New Mountain Finance Corporation Announces Third Quarter Financial Results

Reports Net Investment Income of $0.40 per share

Declares a Regular Fourth 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 September 30, 2023. The Company reported third quarter net investment income ("NII") of $0.40 per weighted average share, representing a 25% year-over-year increase, and net asset value (“NAV”) per share of $13.06. The Company also announced that its board of directors declared a fourth quarter regular distribution of $0.32 per share and a supplemental distribution of $0.04, which will be payable on December 29, 2023 to holders of record as of December 15, 2023.

Selected Financial Highlights

(in thousands, except per share data)

September 30, 2023

Investment Portfolio1

$

3,128,403

Total Assets

$

3,279,586

Total Statutory Debt2

$

1,602,672

NAV3

$

1,325,018

 

 

NAV per Share

$

13.06

Net Investment Income per Weighted Average Share

$

0.40

Regular Third Quarter Distribution Paid per Share

$

0.32

Supplemental Distribution Paid per Share

$

0.04

Statutory Debt/Equity

1.21x

Statutory Debt/Equity (net of available cash)

1.16x

Management Comments on Third Quarter Performance

“Our third quarter results reflect another successful quarter for 2023 with year-over-year net investment income per share growth of approximately 25%. We believe our credit performance remains strong even in a more difficult market environment,” 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 reported another strong quarter, outearning its dividend, and demonstrating New Mountain’s ability to deliver solid risk-adjusted returns amid an uncertain market environment. We remain confident in New Mountain’s defensive growth portfolio that offers an enhanced margin of safety, while distributing capital to shareholders through our regular and supplemental dividend programs.”

Portfolio and Investment Activity1

As of September 30, 2023, the Company’s NAV was $1,325.0 million and its portfolio had a fair value of $3,128.4 million in 110 portfolio companies, with a weighted average YTM at Cost4 of approximately 11.8%. For the three months ended September 30, 2023, the Company generated $15.6 million of originations5 and cash repayments5 of $75.4 million.

Consolidated Results of Operations6

The Company’s total investment income for the three months ended September 30, 2023 and 2022 was $94.1 million and $78.1 million, respectively. The Company’s total net expenses, after income tax expense, for the three months ended September 30, 2023 and 2022 were $53.7 million and $45.6 million, respectively. The Company's NII for the three months ended September 30, 2023 and 2022 was $40.4 million and $32.5 million, respectively. The Company's NII per share for the three months ended September 30, 2023 and 2022 was $0.40 and $0.32, respectively. For the three months ended September 30, 2023 and 2022, the Company recorded $11.7 million and $24.8 million, respectively, of net realized and unrealized losses.

Liquidity and Capital Resources

As of September 30, 2023, the Company had cash and cash equivalents of $83.3 million and total statutory debt outstanding of $1,602.7 million2. The Company's statutory debt to equity was 1.21x as of September 30, 2023. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of September 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 New Mountain’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 September 30, 2023:

(in millions)

As of September 30, 2023

Risk Rating

 

Cost

 

Percent

 

Fair Value

 

Percent

Red

 

$

54.6

 

1.7 %

 

$

5.5

 

0.2 %

Orange

 

 

101.2

 

3.2 %

 

 

60.1

 

1.9 %

Yellow1

 

 

179.7

 

5.6 %

 

 

144.3

 

4.6 %

Green7

 

 

2,863.2

 

89.5 %

 

 

2,918.5

 

93.3 %

Total

 

$

3,198.7

 

100.0 %

 

$

3,128.4

 

100.0 %

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

(in thousands)

 

 

 

 

Investment Portfolio Composition

 

September 30, 2023

 

Percent of Total

First Lien

 

$

1,691,480

 

54.0 %

Second Lien1

 

 

546,113

 

17.5 %

Subordinated

 

 

86,238

 

2.8 %

Preferred Equity

 

 

196,308

 

6.2 %

Investment Fund

 

 

252,400

 

8.1 %

Common Equity and Other7

 

 

355,864

 

11.4 %

Total

 

$

3,128,403

 

100.0 %

Recent Developments

On October 24, 2023, the Company’s board of directors declared a regular fourth quarter 2023 distribution of $0.32 per share and a supplemental distribution related to third quarter earnings of $0.04 per share, each payable on December 29, 2023 to holders of record as of December 15, 2023.

On October 26, 2023, the Company entered into the Eighth Amendment to Loan and Security Agreement (the "Eighth Amendment"), which amended the Holdings Credit Facility, to, among other things, extend the Facility Maturity Date, as defined in the Loan and Security Agreement, from April 20, 2026 to October 26, 2028.

On October 31, 2023, the Company entered into Amendment No. 8 to the Loan Financing and Servicing Agreement, which amended the DB Credit Facility to, among other things, extend the Maturity Date, as defined in the LFSA, from March 25, 2026 to March 25, 2027 and reduce the applicable interest rate.

On October 31, 2023, the Company entered into the Second Amended and Restated Uncommitted Revolving Loan Agreement, which amended the Unsecured Management Company Revolver to, among other things, extend the Maturity Date, as defined in the Agreement, from December 31, 2024 to December 31, 2027 and increase the maximum amount available from $50.0 million to $100.0 million.

Third Quarter 2023 Conference Call

New Mountain Finance Corporation will host an earnings conference call and webcast at 11:00 am Eastern Time on Friday, November 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.

A replay of the conference call can be accessed one hour after the end of the conference call through February 3, 2024. The full webcast replay will be available through November 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: 1426978

For additional details related to the quarter ended September 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 September 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 $(0.2) million and $(0.5) 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)

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Investments at fair value

 

 

 

Non-controlled/non-affiliated investments (cost of $2,429,421 and $2,523,522, respectively)

$

2,318,232

 

 

$

2,400,425

 

Non-controlled/affiliated investments (cost of $105,889 and $85,971, respectively)

 

135,875

 

 

 

130,787

 

Controlled investments (cost of $633,409 and $650,474, respectively)

 

657,796

 

 

 

690,035

 

Total investments at fair value (cost of $3,168,719 and $3,259,967, respectively)

 

3,111,903

 

 

 

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

 

83,265

 

 

 

71,190

 

Interest and dividend receivable

 

45,602

 

 

 

36,154

 

Other assets

 

22,316

 

 

 

9,797

 

Total assets

$

3,279,586

 

 

$

3,354,927

 

Liabilities

 

 

 

Borrowings

 

 

 

Holdings Credit Facility

$

569,563

 

 

$

618,963

 

Unsecured Notes

 

391,500

 

 

 

531,500

 

SBA-guaranteed debentures

 

300,000

 

 

 

300,000

 

Convertible Notes

 

260,236

 

 

 

316,853

 

NMFC Credit Facility

 

192,115

 

 

 

40,359

 

DB Credit Facility

 

186,400

 

 

 

186,400

 

NMNLC Credit Facility II

 

2,858

 

 

 

3,785

 

Deferred financing costs (net of accumulated amortization of $52,507 and $47,531, respectively)

 

(13,515

)

 

 

(17,199

)

Net borrowings

 

1,889,157

 

 

 

1,980,661

 

Interest payable

 

23,202

 

 

 

19,627

 

Management fee payable

 

10,321

 

 

 

10,524

 

Incentive fee payable

 

10,169

 

 

 

6,296

 

Payable for unsettled securities purchased

 

4,678

 

 

 

 

Deferred tax liability

 

2,790

 

 

 

8,487

 

Payable to affiliates

 

256

 

 

 

78

 

Other liabilities

 

2,319

 

 

 

3,063

 

Total liabilities

 

1,942,892

 

 

 

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 101,439,649 and 100,937,026 shares issued and outstanding, respectively

 

1,014

 

 

 

1,009

 

Paid in capital in excess of par

 

1,312,352

 

 

 

1,305,945

 

Accumulated undistributed earnings

 

11,652

 

 

 

7,519

 

Total net assets of New Mountain Finance Corporation

$

1,325,018

 

 

$

1,314,473

 

Non-controlling interest in New Mountain Net Lease Corporation

 

11,676

 

 

 

11,718

 

Total net assets

$

1,336,694

 

 

$

1,326,191

 

Total liabilities and net assets

$

3,279,586

 

 

$

3,354,927

 

Number of shares outstanding

 

101,439,649

 

 

 

100,937,026

 

Net asset value per share of New Mountain Finance Corporation

$

13.06

 

 

$

13.02

 

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, 2023

 

September 30, 2022

 

September 30, 2023

 

September 30, 2022

Investment income

 

 

 

 

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

 

 

 

 

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

$

63,892

 

 

$

49,401

 

 

$

189,299

 

 

$

127,934

 

PIK interest income

 

4,061

 

 

 

2,688

 

 

 

11,772

 

 

 

8,924

 

Dividend income

 

49

 

 

 

9

 

 

 

143

 

 

 

144

 

Non-cash dividend income

 

4,458

 

 

 

3,837

 

 

 

12,929

 

 

 

10,111

 

Other income

 

791

 

 

 

1,517

 

 

 

3,395

 

 

 

7,435

 

From non-controlled/affiliated investments:

 

 

 

 

 

 

 

Interest income (excluding PIK interest income)

 

884

 

 

 

270

 

 

 

1,576

 

 

 

788

 

PIK interest income

 

265

 

 

 

264

 

 

 

1,370

 

 

 

773

 

Non-cash dividend income

 

1,173

 

 

 

1,042

 

 

 

3,417

 

 

 

3,036

 

Other income

 

63

 

 

 

62

 

 

 

189

 

 

 

187

 

From controlled investments:

 

 

 

 

 

 

 

Interest income (excluding PIK interest income)

 

1,351

 

 

 

2,914

 

 

 

4,038

 

 

 

6,285

 

PIK interest income

 

3,591

 

 

 

3,241

 

 

 

11,665

 

 

 

12,296

 

Dividend income

 

11,041

 

 

 

9,867

 

 

 

34,179

 

 

 

32,183

 

Non-cash dividend income

 

1,357

 

 

 

1,116

 

 

 

3,879

 

 

 

3,191

 

Other income

 

1,373

 

 

 

2,221

 

 

 

3,943

 

 

 

7,235

 

Total investment income

 

94,349

 

 

 

78,449

 

 

 

281,794

 

 

 

220,522

 

Expenses

 

 

 

 

 

 

 

Interest and other financing expenses

 

31,425

 

 

 

24,648

 

 

 

93,921

 

 

 

63,957

 

Management fee

 

11,334

 

 

 

11,717

 

 

 

34,549

 

 

 

35,040

 

Incentive fee

 

10,169

 

 

 

8,202

 

 

 

29,748

 

 

 

23,605

 

Administrative expenses

 

995

 

 

 

881

 

 

 

2,996

 

 

 

3,022

 

Professional fees

 

850

 

 

 

775

 

 

 

2,818

 

 

 

2,529

 

Other general and administrative expenses

 

542

 

 

 

545

 

 

 

1,543

 

 

 

1,540

 

Total expenses

 

55,315

 

 

 

46,768

 

 

 

165,575

 

 

 

129,693

 

Less: management fee waived

 

(1,013

)

 

 

(1,115

)

 

 

(3,172

)

 

 

(3,349

)

Less: expenses waived and reimbursed

 

 

 

 

 

 

 

 

 

 

(238

)

Net expenses

 

54,302

 

 

 

45,653

 

 

 

162,403

 

 

 

126,106

 

Net investment income before income taxes

 

40,047

 

 

 

32,796

 

 

 

119,391

 

 

 

94,416

 

Income tax (benefit) expense

 

(627

)

 

 

(13

)

 

 

401

 

 

 

(5

)

Net investment income

 

40,674

 

 

 

32,809

 

 

 

118,990

 

 

 

94,421

 

Net realized gains (losses):

 

 

 

 

 

 

 

Non-controlled/non-affiliated

 

113

 

 

 

(239

)

 

 

(8,509

)

 

 

(903

)

Controlled investments

 

4,560

 

 

 

17

 

 

 

16,413

 

 

 

36,371

 

Foreign currency

 

 

 

 

(166

)

 

 

13

 

 

 

219

 

Net change in unrealized (depreciation) appreciation:

 

 

 

 

 

 

 

Non-controlled/non-affiliated investments

 

12,419

 

 

 

(31,944

)

 

 

11,664

 

 

 

(56,975

)

Non-controlled/affiliated investments

 

(14,815

)

 

 

(13,381

)

 

 

(14,830

)

 

 

377

 

Controlled investments

 

(14,483

)

 

 

20,398

 

 

 

(15,174

)

 

 

(11,036

)

Securities purchased under collateralized agreements to resell

 

 

 

 

 

 

 

(39

)

 

 

(2,021

)

Foreign currency

 

(60

)

 

 

(10

)

 

 

(5

)

 

 

(625

)

Benefit (provision) for taxes

 

291

 

 

 

30

 

 

 

66

 

 

 

(127

)

Net realized and unrealized losses

 

(11,975

)

 

 

(25,295

)

 

 

(10,401

)

 

 

(34,720

)

Net increase in net assets resulting from operations

 

28,699

 

 

 

7,514

 

 

 

108,589

 

 

 

59,701

 

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

 

(3

)

 

 

191

 

 

 

(490

)

 

 

150

 

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

$

28,696

 

 

$

7,705

 

 

$

108,099

 

 

$

59,851

 

Basic earnings per share

$

0.28

 

 

$

0.08

 

 

$

1.07

 

 

$

0.60

 

Weighted average shares of common stock outstanding - basic

 

100,954,898

 

 

 

100,830,075

 

 

 

100,943,049

 

 

 

99,955,432

 

Diluted earnings per share

$

0.27

 

 

$

0.08

 

 

$

0.98

 

 

$

0.59

 

Weighted average shares of common stock outstanding - diluted

 

123,183,269

 

 

 

114,087,660

 

 

 

124,595,709

 

 

 

113,213,017

 

Distributions declared and paid per share

$

0.36

 

 

$

0.30

 

 

$

1.03

 

 

$

0.90

 

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 $45 billion of assets under management as of September 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 $45 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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