New Mountain Finance (NMFC) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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 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 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 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 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 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 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 - 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 industries177 - 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 businesses180 - As of March 31, 2025, the top five industry concentrations were software, healthcare, business services, investment funds, and consumer services181 Note 2. Summary of Significant Accounting Policies 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 companies182 - Investments are reflected at fair value, with changes in unrealized gains and losses recognized in the Consolidated Statements of Operations185 - PIK interest and dividends are accrued as income at contractual rates if deemed collectible and added to principal or share balances201 - Investments are placed on non-accrual status when principal or interest payments are past due for 30 days or more and collectability is doubtful203 - The company intends to qualify as a RIC, which generally exempts it from U.S. federal income tax on timely distributed taxable income and gains207 Note 3. Investments 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)228 229 230 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 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)268 269 270 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)282 283 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 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, 2025294 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 provision297 298 302 Note 6. Related Parties 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 Capital309 311 - 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 directors314 - 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, 2027317 Note 7. Borrowings 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 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, 2024330 335 Note 8. Regulation 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 income373 - As a BDC, at least 70.0% of total assets must be 'qualifying assets' (with limited exceptions) at the time of acquisition374 Note 9. Commitments and Contingencies 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 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 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 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 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 captions388 - The standard is effective for fiscal years beginning after December 15, 2026, with early adoption permitted388 - The company does not expect a material impact on its consolidated financial statements from ASU 2024-03388 Note 14. Segment Reporting 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 segment389 - The Chief Executive Officer is the CODM and assesses performance on a consolidated basis, primarily using net income389 Note 15. Subsequent Events 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, 2025390 Report of Independent Registered Public Accounting Firm 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, 2025392 - The firm found no material modifications needed for the interim financial information to conform with GAAP392 - The consolidated statement of assets and liabilities as of December 31, 2024, was fairly stated in all material respects393 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 volatility398 - 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-K399 - The company assumes no obligation to update or revise publicly any forward-looking statements, except as required by law400 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 sponsors405 - As of March 31, 2025, the portfolio had a fair value of approximately $3,034.2 million in 118 portfolio companies409 - 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 - Top five industry concentrations as of March 31, 2025, were software, healthcare, business services, investment funds, and consumer services408 Recent Developments 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, 2025412 Critical Accounting Estimates 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 investments413 414 415 - 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 prices416 - Fair value measurements are classified into a three-level hierarchy (Level I, II, III), with Level III inputs being unobservable and requiring significant judgment420 421 422 - Valuation approaches for Level III investments include the Market Based Approach (EBITDA/revenue multiples) and the Income Based Approach (discounted cash flow analysis)428 429 NMFC Senior Loan Program III LLC 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 loans431 - 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 III433 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 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 loans438 - 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 IV439 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 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' leases404 444 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 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, 2025447 - 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 collateral447 PPVA Black Elk (Equity) LLC 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, LLC450 - 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 liquidation450 Revenue Recognition 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 collectible452 453 - 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 million452 - 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 collection454 Monitoring of Portfolio Investments 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 Characteristics457 463 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 Rating459 460 462 Portfolio and Investment Activity 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 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 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 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 portfolio466 - 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 dividends466 Operating Expenses 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 year467 - 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 income467 Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (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, LLC468 Investment Income and Net Realized and Unrealized (Losses) Gains Related to Non-Controlling Interest in New Mountain Net Lease Corporation ("NMNLC") 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 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 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 offerings472 - As of March 31, 2025, the asset coverage ratio was 187.0%, exceeding the 150.0% minimum requirement472 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, 2025477 Off-Balance Sheet Agreements 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 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 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 million486 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 plan487 488 Related Parties 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 expenses492 - Co-investment transactions with affiliates are permitted under an SEC exemptive order, requiring approval from a 'required majority' of independent directors491 493 - 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, 2027495 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 fluctuations497 - 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-rate497 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 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