New Mountain Finance Corporation Announces Financial Results for the Quarter Ended March 31, 2024
New Mountain Finance (NMFC) reported net investment income of $0.36 per share for the quarter ended March 31, 2024. The company declared a regular second quarter distribution of $0.32 per share and a supplemental distribution of $0.02 per share. Despite a slight decline in net asset value from $12.87 to $12.77 per share, the company saw an improvement in its internal risk rating with 96.5% of the portfolio rated green. NMFC de-levered from 1.14x to 1.08x, showing financial stability. The company generated $191.8 million of originations and managed its cash repayments effectively. With a focus on defensive growth investments, NMFC continues to deliver stable earnings and strong credit performance, reflecting its strategic investments in high-quality companies.
New Mountain Finance reported stable net investment income of $0.36 per share, showing a consistent financial performance.
The company declared a regular second quarter distribution of $0.32 per share and a supplemental distribution of $0.02 per share, demonstrating shareholder-friendly practices.
With an improved internal risk rating of 96.5% of the portfolio rated green, NMFC showcases its commitment to solid risk management.
De-leveraging from 1.14x to 1.08x signifies the company's strong financial position and effective debt management.
Generating $191.8 million of originations while managing cash repayments effectively reflects NMFC's strategic investment decisions and financial discipline.
The slight decline in net asset value from $12.87 to $12.77 per share may raise concerns among investors about the company's growth prospects.
Despite stable earnings, the decrease in value in one of the Company's equity positions could impact the overall performance of the portfolio.
Insights
New Mountain Finance Corporation's (NMFC) latest earnings report reveals a slightly declining net asset value (NAV) per share, from
In the context of portfolio and asset quality, a more granular approach is necessary. The report boasts a
From a liquidity standpoint, NMFC possesses substantial cash and cash equivalents, amounting to
The report's impact on the stock market and investors is likely to be moderate. While the stable earnings and strong credit performance are positives, the slight decline in NAV and the acknowledgment of risk in the portfolio may lead to conservative optimism. Investors should balance the company's disciplined investment strategy against the modest decline in NAV and the inherent risks associated with investing in middle market companies.
Examining NMFC's industry composition reveals a focus on sectors such as software and business services, which comprise a significant portion of the portfolio. This aligns with New Mountain's investment philosophy that targets defensive growth companies capable of performing well across various economic cycles.
The company's
For the retail investor, the portfolio's diverse composition across multiple industries, primarily those with growth prospects and high barriers to entry, is reassuring. Yet, the emphasis should be on the quality of earnings and the ability to sustain or grow the dividend yield over time, as this is often a key driver of a BDC's investment appeal.
Reports Net Investment Income of
Declares a Regular Second Quarter Distribution of
First Quarter Highlights1
-
Net investment income of
$37.3 million $0.36 -
Net asset value of
$12.77 $12.87 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 to94.5% as of December 31, 2023 -
Generated
$191.8 million $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 $0.02
($ 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
Portfolio and Investment Activity6
As of March 31, 2024, the Company’s NAV1 was
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
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
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
Recent Developments
On April 18, 2024, the Company’s board of directors declared a regular second quarter 2024 distribution of
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
- Live Audio Webcast
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 http://www.newmountainfinance.com.
| ___________________________________________ | ||
(1) |
Excludes non-controlling interest in New Mountain Net Lease Corporation (“NMNLC”). For the quarter ended March 31, 2024 and 2023, |
|
(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 |
|
(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 |
$ |
2,279,598 |
|
|
$ |
2,209,867 |
|
Non-controlled/affiliated investments (cost of |
|
113,281 |
|
|
|
133,659 |
|
Controlled investments (cost of |
|
677,103 |
|
|
|
667,796 |
|
Total investments at fair value (cost of |
|
3,069,982 |
|
|
|
3,011,322 |
|
Securities purchased under collateralized agreements to resell (cost of |
|
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 |
|
(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 |
|
— |
|
|
|
— |
|
Common stock, par value |
|
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
ABOUT NEW MOUNTAIN CAPITAL
New Mountain Capital is a
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240501907151/en/
New Mountain Finance Corporation
Investor Relations
Laura C. Holson, Authorized Representative
NMFCIR@newmountaincapital.com
(212) 220-3505
Source: New Mountain Finance Corporation
FAQ
What was the net investment income per share reported by New Mountain Finance for the quarter ended March 31, 2024?
What distributions did New Mountain Finance declare for the second quarter of 2024?
How did the internal risk rating of the portfolio change for New Mountain Finance ?
What was the change in net asset value per share for New Mountain Finance from December 31, 2023, to March 31, 2024?
How much did New Mountain Finance de-lever from December 31, 2023, to March 31, 2024?
