Core Viewpoint - B. Riley analyst Sean-Paul Adams has lowered the price target for New Mountain Finance (NMFC) to $7.50 from $10, maintaining a Neutral rating on the shares following the Q4 report [1] Group 1: Price Target Adjustment - The price target reduction is attributed to issues disclosed in the quarter for which New Mountain Finance does not have near-term solutions [1] - The new price target reflects a significant decrease of 25% from the previous target [1] Group 2: Identified Issues - Key issues impacting the company include near to mid-term portfolio sale drag, uncertainty regarding redeployment, and reliance on fee waivers [1]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 2025 was $0.32 per share, covering the $0.32 per share dividend paid on December 31 [4][5] - Net asset value (NAV) declined to $11.52 per share from $12.06 per share, primarily due to lower valuation on Edmentum [5][25] - Total investment income for the quarter was $77 million, a 4% decrease compared to the prior quarter [34] Business Line Data and Key Metrics Changes - Approximately 95% of the loan portfolio is ranked green, with no positions rated red [8][24] - PIK income is expected to decrease by 20%-25% as cash proceeds from the asset sale are redeployed [20] - The top five positions now account for 14% of NMFC's portfolio value, down from a higher concentration [19] Market Data and Key Metrics Changes - The company sold approximately $477 million of assets at a price of 94% of the 12/31/2025 marks, which is considered essentially par [12][13] - The secondary sale is expected to improve diversification, with senior-oriented assets now representing 81% of the portfolio, up from 75% [19][32] Company Strategy and Development Direction - The company plans to utilize the full Dividend Protection Program, reducing the performance fee from 20% to 15% until the end of 2026, and intends to maintain this lower fee permanently thereafter [12] - The focus is on redeploying proceeds from the asset sale into first lien assets and potentially buying back stock [41][42] - The company aims to improve earnings and book value through strategic investments and stock buybacks [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's quality, with 95% rated green, and highlighted the potential for equity appreciation in companies like UniTek [11][16] - The impact of AI on the market is acknowledged, with a focus on managing risks associated with technological changes [22] - Management believes NMFC shares should trade back towards book value, given the positive factors in the market [11] Other Important Information - The company repurchased approximately $52 million of shares in 2025 and has board authorization to buy an additional $80 million [16] - Nonaccruals remain low at 1.4% of the portfolio at fair value, with expectations for DCA to return to accrual status in Q2 [26] Q&A Session Summary Question: Is the 94% discount inclusive of any advisory fee? - The 94% of par was the purchase price of the assets, with expected fees and expenses around $7 million [41] Question: Did the company try to sell any struggling assets? - The company focused on reducing concentration and PIK income, selling larger positions that were scrutinized by the market [44][46] Question: How were the assets selected and priced? - The sale was a competitive process with multiple bidders, and assets were selected based on concentration and PIK characteristics [50][52] Question: How does the pricing of these assets relate to internal marks? - The sale was seen as fair for both sides, validating internal marks while improving portfolio composition [60]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 2025 was $0.32 per share, covering the $0.32 per share dividend paid on December 31 [4][5] - Net asset value (NAV) declined to $11.52 per share from $12.06 per share, primarily due to lower valuation on Edmentum [5][25] - Total investment income for the quarter was $77 million, a 4% decrease compared to the prior quarter [34] Business Line Data and Key Metrics Changes - Approximately 95% of the loan portfolio is ranked green, with no positions ranked red [8][24] - PIK income is expected to decrease by 20%-25% as cash proceeds from the asset sale are redeployed [20] - The top five positions now represent 14% of NMFC's portfolio value, down from previous concentrations [19] Market Data and Key Metrics Changes - The company sold approximately $477 million of assets at a price of 94% of the December 31 marks, which is considered essentially par [12][13] - The secondary sale is expected to improve diversification, with senior-oriented assets now representing 81% of the portfolio, up from 75% [19][32] Company Strategy and Development Direction - The company plans to utilize the full Dividend Protection Program, reducing the performance fee from 20% to 15% until the end of 2026, and intends to maintain this lower fee permanently thereafter [12] - The focus remains on deploying proceeds from the asset sale into better credit investment opportunities and stock buybacks [42][60] - The company aims to improve earnings and book value through strategic investments and potential equity appreciation in companies like UniTek [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges increased risks across various sectors due to AI but sees opportunities for informed lenders [22] - The company expects to operate within a leverage target of 1 to 1.25, maintaining financial flexibility post-asset sale [41] - Management believes NMFC shares should trade back towards book value, supported by a sustainable dividend rate of approximately $0.25 per share per quarter starting Q2 2026 [15] Other Important Information - The company repurchased approximately $52 million of shares in 2025 and has board authorization to buy an additional $80 million [16] - Non-accruals remain low at 1.4% of the portfolio at fair value, with expectations for DCA to return to accrual status in Q2 [26] Q&A Session Summary Question: Is the 94% discount inclusive of any advisory fee? - The 94% of par was the purchase price of the assets, with expected fees and expenses of about $7 million [41] Question: Did you try to sell any struggling assets? - The mindset was to reduce concentration and PIK income, focusing on over-concentrated names with high PIK characteristics [44][52] Question: Was the asset sale process competitive? - The sale was competitive, led by Evercore, with multiple bids received, and the selected assets were those that aligned with the company's strategic goals [50][51]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 2025 was $0.32 per share, covering the $0.32 per share dividend paid on December 31, 2025 [4] - Net asset value (NAV) declined to $11.52 per share from $12.06 per share, primarily due to lower valuation on Edmentum [5][25] - Total investment income for the quarter was $77 million, a 4% decrease compared to the prior quarter [35] - Total net expenses decreased by 5% to $44 million, including a fee waiver [35] Business Line Data and Key Metrics Changes - Approximately 95% of the loan portfolio is ranked green, with no positions rated red [8][24] - The company sold $477 million of assets, diversifying the portfolio and reducing PIK income [12][18] - Senior-oriented assets now represent 81% of the portfolio, up from 75% in the prior year [19][32] Market Data and Key Metrics Changes - The company expects to see some spread widening and increased pricing dispersion in direct lending [28] - Approximately 41% of pro forma PIK income will be generated by high-performing companies like Benevis and UniTek [20] Company Strategy and Development Direction - The company plans to utilize the full Dividend Protection Program, reducing the incentive fee from 20% to 15% until the end of 2026 [12] - Following the asset sale, the company aims to redeploy proceeds primarily into first lien assets [19][32] - The company is focused on business building and leveraging its expertise in software loans, particularly in the context of AI [10][22] Management's Comments on Operating Environment and Future Outlook - Management believes NMFC shares should trade back towards book value, citing several positive factors [11] - The company acknowledges increased risks related to AI but sees opportunities for well-informed lenders [22] - Management remains optimistic about the potential for equity appreciation in companies like UniTek [16] Other Important Information - The company repurchased approximately $52 million of shares in 2025 and has authorization to buy an additional $80 million [16] - Nonaccruals remain low at 1.4% of the portfolio at fair value [26] Q&A Session Summary Question: Is the 94% discount on the asset sale inclusive of any advisory fees? - The 94% of par was the purchase price, with expected fees and expenses of about $7 million [41] Question: Did the company try to sell any struggling assets? - The company focused on reducing concentration and PIK income, selling larger positions that were scrutinized by the market [44][45] Question: How were the assets selected for the sale? - The assets were chosen based on concentration and PIK characteristics, aiming to improve portfolio composition [51][52] Question: How does the pricing of the assets compare to internal marks? - The sale was seen as fair for both sides, validating internal marks while reducing concentration [61]

Earnings Presentation Q4 2025 February 25, 2026 14 Important Notices and Safe Harbor Statement Throughout the document, Senior Advisors are included in all references to staff members, team members, investment professionals or operating partners/executives unless stated otherwise. Generally, New Mountain Senior Advisors are similar to "Operating Partners" who provide general or specific industry expertise on particular projects or transactions. All persons listed in the Senior Advisors (Full Access) categor ...

分组1 - New Mountain Finance (NMFC) reported quarterly earnings of $0.32 per share, matching the Zacks Consensus Estimate, with an earnings surprise of +1.59% [1] - The company posted revenues of $77.4 million for the quarter ended December 2025, missing the Zacks Consensus Estimate by 1.82%, and down from $91.19 million year-over-year [2] - New Mountain shares have declined approximately 12.2% since the beginning of the year, contrasting with the S&P 500's slight decline of 0.1% [3] 分组2 - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The estimate revisions trend for New Mountain was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] - The current consensus EPS estimate for the upcoming quarter is $0.32 on revenues of $76.99 million, and for the current fiscal year, it is $1.26 on revenues of $302.49 million [7] 分组3 - The Zacks Industry Rank for the Financial - SBIC & Commercial Industry, to which New Mountain belongs, is currently in the bottom 44% of over 250 Zacks industries, suggesting potential underperformance compared to higher-ranked industries [8] - Nuveen Churchill Direct Lending Corp. (NCDL), another company in the same industry, is expected to report quarterly earnings of $0.43 per share, reflecting a year-over-year decline of 23.2% [9] - NCDL's anticipated revenues are projected to be $50.1 million, down 12.2% from the same quarter last year [10]

Investment Portfolio - The fair value of the company's investments was approximately $2,742.0 million in 113 portfolio companies as of December 31, 2025, compared to approximately $3,091.0 million in 120 portfolio companies as of December 31, 2024[25]. - The company's ten largest portfolio investments accounted for 33.2% of total assets as of December 31, 2025, with the largest being NMFC Senior Loan Program III LLC at 5.5%[27]. - The top three industries in which the company was invested as of December 31, 2025, were Software (18.1%), Business Services (17.8%), and Healthcare (16.0%), totaling 90.1% of total assets[27]. - The company targets debt investments that yield current income and may provide opportunities for capital appreciation through equity securities[33]. - The company monitors portfolio company performance and financial trends on at least a quarterly basis to identify any developments that may impact investment strategy[38]. - Exit strategies for investments include the sale of the portfolio company, recapitalization, repayment of loans at maturity, or sale of the debt investment[39]. - The company values its assets on a quarterly basis, with the board of directors responsible for determining the fair value of portfolio investments[41]. - The company may suffer credit losses and defaults by portfolio companies, which could harm its operating results[72]. - The company’s investment strategy focuses primarily on privately held companies, presenting challenges due to the lack of available information about these companies[76]. Financial Performance - The weighted average yield to maturity at cost for income-producing investments was approximately 10.5% at December 31, 2025, down from 11.0% at December 31, 2024[26]. - The base management fee is calculated at an annual rate of 1.25% of gross assets, following a fee waiver agreement that resulted in approximately $0.3 million in waived management fees for the year ended December 31, 2025[79][80]. - The incentive fee consists of two parts, with 20.0% of Pre-Incentive Fee Net Investment Income payable quarterly, subject to a hurdle rate of 2.0% per quarter[81][82]. - For the year ended December 31, 2025, total incentive fees waived were approximately $12.8 million, which cannot be recouped by the Investment Adviser[83]. - The company accrued a hypothetical capital gains incentive fee based on cumulative net realized capital gains and losses, as well as cumulative net unrealized capital appreciation and depreciation on investments held at the end of each period[85]. - In Alternative 1, the pre-incentive fee net investment income was 0.74%, which did not exceed the hurdle rate of 2.00%, resulting in no income-related incentive fee[86]. - In Alternative 2, the pre-incentive fee net investment income was 2.39%, leading to an income-related incentive fee of 0.39% after applying the "catch-up" provision[87]. - In Alternative 3, the pre-incentive fee net investment income was 2.99%, resulting in an income-related incentive fee of 0.60% after fully satisfying the "catch-up" provision[89]. - For Year 2 in Example 1, the capital gains incentive fee was $6.0 million, calculated as 20.0% of the $30.0 million realized capital gains from the sale of Investment A[90]. - In Year 4 of Example 1, the capital gains incentive fee was $0.2 million, calculated as $6.2 million (20.0% of cumulative realized capital gains) less the $6.0 million fee taken in Year 2[90]. - In Example 2, the capital gains incentive fee for Year 2 was $5.0 million, calculated as 20.0% of the $25.0 million (realized gains from Investment A less unrealized depreciation on Investment B)[92]. Regulatory Compliance - The company adheres to regulatory requirements under the 1940 Act, which includes restrictions on investments and transactions with affiliates[44]. - The company is required to maintain a coverage ratio of at least 150.0%, allowing it to borrow $2 for every $1 of equity[46]. - The company may issue additional equity or debt capital, but cannot sell common stock below net asset value without shareholder approval[47]. - The company received a new exemptive order from the SEC on May 13, 2025, allowing co-investments with affiliates under specific conditions[48]. - To qualify as a Regulated Investment Company (RIC), the company must distribute at least 90.0% of its investment company taxable income annually[54]. - The company is subject to a 4.0% nondeductible U.S. federal excise tax on certain undistributed income unless it meets specific distribution requirements[55]. - The company has received licenses from the SBA for its subsidiaries to operate as SBICs, allowing them to incur leverage through SBA-guaranteed debentures[60]. - The maximum leverage available to a group of SBICs under common control is $350.0 million, with individual SBICs having specific limits[61]. - The SBA prohibits SBICs from financing certain businesses, including those engaged in project finance and real estate[64]. - An SBIC may not provide financing to a single small business in an amount exceeding approximately 10.0% of its private capital and the aggregate amount of SBA leverage[65]. - The company intends to monitor compliance with the Sarbanes-Oxley Act of 2002 and related regulations[116]. Operational Structure - The Investment Committee is responsible for approving investments above $10.0 million, ensuring a structured investment process[29]. - The company does not have any employees; day-to-day operations are managed by the Investment Adviser[115]. - The company has adopted a code of ethics to establish procedures for personal investments and restrict certain personal securities transactions[107]. - The company incurs various operating expenses, including management fees, incentive fees, and costs associated with investment monitoring and compliance[93]. Market Conditions - The company operates in a period of capital markets disruption and economic uncertainty, which may impair its ability to secure debt financing[69]. - The company is subject to numerous constraints under the 1940 Act and the Code, which could adversely affect its business operations[69]. - The company’s ability to grow may be impaired if additional capital is unavailable or not available on favorable terms[72]. - The valuation process for certain portfolio holdings creates potential conflicts of interest, impacting investment returns[72]. - The company’s business model may depend on maintaining referral relationships with private equity sponsors, which could affect its investment strategy if not developed effectively[72]. Interest Rate Sensitivity - As of December 31, 2025, approximately 83.74% of the company's investments at fair value are floating-rate investments, while 16.26% are fixed-rate investments[503]. - The Federal Reserve held interest rates flat in January 2026 after previously decreasing rates by 0.25% in September, October, and December of 2025[503]. - A hypothetical decrease of 200 basis points in interest rates could lead to a 12.07% reduction in interest and dividend income net of interest expense[506]. - Conversely, a hypothetical increase of 200 basis points in interest rates could result in a 12.07% increase in interest and dividend income net of interest expense[506]. Investment Restrictions - The company had no temporary investments as of December 31, 2025[104]. - The company had no repurchase agreements as of December 31, 2025[105]. - The company is permitted to issue multiple classes of debt if its asset coverage is at least 150.0% immediately after issuance[106].

Financial Performance - Fourth quarter net investment income was $33.0 million, or $0.32 per weighted average share, consistent with Q4 2024[2] - Total investment income for 2025 was $327,084,000, a decrease of 11.97% from $371,666,000 in 2024[18] - Net investment income before income taxes for 2025 was $136,379,000, down from $146,222,000 in 2024, reflecting a decline of 5.79%[18] - Net increase in net assets resulting from operations for New Mountain Finance Corporation was $16,488,000 in 2025, compared to $113,443,000 in 2024, a decrease of 85.48%[19] - Basic earnings per share for 2025 was $0.16, significantly lower than $1.06 in 2024, representing a decline of 84.96%[19] Asset and Liability Management - Total assets decreased to $2,902,853,000 in 2025 from $3,246,701,000 in 2024, a reduction of 10.59%[16] - Total liabilities decreased to $1,714,597,000 in 2025 from $1,887,410,000 in 2024, a decline of 9.15%[16] - Net asset value per share decreased to $11.52 in 2025 from $12.55 in 2024, a decrease of 8.22%[16] Investment Portfolio - The investment portfolio's fair value decreased to $2,755.5 million from $2,957.1 million as of September 30, 2025[2] - The investment portfolio composition included 66.0% in first lien investments, 14.1% in senior loan funds, and 8.4% in preferred equity[8] - Approximately 95% of the portfolio is rated green, indicating strong performance[4] Dividend Policy - The annualized dividend yield increased to 15.7% from 10.7% year-over-year[2] - The company plans to reduce the dividend to $0.25 per share starting in Q2 2026, reflecting a pro forma yield of approximately 12% at the current stock price[4] Cash and Debt Position - As of December 31, 2025, the company had cash and cash equivalents of $80.7 million and total statutory debt of $1,492.7 million, resulting in a debt-to-equity ratio of 1.26x[9] Share Repurchase - The company repurchased $30 million worth of shares since the end of Q3 2025, with plans for continued repurchases in 2026[3] Management Fees - Management fees for 2025 were $38,787,000, down from $45,522,000 in 2024, a decrease of 14.06%[18] Company Overview - New Mountain Finance Corporation focuses on providing direct lending solutions to U.S. upper middle market companies, with approximately $60 billion in assets under management[20]

Core Insights - New Mountain Finance Corporation reported its financial results for the quarter and year ended December 31, 2025, highlighting stable net investment income and proactive measures to enhance financial flexibility [1][4]. Financial Performance - Net investment income for Q4 2025 was $33.0 million, or $0.32 per weighted average share, consistent with Q4 2024 [3][6]. - Regular and supplemental dividends paid per share in Q4 2025 were $0.32, slightly down from $0.33 in Q4 2024 [3]. - The annualized dividend yield as of December 31, 2025, was 15.7%, compared to 10.7% in the previous year [3]. - The net asset value (NAV) per share decreased to $11.52 from $12.06 as of September 30, 2025 [3][6]. Portfolio and Investment Activity - The investment portfolio's fair value was $2,755.5 million, with a weighted average yield to maturity (YTM) at cost of approximately 10.5% [7]. - The company signed a definitive agreement to sell $477 million of assets at 94% of fair value to enhance portfolio diversification and reduce payment-in-kind (PIK) income [6][8]. - Approximately 95% of the portfolio is rated green on the internal heatmap, indicating strong asset quality [6]. Management Strategy - Management is taking steps to strengthen the company, including reducing incentive fees and repurchasing shares worth $30 million since the end of Q3 2025 [4][6]. - The company plans to declare a first-quarter 2026 distribution of $0.32 per share, with expectations to reduce the dividend to $0.25 per share starting in Q2 2026 [6]. Liquidity and Capital Resources - As of December 31, 2025, the company had cash and cash equivalents of $80.7 million and total statutory debt outstanding of $1,492.7 million, resulting in a statutory debt-to-equity ratio of 1.26x [12]. - The company had $856.0 million of available capacity on its credit facilities as of the same date [12]. Portfolio Composition - As of December 31, 2025, the investment portfolio composition included 66.0% in first lien investments and 14.1% in senior loan funds [11]. - The company primarily targets middle-market businesses in defensive growth sectors, focusing on high-quality companies with sustainable growth drivers [8][21].

Group 1 - New Mountain Finance (NMFC) shares increased by 5% to close at $8.58, following a period of 10.7% loss over the past four weeks, indicating a significant recovery in trading volume [1] - The rise in NMFC shares is attributed to positive market sentiment driven by U.S. Small Business Administration reforms, which aim to reduce regulatory barriers and encourage private capital investment in critical industries, thereby enhancing lending activity for SBIC-focused companies [2] - NMFC is expected to report quarterly earnings of $0.32 per share, unchanged from the previous year, while revenues are projected to decline by 13.6% to $78.84 million [3] Group 2 - The consensus EPS estimate for NMFC has remained stable over the last 30 days, suggesting that stock price movements may not sustain without trends in earnings estimate revisions [4] - NMFC holds a Zacks Rank of 3 (Hold), indicating a neutral outlook, while another company in the same industry, Nuveen Churchill Direct Lending Corp. (NCDL), also holds a Zacks Rank of 3 and has seen a 2.8% return over the past month [4][5]