New Mountain Finance (NMFC) - 2024 Q4 - Annual Report

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].