New Mountain Finance (US:NMFC)2023-11-03 19:52Financial Data and Key Metrics Changes - The net asset value per share decreased slightly to $13.06, an $0.08 decline compared to the last quarter, indicating stable credit performance across the portfolio [7][60] - Adjusted net investment income for Q3 was $0.40 per share, exceeding the regular dividend of $0.32 per share [18][36] - Total investment income for the quarter was $94.1 million, a 20% increase over the prior year, while total net expenses were approximately $53.7 million, an 18% increase [36] Business Line Data and Key Metrics Changes - The average yield of the portfolio increased from 11.6% in Q2 to 11.8% in Q3, primarily due to the higher base rate environment [32] - The net lease portfolio, although only 4% of the total portfolio, continues to perform strongly with a weighted average cash yield of approximately 11% [31] Market Data and Key Metrics Changes - The portfolio had approximately $3.1 billion in investments at fair value, with total assets of $3.3 billion and total liabilities of $2 billion [60] - The weighted average EBITDA of borrowers has increased to $147 million over the last several quarters, indicating a positive trend in borrower performance [58] Company Strategy and Development Direction - The company focuses on defensive growth sectors such as software, healthcare, and business services, which are expected to perform well in uncertain economic times [19][47] - The strategy has been consistent over 12 years, allowing the company to operate confidently in various economic environments [47] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term value proposition and prospects for recovery in first lien positions despite short-term operational headwinds [13] - The outlook for the sponsor-backed direct lending market is positive, with expectations for continued strong credit performance and elevated base rates [54] Other Important Information - The company has returned over $1.1 billion to shareholders through its dividend program since its IPO in 2011, generating an annualized return of approximately 10% [12] - Senior management and employee share ownership has risen over time, with management now owning approximately 13% of total shares [10] Q&A Session Summary Question: Can you expand on the adviser revolver upsize post quarter? - The management company revolver was upsized from $50 million to $100 million and extended to December 2027, signaling support for liquidity [67][68] Question: Will the trend of balance sheet leverage working lower continue? - The company aims to operate within a leverage range of 1 to 1.25 times and is focused on moving towards the middle of that range due to the current macro environment [77][78] Question: What drove the markdown for Edmentum this quarter? - The markdown was consistent with the overall M&A environment where valuations have come down, reflecting the need to fair value all positions [82] Question: Is the income from joint ventures expected to remain stable? - The income from joint ventures has been growing, and the current run rate is expected to be stable, with no significant one-time items anticipated [83]