New Mountain Finance Corporation Announces Financial Results for the Quarter Ended June 30, 2024
New Mountain Finance Corporation (NASDAQ: NMFC) (“New Mountain,” “New Mountain Finance” or the “Company”) today announced its financial results for the quarter ended June 30, 2024.
Second Quarter Highlights1
Net investment income of $38.2 million, or $0.36 per weighted average share Net asset value of $12.74 per share compared to $12.77 per share as of March 31, 2024 Plan to permanently reduce base management fee to 1.25% Amending and extending the dividend protection program Continued strong credit performance with approximately 97.0% of the portfolio rated green on our internal risk rating system, up from 96.5% at March 31, 2024 Increased portfolio velocity with $437.3 million of gross originations2, $299.1 million of repayments2 and $5.5 million of asset sales Significant first lien loan originations contributed to asset mix improvement Successful repricing of the Wells Fargo Credit Facility, reducing the spread from S + 2.50% to S + 2.15% Declared a regular third quarter 2024 distribution of $0.32 per share and a supplemental distribution related to second quarter earnings of $0.02 per share, each payable on September 30, 2024 to holders of record as of September 16, 2024($ in millions, except per share data)
Q2 2024
Q2 2023
Net Investment Income per Weighted Average Share
$
0.36
$
0.39
Dividends Paid per Share4
$
0.34
$
0.35
11.0
%
11.0
%
June 30, 2024
March 31, 2024
Investment Portfolio6
$
3,227.3
$
3,086.5
NAV per Share
$
12.74
$
12.77
Statutory Debt/Equity3
1.21x
1.08x
Statutory Debt/Equity (Net of Available Cash)3
1.14x
1.03x
Management Comments on Second Quarter Performance
“Our second quarter results reflect another good quarter for NMFC,” said Steven B. Klinsky, NMFC Chairman. “NMFC’s consistent book value and dividend coverage reflect the benefit of our disciplined, defensive growth strategy focused on end markets that perform well across economic cycles.”
John R. Kline, CEO, commented: “We delivered solid performance with stable sequential NII and strong originations totaling more than $437 million in the second quarter. NMFC remains well positioned to capitalize on high-quality investment opportunities in our core defensive growth power alleys. Further, we have maintained strong credit performance, improved our asset mix and reduced the interest rate on our core credit facility.”
Portfolio and Investment Activity6
As of June 30, 2024, the Company’s NAV1 was $1,374.1 million and its portfolio had a fair value of $3,227.3 million in 123 portfolio companies, with a weighted average YTM at Cost7 of approximately 11.1%. For the three months ended June 30, 2024, the Company generated $437.3 million of originations2, cash repayments2 of $299.1 million and had $5.5 million of asset sales.
Portfolio and Asset Quality
NMFC’s mandate is to primarily target businesses in the middle market that, consistent with New Mountain’s private equity platform, are high quality, defensive growth companies in industries that are well-researched by New Mountain. The Company’s focus is on defensive growth businesses that generally exhibit the following characteristics: (i) acyclicality, (ii) sustainable secular growth drivers, (iii) niche market dominance and high barriers to competitive entry, (iv) recurring revenue and strong free cash flow, (v) flexible cost structures and (vi) seasoned management teams.
Portfolio Industry Composition based on Fair Value10
Software
Business Services
ERP
8.2 %
Engineering Consulting Services
5.4 %
IT Infrastructure Security
6.9 %
Real Estate Services
4.5 %
Human Capital Management
5.3 %
Misc Services
3.3 %
Ecommerce Logistics
4.0 %
Insurance Benefits Services
3.0 %
Finance Accounting
3.2 %
Utility Services
2.3 %
Governance, Risk Compliance
3.0 %
Digital Transformation
1.6 %
Integrated Payments
1.4 %
Data Information Services
0.2 %
Total Software
32.0 %
Total Business Services
20.3 %
Healthcare
Other Industries
Healthcare Services
9.6 %
Education
7.0 %
Healthcare Software
6.0 %
Consumer Services
6.8 %
Tech-Enabled Healthcare
1.0 %
Distribution Logistics
4.3 %
Pharma Services
0.9 %
Financial Services
4.1 %
Healthcare Products
0.2 %
Packaging
2.4 %
Other
5.6 %
Total Healthcare
17.7 %
Total Other Industries
30.2 %
The Company monitors the performance and financial trends of its portfolio companies on at least a quarterly basis. The Company attempts to identify any developments within the portfolio company, the industry, or the macroeconomic environment that may alter any material element of the Company’s original investment strategy. As described more fully in the Company's Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission, the portfolio monitoring procedures are designed to provide a simple, yet comprehensive analysis of the Company’s portfolio companies based on their operating performance and underlying business characteristics, which in turn forms the basis of its Risk Rating. The Risk Rating is expressed in categories of Green, Yellow, Orange and Red with Green reflecting an investment that is in-line with or above expectations and Red reflecting an investment performing materially below expectations.
The following table shows the Risk Rating of the Company’s portfolio companies as of June 30, 2024:
(in millions)
As of June 30, 2024
Risk Rating
Cost
Percent
Fair Value
Percent
Weighted Average Mark
Green9
$
3,078.3
95.1 %
$
3,130.3
97.0 %
98.1 %
Yellow6
87.0
2.7 %
58.2
1.8 %
66.8 %
Orange
59.4
1.8 %
35.8
1.1 %
74.3 %
Red
12.9
0.4 %
3.0
0.1 %
36.2 %
Total
$
3,237.6
100.0 %
$
3,227.3
100.0 %
As of June 30, 2024, all investments in the Company’s portfolio had a Green Risk Rating, with the exception of four portfolio companies that had a Yellow Risk Rating, five portfolio companies that had an Orange Risk Rating and one portfolio company that had a Red Risk Rating.
The following table shows the Company’s investment portfolio composition as of June 30, 2024:
(in millions)
Investment Portfolio Composition
June 30, 2024
Percent of Total
First Lien
$
2,017.6
63 %
Senior Loan Funds NMNLC11
376.0
12 %
Second Lien6
290.5
9 %
Subordinated
106.8
3 %
Preferred Equity
224.4
6 %
Common Equity and Other
212.0
7 %
Total
$
3,227.3
100 %
Liquidity and Capital Resources
As of June 30, 2024, the Company had cash and cash equivalents of $119.6 million and total statutory debt outstanding of $1,659.5 million3. The Company's statutory debt to equity was 1.21x as of June 30, 2024. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of June 30, 2024. As of June 30, 2024, the Company had $498.1 million of available capacity on its Holdings Credit Facility, DB Credit Facility and NMFC Credit Facility.
For the three months ended June 30, 2024, the Company sold 1,562,122 shares of common stock under its equity distribution agreement. For the same period, the Company received total accumulated net proceeds of approximately $19.8 million, including $0.0 million of offering expenses, from these sales.
Second Quarter 2024 Conference Call
New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Thursday, August 1, 2024. To participate in the live earning conference call, please use the following dial-in numbers or visit the audio webcast link. To avoid any delays, please join at least fifteen minutes prior to the start of the call.
United States: +1 (877) 443-9109 International: +1 (412) 317-1082 Live Audio WebcastA replay of the conference call can be accessed one hour after the end of the conference call through November 1, 2024. The full webcast replay will be available through August 1, 2025. To access the earnings webcast replay please visit the New Mountain Investor Relations website.
United States: +1 (877) 344-7529 International: +1 (412) 317-0088 Access Code: 8717497For additional details related to the quarter ended June 30, 2024, please refer to the New Mountain Finance Corporation Quarterly Report on Form 10-Q filed with the SEC and the supplemental investor presentation which can be found on the Company's website at http://www.newmountainfinance.com.
____________________________________________(1)
Excludes non-controlling interest in New Mountain Net Lease Corporation (“NMNLC”). For the quarter ended June 30, 2024 and 2023, $0.3 million and $0.2 million, respectively, is excluded from investment income, $0.1 million and $0.0 million, respectively, of net direct and indirect professional, administrative, other general and administrative is excluded from net expenses and $0.2 million and $0.2 million, respectively, is excluded from net investment income.
(2)
Originations exclude payment-in-kind (“PIK”); originations, repayments, and sales excludes revolvers, unfunded commitments, bridges, return of capital, and realized gains / losses.
(3)
Excludes the Company’s United States Small Business Administration (“SBA”) guaranteed debentures.
(4)
Includes the regular quarter distribution and the supplemental distribution paid in the quarter.
(5)
Dividend yield calculation uses the closing stock price of $12.42 on July 29, 2024 and $12.75 on July 31, 2023 and includes regular and supplemental dividends.
(6)
Includes collateral for securities purchased under collateralized agreements to resell.
(7)
References to “YTM at Cost” assume the accruing investments, including secured collateralized agreements, in the Company's portfolio as of a certain date, the ‘‘Portfolio 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. This calculation excludes the impact of existing leverage. YTM at Cost uses the Sterling Overnight Interbank Average Rate ("SONIA”), Euro Interbank Offered Rate ("EURIBOR") and Secured Overnight Financing Rate (“SOFR”) curves at each quarter’s respective end date. The actual yield to maturity may be higher or lower due to the future selection of SONIA, EURIBOR and SOFR contracts by the individual companies in the Company’s portfolio or other factors.
(8)
Includes investments in joint ventures.
(9)
Includes investments held in NMNLC.
(10)
Excludes NMFC Senior Loan Program III LLC ("SLP III"), NMFC Senior Loan Program IV LLC ("SLP IV") and NMNLC.
(11)
Senior Loan Funds includes SLP III and SLP IV.
New Mountain Finance Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except shares and per share data)
(unaudited)
June 30, 2024
December 31, 2023
Assets
Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,429,377 and $2,283,490, respectively)
$
2,411,396
$
2,209,867
Non-controlled/affiliated investments (cost of $119,130 and $107,895, respectively)
118,351
133,659
Controlled investments (cost of $659,042 and $646,823, respectively)
684,033
667,796
Total investments at fair value (cost of $3,207,549 and $3,038,208, respectively)
3,213,780
3,011,322
Securities purchased under collateralized agreements to resell (cost of $30,000 and $30,000, respectively)
13,500
16,500
Cash and cash equivalents
119,607
70,090
Interest and dividend receivable
48,071
44,107
Deferred tax asset
—
594
Receivable from affiliates
154
82
Other assets
28,506
16,519
Total assets
$
3,423,618
$
3,159,214
Liabilities
Borrowings
Unsecured Notes
$
685,974
$
506,500
Holdings Credit Facility
386,563
515,063
SBA-guaranteed debentures
300,000
300,000
Convertible Notes
260,150
260,207
DB Credit Facility
182,000
186,400
NMFC Credit Facility
141,840
36,813
NMNLC Credit Facility II
2,948
2,853
Deferred financing costs (net of accumulated amortization of $58,243 and $54,263, respectively)
(22,516
)
(22,387
)
Net borrowings
1,936,959
1,785,449
Payable for unsettled securities purchased
51,199
—
Interest payable
22,937
20,440
Management fee payable
10,490
10,116
Incentive fee payable
9,550
8,555
Payable to broker
1,650
—
Derivative liability at fair value
1,552
—
Deferred tax liability
63
—
Other liabilities
2,701
2,931
Total liabilities
2,037,101
1,827,491
Commitments and contingencies
Net assets
Preferred stock, par value $0.01 per share, 2,000,000 shares authorized, none issued
—
—
Common stock, par value $0.01 per share, 200,000,000 shares authorized, and 107,851,415 and 102,558,859 shares issued and outstanding, respectively
1,079
1,026
Paid in capital in excess of par
1,398,438
1,331,269
Accumulated undistributed earnings
(25,399
)
(12,344
)
Total net assets of New Mountain Finance Corporation
$
1,374,118
$
1,319,951
Non-controlling interest in New Mountain Net Lease Corporation
12,399
11,772
Total net assets
$
1,386,517
$
1,331,723
Total liabilities and net assets
$
3,423,618
$
3,159,214
Number of shares outstanding
107,851,415
102,558,859
Net asset value per share of New Mountain Finance Corporation
$
12.74
$
12.87
New Mountain Finance Corporation
Consolidated Statements of Operations
(in thousands, except shares and per share data)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Investment income
From non-controlled/non-affiliated investments:
Interest income (excluding Payment-in-kind ("PIK") interest income)
$
57,583
$
64,649
$
113,820
$
125,407
PIK interest income
4,437
3,767
9,120
7,711
2,284
47
2,577
94
4,797
4,305
9,481
8,471
Other income
3,291
686
4,891
2,604
From non-controlled/affiliated investments:
Interest income (excluding PIK interest income)
376
683
744
692
PIK interest income
873
414
1,709
1,105
1,374
1,139
2,618
2,244
Other income
62
63
125
126
From controlled investments:
Interest income (excluding PIK interest income)
1,383
1,243
2,744
2,687
PIK interest income
3,721
3,686
7,856
8,074
12,340
12,143
25,023
23,138
1,570
1,292
3,066
2,522
Other income
497
1,375
1,370
2,570
Total investment income
94,588
95,492
185,144
187,445
Expenses
Interest and other financing expenses
33,113
31,700
64,129
62,496
Management fee
11,351
11,577
22,348
23,215
Incentive fee
9,550
9,982
18,939
19,579
Professional fees
1,127
1,003
2,194
1,968
Administrative expenses
1,108
953
2,076
2,001
Other general and administrative expenses
527
513
992
1,001
Total expenses
56,776
55,728
110,678
110,260
Less: management fee waived
(861
)
(1,096
)
(1,762
)
(2,159
)
Net expenses
55,915
54,632
108,916
108,101
Net investment income before income taxes
38,673
40,860
76,228
79,344
Income tax expense
234
932
235
1,028
Net investment income
38,439
39,928
75,993
78,316
Net realized (losses) gains:
Non-controlled/non-affiliated investments
(34,966
)
(7,314
)
(46,824
)
(8,622
)
Controlled investments
3,800
9,880
3,831
11,853
Foreign currency
—
1
—
13
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
32,895
2,174
56,055
(755
)
Non-controlled/affiliated investments
(4,080
)
1
(26,543
)
(15
)
Controlled investments
1,697
(9,488
)
4,017
(691
)
Securities purchased under collateralized agreements to resell
(3,000
)
(39
)
(3,000
)
(39
)
Foreign currency
129
29
106
55
Provision for taxes
(130
)
(94
)
(767
)
(225
)
Net realized and unrealized (losses) gains
(3,655
)
(4,850
)
(13,125
)
1,574
Net increase in net assets resulting from operations
34,784
35,078
62,868
79,890
Less: Net increase in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation
(313
)
(248
)
(989
)
(487
)
Net increase in net assets resulting from operations related to New Mountain Finance Corporation
$
34,471
$
34,830
$
61,879
$
79,403
Basic earnings per share
$
0.32
$
0.35
$
0.59
$
0.79
Weighted average shares of common stock outstanding - basic
106,891,784
100,937,026
105,276,077
100,937,026
Diluted earnings per share
$
0.31
$
0.32
$
0.56
$
0.71
Weighted average shares of common stock outstanding - diluted
125,759,769
127,016,910
124,101,624
125,313,634
Distributions declared and paid per share
$
0.34
$
0.35
$
0.70
$
0.67
ABOUT NEW MOUNTAIN FINANCE CORPORATION
New Mountain Finance Corporation (NASDAQ: NMFC) is a leading business development company (BDC) focused on providing direct lending solutions to U.S. middle market companies backed by top private equity sponsors. Our portfolio consists primarily of senior secured loans, and select junior capital positions, to growing businesses in defensive industries that offer attractive risk-adjusted returns. Our differentiated investment approach leverages the deep sector knowledge and operating resources of New Mountain capital, a global investment firm with approximately $55 billion of assets under management.
ABOUT NEW MOUNTAIN CAPITAL
New Mountain Capital ("NMC") is a New York-based investment firm that emphasizes business building and growth, rather than debt, as it pursues long-term Capital appreciation. The firm currently manages private equity, credit and net lease investment strategies with approximately $55 billion in assets under management. New Mountain seeks out what it believes to be the highest quality growth leaders in carefully selected industry sectors and then works intensively with management to build the value of these companies. For more information on New Mountain Capital, please visit http://www.newmountaincapital.com.
FORWARD-LOOKING STATEMENTS
Statements included herein may contain “forward-looking statements”, which relate to our future operations, future performance or our financial condition. Forward-looking statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties, including changes in base interest rates and significant volatility on our business, portfolio companies, our industry and the global economy. Actual results and outcomes may differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including those described from time to time in our filings with the Securities and Exchange Commission or factors that are beyond our control. New Mountain Finance Corporation undertakes no obligation to publicly update or revise any forward-looking statements made herein, except as may be required by law. All forward-looking statements speak only as of the time of this press release.
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