.23 $14.06 $13.83 $13.63 $13.26 $13.00 $13.60 $13.22 $13.46 $13.26 $13.08 $12.00 $12.62 $11.00 NAV per Share (as Reported) NAV + Cumulat
Slide 30: Income Statement Highlights
Income Statement Highlights Quarter Ended ($ in millions, except per share data) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Investment Income Interest income $49.7 $48.9 $47.0 $47.1 $47.8 Dividend income 12.4 12.7 15.4 16.5 14.3 Other income 3.2 6.2 5.0 2.6 6.1 Total investment income $65.3
Slide 31: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Investment Income Build Cash Interest and Dividend Income $43.2 $41.4 $38.9 $39.7 $39.1 SLP and Net Lease Income(1) 8.8 8.6 10.2 10.7 9.4 Recurring Cash Investment Income $52.0 $50.0 $49.1 $50.4
Slide 32: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q4 2021 NII will be at least $0.30 per share. Our board of directors has declared a fourth quarter dividend of $0.30 per share. 104% 103% 102% 102% 100% 99% 99% 100% 102% 100% 98% $1.71 $0.37 $1.48 $1.48 $0.12 $0.12 $1.34 $1.36 $1.36 $1.36 $1.36 $1.36 $1.
Slide 33: Diversified Leverage Profile
Diversified Leverage Profile (As of 9/30/2021, Amount Outstanding $ in millions) / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $493 / $730 Broadly syndicated 1st lien loans(1): L + 1.60% April 2026 (Wells Fargo / Raymond James / State Street / CIT All other: L + 2.10% (0.00% LIB
Slide 34: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 9/30/2021, $ in millions, based on total facility size) Floating vs. Fixed Debt Outstanding Mix $1,699 As of 9/30/2021 Fixed 55.5% Floating 44.5% $730 $280 $189 $341 $200 $201 $105 $117 $300 $55 $140 $50 2021 2022 2023 2024 2025 and thereafter % of Total 0.0% 4.6% 1
Slide 35: 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 36: Appendix A: New Mountain Capital Team Members
Appendix A: New Mountain Capital Team Members Senior Advisors(2) Senior Advisors for Senior Associates / Associates Managing Directors (Full Access) Special Projects(2) ▪ Jag Buddhavarapu ▪ Michael Hammond ▪ Steve Klinsky ▪ Sandra Andersen(3) ▪ Raj Alva ▪ Michael Gawlik ▪ Patrick James ▪ Andrew Baro
Slide 37: Appendix B: NMFC Cumulative Total Return Versus Peers
Appendix B: NMFC Cumulative Total Return Versus Peers(1) May 19, 2011 (IPO) – October 29, 2021 241.4% 198.0% 150.2% 130.7% 101.2% 87.9% 62.4% 38.5% 31.6% 23.7% (54.4%) Peer A ARCC 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,
Slide 38: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 2021 YTD GAAP net investment income ("NII") $28.5 $45.2 $63.7 $80.3 $82.5 $88.1 $102.2 $106.0 $117.2 $117
Slide 39: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION