[Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) NMFC's Q1 2025 performance shows stable net investment income, strong credit quality, and strategic debt cost reduction [First Quarter 2025 Performance Summary](index=1&type=section&id=First%20Quarter%202025%20Performance%20Summary) NMFC reported Q1 2025 net investment income of **$0.32 per share**, with NAV at **$12.45** and **96%** portfolio rated 'Green' Q1 2025 Key Financial Metrics | ($ in millions, except per share data) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Investment Income per Weighted Average Share | $0.32 | $0.36 | | Regular & Supplemental Dividends Paid per Share in Quarter | $0.32 | $0.36 | | Annualized Dividend Yield | 12.8% | 10.7% | | | **March 31, 2025** | **December 31, 2024** | | Investment Portfolio | $3,047.7 | $3,104.5 | | NAV per Share | $12.45 | $12.55 | | Statutory Debt/Equity | 1.15x | 1.15x | - Declared a second quarter 2025 distribution of **$0.32 per share**, payable on June 30, 2025[5](index=5&type=chunk) - Key operational achievements in Q1 2025 include: - Sustained strong credit performance with **~96.5%** of the portfolio rated green[5](index=5&type=chunk) - Reduced cost of debt on the Holdings Credit Facility from **SOFR + 2.15% to SOFR + 1.95%**[5](index=5&type=chunk) - Increased senior-oriented asset mix to **77%**, up from **75%** at the end of 2024[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Comments%20on%20First%20Quarter%20Performance) Management emphasizes NMFC's defensive sector strategy, strong credit performance, and progress on strategic priorities - Chairman Steven B. Klinsky stated that the company's strategy of investing in defensive sectors makes it well-positioned for tariff and other political issues[4](index=4&type=chunk) - CEO John R. Kline highlighted strong credit performance (**over 96% rated green**) and confidence in delivering consistent yield, also noting meaningful progress on strategic priorities such as PIK reduction, investment diversification, and reducing liability costs[4](index=4&type=chunk) [Portfolio Analysis](index=1&type=section&id=Portfolio%20Analysis) The portfolio, valued at **$3.05 billion**, focuses on defensive sectors with **96.5%** 'Green' rated assets and a senior debt emphasis [Portfolio and Investment Activity](index=1&type=section&id=Portfolio%20and%20Investment%20Activity) The portfolio's fair value was **$3.05 billion** across 119 companies, with Q1 2025 seeing **$120.8 million** in new investments - As of March 31, 2025, the portfolio's fair value was **$3,047.7 million** in 119 companies, with a weighted average YTM at Cost of approximately **10.2%**[5](index=5&type=chunk) - In Q1 2025, the company originated **$120.8 million** of new investments, while experiencing **$160.4 million** in repayments and **$26.3 million** in asset sales[5](index=5&type=chunk) [Portfolio Quality and Industry Composition](index=2&type=section&id=Portfolio%20Quality%20and%20Industry%20Composition) NMFC targets defensive growth industries, with Software, Healthcare, and Business Services as top sectors, maintaining **96.5%** 'Green' rated assets - The company focuses on defensive growth businesses characterized by acyclicality, sustainable growth, niche market dominance, recurring revenue, and strong free cash flow[6](index=6&type=chunk) Portfolio Industry Composition (Top 3) | Industry | Percent of Portfolio (Fair Value) | | :--- | :--- | | Software | 31.5% | | Healthcare | 19.8% | | Business Services | 17.3% | Portfolio Risk Rating as of March 31, 2025 | Risk Rating | Percent of Fair Value | | :--- | :--- | | Green | 96.5% | | Yellow | 2.3% | | Orange | 1.2% | | Red | 0.0% | [Investment Portfolio Composition](index=4&type=section&id=Investment%20Portfolio%20Composition) The investment portfolio is heavily weighted towards senior debt, with **64.3%** in First Lien and **12.7%** in Senior Loan Funds Investment Portfolio Composition as of March 31, 2025 | Investment Type | Percent of Total | | :--- | :--- | | First Lien | 64.3% | | Senior Loan Funds (SLP III & SLP IV) & NMNLC | 12.7% | | Second Lien | 6.1% | | Subordinated | 3.4% | | Preferred Equity | 8.0% | | Common Equity and Other | 5.5% | [Liquidity and Capital Resources](index=4&type=section&id=Liquidity%20and%20Capital%20Resources) NMFC maintains strong liquidity with **$85.5 million** cash, a **1.15x** statutory debt-to-equity ratio, and **$1.17 billion** available borrowing capacity Liquidity and Capitalization as of March 31, 2025 | Metric | Value | | :--- | :--- | | Cash and cash equivalents | $85.5 million | | Total statutory debt outstanding | $1,543.7 million | | Statutory debt to equity | 1.15x | | Statutory debt to equity (net of cash) | 1.09x | | Available borrowing capacity | $1,168.8 million | [Financial Statements](index=7&type=section&id=Financial%20Statements) Financial statements show a slight decrease in total assets and net assets, with Q1 2025 net investment income at **$34.6 million** [Consolidated Statements of Assets and Liabilities](index=7&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets decreased to **$3.20 billion** from **$3.25 billion**, leading to a NAV per share decline from **$12.55** to **$12.45** Balance Sheet Comparison (in millions) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments at fair value | $3,034.2 | $3,091.0 | | Total assets | $3,196.7 | $3,246.7 | | Net borrowings | $1,782.9 | $1,836.7 | | Total liabilities | $1,848.5 | $1,887.4 | | Total net assets | $1,348.2 | $1,359.3 | | Net asset value per share | $12.45 | $12.55 | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 total investment income was **$85.7 million**, resulting in net investment income of **$34.6 million** or **$0.32 per share** Statement of Operations Comparison (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $85,663 | $90,556 | | Net expenses | $51,041 | $53,001 | | Net investment income | $34,641 | $37,554 | | Net realized and unrealized losses | $(11,124) | $(9,470) | | Net increase in net assets (NMFC) | $23,413 | $27,408 | Per Share Data Comparison | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Basic earnings per share | $0.22 | $0.26 | | Distributions declared and paid per share | $0.32 | $0.36 | [Corporate and Investor Information](index=4&type=section&id=Corporate%20and%20Investor%20Information) Information on the upcoming earnings call and details about NMFC's direct lending strategy and its manager, New Mountain Capital [Conference Call Information](index=4&type=section&id=Conference%20Call%20Information) An earnings conference call for Q1 2025 results is scheduled for May 6, 2025, with replay options available - An earnings conference call is scheduled for **10:00 am ET** on **Tuesday, May 6, 2025**[15](index=15&type=chunk) - A replay of the conference call will be available for **three months**, and the webcast replay will be available for **one year**[16](index=16&type=chunk) [About New Mountain Finance Corporation and New Mountain Capital](index=12&type=section&id=About%20New%20Mountain%20Finance%20Corporation%20and%20New%20Mountain%20Capital) NMFC is a BDC focused on direct lending to U.S. upper middle-market companies, managed by New Mountain Capital with over **$55 billion** AUM - NMFC focuses on direct lending to U.S. upper middle-market companies in defensive sectors, backed by top private equity sponsors[30](index=30&type=chunk) - New Mountain Capital, the investment manager, has over **$55 billion** in assets under management across private equity, credit, and net lease strategies[31](index=31&type=chunk)

Core Insights - The article emphasizes the importance of innovation and disruption in the financial sector, particularly focusing on high-tech and early growth companies [1] Group 1: Company Insights - The financial researcher highlights a beneficial long position in NMFC shares, indicating confidence in the company's future performance [2] - The article discusses the potential for growth buyouts and value stocks, suggesting that these areas may present significant investment opportunities [1] Group 2: Industry Trends - There is a strong focus on the pace of technological advancements and their impact on investment strategies within the industry [1] - The article suggests that current events and major news in the industry are crucial for identifying potential investment opportunities [1]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 was $0.32 per share, covering the regular dividend of $0.32 per share paid on December 31 [8] - Net asset value per share declined by $0.07 or 0.6% to $12.55, indicating stable credit performance across the portfolio [8][26] - Total investment income for Q4 was $91 million, a 2% decrease year-over-year, while total net expenses decreased by 9% to $57 million [49] Business Line Data and Key Metrics Changes - The portfolio had over $3 billion of investments at fair value, with total assets of $3.2 billion and total liabilities of $2 billion [47] - Approximately 75% of investments are senior in nature, with second lien positions down to 7% from 8% last quarter [40] - The average yield of NMFC's portfolio increased to 11% for Q4, primarily due to the higher for longer shift in the forward SOFR curve [42] Market Data and Key Metrics Changes - The NMFC loan portfolio is 86% floating rate and 14% fixed rate, while liabilities are 49% floating and 51% fixed rate [36] - The weighted average EBITDA of borrowers decreased slightly to $184 million, reflecting the realization of larger companies during the quarter [43] - The current portfolio has an average loan to value of 41%, with weighted average interest coverage increasing to 1.8 times [44] Company Strategy and Development Direction - The company aims to maintain or increase its heavily senior-oriented asset mix, focusing on first lien and unitranche loans [20] - NMFC seeks to optimize the cost, duration, and quality of its liabilities, targeting a floating rate liability mix of approximately 75% over the next twelve months [23][56] - The company continues to focus on defensive growth sectors, avoiding cyclical and volatile industries [16] Management's Comments on Operating Environment and Future Outlook - Management believes that direct lending remains an attractive asset class despite a slower start to 2025 [32] - There is an expectation of increased M&A activity in 2025, driven by private equity dry powder and attractive financing markets [34] - Credit selection remains critical in a backdrop of volatility and uncertainty, with minimal pricing and structural flexibility [35] Other Important Information - The company has never experienced a bankruptcy or missed an interest payment in its private equity funds, managing over $55 billion in assets [12] - The internal risk rating of the portfolio remains consistent at approximately 97% green rated, with only $38 million or 1.2% of the portfolio on non-accrual [24][28] - The company has a diversified portfolio across 121 companies, with the top ten single name issuers accounting for 27% of total fair value [45] Q&A Session Summary Question: Inquiry about UniTek's exit valuation - Management indicated that the enterprise value for UniTek is modestly higher than the Q4 mark [62] Question: Concerns about market uncertainties affecting activity - Management feels that while the start of 2025 has been slower than expected, they remain optimistic about reducing PIK positions [65][66] Question: Allocation strategy among senior loans, loan funds, and net lease - Management stated that the mix within the senior category will remain the same [68] Question: Thoughts on market spreads and potential for repricing - Management noted that spreads have stabilized and do not expect further downward pressure, especially if M&A activity picks up [71][72] Question: Repricing activity within the portfolio - Management believes that most deals that could reprice have already gone through that exercise, indicating confidence in the current portfolio [73]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 was $0.32 per share, covering the regular dividend of $0.32 per share paid on December 31 [8] - Net asset value per share declined to $12.55, a decrease of $0.07 or 0.6% from the previous quarter [8][26] - Total investment income for Q4 was $91 million, a 2% decrease year-over-year, while total net expenses decreased by 9% to $57 million [49] Business Line Data and Key Metrics Changes - The portfolio had over $3 billion of investments at fair value, with total assets of $3.2 billion and total liabilities of $2 billion [47] - Approximately 75% of investments are senior in nature, with second lien positions representing just 7% of the portfolio, down from 8% last quarter [40] - The average yield of NMFC's portfolio increased to 11% for Q4, primarily due to the higher for longer shift in the forward SOFR curve [42] Market Data and Key Metrics Changes - The NMFC loan portfolio is 86% floating rate and 14% fixed rate, while liabilities are 49% floating and 51% fixed rate [36] - The weighted average EBITDA of borrowers decreased slightly to $184 million, with portfolio company leverage coming down slightly [43] Company Strategy and Development Direction - The company aims to maintain or increase its heavily senior-oriented asset mix, focusing on first lien and unitranche loans [20] - NMFC seeks to optimize the cost, duration, and quality of its liabilities, targeting a floating rate liability mix of approximately 75% over the next twelve months [23][56] - The company continues to focus on defensive growth sectors, avoiding cyclical and volatile industries [16] Management's Comments on Operating Environment and Future Outlook - Management believes that direct lending remains an attractive asset class despite a slower start to 2025 [32] - There is an expectation of increased M&A activity in 2025, driven by private equity dry powder and attractive financing markets [34] - Credit selection remains critical in a backdrop of volatility and uncertainty across political and regulatory headlines [35] Other Important Information - The company has never had a bankruptcy or missed an interest payment, managing over $55 billion of assets [12] - NMFC has experienced only 12 basis points of average annualized net realized losses since its IPO [12] Q&A Session Summary Question: How does the enterprise value of UniTek compare to the Q4 mark? - The enterprise value is modestly higher than the Q4 mark [62] Question: How comfortable is the company about UniTek and lowering PIK exposure? - The company feels good about UniTek and expects to show progress in reducing PIK positions [66] Question: Will the mix between senior loans, loan funds, and net lease remain the same? - The expectation is that the mix will stay the same [68] Question: Are market spreads expected to stabilize or recalibrate? - Spreads have stabilized, and the company expects them to pick up if M&A activity increases [71] Question: How much of the portfolio is vulnerable to repricing activity? - The majority of deals that could reprice have already gone through that exercise [73]

Earnings Performance - New Mountain Finance (NMFC) reported quarterly earnings of $0.32 per share, missing the Zacks Consensus Estimate of $0.33 per share, and down from $0.40 per share a year ago, representing an earnings surprise of -3.03% [1] - The company posted revenues of $91.2 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 2.36%, compared to year-ago revenues of $92.8 million [2] Stock Performance - New Mountain shares have increased approximately 6.2% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.33 on revenues of $91.56 million, and for the current fiscal year, it is $1.31 on revenues of $362.11 million [7] Industry Outlook - The Financial - SBIC & Commercial Industry, to which New Mountain belongs, is currently in the top 20% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry performance can significantly impact stock performance [5][8]

Investment Valuation and Performance - The fair value of the company's investments was approximately $3,091.0 million in 120 portfolio companies as of December 31, 2024, compared to approximately $3,011.3 million in 110 portfolio companies as of December 31, 2023, reflecting an increase of 2.65%[27]. - The weighted average yield to maturity at cost for income-producing investments was approximately 11.0% as of December 31, 2024, up from 10.9% as of December 31, 2023[29]. - The weighted average yield to maturity at cost for all investments was approximately 9.2% as of December 31, 2024, down from 9.7% as of December 31, 2023[29]. - The company's ten largest portfolio investments accounted for 31.8% of total assets as of December 31, 2024, with the largest investment being NMFC Senior Loan Program III LLC at 4.9%[30]. - The software industry represented 26.1% of total assets, while healthcare and business services accounted for 15.5% and 15.3%, respectively, as of December 31, 2024[30]. - The company values its assets on a quarterly basis, with the board of directors responsible for determining the fair value of portfolio investments[42]. - As of December 31, 2024, 14.6% of total assets are represented by investments at fair value that are considered non-qualifying assets[110]. - The company reported a net change in unrealized appreciation of investments of $15,069 in 2024, compared to $10,416 in 2023[519]. - The total fair value of investments as of December 31, 2024, is $81,319,000, representing 5.98% of net assets[526]. - The total fair value of investments as of December 31, 2024, is presented in thousands, indicating a comprehensive financial overview[548]. Investment Strategy and Focus - The company targets debt investments that yield current income and may provide opportunities for capital appreciation through equity securities[36]. - The company’s investment strategy focuses primarily on privately held companies, presenting challenges due to the lack of available information[78]. - The overall investment strategy focuses on first lien and subordinated debt across various sectors, including software and financial services[531]. - The company continues to focus on expanding its portfolio in the software and healthcare sectors, indicating a strategic emphasis on high-growth industries[530]. - The company maintains a diversified portfolio across various sectors, including software and healthcare, enhancing its investment strategy[547]. - The company’s investment strategy includes a mix of first lien and preferred shares across various industries, including healthcare and education[557]. - The company is actively managing its investment portfolio with a focus on undrawn commitments, suggesting a strategy for future capital deployment[571]. Financial Performance and Metrics - Total investment income for the year ended December 31, 2024, was $371,666,000, slightly down from $374,836,000 in 2023, representing a decrease of 0.58%[515]. - Net investment income before income taxes decreased to $146,222,000 in 2024 from $160,316,000 in 2023, a decline of 8.77%[515]. - Basic earnings per share for 2024 were $1.06, down from $1.34 in 2023, indicating a decrease of 20.88%[515]. - Total liabilities increased to $1,887,410,000 in 2024 from $1,827,491,000 in 2023, marking an increase of 3.29%[513]. - The net asset value per share of New Mountain Finance Corporation decreased to $12.55 in 2024 from $12.87 in 2023, a decline of 2.48%[513]. - Total expenses increased to $229,183,000 in 2024 from $218,637,000 in 2023, reflecting an increase of 4.99%[515]. - Distributions declared and paid per share decreased to $1.37 in 2024 from $1.49 in 2023, a reduction of 8.05%[515]. - The net increase in net assets resulting from operations for 2024 was $114,503, down 15.9% from $136,090 in 2023[522]. - Total net decrease in net assets resulting from capital transactions was $80,055 in 2024, compared to a decrease of $129,865 in 2023[519]. - Cash flows provided by operating activities were $41,999 in 2024, a decrease from $332,729 in 2023[522]. Regulatory and Compliance - The company is required to maintain a coverage ratio of at least 150.0%, allowing it to borrow $2 for every $1 of equity[50]. - The company may issue additional equity or debt capital, but cannot sell common stock below net asset value without shareholder approval[51]. - The SEC issued an exemptive order allowing the company to co-invest with affiliates under certain conditions, enhancing investment flexibility[52]. - To qualify as a Regulated Investment Company (RIC), the company must distribute at least 90.0% of its investment company taxable income annually[57]. - The company is subject to a 4.0% nondeductible U.S. federal excise tax on certain undistributed income unless it meets specific distribution requirements[58]. - The company is subject to SBA regulations as it operates SBIC I and SBIC II, which may impact its business operations[78]. - The company has received licenses from the SBA for its subsidiaries to operate as Small Business Investment Companies (SBICs), allowing them to incur leverage[63]. Management and Fees - 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 $3.7 million in waived management fees for the year ended December 31, 2024[87]. - 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 (8.0% annualized)[88]. - For the year ended December 31, 2024, no incentive fees were waived, and the Investment Adviser cannot recoup previously waived fees[91]. - The board of directors approved the Investment Management Agreement for a period of 12 months commencing on March 1, 2025, after reviewing the fee structure and performance[107]. - The base management fee is set to be reduced as per Amendment No. 2 of the Investment Management Agreement effective January 29, 2025[103]. Market Conditions and Risks - The company operates in a highly competitive market for investment opportunities, which may affect its ability to compete effectively[74]. - The company may face credit losses and adverse developments in credit markets that could impair its ability to secure debt financing[74]. - The valuation of portfolio investments is determined by the board of directors, which may create uncertainty regarding their fair value[74]. - The company’s performance may differ from historical performance due to a shift towards more primary originations in its investment strategy[82]. - The estimated percentage change in interest income net of interest expense could be a decrease of 15.51% if interest rates drop by 200 basis points[497]. - In September 2024, the Federal Reserve decreased interest rates by 0.50%, followed by an additional 0.25% decrease in December 2024[494]. Future Outlook - Future outlook includes potential market expansions and new product developments to drive growth and enhance shareholder value[547]. - The company’s overall strategy includes market expansion and potential acquisitions to enhance its investment portfolio and improve financial performance[579].

Financial Performance - Fourth Quarter Net Investment Income was $0.32 per share, down from $0.40 per share in Q4 2023[3] - Total investment income for 2024 was $371,666, a slight decrease of 0.45% from $374,836 in 2023[27] - Net investment income before income taxes decreased to $146,222, down 8.75% from $160,316 in 2023[27] - Basic earnings per share for 2024 were $1.06, down from $1.34 in 2023, reflecting a decrease of 20.9%[28] - Net increase in net assets resulting from operations was $114,503, down from $136,090 in 2023, a decline of 15.87%[27] Dividends and Distributions - Regular and Supplemental Dividends paid per share in the quarter were $0.33, compared to $0.36 in Q4 2023, resulting in an annualized dividend yield of 10.7%[3] - A first quarter 2025 distribution of $0.32 per share has been declared, payable on March 31, 2025[5] - Distributions declared and paid per share decreased to $1.37 from $1.49, a reduction of 8.05%[28] Assets and Liabilities - As of December 31, 2024, the Company's NAV was $1,353.3 million, with a portfolio fair value of $3,104.5 million across 121 portfolio companies[5] - Total assets increased to $3,246,701, up from $3,159,214, representing a growth of 2.75% year-over-year[24] - Total liabilities increased to $1,887,410, compared to $1,827,491 in 2023, marking a rise of 3.28%[24] - The Company had cash and cash equivalents of $80.3 million and total statutory debt outstanding of $1,560.9 million as of December 31, 2024[14] - Cash and cash equivalents increased to $80,320 from $70,090, a growth of 14.06%[24] Investment Portfolio - The investment portfolio composition includes 62.9% in First Lien investments and 12.5% in Senior Loan Funds[13] - Approximately 97% of the portfolio is rated green, indicating strong credit performance[5] - The partial sale of UniTek valued the company at $370 million, with NMFC retaining a 31% ownership stake[4] - The Company generated $33.1 million in originations and realized $58.9 million from asset sales during the quarter[5] Debt and Equity - The statutory debt/equity ratio decreased to 1.15x, down from 1.26x as of September 30, 2024[3] - The number of shares outstanding increased to 107,851,415 from 102,558,859, an increase of 5.1%[24] - Non-controlled/non-affiliated investments saw a net realized loss of $45,365, compared to a loss of $49,267 in 2023[27]

Group 1 - The golden era for Business Development Companies (BDCs) is coming to an end as elevated interest rates impact portfolio quality, leading to challenges for borrowers [3] - Some BDCs are experiencing a decline in the quality of their portfolios due to the prolonged high-interest rate environment [3] Group 2 - The article highlights the importance of analyzing market conditions and their effects on investment vehicles like BDCs, emphasizing the need for investors to stay informed [3]

Core Insights - New Mountain Finance Corporation (Nasdaq: NMFC) managed to cover its dividend with net investment income in the third quarter [1] - The company lowered its supplemental dividend to $0.01 per share and paused its supplemental dividend program [1] Financial Performance - NMFC's net investment income was sufficient to cover its regular dividend obligations [1] - The decision to lower the supplemental dividend indicates a shift in the company's financial strategy [1] Dividend Policy - The supplemental dividend program has been paused, reflecting potential changes in the company's capital allocation priorities [1]

NEW MOUNTAIN FINANCE | --- | --- | |-------|-------| | | | | | | Important Notices and Safe Harbor Statement This presentation contains forward looking statements, which are not guarantees of future performance, conditions or results, and involve substantial risks and uncertainties, including the current conflict between Russia and Ukraine, conflict in the Middle East, and related changes in base interest rates and significant volatility on our business, portfolio companies, our industry, and the global eco ...