Reports Adjusted Net Investment Income1 of $0.34 per Share
Declares a Regular Fourth Quarter Distribution of $0.32 per Share and a Supplemental Distribution of $0.01 per Share
NEW YORK, October 30, 2024--(BUSINESS WIRE)--New Mountain Finance Corporation (NASDAQ: NMFC) ("New Mountain," "New Mountain Finance" or the "Company") today announced its financial results for the quarter ended September 30, 2024.
Third Quarter Highlights2
Adjusted net investment income1 of $36.7 million, or $0.34 per weighted average share
Net asset value of $12.62 per share compared to $12.74 per share as of June 30, 2024
Continued strong credit performance with approximately 97.3% of the portfolio rated green on our internal risk rating system, up from 97.0% at June 30, 2024
Generated $146.2 million of gross originations3, partially offset by $100.6 million of repayments3 and $1.5 million of asset sales
Declared a regular fourth quarter 2024 distribution of $0.32 per share and a supplemental distribution related to third quarter earnings of $0.01 per share, each payable on December 31, 2024 to holders of record as of December 17, 2024
($ in millions, except per share data)
Q3 2024
Q3 2023
Net Investment Income per Weighted Average Share
$
0.33
$
0.40
Non-recurring Adjustments1
0.01
—
Net Adjusted Investment Income1 per Weighted Average Share
$
0.34
$
0.40
Regular & Supplemental Dividends Paid per Share in Quarter
$
0.34
$
0.36
Annualized Dividend Yield5
11.9
%
11.7
%
September 30, 2024
June 30, 2024
Investment Portfolio6
$
3,278.8
$
3,227.3
NAV per Share
$
12.62
$
12.74
Statutory Debt/Equity4
1.26x
1.21x
Statutory Debt/Equity (Net of Available Cash)4
1.23x
1.14x
Management Comments on Third Quarter Performance
"Our third quarter results reflect another good 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. Additionally, our commitment to the 1.25% base management fee, along with the extension of our dividend protection program, demonstrates our focus to providing value and stability for our shareholders."
John R. Kline, CEO, commented: "NMFC continues perform well with adjusted earnings per share of $0.34, in line with our implied guidance. The underlying portfolio remains strong with over 97% of the portfolio rated green on our risk rating scale. Additionally, we continue to make substantial improvements to our liabilities. During the quarter, we upsized and extended our NMFC Credit Facility at a lower cost, reduced the spread on our Holdings Credit Facility and completed an attractively priced unsecured note issuance."
Portfolio and Investment Activity6
As of September 30, 2024, the Company’s NAV2 was $1,361.3 million and its portfolio had a fair value of $3,278.8 million of investments in 128 portfolio companies, with a weighted average YTM at Cost7 of approximately 10.5%. For the three months ended September 30, 2024, the Company generated $146.2 million of originations3, $100.6 million of cash repayments3 and realized $1.5 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 Value9
Software
Business Services
ERP
8.1 %
Engineering & Consulting Services
5.4 %
IT Infrastructure & Security
7.1 %
Real Estate Services
4.6 %
Human Capital Management
5.3 %
Insurance & Benefits Services
3.6 %
Ecommerce & Logistics
4.0 %
Misc Services
3.5 %
Governance, Risk & Compliance
3.1 %
Digital Transformation
2.3 %
Finance & Accounting
3.0 %
Utility Services
0.9 %
Integrated Payments
1.6 %
Data & Information Services
0.2 %
Total Software
32.2 %
Total Business Services
20.5 %
Healthcare
Other Industries
Healthcare Services
9.8 %
Consumer Services
6.9 %
Healthcare Software
6.0 %
Education
6.5 %
Tech-Enabled Healthcare
1.0 %
Financial Services
4.3 %
Pharma Services
0.7 %
Distribution & Logistics
4.0 %
Healthcare Products
0.2 %
Packaging
2.4 %
Other
5.5 %
Total Healthcare
17.7 %
Total Other Industries
29.6 %
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 September 30, 2024:
(in millions)
As of September 30, 2024
Risk Rating
Cost
Percent
Fair Value
Percent
Weighted Average Mark
Green8
$
3,143.6
95.4
%
$
3,189.0
97.3
%
99.0
%
Yellow6
80.3
2.4
%
53.0
1.6
%
65.9
%
Orange
72.4
2.2
%
36.8
1.1
%
64.4
%
Red
—
—
—
—
—
Total
$
3,296.3
100.0
%
$
3,278.8
100.0
%
As of September 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 and six portfolio companies that had an Orange Risk Rating. As of September 30, 2024, there were no portfolio companies that had a Red Risk Rating.
The following table shows the Company’s investment portfolio composition as of September 30, 2024:
(in millions)
Investment Portfolio Composition
September 30, 2024
Percent of Total
First Lien
$
2,072.5
63.2
%
Senior Loan Funds (SLP III & SLP IV) & NMNLC
397.3
12.1
%
Second Lien6
264.4
8.1
%
Subordinated
109.8
3.3
%
Preferred Equity
235.1
7.2
%
Common Equity and Other
199.8
6.1
%
Total
$
3,278.8
100.0
%
Liquidity and Capital Resources
As of September 30, 2024, the Company had cash and cash equivalents of $61.9 million and total statutory debt outstanding of $1,719.2 million4. The Company's statutory debt to equity was 1.26x as of September 30, 2024. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of September 30, 2024. As of September 30, 2024, the Company had $1,007.9 million of available capacity on its NMFC Credit Facility, Holdings Credit Facility, Unsecured Management Company Revolver and the NMNLC Credit Facility II.
Third Quarter 2024 Conference Call
New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Thursday, October 31, 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 January 31, 2025. The full webcast replay will be available through October 31, 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: 7380144
For additional details related to the quarter ended September 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)
Adjusted net investment income for Q3 2024 includes $1.2 million of net accelerated deferred financing costs related to the termination of the DB Credit Facility and a corresponding incentive fee adjustment.
(2)
Excludes non-controlling interest in New Mountain Net Lease Corporation ("NMNLC").
(3)
Originations exclude payment-in-kind ("PIK"); originations, repayments, and sales excludes revolvers, unfunded commitments, bridges, return of capital, and realized gains / losses.
(4)
Excludes the Company’s United States Small Business Administration ("SBA") guaranteed debentures.
(5)
Dividend yield calculation uses the closing stock price of $11.44 on October 28, 2024 and $12.33 on October 30, 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 held in NMNLC.
(9)
Excludes NMFC Senior Loan Program III LLC ("SLP III"), NMFC Senior Loan Program IV LLC ("SLP IV") and NMNLC.
New Mountain Finance Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except shares and per share data)
(unaudited)
September 30, 2024
December 31, 2023
Assets
Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,459,913 and $2,283,490, respectively)
$
2,446,773
$
2,209,867
Non-controlled/affiliated investments (cost of $121,649 and $107,895, respectively)
113,017
133,659
Controlled investments (cost of $684,751 and $646,823, respectively)
705,481
667,796
Total investments at fair value (cost of $3,266,313 and $3,038,208, respectively)
3,265,271
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
61,943
70,090
Interest and dividend receivable
45,905
44,107
Derivative asset at fair value
8,320
—
Receivable from affiliates
139
82
Deferred tax asset
—
594
Other assets
19,178
16,519
Total assets
$
3,414,256
$
3,159,214
Liabilities
Borrowings
Unsecured Notes
$
993,577
$
506,500
Holdings Credit Facility
407,563
515,063
SBA-guaranteed debentures
300,000
300,000
Convertible Notes
260,120
260,207
NMFC Credit Facility
55,031
36,813
NMNLC Credit Facility II
2,908
2,853
DB Credit Facility
—
186,400
Deferred financing costs (net of accumulated amortization of $61,723 and $54,263, respectively)
(26,229
)
(22,387
)
Net borrowings
1,992,970
1,785,449
Interest payable
18,485
20,440
Management fee payable
10,730
10,116
Payable to broker
10,370
—
Incentive fee payable
8,821
8,555
Deferred tax liability
1,100
—
Derivative liability at fair value
781
—
Other liabilities
3,420
2,931
Total liabilities
2,046,677
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
1,398,395
1,331,269
Accumulated undistributed earnings
(38,178
)
(12,344
)
Total net assets of New Mountain Finance Corporation
$
1,361,296
$
1,319,951
Non-controlling interest in New Mountain Net Lease Corporation
6,283
11,772
Total net assets
$
1,367,579
$
1,331,723
Total liabilities and net assets
$
3,414,256
$
3,159,214
Number of shares outstanding
107,851,415
102,558,859
Net asset value per share of New Mountain Finance Corporation
$
12.62
$
12.87
New Mountain Finance Corporation
Consolidated Statements of Operations
(in thousands, except shares and per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
September 30, 2024
September 30, 2023
Investment income
From non-controlled/non-affiliated investments:
Interest income (excluding Payment-in-kind ("PIK") interest income)
$
61,788
$
63,892
$
175,608
$
189,299
PIK interest income
4,340
4,061
13,460
11,772
Dividend income
185
49
2,762
143
Non-cash dividend income
5,077
4,458
14,558
12,929
Other income
1,454
791
6,345
3,395
From non-controlled/affiliated investments:
Interest income (excluding PIK interest income)
349
884
1,093
1,576
PIK interest income
971
265
2,680
1,370
Non-cash dividend income
1,593
1,173
4,211
3,417
Other income
63
63
188
189
From controlled investments:
Interest income (excluding PIK interest income)
1,651
1,351
4,395
4,038
PIK interest income
3,739
3,591
11,595
11,665
Dividend income
11,789
11,041
36,812
34,179
Non-cash dividend income
1,649
1,357
4,715
3,879
Other income
679
1,373
2,049
3,943
Total investment income
95,327
94,349
280,471
281,794
Expenses
Interest and other financing expenses
37,661
31,425
101,790
93,921
Management fee
11,700
11,334
34,048
34,549
Incentive fee
8,821
10,169
27,760
29,748
Administrative expenses
1,059
995
3,135
2,996
Professional fees
1,019
850
3,213
2,818
Other general and administrative expenses
531
542
1,523
1,543
Total expenses
60,791
55,315
171,469
165,575
Less: management fee waived
(970
)
(1,013
)
(2,732
)
(3,172
)
Net expenses
59,821
54,302
168,737
162,403
Net investment income before income taxes
35,506
40,047
111,734
119,391
Income tax expense (benefit)
118
(627
)
353
401
Net investment income
35,388
40,674
111,381
118,990
Net realized (losses) gains:
Non-controlled/non-affiliated investments
(75
)
113
(46,899
)
(8,509
)
Controlled investments
(456
)
4,560
3,375
16,413
Foreign currency
(1,455
)
—
(1,455
)
13
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
419
12,419
56,474
11,664
Non-controlled/affiliated investments
(7,853
)
(14,815
)
(34,396
)
(14,830
)
Controlled investments
(4,260
)
(14,483
)
(243
)
(15,174
)
Securities purchased under collateralized agreements to resell
—
—
(3,000
)
(39
)
New Mountain Net Lease Corporation
1,533
—
1,533
—
Foreign currency
1,690
(60
)
1,796
(5
)
(Provision) benefit for taxes
(1,037
)
291
(1,804
)
66
Net realized and unrealized losses
(11,494
)
(11,975
)
(24,619
)
(10,401
)
Net increase in net assets resulting from operations
23,894
28,699
86,762
108,589
Less: Net increase in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation
(5
)
(3
)
(994
)
(490
)
Net increase in net assets resulting from operations related to New Mountain Finance Corporation
$
23,889
$
28,696
$
85,768
$
108,099
Basic earnings per share
$
0.22
$
0.28
$
0.81
$
1.07
Weighted average shares of common stock outstanding - basic
107,851,415
100,954,898
106,140,789
100,943,049
Diluted earnings per share
$
0.22
$
0.27
$
0.78
$
0.98
Weighted average shares of common stock outstanding - diluted
126,779,819
123,183,269
125,000,872
124,595,709
Distributions declared and paid per share
$
0.34
$
0.36
$
1.04
$
1.03
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 over $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 over $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.
