Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

New Mountain Finance Corporation Announces Financial Results for the Quarter and Year Ended December 31, 2023


New Mountain Finance Corporation (NASDAQ: NMFC) ("New Mountain," "NMFC," "New Mountain Finance" or the "Company") today announced its financial results for the quarter and year ended December 31, 2023. In line with preliminary estimates reported on January 18, 2024, the Company reported fourth quarter net investment income ("NII") of $0.40 per weighted average share and net asset value ("NAV") per share of $12.87, compared to $13.06 on September 30, 2023, a decline of 0.7% excluding the impact of the $0.10 special dividend paid on December 29, 2023. The Company also announced that its Board of Directors declared a first quarter regular distribution of $0.32 per share and a supplemental distribution of $0.04, which will be payable on March 29, 2024 to holders of record as of March 15, 2024.

Selected Financial Highlights

(in thousands, except per share data)

December 31, 2023

Investment Portfolio1

$

3,027,822

Total Assets

$

3,159,214

Total Statutory Debt2

$

1,507,836

NAV3

$

1,319,951

 

 

NAV per Share

$

12.87

Net Investment Income per Weighted Average Share

$

0.40

Regular Fourth Quarter Distribution Paid per Share

$

0.32

Supplemental Fourth Quarter Distribution Declared per Share

$

0.04

Statutory Debt/Equity

1.14x

Statutory Debt/Equity (net of available cash)

1.10x

Management Comments on Fourth Quarter Performance

"Our fourth quarter results reflect another successful quarter for 2023," said Steven B. Klinsky, NMFC Chairman. "New Mountain continues to benefit from our disciplined, defensive growth strategy that is focused on end markets that perform well in all economic cycles."

John R. Kline, CEO, commented, "New Mountain closed out the fourth quarter with year-over-year earnings growth, outpacing its regular dividend for the fourth consecutive quarter. Additionally, NMFC distributed a $0.10 special dividend at the end of 2023 as a result of our team's ability to monetize the Haven Midstream equity investment. Our focus on defensive growth sectors of the economy remains a competitive advantage, and we believe NMFC remains well positioned to execute while continuing to deliver strong and stable dividends to our shareholders."

Portfolio and Investment Activity1

As of December 31, 2023, the Company's NAV3 was $1,320.0 million and its portfolio had a fair value of $3,027.8 million in 111 portfolio companies, with a weighted average YTM at Cost4 of approximately 10.9%. For the three months ended December 31, 2023, the Company generated $142.5 million of originations5, and had $11.1 million of asset sales and cash repayments5 of $245.8 million.

Consolidated Results of Operations6

Quarterly Results

The Company's total investment income for the three months ended December 31, 2023 and 2022 was $92.8 million and $73.9 million, respectively. The Company's total net expenses, after income tax expense, for the three months ended December 31, 2023 and 2022 were $52.1 million and $48.9 million, respectively. The Company's NII for the three months ended December 31, 2023 and 2022 was $40.7 million and $25.0 million, respectively. The Company's NII per share for the three months ended December 31, 2023 and 2022 was $0.40 and $0.258, respectively. For the three months ended December 31, 2023 and 2022, the Company recorded $13.5 million and $10.2 million, respectively, of net realized and unrealized losses.

Annual Results

The Company's total investment income for the years ended December 31, 2023 and 2022 was $373.8 million and $293.4 million, respectively. The Company's total net expenses, after income tax expense, for the years ended December 31, 2023 and 2022 were $214.9 million and $174.9 million, respectively. For the years ended December 31, 2023 and 2022, the Company recorded $23.6 million and $43.8 million, respectively, of net realized and unrealized losses.

Liquidity and Capital Resources

As of December 31, 2023, the Company had cash and cash equivalents of $70.1 million and total statutory debt outstanding of $1,507.8 million2. The Company's statutory debt to equity was 1.14x as of December 31, 2023. Additionally, the Company had $300.0 million of SBA-guaranteed debentures outstanding as of December 31, 2023. For the year ended December 31, 2023, the Company sold 1,621,833 shares of common stock under its equity distribution agreement. For the same period, the Company received total accumulated net proceeds of approximately $21.2 million, net of offering expenses, from these sales.

Portfolio and Asset Quality1

The Company monitors the performance and financial trends of its portfolio companies on at least a quarterly basis. The Company attempts to identify any developments within the portfolio company, the industry or the macroeconomic environment that may alter any material element of the Company's original investment strategy. As described more fully in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, the portfolio monitoring procedures are designed to provide a simple, yet comprehensive analysis of the Company's portfolio companies based on their operating performance and underlying business characteristics, which in turn forms the basis of its Risk Rating. The Risk Rating is expressed in categories of Red, Orange, Yellow and Green with Red reflecting an investment performing materially below expectations and Green reflecting an investment that is in-line with or above expectations.

The following table shows the Risk Rating of the Company's portfolio companies as of December 31, 2023:

(in millions)

 

December 31, 2023

Risk Rating

 

 

Cost

 

Percent

 

Fair Value

 

Percent

Red

 

 

$

39.7

 

1.3

%

 

$

4.6

 

0.2

%

Orange

 

 

 

73.1

 

2.4

%

 

 

42.5

 

1.4

%

Yellow1

 

 

 

157.6

 

5.1

%

 

 

118.5

 

3.9

%

Green7

 

 

 

2,797.8

 

91.2

%

 

 

2,862.2

 

94.5

%

Total

 

 

$

3,068.2

 

100.0

%

 

$

3,027.8

 

100.0

%

As of December 31, 2023, all investments in the Company's portfolio had a Green Risk Rating with the exception of six portfolio companies that had a Yellow Risk Rating, four portfolio companies that had an Orange Risk Rating and three portfolio companies that had a Red Risk Rating.

The following table shows the Company's investment portfolio composition as of December 31, 2023:

(in thousands)

 

 

 

 

Investment Portfolio Composition

 

December 31, 2023

 

Percent of Total

First Lien

 

$

1,683,952

 

55.6

%

Second Lien1

 

 

441,013

 

14.6

%

Subordinated

 

 

90,948

 

3.0

%

Preferred Equity

 

 

208,459

 

6.9

%

Investment Fund

 

 

252,400

 

8.3

%

Common Equity and Other7

 

 

351,050

 

11.6

%

Total

 

$

3,027,822

 

100.0

%

Recent Developments

On January 25, 2024, the Company caused notices to be issued to holders of the Company's 2019A Unsecured Notes regarding the exercise of the Company's option to repay all of the Company's $116.5 million in aggregate principal amount of issued and outstanding 2019A Unsecured Notes, which was repaid on February 5, 2024.

On January 30, 2024, the Company's Board of Directors declared a regular first quarter 2024 distribution of $0.32 per share and a supplemental distribution related to fourth quarter earnings of $0.04 per share, each payable on March 29, 2024 to holders of record as of March 15, 2024.

On February 1, 2024, the Company issued $300.0 million in aggregate principal amount of its 6.875% notes due 2029 (the "2029 Unsecured Notes") for net proceeds of $293.9 million after deducting underwriting commissions of $3.0 million. Offering costs incurred were approximately $0.9 million. Interest on the 2029 Unsecured Notes will be paid semi-annually in arrears on February 1 and August 1 at a rate of 6.875% per year, beginning on August 1, 2024, to holders of record as of the close of business on January 15 or July 15 (whether or not a business day), as the case may be, immediately preceding the relevant interest payment date. The 2029 Unsecured Notes may be redeemed in whole or in part at the Company's option at any time prior to January 1, 2029, at par plus a "make-whole" premium, and thereafter at par, plus accrued interest.

___________________________________________

(1)

Includes collateral for securities purchased under collateralized agreements to resell.

(2)

Excludes the Company's United States Small Business Administration ("SBA") guaranteed debentures.

(3)

Excludes non-controlling interest in New Mountain Net Lease Corporation ("NMNLC").

(4)

References to "YTM at Cost" assume the accruing investments, including secured collateralized agreements, in the Company's portfolio as of a certain date, the ??Portfolio Date'', are purchased at cost on that date and held until their respective maturities with no prepayments or losses and are exited at par at maturity. This calculation excludes the impact of existing leverage. YTM at Cost uses the London Interbank Offered Rate ("LIBOR"), Sterling Overnight Interbank Average Rate ("SONIA"), Euro Interbank Offered Rate ("EURIBOR") and Secured Overnight Financing Rate ("SOFR") curves at each quarter's respective end date. The actual yield to maturity may be higher or lower due to the future selection of SONIA, EURIBOR and SOFR contracts by the individual companies in the Company's portfolio or other factors.

 

(5)

Originations exclude payment-in-kind ("PIK"); originations, repayments, and sales excludes revolvers, unfunded commitments, bridges, return of capital, and realized gains / losses.

(6)

Excludes net income related to non-controlling interests in NMNLC. For the quarter ended December 31, 2023 and 2022, $0.2 million and $0.2 million, respectively, of dividend income is excluded from investment income, $0.0 million and $0.0 million, respectively, of net direct and indirect professional, administrative, other general and administrative is excluded from net expenses, and $0.0 million and $(0.2) million, respectively, of realized and unrealized gains and (losses), is excluded from net realized and unrealized gains and losses. For the years ended December 31, 2023 and 2022, $1.0 million and $1.2 million, respectively, of dividend income is excluded from investment income, $0.0 million and $0.1 million, respectively, of net direct and indirect professional, administrative, other general and administrative is excluded from net expenses, and $0.2 million and $1.3 million, respectively, of realized and unrealized losses, is excluded from net realized and unrealized gains and losses.

(7)

Includes investment held in NMNLC.

(8)

Adjusted net investment income per share for the three months ended December 31, 2022 was $0.35. Adjusted net investment income for the three months ended December 31, 2022 included $10.4 million of non-recurring interest, other income, other general and administrative expense and incentive fee adjustment related to National HME, Inc. and NHME Holdings Corp. and $0.1 million of accelerated deferred financing costs related to the tender offer on the 2018 Convertible Notes.

Fourth Quarter 2023 Conference Call

New Mountain Finance Corporation will host an earnings conference call and webcast at 10:00 am Eastern Time on Tuesday, February 27, 2024. To participate in the live earning conference call, please use the following dial-in numbers or visit the audio webcast link. To avoid any delays, please join at least fifteen minutes prior to the start of the call.

A replay of the conference call can be accessed one hour after the end of the conference call through May 27, 2024. The full webcast replay will be available through February 27, 2025. To access the earnings webcast replay please visit the New Mountain Investor Relations website.

For additional details related to the quarter and year ended December 31, 2023, please refer to the New Mountain Finance Corporation Form 10-K filed with the SEC and the supplemental investor presentation which can be found on the Company's website at http://www.newmountainfinance.com.

 

New Mountain Finance Corporation

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

 

 

December 31, 2023

 

December 31, 2022

Assets

 

 

 

Investments at fair value

 

 

 

Non-controlled/non-affiliated investments (cost of $2,283,490 and $2,523,522, respectively)

$

2,209,867

 

 

$

2,400,425

 

Non-controlled/affiliated investments (cost of $107,895 and $85,971, respectively)

 

133,659

 

 

 

130,787

 

Controlled investments (cost of $646,823 and $650,474, respectively)

 

667,796

 

 

 

690,035

 

Total investments at fair value (cost of $3,038,208 and $3,259,967, respectively)

 

3,011,322

 

 

 

3,221,247

 

Securities purchased under collateralized agreements to resell (cost of $30,000 and $30,000, respectively)

 

16,500

 

 

 

16,539

 

Cash and cash equivalents

 

70,090

 

 

 

71,190

 

Interest and dividend receivable

 

44,107

 

 

 

36,154

 

Deferred tax asset

 

594

 

 

 

?

 

Receivable from affiliates

 

82

 

 

 

?

 

Other assets

 

16,519

 

 

 

9,797

 

Total assets

$

3,159,214

 

 

$

3,354,927

 

Liabilities

 

 

 

Borrowings

 

 

 

Holdings Credit Facility

$

515,063

 

 

$

618,963

 

Unsecured Notes

 

506,500

 

 

 

531,500

 

SBA-guaranteed debentures

 

300,000

 

 

 

300,000

 

Convertible Notes

 

260,207

 

 

 

316,853

 

DB Credit Facility

 

186,400

 

 

 

186,400

 

NMFC Credit Facility

 

36,813

 

 

 

40,359

 

NMNLC Credit Facility II

 

2,853

 

 

 

3,785

 

Deferred financing costs (net of accumulated amortization of $54,263 and $47,531, respectively)

 

(22,387

)

 

 

(17,199

)

Net borrowings

 

1,785,449

 

 

 

1,980,661

 

Management fee payable

 

10,116

 

 

 

10,524

 

Incentive fee payable

 

8,555

 

 

 

6,296

 

Interest payable

 

20,440

 

 

 

19,627

 

Payable to affiliates

 

?

 

 

 

78

 

Deferred tax liability

 

?

 

 

 

8,487

 

Other liabilities

 

2,931

 

 

 

3,063

 

Total liabilities

 

1,827,491

 

 

 

2,028,736

 

Commitments and contingencies

 

 

 

Net assets

 

 

 

Preferred stock, par value $0.01 per share, 2,000,000 shares authorized, none issued

 

?

 

 

 

?

 

Common stock, par value $0.01 per share, 200,000,000 shares authorized, and 102,558,859 and 100,937,026 shares issued and outstanding, respectively

 

1,026

 

 

 

1,009

 

Paid in capital in excess of par

 

1,331,269

 

 

 

1,305,945

 

Accumulated undistributed earnings

 

(12,344

)

 

 

7,519

 

Total net assets of New Mountain Finance Corporation

$

1,319,951

 

 

$

1,314,473

 

Non-controlling interest in New Mountain Net Lease Corporation

 

11,772

 

 

 

11,718

 

Total net assets

$

1,331,723

 

 

$

1,326,191

 

Total liabilities and net assets

$

3,159,214

 

 

$

3,354,927

 

Number of shares outstanding

 

102,558,859

 

 

 

100,937,026

 

Net asset value per share of New Mountain Finance Corporation

$

12.87

 

 

$

13.02

 

 

New Mountain Finance Corporation

Consolidated Statements of Operations

(in thousands, except shares and per share data)

 

 

Year ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2021

 

Investment income

 

 

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

 

 

Interest income (excluding Payment-in-kind ("PIK") interest income)

$

249,851

 

 

$

184,367

 

 

$

159,189

 

PIK interest income

 

15,968

 

 

 

11,767

 

 

 

8,582

 

Dividend income

 

193

 

 

 

193

 

 

 

915

 

Non-cash dividend income

 

17,481

 

 

 

14,071

 

 

 

10,153

 

Other income

 

4,981

 

 

 

9,156

 

 

 

14,106

 

From non-controlled/affiliated investments:

 

 

 

 

 

Interest income (excluding PIK interest income)

 

1,951

 

 

 

1,062

 

 

 

1,579

 

PIK interest income

 

2,183

 

 

 

1,043

 

 

 

434

 

Dividend income

 

?

 

 

 

?

 

 

 

288

 

Non-cash dividend income

 

4,625

 

 

 

4,109

 

 

 

4,835

 

Other income

 

251

 

 

 

250

 

 

 

345

 

From controlled investments:

 

 

 

 

 

Interest income (excluding PIK interest income)

 

5,386

 

 

 

9,438

 

 

 

5,470

 

PIK interest income

 

15,443

 

 

 

4,516

 

 

 

14,327

 

Dividend income

 

45,905

 

 

 

43,149

 

 

 

41,659

 

Non-cash dividend income

 

5,303

 

 

 

4,363

 

 

 

4,497

 

Other income

 

5,315

 

 

 

7,146

 

 

 

4,580

 

Total investment income

 

374,836

 

 

 

294,630

 

 

 

270,959

 

Expenses

 

 

 

 

 

Interest and other financing expenses

 

124,784

 

 

 

92,421

 

 

 

73,098

 

Management fee

 

45,610

 

 

 

46,617

 

 

 

52,960

 

Incentive fee

 

38,303

 

 

 

29,901

 

 

 

29,710

 

Administrative expenses

 

4,101

 

 

 

4,131

 

 

 

4,461

 

Professional fees

 

3,771

 

 

 

3,433

 

 

 

3,197

 

Other general and administrative expenses

 

2,068

 

 

 

2,338

 

 

 

1,923

 

Total expenses

 

218,637

 

 

 

178,841

 

 

 

165,349

 

Less: management fee waived

 

(4,117

)

 

 

(4,402

)

 

 

(13,104

)

Less: expenses waived and reimbursed

 

?

 

 

 

(238

)

 

 

(244

)

Net expenses

 

214,520

 

 

 

174,201

 

 

 

152,001

 

Net investment income before income taxes

 

160,316

 

 

 

120,429

 

 

 

118,958

 

Income tax expense

 

418

 

 

 

825

 

 

 

118

 

Net investment income

 

159,898

 

 

 

119,604

 

 

 

118,840

 

Net realized (losses) gains:

 

 

 

 

 

Non-controlled/non-affiliated investments

 

(49,267

)

 

 

(737

)

 

 

(3,167

)

Non-controlled/affiliated investments

 

?

 

 

 

?

 

 

 

8,338

 

Controlled investments

 

16,413

 

 

 

53,440

 

 

 

(9,035

)

Foreign currency

 

13

 

 

 

827

 

 

 

15

 

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

Non-controlled/non-affiliated investments

 

47,956

 

 

 

(81,197

)

 

 

(23,466

)

Non-controlled/affiliated investments

 

(19,052

)

 

 

(9,156

)

 

 

66,505

 

Controlled investments

 

(18,588

)

 

 

6,219

 

 

 

49,347

 

Securities purchased under collateralized agreements to resell

 

(39

)

 

 

(4,883

)

 

 

?

 

Foreign currency

 

100

 

 

 

(1,115

)

 

 

(81

)

Provision for taxes

 

(1,344

)

 

 

(8,474

)

 

 

(114

)

Net realized and unrealized (losses) gains

 

(23,808

)

 

 

(45,076

)

 

 

88,342

 

Net increase in net assets resulting from operations

 

136,090

 

 

 

74,528

 

 

 

207,182

 

Less: Net (increase) decrease in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation

 

(747

)

 

 

204

 

 

 

(5,783

)

Net increase in net assets resulting from operations related to New Mountain Finance Corporation

$

135,343

 

 

$

74,732

 

 

$

201,399

 

Basic earnings per share

$

1.34

 

 

$

0.75

 

 

$

2.08

 

Weighted average shares of common stock outstanding - basic

 

101,118,302

 

 

 

100,202,847

 

 

 

96,952,959

 

Diluted earnings per share

$

1.24

 

 

$

0.74

 

 

$

1.91

 

Weighted average shares of common stock outstanding - diluted

 

123,488,882

 

 

 

115,426,198

 

 

 

110,210,545

 

Distributions declared and paid per share

$

1.49

 

 

$

1.22

 

 

$

1.20

 

ABOUT NEW MOUNTAIN FINANCE CORPORATION

New Mountain Finance Corporation (NASDAQ: NMFC) is a leading business development company (BDC) focused on providing direct lending solutions to U.S. middle market companies backed by top private equity sponsors. Our portfolio consists primarily of senior secured loans, and select junior capital positions, to growing businesses in defensive industries that offer attractive risk-adjusted returns. Our differentiated investment approach leverages the deep sector knowledge and operating resources of New Mountain Capital, a global investment firm with approximately $50 billion of assets under management as of December 31, 2023.

ABOUT NEW MOUNTAIN CAPITAL

New Mountain Capital is a New York-based investment firm that emphasizes business building and growth, rather than debt, as it pursues long-term capital appreciation. The firm currently manages private equity, credit and net lease investment strategies with approximately $50 billion in assets under management. New Mountain seeks out what it believes to be the highest quality growth leaders in carefully selected industry sectors and then works intensively with management to build the value of these companies. For more information on New Mountain Capital, please visit http://www.newmountaincapital.com.

FORWARD-LOOKING STATEMENTS

Statements included herein may contain "forward-looking statements", which relate to our future operations, future performance or our financial condition. Forward-looking statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties, including changes in base interest rates and significant volatility on our business, portfolio companies, our industry and the global economy. Actual results and outcomes may differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including those described from time to time in our filings with the Securities and Exchange Commission or factors that are beyond our control. New Mountain Finance Corporation undertakes no obligation to publicly update or revise any forward-looking statements made herein, except as may be required by law. All forward-looking statements speak only as of the time of this press release.


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