NEW YORK--(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 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.
- United States: +1 (877) 443-9109
- International: +1 (412) 317-1082
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 .
| ___________________________________________ | ||
(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 .
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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