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New Mountain Finance Corporation Announces First Quarter Financial Results

Reports Net Investment Income of $0.38 per share

Declares a Regular Second Quarter Distribution of $0.32 per Share and a Supplemental Distribution of $0.03 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, 2023. The Company reported first quarter net investment income ("NII") of $0.38 per weighted average share and net asset value (“NAV”) per share of $13.14, compared to $13.02 on December 31, 2022. The Company also announced that its board of directors declared a second quarter regular distribution of $0.32 per share and a supplemental distribution of $0.03, which will be payable on June 30, 2023 to holders of record as of June 16, 2023.

Selected Financial Highlights

(in thousands, except per share data)

March 31, 2023

Investment Portfolio1

$

3,286,865

Total Assets

$

3,378,935

Total Statutory Debt2

$

1,710,767

NAV3

$

1,326,690

 

 

NAV per Share

$

13.14

Net Investment Income per Weighted Average Share

$

0.38

Distribution Paid per Share

$

0.32

Statutory Debt/Equity

1.29x

Statutory Debt/Equity (net of available cash)

1.26x

Management Comments on First Quarter Performance

“Our first quarter results reflect a very good start to 2023 with year-over-year net investment income per share growth of over 26%. Our credit performance remains strong even in a more difficult market environment,” said Steven B. Klinsky, NMFC Chairman. “New Mountain Finance Corporation continues to benefit from our disciplined defensive growth investment focus and our knowledgeable and experienced team."

John R. Kline, CEO, commented: “NMFC’s net investment income per share again outpaced its regular quarterly dividend in the first quarter, resulting in a supplemental distribution of $0.03 per share in addition to our regular distribution of $0.32 per share. We remain focused on delivering stable enhanced yield to our shareholders through our base dividend and future variable supplemental dividend payments."

Portfolio and Investment Activity1

As of March 31, 2023, the Company’s NAV was $1,326.7 million and its portfolio had a fair value of $3,286.9 million in 112 portfolio companies, with a weighted average YTM at Cost4 of approximately 10.9%. For the three months ended March 31, 2023, the Company generated $76.7 million of originations5, and cash repayments5 of $30.7 million.

Consolidated Results of Operations6

The Company’s total investment income for the three months ended March 31, 2023 and 2022 was $91.7 million and $68.6 million, respectively. The Company’s total net expenses, after income tax expense, for the three months ended March 31, 2023 and 2022 were $53.6 million and $39.0 million, respectively. The Company's NII for the three months ended March 31, 2023 and 2022 was $38.1 million and $29.6 million, respectively. The Company's NII per share for the three months ended March 31, 2023 and 2022 was $0.38 and $0.30, respectively. For the three months ended March 31, 2023 and 2022, the Company recorded $6.4 million and $6.6 million, respectively, of net realized and unrealized gains.

Liquidity and Capital Resources

As of March 31, 2023, the Company had cash and cash equivalents of $46.4 million and total statutory debt outstanding of $1,710.8 million2. The Company's statutory debt to equity was 1.29x as of March 31, 2023. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of March 31, 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 March 31, 2023:

(in millions)

 

As of March 31, 2023

Risk Rating

 

Cost

 

Percent

 

Fair Value

 

Percent

Red

 

$

62.3

 

1.9

%

 

$

17.6

 

0.5

%

Orange

 

 

60.1

 

1.8

%

 

 

41.0

 

1.3

%

Yellow1

 

 

187.7

 

5.6

%

 

 

138.7

 

4.2

%

Green7

 

 

3,022.5

 

90.7

%

 

 

3,089.6

 

94.0

%

Total

 

$

3,332.6

 

100.0

%

 

$

3,286.9

 

100.0

%

As of March 31, 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, 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, 2023:

(in thousands, except per share data)

 

 

 

 

Investment Portfolio Composition

 

March 31, 2023

 

Percent of Total

First Lien

 

 

1,798,746

 

54.7

%

Second Lien1

 

 

578,952

 

17.6

%

Subordinated

 

 

78,282

 

2.4

%

Preferred Equity

 

 

191,155

 

5.8

%

Investment Fund

 

 

252,400

 

7.7

%

Common Equity and Other7

 

 

387,330

 

11.8

%

Total

 

$

3,286,865

 

100.0

%

Recent Developments

On April 25, 2023, the Company’s board of directors declared a regular second quarter 2023 distribution of $0.32 per share and a supplemental distribution related to Q1 earnings of $0.03 per share, each payable on June 30, 2023 to holders of record as of June 16, 2023.

On April 25, 2023, Alice W. Handy notified the Company's board of directors that she was resigning as a director, effective immediately. In submitting her resignation, Ms. Handy did not express any disagreement on any matter relating to the Company's operations, policies or practices. The Nominating and Corporate Governance Committee of the board of directors has been actively searching for Ms. Handy’s successor in accordance with its policies and procedures, and expects to appoint a new director in the near future.

_____________________________________
(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 LIBOR, 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 March 31, 2023 and 2022, $0.3 million and $0.4 million, respectively, of dividend income is excluded from investment income, $0.0 million and $0.1 million, respectively, of net direct and indirect professional, administrative, other general and administrative is excluded from net expenses, and $(0.0) million and $0.5 million, respectively, of unrealized losses and realized and unrealized gains, respectively, is excluded from net realized and unrealized gains.

(7)

 

Includes investment held in NMNLC

First Quarter 2023 Conference Call

New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Tuesday, May 9, 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.

A replay of the conference call can be accessed one hour after the end of the conference call through August 9, 2023. The full webcast replay will be available through May 9, 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: 8478449

For additional details related to the quarter ended March 31, 2023, please refer to the New Mountain Finance Corporation 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.

New Mountain Finance Corporation

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

(unaudited)

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

Investments at fair value

 

 

 

Non-controlled/non-affiliated investments (cost of $2,578,975 and $2,523,522, respectively)

$

2,453,534

 

 

$

2,400,425

 

Non-controlled/affiliated investments (cost of $102,901 and $85,971, respectively)

 

147,701

 

 

 

130,787

 

Controlled investments (cost of $620,738 and $650,474, respectively)

 

669,091

 

 

 

690,035

 

Total investments at fair value (cost of $3,302,614 and $3,259,967, respectively)

 

3,270,326

 

 

 

3,221,247

 

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

 

16,539

 

 

 

16,539

 

Cash and cash equivalents

 

46,399

 

 

 

71,190

 

Interest and dividend receivable

 

34,288

 

 

 

36,154

 

Receivable from affiliates

 

91

 

 

 

 

Other assets

 

11,292

 

 

 

9,797

 

Total assets

$

3,378,935

 

 

$

3,354,927

 

Liabilities

 

 

 

Borrowings

 

 

 

Holdings Credit Facility

$

614,663

 

 

$

618,963

 

Unsecured Notes

 

441,500

 

 

 

531,500

 

Convertible Notes

 

377,135

 

 

 

316,853

 

SBA-guaranteed debentures

 

300,000

 

 

 

300,000

 

DB Credit Facility

 

186,400

 

 

 

186,400

 

NMFC Credit Facility

 

87,949

 

 

 

40,359

 

NMNLC Credit Facility II

 

3,120

 

 

 

3,785

 

Deferred financing costs (net of accumulated amortization of $49,187 and $47,531, respectively)

 

(16,699

)

 

 

(17,199

)

Net borrowings

 

1,994,068

 

 

 

1,980,661

 

Management fee payable

 

10,575

 

 

 

10,524

 

Incentive fee payable

 

9,597

 

 

 

6,296

 

Interest payable

 

20,566

 

 

 

19,627

 

Payable to affiliates

 

 

 

 

78

 

Deferred tax liability

 

2,988

 

 

 

8,487

 

Other liabilities

 

2,647

 

 

 

3,063

 

Total liabilities

 

2,040,441

 

 

 

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

 

1,305,889

 

 

 

1,305,945

 

Accumulated undistributed earnings

 

19,792

 

 

 

7,519

 

Total net assets of New Mountain Finance Corporation

$

1,326,690

 

 

$

1,314,473

 

Non-controlling interest in New Mountain Net Lease Corporation

 

11,804

 

 

 

11,718

 

Total net assets

$

1,338,494

 

 

$

1,326,191

 

Total liabilities and net assets

$

3,378,935

 

 

$

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

 

March 31, 2023

 

March 31, 2022

Investment income

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

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

$

60,758

 

 

$

37,444

 

PIK interest income

 

3,944

 

 

 

3,302

 

Dividend income

 

47

 

 

 

48

 

Non-cash dividend income

 

4,166

 

 

 

3,085

 

Other income

 

1,918

 

 

 

1,631

 

From non-controlled/affiliated investments:

 

 

 

Interest income (excluding PIK interest income)

 

9

 

 

 

255

 

PIK interest income

 

691

 

 

 

251

 

Non-cash dividend income

 

1,105

 

 

 

982

 

Other income

 

63

 

 

 

63

 

From controlled investments:

 

 

 

Interest income (excluding PIK interest income)

 

1,444

 

 

 

1,656

 

PIK interest income

 

4,388

 

 

 

4,970

 

Dividend income

 

10,995

 

 

 

11,645

 

Non-cash dividend income

 

1,230

 

 

 

1,012

 

Other income

 

1,195

 

 

 

2,619

 

Total investment income

 

91,953

 

 

 

68,963

 

Expenses

 

 

 

Interest and other financing expenses

 

30,796

 

 

 

18,637

 

Management fee

 

11,638

 

 

 

11,553

 

Incentive fee

 

9,597

 

 

 

7,477

 

Administrative expenses

 

1,048

 

 

 

1,209

 

Professional fees

 

965

 

 

 

937

 

Other general and administrative expenses

 

488

 

 

 

477

 

Total expenses

 

54,532

 

 

 

40,290

 

Less: management fee waived

 

(1,063

)

 

 

(1,092

)

Less: expenses waived and reimbursed

 

 

 

 

(238

)

Net expenses

 

53,469

 

 

 

38,960

 

Net investment income before income taxes

 

38,484

 

 

 

30,003

 

Income tax expense

 

96

 

 

 

95

 

Net investment income

 

38,388

 

 

 

29,908

 

Net realized gains (losses):

 

 

 

Non-controlled/non-affiliated investments

 

(1,308

)

 

 

(70

)

Controlled investments

 

1,973

 

 

 

19,242

 

Foreign currency

 

12

 

 

 

345

 

Net change in unrealized appreciation (depreciation):

 

 

 

Non-controlled/non-affiliated investments

 

(2,929

)

 

 

(4,524

)

Non-controlled/affiliated investments

 

(16

)

 

 

10,759

 

Controlled investments

 

8,797

 

 

 

(16,168

)

Securities purchased under collateralized agreements to resell

 

 

 

 

(2,021

)

Foreign currency

 

26

 

 

 

(422

)

Provision for taxes

 

(131

)

 

 

(2

)

Net realized and unrealized gains

 

6,424

 

 

 

7,139

 

Net increase in net assets resulting from operations

 

44,812

 

 

 

37,047

 

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

 

(239

)

 

 

(855

)

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

$

44,573

 

 

$

36,192

 

Basic earnings per share

$

0.44

 

 

$

0.37

 

Weighted average shares of common stock outstanding - basic

 

100,937,026

 

 

 

98,413,476

 

Diluted earnings per share

$

0.40

 

 

$

0.34

 

Weighted average shares of common stock outstanding - diluted

 

123,591,432

 

 

 

111,671,062

 

Distributions declared and paid per share

$

0.32

 

 

$

0.30

 

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 $37 billion of assets under management as of March 31, 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 $37 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 the impact of COVID-19 and related 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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