New Mountain Finance Corporation Announces Financial Results for the Quarter and Year Ended December 31, 2023
- NMFC reports a net investment income of $0.40 per weighted average share for the fourth quarter of 2023.
- The net asset value per share stands at $12.87, showing a decline from $13.06 on September 30, 2023.
- The Board of Directors declares a first quarter regular distribution of $0.32 per share and a supplemental distribution of $0.04 per share.
- The company's investment portfolio has a fair value of $3,027.8 million across 111 portfolio companies.
- NMFC generated $142.5 million of originations for the three months ended December 31, 2023.
- The total investment income for the year ended December 31, 2023, was $373.8 million, showing growth from the previous year.
- As of December 31, 2023, all investments in the company's portfolio had a Green Risk Rating, except for a few exceptions.
- On January 30, 2024, the Board of Directors declared a regular first quarter 2024 distribution of $0.32 per share and a supplemental distribution of $0.04 per share.
- The Company issued $300.0 million in aggregate principal amount of its 6.875% notes due 2029 on February 1, 2024.
- The net asset value per share has declined from the previous quarter.
- The company recorded net realized and unrealized losses for the three months ended December 31, 2023.
- Total net expenses for the year ended December 31, 2023, increased compared to the previous year.
- The company's statutory debt to equity ratio stands at 1.14x as of December 31, 2023.
- NMFC sold 1,621,833 shares of common stock under its equity distribution agreement, resulting in net proceeds of approximately $21.2 million.
Insights
The reported net investment income (NII) of $0.40 per share indicates a robust earning capacity for New Mountain Finance Corporation (NMFC) during the fourth quarter. This figure surpasses the regular quarterly distribution of $0.32 per share, suggesting a sustainable dividend policy. The slight decline in net asset value (NAV) per share from $13.06 to $12.87, while notable, is mitigated by the special dividend paid, reflecting prudent capital management. The statutory debt-to-equity ratio of 1.14x, adjusted to 1.10x net of available cash, is within a reasonable range for business development companies (BDCs), offering a snapshot of leverage and underlying financial health.
Investors should note the year-over-year earnings growth, which may signal operational efficiency and effective investment strategies. The portfolio's weighted average yield to maturity (YTM) at cost of approximately 10.9% is indicative of the income-generating potential of the investments, although this figure should be considered with caution as it assumes no prepayments or losses and exits at par at maturity, which may not reflect actual future outcomes.
NMFC's focus on defensive growth sectors, as highlighted by management, positions the company to potentially weather economic downturns. The portfolio composition, with a majority in first lien loans (55.6%), demonstrates a conservative risk profile. The Risk Rating distribution, with the majority of investments rated Green, suggests overall portfolio health and effective risk management practices. However, the presence of investments in the Red and Orange categories, albeit a small percentage, should be monitored for potential default risks.
The recent repayment of 2019A Unsecured Notes and the issuance of 2029 Unsecured Notes with a 6.875% interest rate reflect active capital management. This refinancing strategy may impact future interest expenses and income, which are crucial for a BDC's performance. The supplemental distribution related to fourth-quarter earnings indicates a one-time earnings boost, potentially from successful investment exits or other income-generating activities.
From a regulatory standpoint, NMFC's compliance with the U.S. Securities and Exchange Commission (SEC) filings, as evidenced by the Form 10-K filing, provides transparency and adheres to the required disclosure norms for publicly traded companies. The repayment of the 2019A Unsecured Notes and the issuance of new notes should be executed in accordance with the terms of the indenture and relevant securities laws. The company's management of statutory debt and adherence to debt covenants is a critical aspect that ensures ongoing legal compliance and financial stability.
Investors should be aware of the potential implications of the SEC's focus on BDC practices, including fee structures, valuation methods and performance reporting, which could affect NMFC's operations and reporting requirements.
Reports Net Investment Income of
Declares a First Quarter Regular Distribution of
Selected Financial Highlights
(in thousands, except per share data) |
December 31, 2023 |
|
Investment Portfolio1 |
$ |
3,027,822 |
Total Assets |
$ |
3,159,214 |
Total Statutory Debt2 |
$ |
1,507,836 |
NAV3 |
$ |
1,319,951 |
|
|
|
NAV per Share |
$ |
12.87 |
Net Investment Income per Weighted Average Share |
$ |
0.40 |
Regular Fourth Quarter Distribution Paid per Share |
$ |
0.32 |
Supplemental Fourth Quarter Distribution Declared per Share |
$ |
0.04 |
Statutory Debt/Equity |
1.14x |
|
Statutory Debt/Equity (net of available cash) |
1.10x |
|
Management Comments on Fourth Quarter Performance
“Our fourth quarter results reflect another successful quarter for 2023,” 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, “New Mountain closed out the fourth quarter with year-over-year earnings growth, outpacing its regular dividend for the fourth consecutive quarter. Additionally, NMFC distributed a
Portfolio and Investment Activity1
As of December 31, 2023, the Company’s NAV3 was
Consolidated Results of Operations6
Quarterly Results
The Company’s total investment income for the three months ended December 31, 2023 and 2022 was
Annual Results
The Company’s total investment income for the years ended December 31, 2023 and 2022 was
Liquidity and Capital Resources
As of December 31, 2023, the Company had cash and cash equivalents of
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 Annual Report on Form 10-K filed with the
The following table shows the Risk Rating of the Company’s portfolio companies as of December 31, 2023:
(in millions) |
December 31, 2023 |
||||||||||||
Risk Rating |
|
Cost |
|
Percent |
|
Fair Value |
|
Percent |
|||||
Red |
|
$ |
39.7 |
|
1.3 |
% |
|
$ |
4.6 |
|
0.2 |
% |
|
Orange |
|
|
73.1 |
|
2.4 |
% |
|
|
42.5 |
|
1.4 |
% |
|
Yellow1 |
|
|
157.6 |
|
5.1 |
% |
|
|
118.5 |
|
3.9 |
% |
|
Green7 |
|
|
2,797.8 |
|
91.2 |
% |
|
|
2,862.2 |
|
94.5 |
% |
|
Total |
|
$ |
3,068.2 |
|
100.0 |
% |
|
$ |
3,027.8 |
|
100.0 |
% |
|
As of December 31, 2023, all investments in the Company’s portfolio had a Green Risk Rating with the exception of six 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 December 31, 2023:
(in thousands) |
|
|
|
|
||
Investment Portfolio Composition |
|
December 31, 2023 |
|
Percent of Total |
||
First Lien |
|
$ |
1,683,952 |
|
55.6 |
% |
Second Lien1 |
|
|
441,013 |
|
14.6 |
% |
Subordinated |
|
|
90,948 |
|
3.0 |
% |
Preferred Equity |
|
|
208,459 |
|
6.9 |
% |
Investment Fund |
|
|
252,400 |
|
8.3 |
% |
Common Equity and Other7 |
|
|
351,050 |
|
11.6 |
% |
Total |
|
$ |
3,027,822 |
|
100.0 |
% |
Recent Developments
On January 25, 2024, the Company caused notices to be issued to holders of the Company's 2019A Unsecured Notes regarding the exercise of the Company's option to repay all of the Company's
On January 30, 2024, the Company’s Board of Directors declared a regular first quarter 2024 distribution of
On February 1, 2024, the Company issued
| ___________________________________________ | |||
(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 December 31, 2023 and 2022, |
||
(7) |
Includes investment held in NMNLC. |
||
(8) |
Adjusted net investment income per share for the three months ended December 31, 2022 was |
||
Fourth Quarter 2023 Conference Call
New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Tuesday, February 27, 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 May 27, 2024. The full webcast replay will be available through February 27, 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: 4449111
For additional details related to the quarter and year ended December 31, 2023, please refer to the New Mountain Finance Corporation Form 10-K 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) |
|||||||
|
December 31, 2023 |
|
December 31, 2022 |
||||
Assets |
|
|
|
||||
Investments at fair value |
|
|
|
||||
Non-controlled/non-affiliated investments (cost of |
$ |
2,209,867 |
|
|
$ |
2,400,425 |
|
Non-controlled/affiliated investments (cost of |
|
133,659 |
|
|
|
130,787 |
|
Controlled investments (cost of |
|
667,796 |
|
|
|
690,035 |
|
Total investments at fair value (cost of |
|
3,011,322 |
|
|
|
3,221,247 |
|
Securities purchased under collateralized agreements to resell (cost of |
|
16,500 |
|
|
|
16,539 |
|
Cash and cash equivalents |
|
70,090 |
|
|
|
71,190 |
|
Interest and dividend receivable |
|
44,107 |
|
|
|
36,154 |
|
Deferred tax asset |
|
594 |
|
|
|
— |
|
Receivable from affiliates |
|
82 |
|
|
|
— |
|
Other assets |
|
16,519 |
|
|
|
9,797 |
|
Total assets |
$ |
3,159,214 |
|
|
$ |
3,354,927 |
|
Liabilities |
|
|
|
||||
Borrowings |
|
|
|
||||
Holdings Credit Facility |
$ |
515,063 |
|
|
$ |
618,963 |
|
Unsecured Notes |
|
506,500 |
|
|
|
531,500 |
|
SBA-guaranteed debentures |
|
300,000 |
|
|
|
300,000 |
|
Convertible Notes |
|
260,207 |
|
|
|
316,853 |
|
DB Credit Facility |
|
186,400 |
|
|
|
186,400 |
|
NMFC Credit Facility |
|
36,813 |
|
|
|
40,359 |
|
NMNLC Credit Facility II |
|
2,853 |
|
|
|
3,785 |
|
Deferred financing costs (net of accumulated amortization of |
|
(22,387 |
) |
|
|
(17,199 |
) |
Net borrowings |
|
1,785,449 |
|
|
|
1,980,661 |
|
Management fee payable |
|
10,116 |
|
|
|
10,524 |
|
Incentive fee payable |
|
8,555 |
|
|
|
6,296 |
|
Interest payable |
|
20,440 |
|
|
|
19,627 |
|
Payable to affiliates |
|
— |
|
|
|
78 |
|
Deferred tax liability |
|
— |
|
|
|
8,487 |
|
Other liabilities |
|
2,931 |
|
|
|
3,063 |
|
Total liabilities |
|
1,827,491 |
|
|
|
2,028,736 |
|
Commitments and contingencies |
|
|
|
||||
Net assets |
|
|
|
||||
Preferred stock, par value |
|
— |
|
|
|
— |
|
Common stock, par value |
|
1,026 |
|
|
|
1,009 |
|
Paid in capital in excess of par |
|
1,331,269 |
|
|
|
1,305,945 |
|
Accumulated undistributed earnings |
|
(12,344 |
) |
|
|
7,519 |
|
Total net assets of New Mountain Finance Corporation |
$ |
1,319,951 |
|
|
$ |
1,314,473 |
|
Non-controlling interest in New Mountain Net Lease Corporation |
|
11,772 |
|
|
|
11,718 |
|
Total net assets |
$ |
1,331,723 |
|
|
$ |
1,326,191 |
|
Total liabilities and net assets |
$ |
3,159,214 |
|
|
$ |
3,354,927 |
|
Number of shares outstanding |
|
102,558,859 |
|
|
|
100,937,026 |
|
Net asset value per share of New Mountain Finance Corporation |
$ |
12.87 |
|
|
$ |
13.02 |
|
New Mountain Finance Corporation Consolidated Statements of Operations (in thousands, except shares and per share data) |
|||||||||||
|
Year ended December 31, |
||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2021 |
|
Investment income |
|
|
|
|
|
||||||
From non-controlled/non-affiliated investments: |
|
|
|
|
|
||||||
Interest income (excluding Payment-in-kind ("PIK") interest income) |
$ |
249,851 |
|
|
$ |
184,367 |
|
|
$ |
159,189 |
|
PIK interest income |
|
15,968 |
|
|
|
11,767 |
|
|
|
8,582 |
|
Dividend income |
|
193 |
|
|
|
193 |
|
|
|
915 |
|
Non-cash dividend income |
|
17,481 |
|
|
|
14,071 |
|
|
|
10,153 |
|
Other income |
|
4,981 |
|
|
|
9,156 |
|
|
|
14,106 |
|
From non-controlled/affiliated investments: |
|
|
|
|
|
||||||
Interest income (excluding PIK interest income) |
|
1,951 |
|
|
|
1,062 |
|
|
|
1,579 |
|
PIK interest income |
|
2,183 |
|
|
|
1,043 |
|
|
|
434 |
|
Dividend income |
|
— |
|
|
|
— |
|
|
|
288 |
|
Non-cash dividend income |
|
4,625 |
|
|
|
4,109 |
|
|
|
4,835 |
|
Other income |
|
251 |
|
|
|
250 |
|
|
|
345 |
|
From controlled investments: |
|
|
|
|
|
||||||
Interest income (excluding PIK interest income) |
|
5,386 |
|
|
|
9,438 |
|
|
|
5,470 |
|
PIK interest income |
|
15,443 |
|
|
|
4,516 |
|
|
|
14,327 |
|
Dividend income |
|
45,905 |
|
|
|
43,149 |
|
|
|
41,659 |
|
Non-cash dividend income |
|
5,303 |
|
|
|
4,363 |
|
|
|
4,497 |
|
Other income |
|
5,315 |
|
|
|
7,146 |
|
|
|
4,580 |
|
Total investment income |
|
374,836 |
|
|
|
294,630 |
|
|
|
270,959 |
|
Expenses |
|
|
|
|
|
||||||
Interest and other financing expenses |
|
124,784 |
|
|
|
92,421 |
|
|
|
73,098 |
|
Management fee |
|
45,610 |
|
|
|
46,617 |
|
|
|
52,960 |
|
Incentive fee |
|
38,303 |
|
|
|
29,901 |
|
|
|
29,710 |
|
Administrative expenses |
|
4,101 |
|
|
|
4,131 |
|
|
|
4,461 |
|
Professional fees |
|
3,771 |
|
|
|
3,433 |
|
|
|
3,197 |
|
Other general and administrative expenses |
|
2,068 |
|
|
|
2,338 |
|
|
|
1,923 |
|
Total expenses |
|
218,637 |
|
|
|
178,841 |
|
|
|
165,349 |
|
Less: management fee waived |
|
(4,117 |
) |
|
|
(4,402 |
) |
|
|
(13,104 |
) |
Less: expenses waived and reimbursed |
|
— |
|
|
|
(238 |
) |
|
|
(244 |
) |
Net expenses |
|
214,520 |
|
|
|
174,201 |
|
|
|
152,001 |
|
Net investment income before income taxes |
|
160,316 |
|
|
|
120,429 |
|
|
|
118,958 |
|
Income tax expense |
|
418 |
|
|
|
825 |
|
|
|
118 |
|
Net investment income |
|
159,898 |
|
|
|
119,604 |
|
|
|
118,840 |
|
Net realized (losses) gains: |
|
|
|
|
|
||||||
Non-controlled/non-affiliated investments |
|
(49,267 |
) |
|
|
(737 |
) |
|
|
(3,167 |
) |
Non-controlled/affiliated investments |
|
— |
|
|
|
— |
|
|
|
8,338 |
|
Controlled investments |
|
16,413 |
|
|
|
53,440 |
|
|
|
(9,035 |
) |
Foreign currency |
|
13 |
|
|
|
827 |
|
|
|
15 |
|
Net change in unrealized appreciation (depreciation): |
|
|
|
|
|
||||||
Non-controlled/non-affiliated investments |
|
47,956 |
|
|
|
(81,197 |
) |
|
|
(23,466 |
) |
Non-controlled/affiliated investments |
|
(19,052 |
) |
|
|
(9,156 |
) |
|
|
66,505 |
|
Controlled investments |
|
(18,588 |
) |
|
|
6,219 |
|
|
|
49,347 |
|
Securities purchased under collateralized agreements to resell |
|
(39 |
) |
|
|
(4,883 |
) |
|
|
— |
|
Foreign currency |
|
100 |
|
|
|
(1,115 |
) |
|
|
(81 |
) |
Provision for taxes |
|
(1,344 |
) |
|
|
(8,474 |
) |
|
|
(114 |
) |
Net realized and unrealized (losses) gains |
|
(23,808 |
) |
|
|
(45,076 |
) |
|
|
88,342 |
|
Net increase in net assets resulting from operations |
|
136,090 |
|
|
|
74,528 |
|
|
|
207,182 |
|
Less: Net (increase) decrease in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation |
|
(747 |
) |
|
|
204 |
|
|
|
(5,783 |
) |
Net increase in net assets resulting from operations related to New Mountain Finance Corporation |
$ |
135,343 |
|
|
$ |
74,732 |
|
|
$ |
201,399 |
|
Basic earnings per share |
$ |
1.34 |
|
|
$ |
0.75 |
|
|
$ |
2.08 |
|
Weighted average shares of common stock outstanding - basic |
|
101,118,302 |
|
|
|
100,202,847 |
|
|
|
96,952,959 |
|
Diluted earnings per share |
$ |
1.24 |
|
|
$ |
0.74 |
|
|
$ |
1.91 |
|
Weighted average shares of common stock outstanding - diluted |
|
123,488,882 |
|
|
|
115,426,198 |
|
|
|
110,210,545 |
|
Distributions declared and paid per share |
$ |
1.49 |
|
|
$ |
1.22 |
|
|
$ |
1.20 |
|
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/20240226174936/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 NMFC's net investment income per share for the fourth quarter of 2023?
What is the net asset value per share for NMFC as of December 31, 2023?
How many portfolio companies does NMFC have?
What distributions did NMFC declare for the first quarter of 2024?
What was the total investment income for NMFC for the year ended December 31, 2023?
What risk rating did all investments in NMFC's portfolio have as of December 31, 2023?
What did NMFC declare on January 30, 2024, regarding distributions?
When did NMFC issue $300.0 million in aggregate principal amount of its 6.875% notes due 2029?
