New Mountain Finance (NMFC) - 2024 Q3 - Quarterly Report

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$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$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$341.9 million as of September 30, 2024, compared to $306.5 million as of December 31, 2023, marking an increase of 11.5$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].