New Mountain Finance (US:NMFC)2023-02-28 20:42Financial Data and Key Metrics Changes - The company reported total investment income of $86.7 million for the quarter, an increase of $8.6 million from the prior quarter, primarily driven by higher interest income from base rate resets [33] - Net asset value (NAV) decreased by $0.18 or 1.4% from the prior quarter, standing at $13.02 per share [31] - Adjusted net investment income (NII) for the quarter was $0.25 per weighted average share, while excluding one-time non-cash charges, it was $0.35 per weighted average share, exceeding the quarterly dividend of $0.32 per share [34] Business Line Data and Key Metrics Changes - In Q4, the company originated $94 million of new loans in core defensive growth verticals, including software, financial services, and consumer services [17] - The average yield of the portfolio remained flat at 11.3% from Q3, with spreads remaining wider, supporting net investment income targets [19] Market Data and Key Metrics Changes - The weighted average EBITDA of borrowers increased to $138 million over the last several quarters, indicating stronger financial health [20] - Portfolio company leverage remained consistent, with an average loan-to-value of 41% [21] Company Strategy and Development Direction - The company is focused on a defensive growth strategy, aiming to maintain superior risk-adjusted returns while driving long-term value for shareholders [3] - A supplemental dividend program was announced, intending to pay out at least 50% of any earnings in excess of the regular dividend, starting in Q1 2023 [52][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning to benefit from rising base rates, which are expected to generate a material uplift in earnings [11] - The outlook for 2023 in the sponsor-focused direct lending market appears positive, with opportunities to make loans at attractive spreads despite overall deal flow being down [46] Other Important Information - The company has a diversified portfolio across over 100 portfolio companies, with the top 15 investments accounting for 39% of total fair value [30] - The company has successfully laddered its debt maturities, with approximately 70% of its debt maturing on or after 2025 [40] Q&A Session Summary Question: Why was the dividend payout ratio set at 50%? - Management indicated that the 50% payout ratio was a balance between returning capital to shareholders and maintaining a cushion for potential income fluctuations [6] Question: Will unrealized losses impact the supplemental dividend calculation? - Management clarified that the supplemental dividend is based on over-earnings and not directly affected by mark-to-market changes, focusing instead on real non-accruals and losses [8] Question: How does the company plan to manage upcoming debt maturities? - Management stated that they have sufficient liquidity under credit facilities to manage upcoming maturities and are continuously evaluating both secured and unsecured markets for potential refinancing options [26][27]