New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q1 2016 Earnings Presentation
29 slides from New Mountain Finance's earnings presentation, May 5, 2016
Slide 1: Q1 2016 Earnings Presentation
Q1 2016 Earnings Presentation May 5, 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: Q1 2016 Highlights
Q1 2016 Highlights ▪ Q1 2016 Adjusted Net Investment Income (“NII”) of $0.34 per weighted average share, versus guidance of $0.33 to $0.35 – Q1 2016 regular dividend of $0.34 per share paid on March 31, 2016 ▪ March 31, 2016 book value of $12.87 per share, a decrease of $0.21 per share from the Dece
Slide 5: Key Highlights
Key Highlights Financial Highlights Quarter Ended (1) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 Adjusted NII Per Share $0.34 $0.35 $0.35 $0.35 $0.34 NAV Per Share $13.89 $13.90 $13.73 $13.08 $12.87 Dividends Per Share $0.34 $0.34 $0.34 $0.34 $0.34 Share Count - End of Period (mm) 58.1 58.2
Slide 6: Review of NMFC
Review of NMFC Overview Strategy ▪ Founded in October 2008 to apply New Mountain Capital, ▪ NMFC’s mandate is to primarily target businesses in the L.L.C.’s (“NMC” or “New Mountain”) private equity middle market that, consistent with New Mountain’s private strengths to attractive risk-reward opportu
Slide 7: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – May 2, 2016 Indexed Total Return 180.0 S&P 72.2% 170.0 S&P Fin 62.6% 160.0 150.0 NMFC 51.7% 140.0 130.0 HY 27.6% 120.0 BDCs 17.6% 110.0 100.0 90.0 CAGR (IPO to 5/2/2016) NMFC 8.8% 80.0 S&P 500 11.6% S&P 500 Financials 10.3%
Slide 8: NMFC Cumulative Total Return Performance Versus Peers
NMFC Cumulative Total Return Performance Versus Peers(1) May 19, 2011 (IPO) – May 2, 2016 64.4% 51.7% 43.6% 39.9% 39.0% 21.3% 12.6% 0.9% (7.7%) (11.7%) (25.8%) Peer A NMFC Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I Peer J Source: Capital IQ 1 Peers include publicly-traded, externally-ma
Slide 9: NMFC Return Attribution
NMFC Return Attribution ($ per Share) $6.12 $0.10 $2.17 $0.61 $0.46 $1.80 $0.32 $0.37 $0.93 $0.12 $0.12 $0.61 $6.62 $0.38 $1.34 $1.36 $1.36 $1.36 $0.86 $0.13 $0.34 ($0.21) ($0.48) ($1.21) ($0.55) ($0.75) IPO to 2012 2013 2014 2015 YTD 2016 Cumulative 12/31/2011(1) (IPO to 3/31/2016)(1) Regular Divid
Slide 10: Credit Performance
Credit Performance ($ in millions) Cumulative Since Inception(1) As of 3/31/2016 (October 2008 – March 31, 2016) Cost / FMV Cost / # Portfolio Co’s Investments $1,591 / $1,520 $3,740 / 174 of which of which Internal Watch List (3 or 4 Rating)(2) $98 / $52 $199 / 9 of which of which Non-Accrual $2 /
Slide 11: Credit Performance
Credit Performance (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance (1) (1) Portfolio Company At Purchase Current + / (-) Portfolio Company At Purchase Current + / (-) Company A 3.7x 1.7x 2.0x Company AF 5.0x 4.8x 0.2x Company B 4.1x 2.8x 1.3x Company AG 4.5x 4.4x 0.1x Company C 1.2
Slide 12: Performance Since IPO
Performance Since IPO ($ in millions) IPO - 2016 (1) 12/31/2011 2012 2013 2014 2015 3/31/2016 Regular Dividend $26.6 $46.6 $59.8 $71.4 $81.1 $21.7 Cumulative Regular Dividend 26.6 73.2 133.0 204.3 285.4 307.1 Adj. NII 26.5 46.1 62.1 (2) 73.4 (2) 82.6(2) 21.5 Cumulative Adj. NII 26.5 72.7 134.8 208.2
Slide 13: Cumulative Unrealized Depreciation Breakdown
Cumulative Unrealized Depreciation Breakdown Cumulative unrealized depreciation of $99 million comprises $64 million from specific credit deterioration and $35 million of broad market movements Cumulative (Dollars in millions) Unrealized Depreciation 1) Previously Restructured Investments in Edmentu
Slide 14: Credit Market Conditions
Credit Market Conditions ▪ In Q1 2016, the credit markets have rebounded from February lows due to: – Improved commodity prices – Abating concerns about emerging market economic stability – Positive fund flows into leveraged credit ▪ Since 3/31/2016, credit markets have continued to rally and spread
Slide 15: Transtar Situation Update
Transtar Situation Update ▪ Transtar Holding Company (“Transtar” or the “Company”) is the largest, integrated distributor of automotive aftermarket driveline replacement parts, kits, torque converters and components sold to the transmission repair and remanufacturing market − Transtar is the dominan
Slide 16: Senior Loan Program II (SLP II)
Senior Loan Program II (“SLP II”) ▪ In April 2016, NMFC closed a joint venture (“JV”) with SkyKnight Income, LLC (“SkyKnight”) to create SLP II, a $375 million leveraged loan fund for the purpose of investing in senior secured loans − Stand-alone entity (not consolidated by the BDC); utilizing 50/50
Slide 17: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. Fixed Assets Liabilities (Aggregate par value of $1,560.2 million as of 3/31/2016)(1) ($726.8 million drawn as of 3/31/2016) Fixed 16% Fixed(2) 32% Floating – No Floor Floating – Floor (1-Month Libor) 84% 68% Impact of Changing Rates(3) Estimate
Slide 18: Q1 2016 Originations
Q1 2016 Originations ▪ Minimal investment activity in Q1 2016 driven by the fact that we were fully invested as of December 31, 2015 ▪ Total Q1 2016 purchases of $27.6 million (largest purchase is ~$6 million in size): − $15.3 million of add-on investments to existing portfolio names – National HME,
Slide 19: Origination Activity Since Quarter End (Through 5/2/2016)
Origination Activity Since Quarter End (Through 5/2/2016) ($ 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 4/18/16 Healthcare I.T. $14.6 $167 2nd Lien 25% 12.0% 14.4% Healthcare
Slide 20: Portfolio Mix (By Fair Value as of 3/31/2016)
Portfolio Mix (By Fair Value as of 3/31/2016) By Industry Business Other(1) Media Products 3% 4% 2% Energy Business Svcs 6% 24% Services Federal Services 30% 6% HC Products 3% Healthcare Consumer Svcs 7% 5% HC Services 4% Industrial Svcs Distribution Software <1% & Logistics 24% Education 7% 11% By
Slide 21: Portfolio Concentration (By Fair Value as of 3/31/2016)
Portfolio Concentration (By Fair Value as of 3/31/2016) Portfolio Names By Fair Value Crowley 3.5% UniTek 3.3% Tenawa 2.7% TIBCO 2.7% Deltek 2.6% Assured Partners 2.5% Top 15 portfolio Kronos 2.5% companies Hill Int’l 2.4% represent $568.0 TASC 2.3% million, or 37.4%, 59 Other Physio-Control of cons
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016(1) Assets Portfolio $1,434.8 $1,338.9 $1,508.0 $1,541.9 $1,519.9 Cash & Equivalents 22.2 24.2 24.6 30.1 32.7 (2) Other Assets 30.6 29.0 37.4 30.1 19.6 Total Assets $1,487.
Slide 23: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends NAV / Share $15.50 $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 $14.50 $14.06 $14.53 $14.65 $14.00 (2) $14.31 $14.32 $14.32 $14.38 $14.33 $13.69 $14.08 $13.82 $14.10 $14.06 $13.48 $13.50 $13.83 $13.83 $13
Slide 24: Income Statement Highlights
Income Statement Highlights Quarter Ended (1) ($ in millions, except per share data) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 Investment Income Interest income $33.3 $35.5 $33.6 $37.6 $37.8 Dividend income 1.3 1.8 1.6 1.6 1.6 Other income 1.9 0.6 2.7 2.8 1.5 Total investment income $36.5 $
Slide 25: Investment Income Detail
Investment Income Detail Quarter Ended ($ in millions) (1) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 Investment Income Build (3) Cash Interest Income $31.2 $31.1 $32.2 $35.5 $35.9 (2) SLP Income 1.2 1.2 1.2 1.2 1.2 Recurring Cash Investment Income $32.4 $32.3 $33.4 $36.7 $37.1 (3) Non-cash
Slide 26: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q2 2016 Adjusted NII will be in the $0.33 to $0.35 per share range. Our board of directors has declared a second quarter dividend of $0.34 per share. 0.8 114% 120% 108% 105% 101% 103% 103% 102% 102% 103% 103% 0.7 100% 99% 99% 100% 100% 99% 99% 98% 98% 95%
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 3/31/2016, $ in millions) Amount Outstanding / Facility Size Interest Rate Maturity Wells Fargo Credit Facility $397 / $495 Broadly syndicated 1st lien loans(1): L + 1.75% December 2019 All other: L + 2.50% (No LIBOR floor) NMFC Credit Facility $97 / $110 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: New Mountain Finance Corporation
NIM|E NEW MOUNTAIN FINANCE CORPORATION