New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q3 2024 Earnings Presentation
36 slides from New Mountain Finance's earnings presentation, Oct 31, 2024
Slide 1: Earnings Presentation Q3 2024
Earnings Presentation Q3 2024 October 31, 2024 14
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 current conflict between Russia and Ukraine, conflict in the Middle
Slide 3: Important Notices and Safe Harbor Statement (cont.)
Important Notices and Safe Harbor Statement (cont.) Yield to Maturity (“YTM”) at Cost assumes that the accruing investments in our portfolio as of each date are purchased at cost on that date and held until their respective maturities with no prepayments or losses and are exited at par at maturity.
Slide 4: Today's Presenters
Today’s Presenters Steven B. Klinsky John R. Kline Laura C. Holson Kris Corbett Founder & Chairman President & CEO COO CFO Years at 25 15 15 1 4
Slide 5: Chairman's Overview
Chairman’s Overview ▪ Q3 2024 adjusted net investment income (“NII”) of $0.34 per share exceeded our regular dividend of $0.32 per share – NMFC will pay a $0.01 per share supplemental dividend alongside the Q4 2024 regular dividend (1) • In line with the previously communicated estimate ▪ September
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Adjusted NII Per Share $0.40 $0.40 $0.36 $0.36 $0.34 NAV Per Share $13.06 $12.87 $12.77 $12.74 $12.62 Dividends Per Share(1) $0.36 $0.46 $0.34 $0.34 $0.33 (2) Pro Forma Statutory Debt / Equity 1.16x
Slide 7: New Mountain Capital Overview
New Mountain Capital Overview New Mountain Capital (“NMC”) was founded in 1999 to focus on “defensive growth” business building and deep fundamental research $55bn+ ~260 ~160 0 13bps Employees & Senior Investment Private Equity Bankruptcies Average Net Realized Loss Rate Assets Under Management(1) A
Slide 8: Differentiated, Defensive Growth Approach to Lending
Differentiated, Defensive Growth Approach to Lending Why NMFC? ACYCLICAL SECTORS(4) “Defensive Growth” Strategy Where NMC has deep expertise • Focused on investing in strong businesses in acyclical sectors Other ERP • Achieving superior risk-adjusted returns despite Packaging 6% 8% economic volatili
Slide 9: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Attractive Return Profile $3.3bn 97% 12% Green Annualized Div. Portfolio Size(1) Portfolio Risk Rating Yield(4) 16 Year Operating History 41% Avg. Loan to Value(2) 10% Annual Return Since IPO(5) Baa3 / 13bps Stable Average realized los
Slide 10: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) Q2 2024 Risk Ratings Q3 2024 Risk Ratings (FMV as of 6/30/2024) (FMV as of 9/30/2024) 0.1% 1.1% 1.1% 1.6% 1.8% Positions representing $3m improved in Rating No positions worsened in Rating 97.0% 97.3% Weighted Average Risk Rating Mark(2) Green 99% Yellow 66% Orange
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings (FMV as of 9/30/2024) ($ in millions / company count) $20 / 2 $36 / 5 Business Services $20 / 2 Education $18 / 1 Business Characteristics(2) (A = Best; C = Worst) Healthcare $13 / 2 C National HME $3 / 1 Sierra Hamilton $2 / 1 $61 / 2 $550 / 19 $33 / 2 $1 / 1 Software
Slide 12: Q3 2024 NAV Update
Q3 2024 NAV Update Q3 2024 NAV declined $0.12 per share (or 0.9%) compared to the prior quarter $0.06 $12.74 ($0.17) $0.01 $12.62 $0.00 ($0.02) Net $0.11 NAV Per Share Decrease Company $ / Share HB Wealth Management + $0.03 Net Lease (REIT) + $0.02 Permian – $0.07 Edmentum – $0.07 Other – $0.02 6/30
Slide 13: Credit Performance Track Record
Credit Performance Track Record ▪ No new non-accruals in Q3 2024; adjusted non-accruals represent just 1.1% of total portfolio FMV ▪ $10+ billion of cumulative investments since IPO have generated net realized losses of just $71 million ($ in millions) As of 9/30/2024 Cumulative Since IPO (13+ years
Slide 14: Total Value Generated for Shareholders
Cumulative Performance Since IPO(1) ($ in millions) Since IPO in 2011, NMFC has distributed $1.3+ billion to shareholders while creating $1.2+ billion of total value $1,200 $1,220 NMFC has generated $1,329 million of Adj. NII, $71 million of net realized losses and $38 million of net unrealized loss
Slide 15: Credit Market Conditions
Credit Market Conditions General Investing Environment ▪ Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt structures, floating base rates, and attractive spreads Direct Lending Opportunities ▪ Sponsor backed M&A remained e
Slide 16: Interest Rate Exposure
Interest Rate Exposure Asset Mix Liability Mix Pro Forma Liability Mix(3) (Aggregate par value of ($2,016 million drawn as of 9/30/2024)(2) (See footnote disclosure) $2,740 million as of 9/30/2024)(1) Fixed 14% Fixed Floating Fixed Floating 24% 47% 53% 76% 86% Floating Impact of Changing Rates(4) Ch
Slide 17: Q3 2024 Originations
Q3 2024 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread Davies Business Services - Insurance & Benefits Services $58.2 First Lien SONIA2 + 5.25% SLP III Investment Fund 20.0 Membership Interest N/A Park Place Technologies Busine
Slide 18: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 9/30/2024)(1) ~75% of the portfolio is senior in nature, flat with prior quarter and up from ~66% in the prior year period Common Equity & Other Positions(3) Common Equity & Other Positions(3) Preferred 7% Subordinated 6% Company FMV 3% UniTek $82.9 Edmentum 6
Slide 19: Q3 2024 Investment Activity Roll
Q3 2024 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.1% 11.3% 10.5% 10.5% 10.1% 6/30/2024 6/30/2024 Q3 Originations Q3 Sales / 9/30/2024 PF for 9/30/2024 Repayments Base Rate Changes(3) Cost ($m)(4) $3,237.5 $3,237.5 $146.2 $102.1 $3,296.3 1 Assumes that investments are purchased at cost
Slide 20: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $200 $189 $179 $180 $180 $155 $160 $147 $140 $120 $100 $80 $60 $40 $20 $0 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 7.0x 6.6x 6.5x 6.3x 6.3x 6.3x 6.0x 5.0x
Slide 21: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 9/30/2024)(1) Top 10 portfolio companies(2) represent $826.5 million, or 25.2%, of consolidated investments Benevis 4.2% UniTek 3.2% Edmentum 2.8% Kaseya 2.6% Alliance Animal Health 2.5% Dealer Tire 2.3% Top 1 0 Po rtfo Office Ally l io 2.0% C Permian om 1.9% p
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Assets Portfolio $3,128.4 $3,027.8 $3,086.5 $3,227.3 $3,278.8 Cash & Equivalents 83.3 70.1 107.5 119.6 61.9 (1) Other Assets 67.9 61.3 61.6 76.7 73.6 Total Assets $3,279.6
Slide 23: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Investment Income Interest income $74.0 $71.1 $67.6 $68.4 $72.9 Dividend income 17.9 18.7 20.2 22.1 20.4 Other income 2.2 3.0 2.5 3.8 2.2 Total investment i
Slide 24: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 98%+ of Q3 2024 non-cash interest and dividend income is generated by positions with a Green risk rating – ~80% is generated by positions that included PIK fr
Slide 25: Dividend Summary and Coverage
Dividend Summary and Coverage ▪ Q4 2024 estimated adjusted NII is expected to more than cover our regular dividend of $0.32 per share (payable in December 2024) ▪ Investment Adviser has pledged to reduce its incentive if and as needed through 2026 to support the $0.32 per share regular quarterly div
Slide 26: Capital Structure Snapshot
Capital Structure Snapshot Focus on maintaining healthy unsecured debt mix, while increasing liquidity and asset coverage 1.23x 77% 179% Statutory Leverage(1) Unsecured Debt(2) Asset Coverage Ratio(3) 3.9x 209% 1.9x Coverage of unfunded investments through Asset Coverage for Fixed Charge Coverage(4)
Slide 27: Diversified Leverage Profile
Diversified Leverage Profile (As of 09/30/2024, Outstanding Percentage of $ in millions) / Facility Size Interest Rate(1) Maturity Outstanding NMFC Credit Facility(2) $55(3) / $639 Base Rate + 1.90%(4) September 2029(4) 2.7% Corporate Revolving Credit Facilities $55 / $639 Base Rate + 1.90%(4) 2.7%
Slide 28: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 09/30/2024, $ in millions) Floating vs Fixed Debt Mix Debt Type Outstanding Debt Max Facility Size $875 $846 $30 $19 Fixed 47% 31% $115 Floating 53% 69% $300 $488 $13 $364 $75 $329 $100 $730 $104 $18 $527 $200 $260 $300 $116 $5 $5 $111 $116 2024 2025 2026 2027 2028
Slide 29: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Janney Montgomery Scott J.P. Morgan – Fixed Income Derek Hewett Bryce Rowe John Rowan Kabir Caprihan Keefe, Bruyette & Woods Raymond James Oppenheimer & Co. Wells Fargo Securities Paul Johnson Robert Dodd Mitchel Penn Finian O’Shea 2
Slide 30: Appendix
NIM] NEw MOUNTAIN FINANCE CORPORATION Appendix
Slide 31: Appendix A: Risk Rating Migration from Prior Quarter
Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter (FMV as of 9/30/24) ($ in millions) Business Characteristics(2) (A = Best; C = Worst) National HME C $3 B A ** Excludes Green to Green Migration ** Tier 4 Tier 3 Tier 2 Tier 1 Operating Performance(1) (4 = Best; 1 = Worst) 1 “Oper
Slide 32: Appendix B: Credit Performance
Appendix B: Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company / Asset Type (Vintage) Purchase Current + / (-) Company / Asset Type (Vintage) Purchase Current + / (-) Company / Asset Type (Vintage) Purchase Curren
Slide 33: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended YTD (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 9/30/2024 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $159.9 $111.4 Non-controlling interest in
Slide 34: Appendix D: Performance Since IPO Detail
Appendix D: Performance Since IPO Detail IPO - (1) ($ in millions) 12/31/2017 2018 2019 2020 2021 2022 2023 YTD 2024 Regular & Supplemental Dividend (2) $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 $154.8 $111.6 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,209.6 1,
Slide 35: Appendix E: Capital Structure Philosophy
Appendix E: Capital Structure Philosophy Committed to consistently accessing Unsecured Debt Markets Unsecured ▪ NMFC has issued multiple series of unsecured debt: $200mm in 2021, $275mm in 2022, $175mm in 2023 Issuances and $600mm in 2024 YTD ▪ Two Public IG bonds issued in 2024, with maturities in
Slide 36: INIMIF]
INIMIF] New MountTAIN FINANCE CORPORATION