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New Mountain Finance Corporation Announces Financial Results for the Quarter Ended March 31, 2024

By: via Business Wire

Reports Net Investment Income of $0.36 per Share

Declares a Regular Second Quarter Distribution of $0.32 per Share and a Supplemental Distribution of $0.02 per Share

New Mountain Finance Corporation (NASDAQ: NMFC) (“New Mountain,” “New Mountain Finance” or the “Company”) today announced its financial results for the quarter ended March 31, 2024.

First Quarter Highlights1

  • Net investment income of $37.3 million, or $0.36 per weighted average share
  • Net asset value of $12.77 per share compared to $12.87 per share as of December 31, 2023. The 0.8% decline is driven by stable core credit performance, offset by a decrease in value in one of the Company's equity positions
  • Internal risk rating improved with 96.5% of the portfolio rated green as of March 31, 2024, compared to 94.5% as of December 31, 2023
  • Generated $191.8 million of originations2, partially offset by cash repayments2 of $144.9 million
  • De-levered from 1.14x3 as of December 31, 2023 to 1.08x3 as of March 31, 2024
  • Declared a regular second quarter 2024 distribution of $0.32 per share and a supplemental distribution related to first quarter earnings of $0.02 per share, which will be payable on June 28, 2024 to holders of record as of June 14, 2024

($ in millions, except per share data)

Q1 2024

Q1 2023

Net Investment Income per Weighted Average Share

$

0.36

 

$

0.38

 

Dividends per Share4

$

0.34

 

$

0.35

 

Annualized Dividend Yield5

 

10.7

%

 

12.1

%

     

 

March 31, 2024

 

December 31, 2023

 

Investment Portfolio6

$

3,086.5

 

$

3,027.8

 

NAV per Share

$

12.77

 

$

12.87

 

Statutory Debt/Equity3

1.08x

 

1.14x

 

Statutory Debt/Equity (Net of Available Cash)3

1.03x

 

1.10x

 

Management Comments on First Quarter Performance

“Our first quarter results reflect another successful quarter for NMFC,” said Steven B. Klinsky, NMFC Chairman. “New Mountain continues to benefit from our disciplined, defensive growth strategy that is focused on end markets that perform well in all economic cycles.”

John R. Kline, CEO, commented: “NMFC’s portfolio continues to be well-positioned as a result of our defensive growth investment strategy. New Mountain delivered stable earnings and strong credit performance during the first quarter with over 96% of the portfolio rated green on our risk rating scale. We believe this is a direct result of our continued effort to invest in high-quality companies and deliver constant yield to our shareholders.”

Portfolio and Investment Activity6

As of March 31, 2024, the Company’s NAV1 was $1,356.9 million and its portfolio had a fair value of $3,086.5 million in 115 portfolio companies, with a weighted average YTM at Cost7 of approximately 11.1%. For the three months ended March 31, 2024, the Company generated $191.8 million of originations2 and cash repayments2 of $144.9 million.

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.

Industry Composition of the Company's Portfolio based on Fair Value10

Software

 

Business Services

ERP

 

9.1 %

 

Engineering & Consulting Services

 

5.4 %

IT Infrastructure & Security

 

7.0 %

 

Real Estate Services

 

4.5 %

Human Capital Management

 

4.8 %

 

Misc Services

 

3.5 %

Ecommerce & Logistics

 

4.1 %

 

Insurance & Benefits Services

 

3.1 %

Finance & Accounting

 

3.4 %

 

Digital Transformation

 

2.3 %

Governance, Risk & Compliance

 

2.0 %

 

Utility Services

 

1.7 %

Integrated Payments

 

1.5 %

 

Data & Information Services

 

0.2 %

Total Software

 

31.9 %

 

Total Business Services

 

20.7 %

 

 

 

 

 

 

 

Healthcare

 

Other Industries

 

 

Healthcare Services

 

10.9 %

 

Education

 

7.3 %

Healthcare Software

 

4.3 %

 

Consumer Services

 

6.5 %

Pharma Services

 

1.1 %

 

Distribution & Logistics

 

4.3 %

Tech-Enabled Healthcare

 

1.0 %

 

Financial Services

 

4.0 %

Healthcare Products

 

0.2 %

 

Packaging

 

2.3 %

 

 

 

 

Other

 

5.5 %

Total Healthcare

 

17.5 %

 

Total Other Industries

 

29.9 %

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 March 31, 2024:

(in millions)

As of March 31, 2024

Risk Rating

 

Cost

 

Percent

 

Fair Value

 

Percent

 

Weighted Average Mark

Green9

 

$

2,924.0

 

93.6

%

 

$

2,978.4

 

96.5

%

 

98.1

%

Yellow6

 

 

87.3

 

2.8

%

 

 

63.1

 

2.1

%

 

72.1

%

Orange

 

 

73.1

 

2.3

%

 

 

41.5

 

1.3

%

 

67.0

%

Red

 

 

39.8

 

1.3

%

 

 

3.5

 

0.1

%

 

8.0

%

Total

 

$

3,124.2

 

100.0

%

 

$

3,086.5

 

100.0

%

 

 

As of March 31, 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, four portfolio companies that had an Orange Risk Rating and three portfolio companies that had a Red Risk Rating.

The following table shows the Company’s investment portfolio composition as of March 31, 2024:

(in millions)

 

 

 

 

Investment Portfolio Composition

 

March 31, 2024

 

Percent of Total

First Lien

 

$

1,757.0

 

56.9

%

Senior Loan Funds & NMNLC11

 

 

375.2

 

12.2

%

Second Lien6

 

 

431.5

 

14.0

%

Subordinated

 

 

95.2

 

3.1

%

Preferred Equity

 

 

215.8

 

7.0

%

Common Equity and Other

 

 

211.8

 

6.8

%

Total

 

$

3,086.5

 

100.0

%

Liquidity and Capital Resources

As of March 31, 2024, the Company had cash and cash equivalents of $107.5 million and total statutory debt outstanding of $1,471.0 million3. The Company's statutory debt to equity was 1.08x as of March 31, 2024. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of March 31, 2024. As of March 31, 2024, the Company had $687.3 million of available capacity on its Holdings Credit Facility, DB Credit Facility and NMFC Credit Facility.

For the three months ended March 31, 2024, the Company sold 3,730,434 shares of common stock under its equity distribution agreement. For the same period, the Company received total accumulated net proceeds of approximately $47.9 million, including $0.0 million of offering expenses, from these sales.

Recent Developments

On April 18, 2024, the Company’s board of directors declared a regular second quarter 2024 distribution of $0.32 per share and a supplemental distribution related to first quarter earnings of $0.02 per share, each payable on June 28, 2024 to holders of record as of June 14, 2024.

First Quarter 2024 Conference Call

New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Thursday, May 2, 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.

A replay of the conference call can be accessed one hour after the end of the conference call through August 2, 2024. The full webcast replay will be available through May 2, 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: 7036283

For additional details related to the quarter ended March 31, 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 March 31, 2024 and 2023, $0.2 million and $0.3 million, respectively, is excluded from investment income, $0.0 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 $0.3 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 related to current quarter's earnings, paid in the following quarter.

(5)

Dividend yield calculation uses the closing stock price of $12.72 on April 29, 2024 and $11.61 on May 5, 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)

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Investments at fair value

 

 

 

Non-controlled/non-affiliated investments (cost of $2,330,396 and $2,283,490, respectively)

$

2,279,598

 

 

$

2,209,867

 

Non-controlled/affiliated investments (cost of $109,980 and $107,895, respectively)

 

113,281

 

 

 

133,659

 

Controlled investments (cost of $653,810 and $646,823, respectively)

 

677,103

 

 

 

667,796

 

Total investments at fair value (cost of $3,094,186 and $3,038,208, respectively)

 

3,069,982

 

 

 

3,011,322

 

Securities purchased under collateralized agreements to resell (cost of $30,000 and $30,000, respectively)

 

16,500

 

 

 

16,500

 

Cash and cash equivalents

 

107,467

 

 

 

70,090

 

Interest and dividend receivable

 

43,171

 

 

 

44,107

 

Receivable from broker

 

960

 

 

 

—

 

Deferred tax asset

 

68

 

 

 

594

 

Receivable from affiliates

 

50

 

 

 

82

 

Other assets

 

17,409

 

 

 

16,519

 

Total assets

$

3,255,607

 

 

$

3,159,214

 

Liabilities

 

 

 

Borrowings

 

 

 

Unsecured Notes

$

686,663

 

 

$

506,500

 

SBA-guaranteed debentures

 

300,000

 

 

 

300,000

 

Holdings Credit Facility

 

291,563

 

 

 

515,063

 

Convertible Notes

 

260,178

 

 

 

260,207

 

DB Credit Facility

 

182,000

 

 

 

186,400

 

NMFC Credit Facility

 

47,618

 

 

 

36,813

 

NMNLC Credit Facility II

 

2,938

 

 

 

2,853

 

Deferred financing costs (net of accumulated amortization of $56,248 and $54,263, respectively)

 

(24,370

)

 

 

(22,387

)

Net borrowings

 

1,746,590

 

 

 

1,785,449

 

Payable for unsettled securities purchased

 

94,079

 

 

 

—

 

Interest payable

 

23,071

 

 

 

20,440

 

Management fee payable

 

10,096

 

 

 

10,116

 

Incentive fee payable

 

9,389

 

 

 

8,555

 

Other liabilities

 

3,199

 

 

 

2,931

 

Total liabilities

 

1,886,424

 

 

 

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 106,289,293 and 102,558,859 shares issued and outstanding, respectively

 

1,063

 

 

 

1,026

 

Paid in capital in excess of par

 

1,379,070

 

 

 

1,331,269

 

Accumulated undistributed earnings

 

(23,201

)

 

 

(12,344

)

Total net assets of New Mountain Finance Corporation

$

1,356,932

 

 

$

1,319,951

 

Non-controlling interest in New Mountain Net Lease Corporation

 

12,251

 

 

 

11,772

 

Total net assets

$

1,369,183

 

 

$

1,331,723

 

Total liabilities and net assets

$

3,255,607

 

 

$

3,159,214

 

Number of shares outstanding

 

106,289,293

 

 

 

102,558,859

 

Net asset value per share of New Mountain Finance Corporation

$

12.77

 

 

$

12.87

 

New Mountain Finance Corporation

Consolidated Statements of Operations

(in thousands, except shares and per share data)

(unaudited)

 

Three Months Ended

 

March 31, 2024

 

March 31, 2023

Investment income

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

Interest income (excluding Payment-in-kind ("PIK") interest income)

$

56,237

 

 

$

60,758

 

PIK interest income

 

4,683

 

 

 

3,944

 

Dividend income

 

293

 

 

 

47

 

Non-cash dividend income

 

4,684

 

 

 

4,166

 

Other income

 

1,600

 

 

 

1,918

 

From non-controlled/affiliated investments:

 

 

 

Interest income (excluding PIK interest income)

 

368

 

 

 

9

 

PIK interest income

 

836

 

 

 

691

 

Non-cash dividend income

 

1,244

 

 

 

1,105

 

Other income

 

63

 

 

 

63

 

From controlled investments:

 

 

 

Interest income (excluding PIK interest income)

 

1,361

 

 

 

1,444

 

PIK interest income

 

4,135

 

 

 

4,388

 

Dividend income

 

12,683

 

 

 

10,995

 

Non-cash dividend income

 

1,496

 

 

 

1,230

 

Other income

 

873

 

 

 

1,195

 

Total investment income

 

90,556

 

 

 

91,953

 

Expenses

 

 

 

Interest and other financing expenses

 

31,016

 

 

 

30,796

 

Management fee

 

10,997

 

 

 

11,638

 

Incentive fee

 

9,389

 

 

 

9,597

 

Professional fees

 

1,067

 

 

 

965

 

Administrative expenses

 

968

 

 

 

1,048

 

Other general and administrative expenses

 

465

 

 

 

488

 

Total expenses

 

53,902

 

 

 

54,532

 

Less: management fee waived

 

(901

)

 

 

(1,063

)

Net expenses

 

53,001

 

 

 

53,469

 

Net investment income before income taxes

 

37,555

 

 

 

38,484

 

Income tax expense

 

1

 

 

 

96

 

Net investment income

 

37,554

 

 

 

38,388

 

Net realized (losses) gains:

 

 

 

Non-controlled/non-affiliated investments

 

(11,858

)

 

 

(1,308

)

Controlled investments

 

31

 

 

 

1,973

 

Foreign currency

 

—

 

 

 

12

 

Net change in unrealized appreciation (depreciation):

 

 

 

Non-controlled/non-affiliated investments

 

23,160

 

 

 

(2,929

)

Non-controlled/affiliated investments

 

(22,463

)

 

 

(16

)

Controlled investments

 

2,320

 

 

 

8,797

 

Foreign currency

 

(23

)

 

 

26

 

Provision for taxes

 

(637

)

 

 

(131

)

Net realized and unrealized (losses) gains

 

(9,470

)

 

 

6,424

 

Net increase in net assets resulting from operations

 

28,084

 

 

 

44,812

 

Less: Net increase in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation

 

(676

)

 

 

(239

)

Net increase in net assets resulting from operations related to New Mountain Finance Corporation

$

27,408

 

 

$

44,573

 

Basic earnings per share

$

0.26

 

 

$

0.44

 

Weighted average shares of common stock outstanding - basic

 

103,660,370

 

 

 

100,937,026

 

Diluted earnings per share

$

0.26

 

 

$

0.40

 

Weighted average shares of common stock outstanding - diluted

 

122,443,478

 

 

 

123,591,432

 

Distributions declared and paid per share

$

0.36

 

 

$

0.32

 

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 $50 billion of assets under management.

ABOUT NEW MOUNTAIN CAPITAL

New Mountain Capital 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 $50 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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