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New Mountain Finance Corporation Announces Second Quarter Financial Results

Reports Net Investment Income of $0.39 per share and stable Net Asset Value

Declares a Regular Third Quarter Distribution of $0.32 per Share and a Supplemental Distribution of $0.04 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 June 30, 2023. The Company reported second quarter net investment income ("NII") of $0.39 per weighted average share, a 26% increase in year-over-year NII, and net asset value (“NAV”) per share of $13.14, in line with prior quarter NAV of $13.14. The Company also announced that its board of directors declared a third quarter regular distribution of $0.32 per share and a supplemental distribution of $0.04, which will be payable on September 29, 2023 to holders of record as of September 15, 2023.

Selected Financial Highlights

(in thousands, except per share data)

June 30, 2023

Investment Portfolio1

$

3,195,965

Total Assets

$

3,296,981

Total Statutory Debt2

$

1,623,483

NAV3

$

1,326,101

 

 

NAV per Share

$

13.14

Net Investment Income per Weighted Average Share

$

0.39

Regular Second Quarter Distribution Paid per Share

$

0.32

Supplemental Distribution Paid per Share

$

0.03

Statutory Debt/Equity

1.22x

Statutory Debt/Equity (net of available cash)

1.19x

Management Comments on Second Quarter Performance

“New Mountain Finance Corporation delivered strong second quarter operating results, highlighted by net investment income of $0.39 per share and resilient credit performance,” 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.”

“We are pleased to report stable book value in Q2, which was supported by our high-quality portfolio of loans to issuers in defensive growth industries,” said John R. Kline, President and Chief Executive Officer. “New Mountain is positioned to deliver enhanced risk-adjusted returns and continue our track record of returning capital to our fellow shareholders through our regular and supplemental dividend programs.”

Portfolio and Investment Activity1

As of June 30, 2023, the Company’s NAV was $1,326.1 million and its portfolio had a fair value of $3,196.0 million in 114 portfolio companies, with a weighted average YTM at Cost4 of approximately 11.6%. For the three months ended June 30, 2023, the Company generated $29.5 million of originations5, $119.9 million of asset sales and cash repayments5 of $3.9 million.

Consolidated Results of Operations6

The Company’s total investment income for the three months ended June 30, 2023 and 2022 was $95.2 million and $72.8 million, respectively. The Company’s total net expenses, after income tax expense, for the three months ended June 30, 2023 and 2022 were $55.5 million and $41.4 million, respectively. The Company's NII for the three months ended June 30, 2023 and 2022 was $39.7 million and $31.4 million, respectively. The Company's NII per share for the three months ended June 30, 2023 and 2022 was $0.39 and $0.31, respectively, which represents a 26% increase year-over-year. For the three months ended June 30, 2023 and 2022, the Company recorded $4.8 million and $15.4 million, respectively, of net realized and unrealized losses.

Liquidity and Capital Resources

As of June 30, 2023, the Company had cash and cash equivalents of $45.9 million and total statutory debt outstanding of $1,623.5 million2. The Company's statutory debt to equity was 1.22x as of June 30, 2023. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of June 30, 2023.

Portfolio and Asset Quality1

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 Red, Orange, Yellow and Green, with Red reflecting an investment performing materially below expectations and Green reflecting an investment that is in-line with or above expectations.

The following table shows the Risk Rating of the Company’s portfolio companies as of June 30, 2023:

(in millions)

As of June 30, 2023

Risk Rating

 

Cost

 

Percent

 

Fair Value

 

Percent

Red

 

$

54.6

 

1.7

%

 

$

9.0

 

0.3

%

Orange

 

 

86.5

 

2.7

%

 

 

51.1

 

1.6

%

Yellow1

 

 

182.7

 

5.6

%

 

 

142.8

 

4.5

%

Green7

 

 

2,924.4

 

90.0

%

 

 

2,993.1

 

93.6

%

Total

 

$

3,248.2

 

100.0

%

 

$

3,196.0

 

100.0

%

As of June 30, 2023, all investments in the Company’s portfolio had a Green Risk Rating, with the exception of nine portfolio companies that had a Yellow Risk Rating, five 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 June 30, 2023:

(in thousands, except per share data)

 

 

 

 

Investment Portfolio Composition

 

June 30, 2023

 

Percent of Total

First Lien

 

 

1,703,788

 

53.4

%

Second Lien1

 

 

579,833

 

18.1

%

Subordinated

 

 

84,683

 

2.6

%

Preferred Equity

 

 

195,279

 

6.1

%

Investment Fund

 

 

252,400

 

7.9

%

Common Equity and Other7

 

 

379,982

 

11.9

%

Total

 

$

3,195,965

 

100.0

%

Recent Developments

On July 27, 2023, the Company’s board of directors declared a regular third quarter 2023 distribution of $0.32 per share and a supplemental distribution related to Q2 earnings of $0.04 per share, each payable on September 29, 2023 to holders of record as of September 15, 2023.

Second Quarter 2023 Conference Call

New Mountain Finance Corporation will host an earnings conference call and webcast at 12:00 pm Eastern Time on Thursday, August 3, 2023. 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 Webcast

A replay of the conference call can be accessed one hour after the end of the conference call through November 3, 2023. The full webcast replay will be available through August 3, 2024. 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: 3039293

For additional details related to the quarter ended June 30, 2023, 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)

Includes collateral for securities purchased under collateralized agreements to resell.

(2)

Excludes the Company’s United States Small Business Administration (“SBA”) guaranteed debentures.

(3)

Excludes non-controlling interest in New Mountain Net Lease Corporation (“NMNLC”).

(4)

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 London Interbank Offered Rate (“LIBOR”), 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.

(5)

Originations exclude payment-in-kind (“PIK”); originations, repayments, and sales excludes revolvers, unfunded commitments, bridges, return of capital, and realized gains / losses.

(6)

Excludes net income related to non-controlling interests in NMNLC. For the quarter ended June 30, 2023 and 2022, $0.2 million and $0.3 million, respectively, of dividend income 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 $0.0 million and $(1.1) million, respectively, of realized gains and unrealized losses is excluded from net realized and unrealized losses.

(7)

Includes investment held in NMNLC.

 

New Mountain Finance Corporation

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

(unaudited)

 

 

June 30, 2023

 

December 31, 2022

Assets

 

 

 

Investments at fair value

 

 

 

Non-controlled/non-affiliated investments (cost of $2,486,589 and $2,523,522, respectively)

$

2,364,179

 

 

$

2,400,425

 

Non-controlled/affiliated investments (cost of $104,459 and $85,971, respectively)

 

149,260

 

 

 

130,787

 

Controlled investments (cost of $627,156 and $650,474, respectively)

 

666,026

 

 

 

690,035

 

Total investments at fair value (cost of $3,218,204 and $3,259,967, respectively)

 

3,179,465

 

 

 

3,221,247

 

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

 

16,500

 

 

 

16,539

 

Cash and cash equivalents

 

45,930

 

 

 

71,190

 

Interest and dividend receivable

 

40,528

 

 

 

36,154

 

Receivable from unsettled securities sold

 

683

 

 

 

 

Other assets

 

13,875

 

 

 

9,797

 

Total assets

$

3,296,981

 

 

$

3,354,927

 

Liabilities

 

 

 

Borrowings

 

 

 

Holdings Credit Facility

$

574,263

 

 

$

618,963

 

Unsecured Notes

 

391,500

 

 

 

531,500

 

Convertible Notes

 

377,104

 

 

 

316,853

 

SBA-guaranteed debentures

 

300,000

 

 

 

300,000

 

DB Credit Facility

 

186,400

 

 

 

186,400

 

NMFC Credit Facility

 

91,290

 

 

 

40,359

 

NMNLC Credit Facility II

 

2,926

 

 

 

3,785

 

Deferred financing costs (net of accumulated amortization of $50,855 and $47,531, respectively)

 

(15,183

)

 

 

(17,199

)

Net borrowings

 

1,908,300

 

 

 

1,980,661

 

Interest payable

 

18,797

 

 

 

19,627

 

Management fee payable

 

10,481

 

 

 

10,524

 

Incentive fee payable

 

9,982

 

 

 

6,296

 

Payable for unsettled securities purchased

 

4,897

 

 

 

 

Deferred tax liability

 

3,080

 

 

 

8,487

 

Payable to affiliates

 

93

 

 

 

78

 

Other liabilities

 

3,389

 

 

 

3,063

 

Total liabilities

 

1,959,019

 

 

 

2,028,736

 

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 100,937,026 and 100,937,026 shares issued and outstanding, respectively

 

1,009

 

 

 

1,009

 

Paid in capital in excess of par

 

1,305,798

 

 

 

1,305,945

 

Accumulated undistributed earnings

 

19,294

 

 

 

7,519

 

Total net assets of New Mountain Finance Corporation

$

1,326,101

 

 

$

1,314,473

 

Non-controlling interest in New Mountain Net Lease Corporation

 

11,861

 

 

 

11,718

 

Total net assets

$

1,337,962

 

 

$

1,326,191

 

Total liabilities and net assets

$

3,296,981

 

 

$

3,354,927

 

Number of shares outstanding

 

100,937,026

 

 

 

100,937,026

 

Net asset value per share of New Mountain Finance Corporation

$

13.14

 

 

$

13.02

 

 

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, 2023

 

June 30, 2022

 

June 30, 2023

 

June 30, 2022

Investment income

 

 

 

 

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

 

 

 

 

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

$

64,649

 

 

$

41,089

 

 

$

125,407

 

 

$

78,533

 

PIK interest income

 

3,767

 

 

 

2,934

 

 

 

7,711

 

 

 

6,236

 

Dividend income

 

47

 

 

 

87

 

 

 

94

 

 

 

135

 

Non-cash dividend income

 

4,305

 

 

 

3,189

 

 

 

8,471

 

 

 

6,274

 

Other income

 

686

 

 

 

4,287

 

 

 

2,604

 

 

 

5,918

 

From non-controlled/affiliated investments:

 

 

 

 

 

 

 

Interest income (excluding PIK interest income)

 

683

 

 

 

263

 

 

 

692

 

 

 

518

 

PIK interest income

 

414

 

 

 

258

 

 

 

1,105

 

 

 

509

 

Non-cash dividend income

 

1,139

 

 

 

1,012

 

 

 

2,244

 

 

 

1,994

 

Other income

 

63

 

 

 

62

 

 

 

126

 

 

 

125

 

From controlled investments:

 

 

 

 

 

 

 

Interest income (excluding PIK interest income)

 

1,243

 

 

 

1,715

 

 

 

2,687

 

 

 

3,371

 

PIK interest income

 

3,686

 

 

 

4,085

 

 

 

8,074

 

 

 

9,055

 

Dividend income

 

12,143

 

 

 

10,671

 

 

 

23,138

 

 

 

22,316

 

Non-cash dividend income

 

1,292

 

 

 

1,063

 

 

 

2,522

 

 

 

2,075

 

Other income

 

1,375

 

 

 

2,395

 

 

 

2,570

 

 

 

5,014

 

Total investment income

 

95,492

 

 

 

73,110

 

 

 

187,445

 

 

 

142,073

 

Expenses

 

 

 

 

 

 

 

Interest and other financing expenses

 

31,700

 

 

 

20,672

 

 

 

62,496

 

 

 

39,309

 

Management fee

 

11,577

 

 

 

11,770

 

 

 

23,215

 

 

 

23,323

 

Incentive fee

 

9,982

 

 

 

7,926

 

 

 

19,579

 

 

 

15,403

 

Administrative expenses

 

953

 

 

 

932

 

 

 

2,001

 

 

 

2,141

 

Professional fees

 

1,003

 

 

 

817

 

 

 

1,968

 

 

 

1,754

 

Other general and administrative expenses

 

513

 

 

 

518

 

 

 

1,001

 

 

 

995

 

Total expenses

 

55,728

 

 

 

42,635

 

 

 

110,260

 

 

 

82,925

 

Less: management fee waived

 

(1,096

)

 

 

(1,142

)

 

 

(2,159

)

 

 

(2,234

)

Less: expenses waived and reimbursed

 

 

 

 

 

 

 

 

 

 

(238

)

Net expenses

 

54,632

 

 

 

41,493

 

 

 

108,101

 

 

 

80,453

 

Net investment income before income taxes

 

40,860

 

 

 

31,617

 

 

 

79,344

 

 

 

61,620

 

Income tax expense

 

932

 

 

 

(87

)

 

 

1,028

 

 

 

8

 

Net investment income

 

39,928

 

 

 

31,704

 

 

 

78,316

 

 

 

61,612

 

Net realized gains (losses):

 

 

 

 

 

 

 

Non-controlled/non-affiliated investments

 

(7,314

)

 

 

(594

)

 

 

(8,622

)

 

 

(664

)

Controlled investments

 

9,880

 

 

 

17,112

 

 

 

11,853

 

 

 

36,354

 

Foreign currency

 

1

 

 

 

40

 

 

 

13

 

 

 

385

 

Net change in unrealized (depreciation) appreciation :

 

 

 

 

 

 

 

Non-controlled/non-affiliated investments

 

2,174

 

 

 

(20,507

)

 

 

(755

)

 

 

(25,031

)

Non-controlled/affiliated investments

 

1

 

 

 

2,999

 

 

 

(15

)

 

 

13,758

 

Controlled investments

 

(9,488

)

 

 

(15,266

)

 

 

(691

)

 

 

(31,434

)

Securities purchased under collateralized agreements to resell

 

(39

)

 

 

 

 

 

(39

)

 

 

(2,021

)

Foreign currency

 

29

 

 

 

(193

)

 

 

55

 

 

 

(615

)

Provision for taxes

 

(94

)

 

 

(155

)

 

 

(225

)

 

 

(157

)

Net realized and unrealized (losses) gains

 

(4,850

)

 

 

(16,564

)

 

 

1,574

 

 

 

(9,425

)

Net increase in net assets resulting from operations

 

35,078

 

 

 

15,140

 

 

 

79,890

 

 

 

52,187

 

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

 

(248

)

 

 

814

 

 

 

(487

)

 

 

(41

)

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

$

34,830

 

 

$

15,954

 

 

$

79,403

 

 

$

52,146

 

Basic earnings per share

$

0.35

 

 

$

0.16

 

 

$

0.79

 

 

$

0.52

 

Weighted average shares of common stock outstanding - basic

 

100,937,026

 

 

 

100,596,188

 

 

 

100,937,026

 

 

 

99,510,862

 

Diluted earnings per share

$

0.32

 

 

$

0.16

 

 

$

0.71

 

 

$

0.50

 

Weighted average shares of common stock outstanding - diluted

 

127,016,910

 

 

 

113,853,773

 

 

 

125,313,634

 

 

 

112,768,447

 

Distributions declared and paid per share

$

0.35

 

 

$

0.30

 

 

$

0.67

 

 

$

0.60

 

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 $40 billion of assets under management as of June 30, 2023.

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 over $40 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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