Financial Data and Key Metrics Changes - Adjusted net investment income for Q3 2024 was $0.34 per share, exceeding the regular dividend of $0.32 per share [5][45] - Net asset value per share declined to $12.62, a decrease of $0.12 or 0.9% from the previous quarter [6][20] - Total investment income for the quarter was $96 million, a 2% increase year-over-year [45] Business Line Data and Key Metrics Changes - The internal risk ratings of the portfolio improved, with 97.3% rated green, the highest level since 2020 [17] - Approximately 75% of investments are senior in nature, with second-lien positions down to 8% of the portfolio [37] - The average yield of the portfolio decreased to 10.5% due to a downward shift in the forward SOFR curve [39] Market Data and Key Metrics Changes - Sponsor-backed M&A activity remained below normal levels, but opportunities were found in defensive growth verticals [26] - The direct lending market continues to be the financing market of choice for sponsors, with expectations for increased activity in early 2025 [29][27] - The weighted average EBITDA of borrowers increased to $189 million, indicating growth among the companies financed [40] Company Strategy and Development Direction - The company focuses on defensive growth sectors such as life science supplies, healthcare IT, and software [10] - The strategy emphasizes minimizing credit losses and distributing excess income to shareholders, with a long-term track record of consistent returns [16] - Management aims to reduce PIK exposure and replace it with cash-oriented assets, targeting a PIK ratio below 10% to 12% [64] Management Comments on Operating Environment and Future Outlook - Management remains optimistic about the prospects for non-green names in the portfolio, with expectations for M&A activity to increase in 2025 [19][27] - The company has successfully improved its liability structure and anticipates further opportunities to refinance and reduce financing costs [50][52] - Management acknowledges the current weakness in stock price is related to PIK levels but sees potential for improvement in 2025 [77] Other Important Information - The company has paid $0.20 per share in supplemental dividends since the program began in Q2 2023 [8] - The company has a diversified portfolio across 128 companies, with the top 10 issuers accounting for 25% of total fair value [43] - The company has $3 billion in total borrowing capacity, highlighting a strong liquidity position [48] Q&A Session Summary Question: Changes in portfolio leverage - Management indicated that the decrease in leverage from 6.7 times to 6.3 times is due to a combination of factors, including the performance of existing businesses and the types of new assets being originated [55][56] Question: PIK assets and refinancing - Management expects to reduce PIK exposure through refinancing as older PIK-preferred investments mature and perform well, aiming for a long-term target of under 10% to 12% [60][64] Question: SLP performance and dividends - Management clarified that the decrease in dividends from SLPs was timing-related and not indicative of any underlying issues, as the SLPs continue to perform well [65] Question: Cash pay assets versus PIK - Management plans to focus on reducing chunky PIK exposures while still offering PIK options on predominantly cash pay loans, aiming for a balanced portfolio [69][70] Question: Direct lending market spreads - Management noted that current spreads are indicative of a tighter market but expect normalization as deal flow increases post-election and into 2025 [72][73] Question: Stock buyback and valuation - Management is open to utilizing the stock buyback program to defend stock value, particularly as the stock trades below historical NAV levels [78][79]

Group 1 - New Mountain Finance (NMFC) reported quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.35 per share, and down from $0.40 per share a year ago, representing an earnings surprise of -2.86% [1] - The company posted revenues of $95.33 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.71%, compared to year-ago revenues of $94.35 million [2] - New Mountain shares have underperformed the market, losing about 10.5% since the beginning of the year, while the S&P 500 gained 22.3% [3] Group 2 - The current consensus EPS estimate for the coming quarter is $0.34 on revenues of $93.27 million, and for the current fiscal year, it is $1.41 on revenues of $372.07 million [7] - The Zacks Industry Rank for Financial - SBIC & Commercial Industry is currently in the bottom 20% of over 250 Zacks industries, indicating potential underperformance compared to the top 50% of ranked industries [8]

Financial Performance - As of September 30, 2024, the net asset value was approximately $1,361.3 million, with a portfolio fair value of approximately $3,265.3 million across 127 portfolio companies[252]. - Total investment income for the three months ended September 30, 2024, was approximately $95.3 million, a slight increase of 1% compared to $94.3 million for the same period in 2023[276]. - Total investment income for the nine months ended September 30, 2024, was approximately $280.5 million, a slight decrease from $281.8 million in the same period of 2023[281]. - The company reported net realized losses of $531,000 for the three months ended September 30, 2024, compared to net realized gains of $4.7 million for the same period in 2023[279]. - Net realized losses on investments for the nine months ended September 30, 2024, were $43.5 million, compared to net realized gains of $7.9 million in the same period of 2023[283]. - The company experienced a net loss of approximately $11.5 million for the three months ended September 30, 2024, compared to a net loss of approximately $12.0 million for the same period in 2023[279]. - The net change in unrealized appreciation of investments was $21.8 million for the nine months ended September 30, 2024, contrasting with a depreciation of $18.3 million in 2023[283]. - Total operating expenses increased by approximately $6.3 million to $168.7 million for the nine months ended September 30, 2024, compared to $162.4 million in 2023[282]. Investment Strategy and Portfolio - The company focuses on providing direct lending solutions to U.S. upper middle market companies, particularly in defensive growth sectors[252]. - The investment strategy includes significant investments in unitranche loans, which combine senior and subordinated debt[252]. - As of September 30, 2024, SLP III had total investments with an aggregate fair value of approximately $680.7 million, an increase from $636.6 million as of December 31, 2023, representing a growth of 6.5%[261]. - SLP IV had total investments with an aggregate fair value of approximately $466.3 million as of September 30, 2024, slightly down from $467.9 million as of December 31, 2023[264]. - The top five industry concentrations as of September 30, 2024, were software, business services, healthcare, investment funds, and consumer services[252]. - New investments totaled $777.2 million in 67 portfolio companies for the nine months ended September 30, 2024, compared to $140.5 million in 32 portfolio companies for the same period in 2023[275]. Debt and Financing - SLP III's debt outstanding under its credit facility increased to $473.2 million as of September 30, 2024, compared to $453.2 million as of December 31, 2023, reflecting a rise of 4.2%[261]. - The debt outstanding under SLP IV's credit facility increased to $341.9 million as of September 30, 2024, compared to $306.5 million as of December 31, 2023, marking an increase of 11.5%[264]. - Interest and other financing expenses increased to $37.66 million for the three months ended September 30, 2024, compared to $31.43 million for the same period in 2023[278]. - Interest and other financing expenses rose by approximately $7.9 million to $101.8 million for the nine months ended September 30, 2024, due to higher borrowing costs[282]. Distributions and Shareholder Returns - A fourth quarter 2024 distribution of $0.32 per share and a supplemental distribution of $0.01 per share were declared, payable on December 31, 2024[254]. - Distributions declared and paid to stockholders for the nine months ended September 30, 2024, totaled approximately $111.6 million[293]. - The company intends to distribute approximately all of its net investment income on a quarterly basis and substantially all of its taxable income on an annual basis[293]. Regulatory and Compliance - The company is regulated as a business development company (BDC) under the Investment Company Act of 1940[248]. - The company has established several wholly-owned subsidiaries to facilitate compliance with regulatory requirements and manage investments[250]. - The company has adopted a formal code of ethics governing the conduct of its officers and directors[296]. - As of September 30, 2024, the company evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective in ensuring timely and accurate reporting[303]. - No changes in internal controls over financial reporting were identified during the quarter ended September 30, 2024, that materially affected the internal control[304]. Market Conditions and Economic Factors - The Federal Reserve cut its benchmark rate in Q3 2024 for the first time since March 2020, indicating possible future rate cuts[299]. - The company’s net investment income is affected by interest rate fluctuations, with potential changes in interest income estimated based on varying interest rate scenarios[299]. - The company reported a change in interest income net of interest expense, with a decrease of 14.16% for a -200 basis points change in interest rates[300]. Cash and Liquidity - As of September 30, 2024, the company had cash and cash equivalents of approximately $61.9 million, down from $70.1 million as of December 31, 2023[287]. - Outstanding commitments to fund investments totaled $277.4 million as of September 30, 2024, compared to $156.8 million as of December 31, 2023[288]. - Total contractual obligations amounted to $2,015.5 million as of September 30, 2024, with $106.7 million due in less than one year[290]. - The company raised approximately $1,034.6 million in net proceeds from additional offerings of common stock since its IPO through September 30, 2024[286]. - The company sold 5,292,556 shares of common stock under the Distribution Agreement for total net proceeds of approximately $67.7 million during the nine months ended September 30, 2024[287]. Investment Valuation - The fair value of collateralized agreements to resell was $13.5 million as of September 30, 2024, down from $16.5 million on December 31, 2023[268]. - The fair value of the SPP Agreement was $6.5 million as of September 30, 2024, compared to $8.0 million on December 31, 2023[269]. - The total square footage of properties in NMNLC's portfolio was 1,058,000 square feet, with a fair value of $124,880,000 as of September 30, 2024[267]. - The aggregate cost basis of the investment in National HME was $7.9 million with a fair value of $3.0 million as of September 30, 2024[273]. - The investment in American Achievement Corporation had an aggregate cost basis of $31.4 million and a fair value of $18.0 million as of September 30, 2024[273]. - The investment in UniTek had a total cost basis of $54.2 million (junior and senior preferred shares combined) with a fair value of approximately $2.4 million as of September 30, 2024[273].

Financial Performance - Adjusted net investment income for Q3 2024 was $36.7 million, or $0.34 per weighted average share[3] - Net investment income before income taxes for the three months ended September 30, 2024, was $35,506 thousand, a decrease of 3.9% compared to $40,047 thousand for the same period in 2023[19] - Total investment income for the three months ended September 30, 2024, was $95,327 thousand, slightly up from $94,349 thousand in the same period last year, indicating a year-over-year increase of 1.0%[19] - Basic earnings per share for the latest quarter were $0.22, compared to $0.28 in the previous quarter, reflecting a decrease of 21.4%[20] - Diluted earnings per share also decreased to $0.22 from $0.27, representing a decline of 18.5%[20] - Distributions declared and paid per share were $0.34, down from $0.36 in the previous quarter, a decrease of 5.6%[20] Asset and Portfolio Management - Net asset value per share decreased to $12.62 as of September 30, 2024, from $12.74 as of June 30, 2024[5] - The investment portfolio had a fair value of $3,278.8 million, with first lien investments comprising 63.2% of the total[11] - Total investments at fair value increased to $3,265,271 thousand as of September 30, 2024, up from $3,011,322 thousand at December 31, 2023, representing a growth of approximately 8.4%[17] - The net asset value per share of New Mountain Finance Corporation was $12.62 as of September 30, 2024, down from $12.87 at December 31, 2023, a decrease of 1.9%[17] - Total liabilities increased to $2,046,677 thousand as of September 30, 2024, compared to $1,827,491 thousand at December 31, 2023, marking an increase of approximately 12.0%[17] - The company’s accumulated undistributed earnings decreased to $(38,178) thousand as of September 30, 2024, compared to $(12,344) thousand at December 31, 2023[17] - The number of shares outstanding increased to 107,851,415 as of September 30, 2024, up from 102,558,859 at December 31, 2023, an increase of approximately 5.2%[17] Investment Strategy - Approximately 97.3% of the portfolio is rated green on the internal risk rating system, an increase from 97.0% at the end of Q2 2024[3] - The company maintains a focus on defensive growth businesses, targeting high-quality middle-market companies[8] - As of September 30, 2024, there were no portfolio companies rated red, with only four rated yellow and six rated orange[10] - New Mountain Finance Corporation focuses on providing direct lending solutions to U.S. middle market companies, primarily through senior secured loans[22] - The firm manages over $55 billion in assets, emphasizing business building and growth strategies[23] - The portfolio consists of investments in defensive industries that offer attractive risk-adjusted returns[22] Financial Outlook and Risks - Forward-looking statements indicate potential risks including changes in interest rates and market volatility, which may impact future performance[24] - The company has a differentiated investment approach leveraging deep sector knowledge and operating resources[22] - New Mountain Finance Corporation does not undertake any obligation to publicly update forward-looking statements except as required by law[24] Financing and Expenses - Interest and other financing expenses rose to $37,661 thousand for the three months ended September 30, 2024, compared to $31,425 thousand in the prior year, reflecting an increase of 19.5%[19] - The company generated $146.2 million in gross originations, offset by $100.6 million in repayments and $1.5 million in asset sales during the quarter[3]

Henrik Sorensen New Mountain Finance (NASDAQ:NMFC) is a well-managed business development company that covered its $0.32 per share base dividend with adjusted net investment income in the second quarter. In addition, the business development company paid a $0.02 per share supplemental dividend, which translated into a 94% total dividend pay-out ratio. Furthermore, New Mountain Finance announced that it would lower its base management fee from 1.40% to 1.25% which should yield a higher margin of safety movin ...

New Mountain Finance Corporation (NASDAQ:NMFC) Q2 2024 Earnings Conference Call August 1, 2024 10:00 AM ET Company Participants John Kline - President, CEO & Director Kris Corbett - CFO & Treasurer Steven Klinsky - Chairman Laura Holson - COO Conference Call Participants Finian O'Shea - Wells Fargo Bryce Rowe - B. Riley Securities Robert Dodd - Raymond James Paul Johnston - KBW Operator Good day, and welcome to the New Mountain Finance Corporation Second Quarter 2024 Earnings Call. [Operator Instructions]. ...

New Mountain Finance (NMFC) came out with quarterly earnings of $0.36 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.39 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this business development company would post earnings of $0.39 per share when it actually produced earnings of $0.36, delivering a surprise of -7.69%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Ne ...

Financial Performance - Net investment income for Q2 2024 was $38.2 million, or $0.36 per weighted average share, compared to $0.39 per share in Q2 2023[3]. - Net investment income for the three months ended June 30, 2024, was $38,439, a decrease of 3.7% from $39,928 for the same period in 2023[16]. - Total investment income for the three months ended June 30, 2024, was $94,588, slightly down from $95,492 in the prior year, reflecting a decrease of 1.0%[16]. - Basic earnings per share for the latest quarter were $0.32, a decrease from $0.35 in the previous quarter[17]. - Diluted earnings per share for the latest quarter were $0.31, down from $0.32 in the previous quarter[17]. - Distributions declared and paid per share were $0.34, compared to $0.35 in the previous quarter[17]. Asset and Investment Portfolio - As of June 30, 2024, the company's total investment portfolio was valued at $3,227.3 million, with a weighted average yield to maturity (YTM) at cost of approximately 11.1%[5]. - Total investments at fair value rose to $3,213,780, compared to $3,011,322, marking an increase of 6.7%[14]. - The investment portfolio composition included 63% in first lien loans, 12% in senior loan funds, and 9% in second lien loans as of June 30, 2024[9]. - The company reported a strong credit performance, with approximately 97.0% of the portfolio rated green, up from 96.5% at the end of Q1 2024[3]. Financial Position - The net asset value (NAV) per share decreased slightly to $12.74 as of June 30, 2024, from $12.77 as of March 31, 2024[3]. - The net asset value per share decreased to $12.74 from $12.87, a decline of 1.0%[14]. - Total assets increased to $3,423,618, up from $3,159,214, representing a growth of 8.3%[14]. - Total liabilities increased to $2,037,101, up from $1,827,491, reflecting a growth of 11.5%[14]. - The statutory debt to equity ratio was reported at 1.21x as of June 30, 2024, with total statutory debt outstanding of $1,659.5 million[10]. - The company had cash and cash equivalents of $119.6 million and $498.1 million of available capacity on its credit facilities as of June 30, 2024[10]. - Cash and cash equivalents increased to $119,607, up from $70,090, indicating a significant rise of 70.6%[14]. Management and Strategy - The company plans to permanently reduce the base management fee to 1.25% and amend the dividend protection program[3]. - New Mountain Finance Corporation focuses on providing direct lending solutions to U.S. middle market companies, primarily through senior secured loans[19]. - The firm manages approximately $55 billion in assets under management, emphasizing business building and growth[20]. - New Mountain Capital works intensively with management to build the value of portfolio companies[20]. Market Outlook and Risks - Forward-looking statements indicate potential risks including changes in base interest rates and market volatility[21]. - The company operates in defensive industries that offer attractive risk-adjusted returns[19]. Originations and Repayments - Total gross originations for the quarter were $437.3 million, with cash repayments of $299.1 million and asset sales of $5.5 million[5]. - Interest and other financing expenses for the three months ended June 30, 2024, were $33,113, an increase from $31,700 in the prior year[16]. - The number of shares outstanding increased to 107,851,415 from 102,558,859, representing a growth of 5.3%[14]. - Weighted average shares of common stock outstanding for basic earnings were 106,891,784, an increase from 100,937,026 in the previous quarter[17]. - Weighted average shares of common stock outstanding for diluted earnings were 125,759,769, a decrease from 127,016,910 in the previous quarter[17]. Realized Losses - Net realized losses from non-controlled/non-affiliated investments amounted to $(34,966) for the three months ended June 30, 2024, compared to $(7,314) in the same period last year[16].

Core Viewpoint - New Mountain Finance (NMFC) is anticipated to report a year-over-year decline in earnings due to lower revenues, which could significantly influence its near-term stock price depending on how actual results compare to consensus estimates [1][2]. Earnings Expectations - The earnings report is scheduled for July 31, 2024, with expectations of quarterly earnings at $0.36 per share, reflecting a year-over-year decrease of 7.7% [3][4]. - Revenues are projected to be $90.25 million, down 5.5% from the same quarter last year [4]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' assessments [5]. - The Most Accurate Estimate for NMFC is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +0.56%, suggesting a bullish outlook from analysts [11]. Earnings Surprise Prediction - A positive Earnings ESP is a strong indicator of a potential earnings beat, especially when combined with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) [9]. - NMFC currently holds a Zacks Rank of 3, indicating a likelihood of beating the consensus EPS estimate [12][13]. Historical Performance - In the last reported quarter, NMFC was expected to post earnings of $0.39 per share but delivered $0.36, resulting in a surprise of -7.69% [14]. - Over the past four quarters, NMFC has only beaten consensus EPS estimates once [15]. Conclusion - NMFC is viewed as a compelling candidate for an earnings beat, but investors should consider additional factors before making investment decisions [18].

Financial Data and Key Metrics Changes - Adjusted net investment income for the quarter was $0.36 per share, exceeding the regular dividend of $0.32 per share [25][69] - Net asset value per share decreased slightly to $12.77, a decline of $0.10 compared to the previous quarter [25][66] - Total investment income was $90.3 million, a 2% decrease from the prior year [67] Business Line Data and Key Metrics Changes - The portfolio had approximately $3.1 billion in investments at fair value, with total assets of $3.3 billion and total liabilities of $1.9 billion [66] - The interest coverage ratio for the portfolio increased to 1.7x, indicating improved financial health among portfolio companies [55] Market Data and Key Metrics Changes - The average yield on the portfolio increased from 10.9% in Q4 to 11.1% in Q1, primarily due to a higher base rate environment [63] - Portfolio company leverage has decreased slightly, with an average loan-to-value of 43% [55] Company Strategy and Development Direction - The company focuses on defensive growth sectors such as software, business services, and healthcare, which are expected to perform well regardless of economic conditions [28][43] - The strategy emphasizes high conviction underwriting decisions based on extensive industry knowledge [47] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the medium and long-term outlook for M&A activity, driven by significant private equity dry powder and favorable financing markets [51] - The outlook for the remainder of 2024 in the sponsor-backed direct lending market is positive, with deal flow picking up but still below historical levels [33] Other Important Information - The company has a Dividend Protection Program in place to support the regular dividend if net investment income dips below $0.32 [7][42] - The company plans to issue a $300 million five-year investment grade bond to improve its capital structure [74] Q&A Session Summary Question: Can you elaborate on the potential incentive fee waivers? - The incentive fee waiver program is set to expire at the end of the year, but management plans to discuss extending it with the Board [78][79] Question: What is the outlook for Edmentum and its market performance? - Edmentum has experienced a slowdown post-COVID, but management is optimistic about its future performance as the market stabilizes [30][96] Question: How does the company view the current interest coverage ratio? - The increase in the interest coverage ratio is attributed to good performance from underlying portfolio companies and a positive mix from new deals [55][102]