Financial Performance - Adjusted Net Investment Income (NII) for Q1 2025 was $0.32 per share, covering the dividend of $0.32 per share[14, 15] - Net Asset Value (NAV) as of March 31, 2025, was $12.45 per share, a decrease from $12.55 per share on December 31, 2024[14, 15] - The company permanently waived $1.5 million of incentive fees in connection with the dividend protection program[14] - The fair value of investments decreased to $3.0477 billion as of March 31, 2025, compared to $3.1045 billion as of December 31, 2024[16] Portfolio Composition and Risk - 96.5% of the portfolio is rated green on the company's heatmap, with no names rated red[14, 35] - The company's employees and senior advisors own approximately 13% of the company[14, 15] - Only <1% of the portfolio fair value is meaningfully exposed to global tariffs, compared to 13% on average amongst peers[25] - The company's portfolio consists of 93% first lien debt[65] Investment Activity - Gross originations for Q1 2025 were $120.8 million, while repayments totaled $160.4 million, resulting in net originations of -$39.5 million[16, 63] - The company repaid approximately $42 million, primarily from full redemption of UniTek's PIK 2nd Lien Term Loan and PIK Super Senior Preferred II[14] Leverage and Liquidity - Pro forma statutory debt to equity ratio is 1.09x as of March 31, 2025[15, 87]

分组1 - New Mountain Finance (NMFC) reported quarterly earnings of $0.32 per share, matching the Zacks Consensus Estimate, but down from $0.36 per share a year ago [1] - The company posted revenues of $85.66 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 1.32%, and down from $90.56 million year-over-year [2] - New Mountain shares have declined approximately 11.5% since the beginning of the year, compared to a 3.3% decline in the S&P 500 [3] 分组2 - The current consensus EPS estimate for the upcoming quarter is $0.32 on revenues of $86.51 million, and for the current fiscal year, it is $1.29 on revenues of $347.42 million [7] - The Financial - SBIC & Commercial Industry, to which New Mountain belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including statements of assets and liabilities, operations, changes in net assets, cash flows, and detailed schedules of investments for New Mountain Finance Corporation, along with notes to these financial statements and the report from the independent registered public accounting firm [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) The consolidated statements of assets and liabilities show a slight decrease in total assets and total investments at fair value from December 31, 2024, to March 31, 2025, with net borrowings also decreasing, leading to a modest reduction in total net assets and net asset value per share Consolidated Statements of Assets and Liabilities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $3,196,651 | $3,246,701 | | Total investments at fair value | $3,034,211 | $3,091,024 | | Net borrowings | $1,782,852 | $1,836,710 | | Total net assets | $1,348,178 | $1,359,291 | | Net asset value per share | $12.45 | $12.55 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, total investment income decreased compared to the prior year, but net expenses also saw a reduction, with significant net realized gains largely offset by net unrealized depreciation, resulting in a lower net increase in net assets from operations Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total investment income | $85,663 | $90,556 | | Net expenses | $51,041 | $53,001 | | Net investment income | $34,641 | $37,554 | | Net realized gains (losses) | $37,825 | $(11,827) | | Net change in unrealized appreciation (depreciation) | $(48,927) | $2,994 | | Net increase in net assets from operations | $23,517 | $28,084 | | Basic earnings per share | $0.22 | $0.26 | | Distributions declared and paid per share | $0.32 | $0.36 | [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) The company experienced a net decrease in net assets for the three months ended March 31, 2025, primarily due to distributions declared and a lack of new share sales, contrasting with a net increase in the prior year driven by capital transactions Consolidated Statements of Changes in Net Assets | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net investment income | $34,641 | $37,554 | | Net realized gains (losses) on investments | $37,825 | $(11,827) | | Net change in unrealized (depreciation) appreciation | $(48,927) | $2,994 | | Net increase in net assets from operations | $23,517 | $28,084 | | Net proceeds from shares sold | $— | $47,919 | | Distributions declared to stockholders | $(34,512) | $(38,265) | | Net (decrease) increase in net assets | $(11,127) | $36,981 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows from operating activities significantly increased for the three months ended March 31, 2025, compared to the prior year, though net cash used in financing activities also increased substantially, leading to a smaller overall net increase in cash and cash equivalents Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash flows provided by operating activities | $103,916 | $68,279 | | Net cash flows used in financing activities | $(98,598) | $(30,803) | | Net increase in cash and cash equivalents | $5,318 | $37,476 | | Cash and cash equivalents at end of period | $85,496 | $107,467 | [Consolidated Schedule of Investments as of March 31, 2025](index=7&type=section&id=Consolidated%20Schedule%20of%20Investments%20as%20of%20March%2031%2C%202025) As of March 31, 2025, the investment portfolio primarily consists of first lien debt, with significant concentrations in the software, healthcare, and business services industries, and the majority of investments bear floating interest rates Investment Type (Percent of Total Investments at Fair Value) | Investment Type | Percent of Total Investments at Fair Value | | :-------------------------- | :--------------------------------------- | | First lien | 64.56 % | | Second lien | 5.72 % | | Subordinated | 3.46 % | | Structured Finance Obligations | 0.11 % | | Equity and other | 26.15 % | Industry Type (Percent of Total Investments at Fair Value) | Industry Type | Percent of Total Investments at Fair Value | | :------------------------ | :--------------------------------------- | | Software | 27.51 % | | Healthcare | 17.45 % | | Business Services | 14.69 % | | Investment Funds | 9.08 % | | Consumer Services | 6.21 % | Interest Rate Type (Percent of Total Investments at Fair Value) | Interest Rate Type | Percent of Total Investments at Fair Value | | :----------------- | :--------------------------------------- | | Floating rates | 86.50 % | | Fixed rates | 13.50 % | [Consolidated Schedule of Investments as of December 31, 2024](index=37&type=section&id=Consolidated%20Schedule%20of%20Investments%20as%20of%20December%2031%2C%202024) The investment portfolio as of December 31, 2024, shows a similar composition to the subsequent quarter, with first lien debt dominating and a strong focus on software, healthcare, and business services, and floating rate investments continued to be the predominant interest rate type Investment Type (Percent of Total Investments at Fair Value) | Investment Type | Percent of Total Investments at Fair Value | | :-------------------------- | :--------------------------------------- | | First lien | 63.31 % | | Second lien | 6.37 % | | Subordinated | 3.30 % | | Structured Finance Obligations | 0.10 % | | Equity and other | 26.92 % | Industry Type (Percent of Total Investments at Fair Value) | Industry Type | Percent of Total Investments at Fair Value | | :------------------------ | :--------------------------------------- | | Software | 27.44 % | | Healthcare | 16.24 % | | Business Services | 16.11 % | | Investment Funds | 8.92 % | | Consumer Services | 6.22 % | Interest Rate Type (Percent of Total Investments at Fair Value) | Interest Rate Type | Percent of Total Investments at Fair Value | | :----------------- | :--------------------------------------- | | Floating rates | 86.62 % | | Fixed rates | 13.38 % | [Notes to the Consolidated Financial Statements](index=66&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide comprehensive details on the company's accounting policies, investment specifics, fair value methodologies, agreements with related parties, borrowing structures, regulatory compliance, and other financial disclosures, offering essential context to the financial statements [Note 1. Formation and Business Purpose](index=68&type=section&id=Note%201.%20Formation%20and%20Business%20Purpose) New Mountain Finance Corporation is a Delaware BDC and RIC, focused on direct lending to U.S. upper middle market companies backed by private equity sponsors, aiming to generate current income and capital appreciation through senior secured loans and select junior capital positions in defensive growth industries, with top industry concentrations in software, healthcare, business services, investment funds, and consumer services - **New Mountain Finance Corporation** is a closed-end, non-diversified management investment company regulated as a Business Development Company (BDC) and intends to qualify as a Regulated Investment Company (RIC)[174](index=174&type=chunk) - The company's investment objective is to generate **current income and capital appreciation** through senior secured loans and select junior capital positions to growing businesses in defensive industries[177](index=177&type=chunk) - The company primarily invests in U.S. sponsor-backed middle market companies, defined as those with annual **EBITDA of $10 million to $200 million**, focusing on defensive growth businesses[180](index=180&type=chunk) - As of March 31, 2025, the top five industry concentrations were **software, healthcare, business services, investment funds, and consumer services**[181](index=181&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=69&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) The company's financial statements adhere to GAAP and ASC 946 for investment companies, consolidating wholly-owned and majority-owned subsidiaries, with investments recorded at fair value and revenue recognition policies covering interest, dividends (including PIK), and other income, while intending to qualify as a RIC to minimize federal income tax on distributed income - Consolidated financial statements are prepared in conformity with **GAAP and follow ASC 946** for investment companies[182](index=182&type=chunk) - Investments are reflected at **fair value**, with changes in unrealized gains and losses recognized in the Consolidated Statements of Operations[185](index=185&type=chunk) - **PIK interest and dividends** are accrued as income at contractual rates if deemed collectible and added to principal or share balances[201](index=201&type=chunk) - Investments are placed on **non-accrual status** when principal or interest payments are past due for 30 days or more and collectability is doubtful[203](index=203&type=chunk) - The company intends to qualify as a **RIC**, which generally exempts it from U.S. federal income tax on timely distributed taxable income and gains[207](index=207&type=chunk) [Note 3. Investments](index=75&type=section&id=Note%203.%20Investments) The company's investment portfolio as of March 31, 2025, totaled $3,034,211k at fair value, primarily in first lien debt across software, healthcare, and business services, with details on specific non-accrual investments and summarized financial information for its joint ventures, SLP III and SLP IV, which also focus on senior secured loans Investment Cost and Fair Value by Type (March 31, 2025) | Investment Type | Cost (in thousands) | Fair Value (in thousands) | | :-------------------------- | :------------------ | :------------------------ | | First lien | $1,975,174 | $1,959,038 | | Second lien | $186,274 | $173,598 | | Subordinated | $116,809 | $104,948 | | Structured Finance Obligations | $3,232 | $3,232 | | Equity and other | $811,454 | $793,395 | | Total investments | $3,092,943 | $3,034,211 | Investment Cost and Fair Value by Industry (March 31, 2025) | Industry Type | Cost (in thousands) | Fair Value (in thousands) | | :------------------------ | :------------------ | :------------------------ | | Software | $843,518 | $835,189 | | Healthcare | $535,646 | $529,371 | | Business Services | $500,719 | $445,593 | | Investment Funds | $275,632 | $275,632 | | Consumer Services | $188,708 | $188,503 | | Education | $197,890 | $176,319 | | Financial Services | $120,261 | $125,472 | | Distribution & Logistics | $119,441 | $119,128 | | Net Lease | $81,370 | $114,521 | | Packaging | $68,471 | $68,856 | | Energy | $69,458 | $63,520 | | Food & Beverage | $39,073 | $42,345 | | Business Products | $22,134 | $22,331 | | Consumer Products | $21,090 | $17,844 | | Specialty Chemicals & Materials | $9,532 | $9,587 | | Total investments | $3,092,943 | $3,034,211 | - As of March 31, 2025, the company had several investments on non-accrual status, including a second lien position in **National HME, Inc.** (cost **$7,872k**, fair value **$3,000k**), subordinated and first lien term loans in **American Achievement Corporation** (cost **$31,369k**, fair value **$17,999k**), and junior preferred shares in **Eclipse Topco Holdings, Inc.** (cost **$2,565k**, fair value **$2,702k**)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) SLP III Portfolio Summary | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------------- | :---------------------------- | :------------------------------- | | First lien investments (principal amount) | $710,505 | $727,619 | | Weighted average interest rate | 8.31 % | 8.49 % | | Number of portfolio companies | 90 | 90 | | Largest portfolio company investment | $17,650 | $17,697 | | Total of five largest investments | $80,092 | $80,215 | SLP IV Consolidated Portfolio Summary | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------------- | :---------------------------- | :------------------------------- | | First lien investments (principal amount) | $467,692 | $481,040 | | Weighted average interest rate | 8.38 % | 8.54 % | | Number of portfolio companies | 79 | 79 | | Largest portfolio company investment | $18,015 | $17,933 | | Total of five largest investments | $66,265 | $62,752 | [Note 4. Fair Value](index=94&type=section&id=Note%204.%20Fair%20Value) The company categorizes its investments within a three-level fair value hierarchy, with Level III representing investments valued using significant unobservable inputs, requiring extensive management judgment and the application of market-based and income-based valuation approaches, and also uses derivative instruments, classified as Level II, to manage interest rate risk - Fair value measurements are categorized into a three-level hierarchy: **Level I** (quoted prices in active markets), **Level II** (observable inputs other than Level I), and **Level III** (unobservable inputs)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) Fair Value Hierarchy of Portfolio Investments (March 31, 2025) | Investment Type | Total (in thousands) | Level I (in thousands) | Level II (in thousands) | Level III (in thousands) | | :-------------------------- | :------------------- | :--------------------- | :---------------------- | :----------------------- | | First lien | $1,959,038 | $— | $29,393 | $1,929,645 | | Second lien | $173,598 | $— | $48,594 | $125,004 | | Subordinated | $104,948 | $— | $— | $104,948 | | Structured Finance Obligations | $3,232 | $— | $— | $3,232 | | Equity and other | $793,395 | $— | $— | $793,395 | | Total investments | $3,034,211 | $— | $77,987 | $2,956,224 | - For **Level III investments**, the company primarily uses a **Market Based Approach** (EBITDA or revenue multiples of comparable companies/transactions) and an **Income Based Approach** (discounted cash flow analysis)[282](index=282&type=chunk)[283](index=283&type=chunk) Unobservable Inputs for Level III Investments (March 31, 2025) | Type | Approach | Unobservable Input | Low | High | Weighted Average | | :---------- | :------------------- | :----------------- | :---- | :---- | :--------------- | | First lien | Market & Income | EBITDA multiple | 6.5x | 33.0x | 14.2x | | | | Revenue multiple | 4.0x | 18.5x | 9.2x | | | | Discount rate | 6.3 % | 21.9 %| 9.3 % | | Second lien | Market & Income | EBITDA multiple | 8.0x | 20.0x | 17.3x | | | | Discount rate | 9.5 % | 13.3 %| 9.9 % | | Subordinated| Market & Income | EBITDA multiple | 8.0x | 24.5x | 15.7x | | | | Discount rate | 12.6 %| 27.6 %| 17.6 % | | Equity | Market & Income | EBITDA multiple | 6.0x | 23.0x | 11.7x | | | | Revenue multiple | 5.0x | 20.0x | 6.7x | | | | Discount rate | 8.6 % | 32.6 %| 9.0 % | Derivative Instruments Fair Value (March 31, 2025) | Derivative Type | Notional Amount (in thousands) | Fair Value Asset (in thousands) | Fair Value Liability (in thousands) | | :---------------- | :----------------------------- | :------------------------------ | :---------------------------------- | | Interest rate swaps | $600,000 | $3,117 | $(3,368) | | Total net derivatives | $600,000 | $— | $(251) | [Note 5. Agreements](index=99&type=section&id=Note%205.%20Agreements) The company's Investment Management Agreement with the Investment Adviser was re-approved, with the base management fee reduced to an annual rate of 1.25% of gross assets as of January 29, 2025, and incentive fees are 20.0% of Pre-Incentive Fee Net Investment Income, subject to a hurdle rate, with both management and incentive fees partially waived for the three months ended March 31, 2025 - The **base management fee** was reduced from an annual rate of 1.4% to **1.25%** of the company's gross assets, effective January 29, 2025[294](index=294&type=chunk) Management and Incentive Fees Incurred (in thousands) | Fee Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Management fee | $10,233 | $10,997 | | Less: fee waiver | $(288) | $(901) | | Total management fee | $9,945 | $10,096 | | Incentive fee | $8,247 | $9,389 | | Less: fee waiver | $(1,534) | $— | | Total incentive fee | $6,713 | $9,389 | - The **incentive fee is 20.0%** of Pre-Incentive Fee Net Investment Income, subject to a hurdle rate of **2.0% per quarter** (8.0% annualized) and a catch-up provision[297](index=297&type=chunk)[298](index=298&type=chunk)[302](index=302&type=chunk) [Note 6. Related Parties](index=102&type=section&id=Note%206.%20Related%20Parties) The company maintains various business relationships with affiliated entities, including the Investment Adviser and Administrator, both wholly-owned subsidiaries of New Mountain Capital, and co-investment transactions with affiliates are permitted under an SEC exemptive order, subject to independent director approval, while the Unsecured Management Company Revolver, an unsecured credit facility with an affiliate, was increased to a maximum of $100,000k and extended to December 31, 2027 - The **Investment Adviser and Administrator** are wholly-owned subsidiaries of New Mountain Capital[309](index=309&type=chunk)[311](index=311&type=chunk) - The company is permitted to **co-invest in portfolio companies with certain affiliated funds** under an SEC exemptive order, subject to specific conditions and approval by a majority of independent directors[314](index=314&type=chunk) - The **Unsecured Management Company Revolver** with NMF Investments III, L.L.C. (an affiliate) was increased to a maximum of **$100,000k** and its maturity date extended to **December 31, 2027**[317](index=317&type=chunk) [Note 7. Borrowings](index=103&type=section&id=Note%207.%20Borrowings) The company's asset coverage ratio was 187.0% as of March 31, 2025, exceeding the 150.0% minimum, and it maintains several debt facilities, including the Holdings Credit Facility ($270,563k outstanding), NMFC Credit Facility ($29,059k outstanding), 2022 Convertible Notes ($258,784k outstanding), and various Unsecured Notes ($985,227k outstanding), while the DB Credit Facility and NMNLC Credit Facility II were terminated in Q4 2024, and the company also utilizes SBA-guaranteed debentures ($262,500k outstanding) for leverage - As of March 31, 2025, the company's **asset coverage ratio was 187.0%**, exceeding the minimum requirement of 150.0%[318](index=318&type=chunk) Key Borrowing Details (March 31, 2025) | Borrowing Type | Outstanding Balance (in thousands) | Maximum Facility Amount (in thousands) | Maturity Date | Interest Rate (as of Mar 28, 2025) | | :----------------------------- | :--------------------------------- | :------------------------------------- | :-------------- | :--------------------------------- | | Holdings Credit Facility | $270,563 | $730,000 | March 28, 2030 | SOFR + 1.95% | | NMFC Credit Facility | $29,059 | $638,500 | Sep 28, 2029 | SOFR/SONIA/EURIBOR + 1.90-2.10% | | 2022 Convertible Notes | $258,784 | N/A | October 15, 2025| 7.50% | | Unsecured Notes | $985,227 | N/A | Various | 3.875% - 8.250% | | SBA-guaranteed debentures | $262,500 | N/A | Various | Fixed rates | - The **DB Credit Facility was terminated** on September 30, 2024, and the **NMNLC Credit Facility II was terminated** on November 22, 2024[330](index=330&type=chunk)[335](index=335&type=chunk) [Note 8. Regulation](index=112&type=section&id=Note%208.%20Regulation) The company intends to maintain its status as a Regulated Investment Company (RIC) and Business Development Company (BDC), requiring timely distributions of taxable income and adherence to asset diversification rules, where at least 70.0% of total assets must be 'qualifying assets' - The company intends to qualify annually as a **RIC**, requiring timely distribution of at least **90.0% of its investment company taxable income**[373](index=373&type=chunk) - As a **BDC**, at least **70.0% of total assets** must be 'qualifying assets' (with limited exceptions) at the time of acquisition[374](index=374&type=chunk) [Note 9. Commitments and Contingencies](index=112&type=section&id=Note%209.%20Commitments%20and%20Contingencies) As of March 31, 2025, the company had significant unfunded commitments, including $137,398k for revolving credit facilities and $113,028k for other future funding, and additionally, it held commitment letters to purchase investments totaling $4,727k Unfunded Commitments (in thousands) | Commitment Type | March 31, 2025 | December 31, 2024 | | :---------------------------------- | :------------- | :---------------- | | Unfunded revolving credit facilities | $137,398 | $126,723 | | Other future funding commitments | $113,028 | $116,953 | | Commitment letters to purchase investments | $4,727 | $83,638 | [Note 10. Net Assets](index=113&type=section&id=Note%2010.%20Net%20Assets) The company's total net assets decreased from $1,359,291k at December 31, 2024, to $1,348,178k at March 31, 2025, reflecting offering costs, distributions declared, and the net increase in net assets resulting from operations Changes in Net Assets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :---------------------------------------------- | :------------- | :---------------- | | Net assets at period end | $1,348,178 | $1,359,291 | | Offering costs | $(28) | N/A | | Distributions declared | $(34,602) | N/A | | Net increase in net assets from operations | $23,517 | N/A | [Note 11. Earnings Per Share](index=114&type=section&id=Note%2011.%20Earnings%20Per%20Share) Basic and diluted earnings per share for the three months ended March 31, 2025, were $0.22, a decrease from $0.26 in the prior year, with the diluted EPS calculation including the potential dilutive effect of the 2022 Convertible Notes Earnings Per Share (EPS) Data | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic earnings per share | $0.22 | $0.26 | | Diluted earnings per share | $0.22 | $0.26 | | Weighted average shares outstanding - basic | 107,851,415 | 103,660,370 | | Weighted average shares outstanding - diluted | 126,852,911 | 122,443,478 | [Note 12. Financial Highlights](index=115&type=section&id=Note%2012.%20Financial%20Highlights) Key financial highlights for the three months ended March 31, 2025, show a net asset value per share of $12.45, with a total return based on market value of 0.77% and on net asset value of 1.73%, and an asset coverage ratio of 186.95% Financial Highlights | Metric | March 31, 2025 | March 31, 2024 | | :---------------------------------------------- | :------------- | :------------- | | Net asset value, January 1 | $12.55 | $12.87 | | Net asset value, March 31 | $12.45 | $12.77 | | Per share market value, March 31 | $11.03 | $12.67 | | Total return based on market value | 0.77 % | 2.45 % | | Total return based on net asset value | 1.73 % | 1.99 % | | Asset coverage ratio | 186.95 % | 192.25 % | [Note 13. Recent Accounting Standards Updates](index=116&type=section&id=Note%2013.%20Recent%20Accounting%20Standards%20Updates) The FASB issued ASU 2024-03, requiring disaggregated disclosure of certain costs and expenses, effective for fiscal years beginning after December 15, 2026, which the company is currently assessing but does not expect a material effect on its consolidated financial statements - **ASU 2024-03** requires disaggregated disclosure of certain costs and expenses within income statement captions[388](index=388&type=chunk) - The standard is effective for fiscal years beginning after **December 15, 2026**, with early adoption permitted[388](index=388&type=chunk) - The company does not expect a **material impact** on its consolidated financial statements from ASU 2024-03[388](index=388&type=chunk) [Note 14. Segment Reporting](index=116&type=section&id=Note%2014.%20Segment%20Reporting) The company operates as a single operating and reporting segment, with its Chief Executive Officer serving as the chief operating decision maker (CODM), who assesses performance and makes operating decisions on a consolidated basis, primarily using net income - The company operates through a **single operating and reporting segment**[389](index=389&type=chunk) - The **Chief Executive Officer is the CODM** and assesses performance on a consolidated basis, primarily using net income[389](index=389&type=chunk) [Note 15. Subsequent Events](index=116&type=section&id=Note%2015.%20Subsequent%20Events) On April 22, 2025, the board of directors declared a second quarter 2025 distribution of $0.32 per share, payable on June 30, 2025 - On **April 22, 2025**, the board declared a **second quarter 2025 distribution of $0.32 per share**, payable on June 30, 2025[390](index=390&type=chunk) [Report of Independent Registered Public Accounting Firm](index=115&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP, the independent registered public accounting firm, reviewed the company's interim financial information for the three months ended March 31, 2025, and found no material modifications needed for conformity with GAAP, also confirming the fair statement of the December 31, 2024, consolidated statement of assets and liabilities - **Deloitte & Touche LLP** reviewed the interim financial information for the three months ended March 31, 2025[392](index=392&type=chunk) - The firm found **no material modifications needed** for the interim financial information to conform with GAAP[392](index=392&type=chunk) - The consolidated statement of assets and liabilities as of December 31, 2024, was **fairly stated in all material respects**[393](index=393&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=116&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results, including an overview of its business, critical accounting estimates, and detailed analysis of revenue, expenses, and investment performance, also covering liquidity, capital resources, off-balance sheet arrangements, and contractual obligations, along with discussions on related party transactions and distributions [Forward-Looking Statements](index=118&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements that involve risks and uncertainties, such as credit market liquidity, economic conditions, and interest rate volatility, where actual results may differ materially from projections, and the company does not undertake to update these statements except as required by law - The report contains **forward-looking statements** subject to risks and uncertainties, including impacts from credit market liquidity, economic conditions, and interest rate volatility[398](index=398&type=chunk) - Actual results could differ materially from projections due to various factors, including those in the **Risk Factors section of the Annual Report on Form 10-K**[399](index=399&type=chunk) - The company assumes **no obligation to update or revise publicly** any forward-looking statements, except as required by law[400](index=400&type=chunk) [Overview](index=118&type=section&id=Overview) New Mountain Finance Corporation operates as a BDC and RIC, specializing in direct lending to U.S. upper middle market companies, with an investment strategy focused on senior secured loans and junior capital positions in defensive growth businesses, and as of March 31, 2025, the portfolio's fair value was approximately $3,034.2 million across 118 companies, with a weighted average yield to maturity at cost of 10.7% - The company is a leading **BDC focused on providing direct lending solutions** to U.S. upper middle market companies backed by top private equity sponsors[405](index=405&type=chunk) - As of March 31, 2025, the portfolio had a **fair value of approximately $3,034.2 million** in 118 portfolio companies[409](index=409&type=chunk) - The **weighted average yield to maturity at cost** for income producing investments was approximately **10.7%**, and for all investments was approximately **10.2%**[409](index=409&type=chunk) - Top five industry concentrations as of March 31, 2025, were **software, healthcare, business services, investment funds, and consumer services**[408](index=408&type=chunk) [Recent Developments](index=120&type=section&id=Recent%20Developments) The board of directors declared a second quarter 2025 distribution of $0.32 per share, payable on June 30, 2025 - On **April 22, 2025**, the board of directors declared a **second quarter 2025 distribution of $0.32 per share**, payable on June 30, 2025[412](index=412&type=chunk) [Critical Accounting Estimates](index=120&type=section&id=Critical%20Accounting%20Estimates) The company's financial statements are prepared in accordance with GAAP and ASC 946, with critical estimates primarily related to the valuation of portfolio investments, where the board of directors is solely responsible for determining fair value quarterly, utilizing a three-level hierarchy and employing market-based and income-based approaches for Level III investments - Financial statements are prepared in conformity with **GAAP and ASC 946**, with critical accounting policies including the valuation and leveling of portfolio investments[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) - The **board of directors is ultimately and solely responsible** for determining the fair value of portfolio investments quarterly, especially for those without readily available market prices[416](index=416&type=chunk) - Fair value measurements are classified into a **three-level hierarchy** (Level I, II, III), with Level III inputs being unobservable and requiring significant judgment[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk) - Valuation approaches for **Level III investments** include the **Market Based Approach** (EBITDA/revenue multiples) and the **Income Based Approach** (discounted cash flow analysis)[428](index=428&type=chunk)[429](index=429&type=chunk) [NMFC Senior Loan Program III LLC](index=122&type=section&id=NMFC%20Senior%20Loan%20Program%20III%20LLC) SLP III is a private joint venture with SkyKnight Income II, LLC, focused on investing in senior secured loans, and as of March 31, 2025, the company and SkyKnight II had committed $160.0 million and $40.0 million in equity, respectively, with SLP III's portfolio having a fair value of approximately $688.2 million and $477.7 million outstanding under its revolving credit facility - **SLP III** is a private joint venture investment fund between the company and SkyKnight Income II, LLC, primarily investing in senior secured loans[431](index=431&type=chunk) - As of March 31, 2025, the company and SkyKnight II had committed and contributed **$160.0 million and $40.0 million**, respectively, of equity to SLP III[433](index=433&type=chunk) SLP III Portfolio and Credit Facility Summary | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------------------------------- | :--------------------------- | :------------------------------ | | Total investments at fair value | $688.2 | $715.1 | | Debt outstanding under credit facility | $477.7 | $511.2 | | Maximum borrowing capacity | $600.0 | $600.0 | | Unfunded commitments (delayed draws) | $4.9 | $2.7 | [NMFC Senior Loan Program IV LLC](index=124&type=section&id=NMFC%20Senior%20Loan%20Program%20IV%20LLC) SLP IV is another private joint venture with SkyKnight Income Alpha, LLC, also focused on senior secured loans, and as of March 31, 2025, the company and SkyKnight Alpha had contributed $112.4 million and $30.6 million in equity, respectively, with SLP IV's consolidated portfolio having a fair value of approximately $451.1 million and $323.4 million outstanding under its revolving credit facility - **SLP IV** is a private joint venture investment fund between the company and SkyKnight Income Alpha, LLC, investing primarily in senior secured loans[438](index=438&type=chunk) - As of March 31, 2025, the company and SkyKnight Alpha had transferred and contributed **$112.4 million and $30.6 million**, respectively, of membership interests to SLP IV[439](index=439&type=chunk) SLP IV Consolidated Portfolio and Credit Facility Summary | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------------------------------- | :--------------------------- | :------------------------------ | | Total investments at fair value | $451.1 | $469.3 | | Debt outstanding under credit facility | $323.4 | $334.4 | | Maximum borrowing capacity | $370.0 | $370.0 | | Unfunded commitments (delayed draws) | $2.8 | $1.2 | [New Mountain Net Lease Corporation](index=124&type=section&id=New%20Mountain%20Net%20Lease%20Corporation) NMNLC is a majority-owned consolidated subsidiary that acquires commercial real estate properties under 'triple net' leases, and as of March 31, 2025, the fair value of its properties totaled approximately $114,521k - **NMNLC** is a majority-owned consolidated subsidiary that acquires commercial real estate properties subject to 'triple net' leases[404](index=404&type=chunk)[444](index=444&type=chunk) NMNLC Summarized Property Information (March 31, 2025) | Portfolio Company / Tenant | Fair Value (in thousands) | | :------------------------- | :------------------------ | | NM NL Holdings LP / NM GP Holdco LLC | $105,594 | | NM YI, LLC (Young Innovations, Inc.) | $8,927 | | Total | $114,521 | [Collateralized agreements or repurchase financings](index=125&type=section&id=Collateralized%20agreements%20or%20repurchase%20financings) The company holds one collateralized agreement to resell with a cost basis of $30.0 million and a fair value of $13.5 million as of March 31, 2025, which is on non-accrual status due to the liquidation of the guaranteeing private hedge fund, PPVA Fund, L.P., which breached its repurchase obligation - The company held one collateralized agreement to resell with a **cost basis of $30.0 million** and a **fair value of $13.5 million** as of March 31, 2025[447](index=447&type=chunk) - The collateralized agreement is on **non-accrual status** because the guaranteeing private hedge fund, PPVA Fund, L.P., is in liquidation and breached its obligation to repurchase the collateral[447](index=447&type=chunk) [PPVA Black Elk (Equity) LLC](index=125&type=section&id=PPVA%20Black%20Elk%20(Equity)%20LLC) The company settled a fraudulent conveyance claim related to a $20.5 million repayment from Black Elk Energy Offshore Operations, LLC for $16.0 million, and the underlying SPP Agreement, with a cost basis of $14.5 million and a fair value of $6.5 million as of March 31, 2025, remains in effect as the private hedge fund guarantor is in liquidation - The company settled a fraudulent conveyance claim for **$16.0 million** related to a **$20.5 million repayment** from Black Elk Energy Offshore Operations, LLC[450](index=450&type=chunk) - As of March 31, 2025, the SPP Agreement had a **cost basis of $14.5 million** and a **fair value of $6.5 million**, reflecting the increased inherent risk due to the guarantor's liquidation[450](index=450&type=chunk) [Revenue Recognition](index=126&type=section&id=Revenue%20Recognition) The company recognizes interest and dividend income on an accrual basis, including PIK interest and dividends, if collectible, with other income including non-recurring fees like delayed compensation and structuring fees, and investments are placed on non-accrual status when payments are significantly past due and collectability is doubtful - **Interest and dividend income**, including PIK interest and dividends, are recorded on an accrual basis if deemed collectible[452](index=452&type=chunk)[453](index=453&type=chunk) - For the three months ended March 31, 2025, **PIK and non-cash interest income was approximately $7.6 million**, and **PIK and non-cash dividends income was approximately $8.2 million**[452](index=452&type=chunk) - Investments are placed on **non-accrual status** when principal or interest payments are past due for 30 days or more and there is reasonable doubt of collection[454](index=454&type=chunk) [Monitoring of Portfolio Investments](index=126&type=section&id=Monitoring%20of%20Portfolio%20Investments) The company employs an investment risk rating system (Green, Yellow, Orange, Red) to monitor the credit profile and expected returns of its portfolio, based on operating performance and business characteristics, and as of March 31, 2025, 96.5% of investments by fair value had a Green Risk Rating, with specific investments like National HME and AAC rated Orange, and the collateralized agreement to resell rated Yellow - The company uses an **investment risk rating system (Green, Yellow, Orange, Red)** to monitor the credit profile and expected returns of each investment, based on Operating Performance and Business Characteristics[457](index=457&type=chunk)[463](index=463&type=chunk) Portfolio Risk Rating (as of March 31, 2025) | Risk Rating | Fair Value (in millions) | Percent of Total | | :---------- | :----------------------- | :--------------- | | Green | $2,939.1 | 96.5 % | | Yellow | $71.4 | 2.3 % | | Orange | $37.2 | 1.2 % | | Red | $— | — | - As of March 31, 2025, **National HME and American Achievement Corporation (AAC)** had an **Orange Risk Rating**, while the security purchased under collateralized agreements to resell had a **Yellow Risk Rating**[459](index=459&type=chunk)[460](index=460&type=chunk)[462](index=462&type=chunk) [Portfolio and Investment Activity](index=128&type=section&id=Portfolio%20and%20Investment%20Activity) For the three months ended March 31, 2025, the company invested $121.0 million in new and existing portfolio companies, while experiencing $160.6 million in debt repayments and $26.3 million in sales, with net change in unrealized appreciation/depreciation resulting in a $49.1 million depreciation Portfolio and Investment Activity (in millions) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Investments in new and existing portfolio companies | $121.0 | $192.4 | | Debt repayments in existing portfolio companies | $160.6 | $145.5 | | Sales of securities | $26.3 | $— | | Change in unrealized appreciation | $12.0 | $38.2 | | Change in unrealized depreciation | $(61.1) | $(35.2) | [Recent Accounting Standards Updates](index=128&type=section&id=Recent%20Accounting%20Standards%20Updates) This section refers to Note 13 for details on recent accounting standards updates, specifically ASU 2024-03, which requires disaggregated expense disclosures [Results of Operations for the Three Months Ended March 31, 2025 and March 31, 2024](index=128&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%20March%2031%2C%202024) For the three months ended March 31, 2025, total investment income decreased by 5% year-over-year, primarily due to lower yields, while net operating expenses also decreased, driven by incentive fee waivers, and the period saw net realized gains but significant unrealized depreciation, leading to an overall net realized and unrealized loss [Revenue](index=128&type=section&id=Revenue) Total investment income decreased by 5% to $85.7 million for the three months ended March 31, 2025, compared to the prior year, mainly due to slightly lower portfolio yields, with cash interest income at $52.2 million, PIK and non-cash interest at $7.6 million, and dividend income remaining relatively flat Investment Income (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $61,517 | $67,620 | | Total dividend income | $20,943 | $20,400 | | Other income | $3,203 | $2,536 | | Total investment income | $85,663 | $90,556 | - **Total investment income decreased by approximately $4.9 million, or 5%**, for the three months ended March 31, 2025, compared to the prior year, primarily due to slightly lower yields on the portfolio[466](index=466&type=chunk) - For Q1 2025, total investment income included **$52.2 million in cash interest**, **$7.6 million in PIK and non-cash interest**, **$12.8 million in cash dividends**, and **$8.2 million in PIK and non-cash dividends**[466](index=466&type=chunk) [Operating Expenses](index=129&type=section&id=Operating%20Expenses) Total net operating expenses decreased by approximately $2.0 million for the three months ended March 31, 2025, compared to the prior year, mainly driven by a $2.7 million decrease in incentive fees, attributed to an incentive fee waiver and lower net investment income, while management fees remained relatively stable Operating Expenses (in thousands) | Expense Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total management fee (net of waiver) | $9,945 | $10,096 | | Total incentive fee (net of waiver) | $6,713 | $9,389 | | Interest and other financing expenses | $31,374 | $31,016 | | Total expenses | $51,041 | $53,001 | | Net expenses after income taxes | $51,022 | $53,002 | - **Total net operating expenses decreased by approximately $2.0 million** for the three months ended March 31, 2025, compared to the prior year[467](index=467&type=chunk) - The **incentive fee, net of waiver, decreased by approximately $2.7 million**, primarily due to an incentive fee waiver by the Investment Adviser and a decrease in net investment income[467](index=467&type=chunk) [Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation)](index=129&type=section&id=Net%20Realized%20Gains%20(Losses)%20and%20Net%20Change%20in%20Unrealized%20Appreciation%20(Depreciation)) The company reported a net realized and unrealized loss of $11.1 million for the three months ended March 31, 2025, an increase from $9.5 million in the prior year, driven by significant net realized gains ($37.8 million) being more than offset by substantial net unrealized depreciation ($49.1 million), primarily from UniTek Global Services, Inc., TVG-Edmentum Holdings, LLC, and New Permian Holdco, Inc Net Realized and Unrealized Gains (Losses) (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net realized gains (losses) on investments | $37,825 | $(11,827) | | Net change in unrealized (depreciation) appreciation | $(49,077) | $3,017 | | Net change in unrealized appreciation (depreciation) on foreign currency | $150 | $(23) | | Provision for taxes | $(22) | $(637) | | Net realized and unrealized losses | $(11,124) | $(9,470) | - The **net loss for Q1 2025** was primarily driven by unrealized depreciation in **UniTek Global Services, Inc., TVG-Edmentum Holdings, LLC, and New Permian Holdco, Inc.**, partially offset by unrealized appreciation in OA Buyer and HS Purchaser, LLC[468](index=468&type=chunk) [Investment Income and Net Realized and Unrealized (Losses) Gains Related to Non-Controlling Interest in New Mountain Net Lease Corporation ("NMNLC")](index=129&type=section&id=Investment%20Income%20and%20Net%20Realized%20and%20Unrealized%20(Losses)%20Gains%20Related%20to%20Non-Controlling%20Interest%20in%20New%20Mountain%20Net%20Lease%20Corporation%20(%22NMNLC%22)) Net investment income attributable to non-controlling interest in NMNLC decreased to $117k for the three months ended March 31, 2025, from $229k in the prior year, and net change in unrealized appreciation/depreciation related to non-controlling interest in NMNLC also shifted from appreciation to depreciation NMNLC Non-Controlling Interest Impact (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net investment income related to non-controlling interest in NMNLC | $117 | $229 | | Net change in realized gains on investments related to non-controlling interest in NMNLC | $— | $3 | | Net change in unrealized (depreciation) appreciation of investments related to non-controlling interest in NMNLC | $(13) | $444 | [Liquidity, Capital Resources, Off-Balance Sheet Arrangements and Contractual Obligations](index=130&type=section&id=Liquidity%2C%20Capital%20Resources%2C%20Off-Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) The company's liquidity is supported by revolving credit facilities, cash flows from operations, and equity offerings, with $85.5 million in cash and cash equivalents and an asset coverage ratio of 187.0% as of March 31, 2025, and off-balance sheet, it had $250.4 million in outstanding commitments to fund investments, with total contractual obligations amounting to $1,811.0 million [Liquidity and Capital Resources](index=130&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily derived from revolving credit facilities, cash flows from operations, and periodic equity offerings, with cash and cash equivalents at $85.5 million and net cash provided by operating activities at $103.9 million for the quarter as of March 31, 2025, and an asset coverage ratio of 187.0%, well above the 150.0% minimum - The company's liquidity is generated through advances from **revolving credit facilities, cash flows from operations, and periodic follow-on equity offerings**[472](index=472&type=chunk) - As of March 31, 2025, the **asset coverage ratio was 187.0%**, exceeding the 150.0% minimum requirement[472](index=472&type=chunk) Cash and Cash Equivalents & Operating Cash Flow (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :---------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $85.5 | $80.3 | | Net cash provided by operating activities (Q1) | $103.9 | $68.3 | - Approximately **$258.0 million of common stock** remains available for issuance and sale under the ATM program as of March 31, 2025[477](index=477&type=chunk) [Off-Balance Sheet Agreements](index=131&type=section&id=Off-Balance%20Sheet%20Agreements) As of March 31, 2025, the company had $250.4 million in outstanding commitments to third parties to fund investments, including revolving credit facilities and delayed draw commitments, and also held commitment letters to purchase investments totaling $4.7 million Off-Balance Sheet Commitments (in millions) | Commitment Type | March 31, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------- | :---------------- | | Outstanding commitments to fund investments | $250.4 | $243.7 | | Commitment letters to purchase investments | $4.7 | $83.6 | [Contractual Obligations](index=132&type=section&id=Contractual%20Obligations) The company's total contractual payment obligations as of March 31, 2025, amounted to $1,811.0 million, with the largest portion, $810.7 million, due within 3 to 5 years, followed by $539.0 million due in less than 1 year Contractual Obligations Payments Due by Period (in millions) | Period | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :----------------- | :--------- | :--------------- | :---------- | :---------- | :---------------- | | Unsecured Notes | $990.0 | $200.0 | $375.0 | $415.0 | $— | | Holdings Credit Facility | $270.6 | $— | $— | $270.6 | $— | | SBA-guaranteed debentures | $262.5 | $80.2 | $32.3 | $99.0 | $51.0 | | 2022 Convertible Notes | $258.8 | $258.8 | $— | $— | $— | | NMFC Credit Facility | $29.1 | $— | $3.0 | $26.1 | $— | | Total Contractual Obligations | $1,811.0 | $539.0 | $410.3 | $810.7 | $51.0 | [Distributions and Dividends](index=133&type=section&id=Distributions%20and%20Dividends) Distributions declared and paid to stockholders for the three months ended March 31, 2025, totaled $34.5 million, or $0.32 per share, and the company intends to pay quarterly distributions sufficient to maintain its RIC status and operates an 'opt out' dividend reinvestment plan - **Distributions declared and paid to stockholders** for the three months ended March 31, 2025, totaled approximately **$34.5 million**[486](index=486&type=chunk) Distributions Declared Per Share | Fiscal Year Ended | Quarter | Per Share Amount | | :---------------- | :------------ | :--------------- | | December 31, 2025 | First Quarter | $0.32 | | December 31, 2024 | Total | $1.37 | | December 31, 2023 | Total | $1.49 | - The company intends to pay quarterly distributions sufficient to maintain its status as a **RIC** and operates an **'opt out' dividend reinvestment plan**[487](index=487&type=chunk)[488](index=488&type=chunk) [Related Parties](index=134&type=section&id=Related%20Parties) The company has ongoing business relationships with affiliated entities, including the Investment Adviser and Administrator, both subsidiaries of New Mountain Capital, and co-investment transactions with affiliates are conducted under an SEC exemptive order, subject to independent director approval, while the Unsecured Management Company Revolver, an unsecured credit facility with an affiliate, has a maximum of $100.0 million available and matures on December 31, 2027 - The **Investment Adviser and Administrator** are wholly-owned subsidiaries of New Mountain Capital, and the company reimburses the Administrator for allocable overhead and expenses[492](index=492&type=chunk) - **Co-investment transactions with affiliates** are permitted under an SEC exemptive order, requiring approval from a 'required majority' of independent directors[491](index=491&type=chunk)[493](index=493&type=chunk) - The **Unsecured Management Company Revolver**, an unsecured credit facility with an affiliate, has a maximum of **$100.0 million** available and matures on **December 31, 2027**[495](index=495&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=134&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate fluctuations, which affect its net investment income due to its leveraged investment strategy, with 83.91% of its investments being floating-rate and 16.09% fixed-rate as of March 31, 2025, and a hypothetical 200 basis point increase or decrease in interest rates would result in an estimated 15.53% change in net interest income - The company's **net investment income is affected by the difference between investment rates and borrowing rates**, exposing it to interest rate fluctuations[497](index=497&type=chunk) - As of March 31, 2025, approximately **83.91% of investments** at fair value (excluding certain categories) were **floating-rate**, and approximately **16.09% were fixed-rate**[497](index=497&type=chunk) Estimated Percentage Change in Interest Income Net of Interest Expense | Change in Interest Rates | Estimated Percentage Change in Interest Income Net of Interest Expense (unaudited) | | :----------------------- | :------------------------------------------------------------------------------- | | -200 Basis Points | (15.53)% | | -150 Basis Points | (11.64)% | | -100 Basis Points | (7.76)% | | -50 Basis Points | (3.88)% | | +50 Basis Points | 3.88 % | | +100 Basis Points | 7.76 % | | +150 Basis Points | 11.64 % | | +200 Basis Points | 15.53 % | [Item 4. Controls and Procedures](index=135&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2025, concluding they were effective, and no

[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]