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.
- 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 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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